On July 27, 2023, CMS issued a final rule updating Medicare payments and policies under the Inpatient Rehabilitation Facility (IRF) Prospective Payment System and the IRF Quality Reporting Program for FY 2024 (Final IRF Rule). The updates are expected to result in approximately $355 million in increased payments from the federal government to IRFs during FY 2024, and an estimated increase in costs to IRFs of $31,412.56 beginning with the FY 2025 IRF Quality Reporting Program.

Under the Final IRF Rule, the IRF Prospective Payment System rates will increase by 3.4%, which is based on an IRF market basket update of 3.6% minus a 0.2% productivity adjustment. The Final IRF Rule also adjusts the outlier threshold to maintain outlier payments at 3% of total payments, which will increase IRF payments by 4% percent (about $355 million) for FY 2024 as compared with payments in FY 2023.

CMS has also rebased and revised the IRF market basket, adopting an IRF market basket based in 2021 instead of the 2016-based IRF market basket previously used in the FY 2020 IRF PPS rule. This takes recent inflation into account.

The Final IRF Rule also will allow hospitals to open new IRF units and obtain payment under the IRF Prospective Payment System at any time during the cost reporting period, instead of being required to wait until the start of the next cost reporting period, so long as 30-days advance notice is given to the appropriate CMS regional office and Medicare Administrative Contractor before the date of the change. An identical proposal, which modifies the excluded hospital unit regulation, was also raised in the FY 2024 Inpatient Psychiatric Facility (IPF) PPS Proposed rule and is being finalized in the IPF PPS Final Rule.

Under the IRF Quality Reporting Program, IRFs are required to report standardized patient assessment data about quality measures to CMS in order to avoid penalty of a 2% reduction to their annual payment rate. The Final IRF Rule contains certain updates to IRF Quality Reporting Program measures including:

• Adoption of the Discharge Function Score Measure – The Discharge Function Score measure will assess functional status by assessing the percentage of IRF patients who meet or exceed an expected discharge function score, using mobility and self-care items collected on the IRF Patient Assessment Instrument. The measure will take effect beginning with the 2025 Quality Reporting Program and will replace the Application of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan measure. CMS has also finalized accompanying public reporting policies.
• Adoption of the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date Measure – This measure reports the percentage of IRF patients that are up to date with recommended COVID-19 vaccines in accordance with the CDC’s most recent guidance. This measure will take effect beginning with the 2026 IRF Quality Reporting Program. CMS has also finalized accompanying public reporting policies.
• Modification of the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP COVID-19 Vaccine) Measure– This measure tracks the percentage of healthcare personnel in IRFs who are up to date with the recommended COVID-19 vaccines in accordance with the CDC’s most recent guidance. This marks a change from the prior version of this measure, which focused only on tracking healthcare personnel who received the primary COVID-19 vaccination series. This measure will begin with the 2025 IRF Quality Reporting Program.
• Removal of three measures: (1) the Application of Functional Assessment/Care Plan Measure, (2) the IRF Functional Outcome Measure: Change in Self-Care Score for Medical Rehabilitation Patients Measure and (3) the IRF Functional Outcome Measure: Change in Mobility Score for Medical Rehabilitation Patients Measure – The Final IRF Rule will remove the first measure because measure performance among IRFs is so high and unvarying that meaningful distinctions in improvements can no longer be made, and the final Discharge Function Measure is more associated with positive patient outcomes. The second and third measures are being removed because the costs associated with these measures outweigh the benefits of their use in the IRF Quality Reporting Program and are similar to other existing measures within the IRF Quality Reporting Program.

• Begin the public reporting of the Transfer of Health Information to the Provider—PAC Measure and the Transfer of Health Information to the Patient—PAC Measure beginning with the September 2024 Care Compare refresh or as soon as possible – These measures report the percentage of IRF patients with a discharge assessment indicating that a current reconciled medication list was provided to the subsequent provider, to patients, or to their families or caregivers at discharge or transfer.

The Final IRF Rule can be read in full here, and the Fact Sheet for the Final IRF Rule can be found here.