CMS Proposes an Increase in Medicare Payment Rates for Inpatient Rehabilitation and Psychiatric Hospitals for Fiscal Year 2022

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On April 7, 2021, CMS issued a proposed rule for the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) and a proposed rule for the Inpatient Psychiatric Facility (IPF) PPS for fiscal year (FY) 2022. The overall economic impact of the IRF PPS proposed rule would result in an estimated $160 million in increased payments from the federal government to IRFs during FY 2022, and the IPF PPS proposed rule would result in an estimated $90 million in increased payments to IPFs during FY 2022. Both proposed rules also address CMS’s ongoing health equity efforts. Comments on both proposed rules are due by June 7, 2021.

The IRF PPS proposed rule would make the following changes:

  • Increase IRF PPS rates by 2.2% based on the proposed 2.4% market basket update, less a 0.2 percentage point multi-factor productivity adjustment;
  • Adjust the outlier threshold to maintain outlier payments at 3.0% in FY 2022, resulting in a 0.3 % to overall outlier payments; and
  • Update the denominator for the Transfer of Health Information to the Patient-Post Acute Care quality measure by removing the location from the definition.

The IPF PPS proposed rule would make the following payment-related changes:

  • Increase the IPF PPS base rate by 2.2% from $815.22 to $833.50, while also increasing the payment for electroconvulsive therapy treatment from $350.97 to $358.84;
  • Decrease the labor-related share from 77.3% to 77.1%;
  • Decrease the cost outlier threshold by 4% from the current $14,630 to $14,030; and
  • Update the IPF PPS teaching policy for IPF hospital closures and displaced residents.

Additionally, the IPF PPS proposed rule would modify the IPF quality reporting program by:

  • Adopting voluntary patient-level data reporting for data submitted for payment determination for FY 2023 and mandatory patient-level data reporting for payment determination for FY 2024 and future years;
  • Adopting the COVID-19 Healthcare Personnel Vaccination measure for the FY 2023 payment determination and subsequent years; and
  • Adopting the Follow-up After Psychiatric Hospitalization measure for the FY 2024 payment determination and subsequent years.

Both the IRF PPS proposed rule and IPF PPS proposed rule acknowledge CMS’s on-going health equity efforts, in which CMS looks to “make healthcare quality more transparent to consumers and providers, enabling them to make better choices as well as promoting provider accountability around health equity.” In the IRF proposed rule, CMS seeks comments on the possibility of expanding measure development and the collection of other Standardized Patient Assessment Data Elements that address gaps in health equity in the IRF Quality Reporting Program. Similarly, in the IPF proposed rule, CMS is seeking feedback regarding future potential stratification of quality measure results by dual eligibility and other social risk factors in facility-specific reports, ways to improve demographic data collection, and the potential creation of a facility equity score to synthesize results across multiple measures and social risk factors.

CMS’s fact sheet for the IRF proposed rule is available here, and its fact sheet for the IPF rule is available here. The IRF proposed rule is available here, and the IPF proposed rule is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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