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April 2005


Trends and Issues

By Cherilyn G. Murer, JD, CRA

Growing Confusion


CMS’ 75% rule is causing uncertainty for inpatient rehabilitation facilities


No rule or regulation issued by the Centers for Medicare and Medicaid Services (CMS) has caused the inpatient rehabilitation providers more confusion and controversy than the 75% rule for qualifying as an inpatient rehabilitation facility (IRF).

In July 2002, CMS suspended enforcement of the 75% rule. The moratorium on enforcement remained in effect until CMS finalized revisions to the 75% rule, which went into effect for each IRF’s cost-reporting period beginning on or after July 1, 2004.

THE “NEW” 75% RULE
Since its implementation in 1983, the inpatient acute care hospital PPS has been exempted from the 75% rule’s provisions for freestanding rehabilitation hospitals and inpatient rehabilitation units of general hospitals that meet certain criteria. One of these criteria is that 75% of the exempt hospital’s or unit’s patients, during its most recent 12-month cost-reporting period, must have a diagnosis that falls into one or more categories. The “new” 75% rule retains nine of the diagnosis categories that have been included in the rule since it was first implemented: stroke; spinal cord injury; congenital deformity; amputation; major multiple trauma; fracture of femur (hip fracture); brain injury; neurological disorders, including multiple sclerosis, motor neuron diseases, polyneuropathy, muscular dystrophy, and Parkinson’s disease; and burns.

Newly added to the 75% rule are the following provisions:
  • Replacing the former diagnosis category of “polyarthritis” with three groups of conditions that will more precisely identify the types of arthritis-related conditions appropriate for care in a rehabilitation facility. As a result, there are now 12 qualifying conditions.
  • Continuing to use the facility’s total patient population to determine compliance with the applicable percentage. However, the rule establishes an administrative presumption that if the facility’s Medicare patient population complies with the rule, the facility’s total population complies.
  • Counting secondary medical conditions that meet one of the 12 proposed conditions toward the applicable percentage. However, this method of compliance with the 75% rule disappears with the IRF’s first cost-reporting period beginning on or after July 1, 2007.

The most controversial addition to the new rule, however, was a special provision dealing with knee and hip replacements. CMS placed in the final rule a provision for hip and knee replacements that counts them as qualifying conditions if one of the following three conditions is satisfied:
  1. The patient underwent a bilateral hip or knee replacement during an inpatient hospital stay immediately preceding the IRF admission;
  2. The patient is extremely obese, with a body mass index of at least 50 at the time of admission to the IRF; or
  3. The patient is age 85 or older at the time of admission.

To give IRFs time to comply with the new provisions, CMS also introduced a graduated scale for the percentage of admissions that are required to meet one or more of the qualifying conditions:
  1. 50% for cost-reporting periods beginning on or after July 1, 2004, and before July 1, 2005;
  2. 60% for cost-reporting periods beginning on or after July 1, 2005, and before July 1, 2006;
  3. 65% for cost-reporting periods beginning on or after July 1, 2006, and before July 1, 2007; and
  4. 75% for cost-reporting periods beginning on or after July 1, 2007.

ADDING TO THE CONFUSION
Unsatisfied with CMS’ solution, the provider community again turned to Congress. The resulting Congressional action, however, has only added to the confusion over the current status of the 75% rule. Congress included a provision in the Consolidated Appropriations Act of 2005, enacted at the end of 2004, that prohibits CMS from revoking the Medicare certification of any IRF certified prior to June 30, 2004, on the basis of noncompliance with the 75% rule, until not later than 60 days after the Government Accountability Office (GAO) issues a report on the clinical appropriateness of the diagnosis categories listed in the rule and the Secretary of Health and Human Services either determines that the report is not inconsistent with the rule as written or immediately issues a new interim rule consistent with the report.

Although the GAO report was expected in January 2005, it still had not been published as of the second week of March. In the meantime, CMS has stated that it plans to have fiscal intermediaries proceed with enforcement audits under the rule, delaying only the consequences of a finding of noncompliance—decertification—until after the GAO report is issued.

THE EIGHT-MONTH PERIL
If the Congressional and regulatory situations were not dangerous enough for the unwary IRF, CMS’ instructions to fiscal intermediaries and providers on the methodology for conducting compliance reviews under the 75% rule have created an imminent peril for certain IRFs that have delayed their compliance efforts in the expectation of Congressional relief. Although compliance determinations will apply at the beginning of each IRF’s next cost-reporting period, the 12-month review period will overlap current and preceding cost-reporting periods. CMS’ rationale for the overlap is that the fiscal intermediary will need 4 months to review the facility’s data and make a compliance determination. Thus, for example, if an IRF’s cost-reporting period begins on September 1, 2006, the fiscal intermediary will count back 4 months and use the period from May 1, 2005, through April 30, 2006, as the compliance review period.

Although CMS’ chosen methodology may be confusing, for cost-reporting periods beginning on or after November 1, 2004, it at least tracks the language of the rule, providing for a full 12-month review period. For IRFs with cost-reporting periods beginning from July 1, 2004, through October 1, 2004, however, CMS has chosen a questionable and highly perilous review methodology for the initial compliance review period. Because the new diagnosis categories did not take effect prior to July 1, 2004, CMS has determined that it cannot use data from any IRF prior to that date. Therefore, no compliance review period can begin before July 1, 2004. At the same time, CMS insists that the fiscal intermediary must have the full 4-month period prior to the start of the facility’s next cost-reporting period for making its compliance determination. As a result, IRFs with cost-reporting periods beginning between July and October face drastically shortened compliance review periods. For facilities with cost-reporting periods beginning on July 1, 2004, the initial compliance review period is only 8 months: July 1, 2004, through February 28, 2005. For those IRFs that have delayed compliance with the new rule in the expectation that a moratorium on enforcement was continuing or that further Congressional action was in the offing, the imminent peril is obviously great. Barring an unexpected conclusion in the GAO report that the 75% rule, as written, is clinically inappropriate, these facilities face loss of their IRF certification, with no opportunity for correction, as early as July 1 of this year.

The best hope for these facilities may lie in the language of the 75% rule itself. The rule, as written, requires compliance to be measured over the course of a cost-reporting period—a full 12 months. By adopting an enforcement methodology that shortens the review period by as much as 4 months, CMS seems to be disregarding the language of its own rule. Doubtless, IRFs that feel the sting of this determination will put that methodology to the test in the courts. That, of course, will only serve to extend the confusion and uncertainty that have always gone hand in hand with CMS’ 75% rule.

Cherilyn G. Murer, JD, CRA, is CEO and founder of the Murer Group, a legal-based health care management consulting firm in Joliet, Ill, specializing in strategic analysis and business development. Murer may be reached at (815) 727-3355 or at www.murer.com.

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