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August 2004

By Cherilyn G. Murer, JD, CRA

Not Done Yet

Is CMS' "final" revision to the 75% Rule really final?

When the Centers for Medicare and Medicaid Services (CMS) issued its proposed revision to the "75% rule" for qualifying an inpatient rehabilitation facility (IRF) for Medicare certification in 2003, it issued a challenge to the rehabilitation provider community. The challenge stated that, if providers wished to have single-joint hip and knee replacements counted as a qualifying condition for IRF certification, they should furnish CMS with data justifying the benefit of treating joint replacement patients in an IRF setting as opposed to outpatient rehabilitation. However, instead of accepting CMS' challenge, the providers turned to their Congressional representatives and senators. As we shall see, despite CMS' issuance of a "final" rule on May 7, 2004, it appears that Congress will indeed have the final say on the ultimate disposition of the 75% rule.

THE CURRENT 75% RULE
The 75% rule is a methodology adopted by CMS for the purpose of establishing that an IRF is primarily engaged in providing intensive rehabilitation services as opposed to general medical and surgical services with some rehabilitation services. The current 75% rule requires that, for the hospital's most recent 12-month cost-reporting period, at least 75% of the IRF's patients required treatment for one of 10 specified conditions: stroke; spinal cord injury; congenital deformity; amputation; major multiple trauma; hip fracture; brain injury; polyarthritis including rheumatoid arthritis; neurological disorders, including multiple sclerosis, motor neuron diseases, polyneuropathy, muscular dystrophy, and Parkinson's disease; and burns. The 75% rule has remained virtually unchanged for 20 years. A firestorm of controversy erupted in early 2002, when several inpatient rehabilitation facilities in New Jersey and Tennessee were issued notices of noncompliance after audits of their admission diagnosis categories. In July 2002, CMS suspended enforcement of the 75% rule. The moratorium on enforcement is scheduled to expire when the revised 75% rule takes effect on July 1, 2004.

When CMS proposed the revision to the 75% rule on September 9, 2003, it declined to follow the suggestion put forth by many providers that it replace the 10 qualifying conditions with 20 of the 21 Rehabilitation Impairment Categories (RICs) that are used in formulating payments under the Rehabilitation Prospective Payment System. In the final rule, CMS continues to assert that the RICs are not an appropriate basis for determining IRF qualification. However, CMS has agreed to allow providers more flexibility in achieving compliance.

The final rule's most important feature is that, for its first year in effect, it reduces to 50 the percentage of patients in the facility who are admitted because they are diagnosed with one of the specific qualifying medical conditions and require intensive inpatient rehabilitation services. After the first year, the rule gradually brings the qualifying percentage back to 75% in 2007. This is more flexible than the proposed rule, which would have reduced the initial compliance percentage only to 65%, before returning to 75%. In detail, the rule, unless rescinded, will operate as follows: 50% for cost-reporting periods beginning on or after July 1, 2004, and before July 1, 2005; 60% for cost-reporting periods beginning on or after July 1, 2005, and before July 1, 2006; 65% for cost-reporting periods beginning on or after July 1, 2006, and before July 1, 2007; and 75% for cost-reporting periods beginning on or after July 1, 2007. The final rule retains other important aspects of the proposed rule, including:

Deleting the term "polyarthritis" from the current list of 10 qualifying conditions and replacing it 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 will be 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.
Secondary medical conditions that meet one of the 12 proposed conditions will be counted toward the applicable percentage.
The compliance percentage returns to 75 with cost-reporting periods beginning on or after July 1, 2007, and the use of a secondary medical condition to determine compliance will no longer be allowed as of that date.

The final rule retains the 10 qualifying conditions specified in the existing rule, but replaces polyarthritis with three more specific conditions: active polyarticular rheumatoid arthritis, psoriatic arthritis, and seronegative arthropathies; systematic vasculidities with joint inflammation; and severe or advanced osteoarthritis involving two or more major weight-bearing joints (as opposed to three or more major joints in the proposed rule). None of these conditions will qualify as compliant unless they involve significant functional impairment that has not responded to an aggressive, sustained course of outpatient treatment. During the 3-year period after the new rule goes into effect, CMS plans to closely review both claims and patient assessment data to examine trends in admissions and overall IRF utilization to assess the effectiveness of the new rule. CMS believes that this assessment, together with the increased flexibility allowed by the rule and any further adjustments to be proposed as a result of the assessment, will answer providers' complaints that the rule does not take into account developments in clinical medicine that have changed the basic mix of patients who may benefit from intensive rehabilitation services.

THE BATTLE OVER KNEES AND HIPS
As we noted in our previous article, CMS took the position in the proposed rule that IRF treatment is not medically justified for typical single-joint hip and knee replacements. While challenging providers to present clinical study data demonstrating better outcomes for hip and knee patients in inpatient settings as opposed to outpatient, CMS did propose an alternative qualifying methodology for hip and knee patients, whereby such patients would qualify if they had significant comorbidities that fell within one or more of the 12 qualifying conditions, the comorbidity resulted in significant functional impairment, and an IRF was the only effective venue for treating the condition.

This proposal was clearly inadequate for the provider community, which quickly found a sympathetic ear in Congress. The House and Senate Conference Committees for the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and the Consolidated Appropriations Act of 2003, added nonbinding language to these bills that called on CMS to withhold implementing the proposed rule pending the results of a study by the Institute of Medicine as to which medical conditions are clinically appropriate for inclusion in the rule. The committee for the Consolidated Appropriations Act further advised CMS to order the fiscal intermediaries not to implement any local medical review policies (LMRPs) based on the rule.

Instead of responding to these requests, CMS placed in the final rule a provision for hip and knee replacements that is more lenient than the proposed rule, but by no means as open as that which the provider community has been seeking. The final rule counts hip or knee replacements as qualifying conditions if one of three conditions is satisfied: the patient underwent a bilateral hip or knee replacement during an inpatient hospital stay immediately preceding the IRF admission; the patient is extremely obese, with a body mass index of at least 50 at the time of admission to the IRF; or the patient is age 85 or older at the time of admission to the IRF. Curiously, CMS did not explain why it had decided to implement the final rule despite Congress' entreaties, nor did the commentary to the final rule make any mention of the requested Institute of Medicine study or the LMRPs.

Not surprisingly, the provider community was unsatisfied with the final rule and turned again to Congress. No fewer than 82 senators signed a letter to Health and Human Services Secretary Tommy Thompson, dated June 17, 2004, expressing their disappointment with the final rule and calling upon CMS to delay implementation of the final rule pending the Institute of Medicine study, maintain the moratorium on enforcement of the present rule, and instruct the fiscal intermediaries not to implement any LMRPs based on the rule.

At this writing, it is too soon to know what CMS' response to the senators' letter will be. Given the strength of Congressional opposition, it is safe to say that, if CMS decides to implement the final rule as it stands, binding Congressional action will not be long in coming. Whether this will mean replacement of the traditional qualifying conditions with a system based on the RICs remains to be seen. It is clear, however, that, unless CMS is willing to fundamentally alter its position, the last word on the 75% rule will be written in the halls of Congress and not CMS.

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. She may be reached at (815) 727-3355 or via the Web: www.murer.com.

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August 2004