This document discusses Medicare's prospective payment system for inpatient rehabilitation facilities (IRFs). It provides an overview of IRFs, including the services they provide and requirements for reimbursement. The key aspects of the IRF prospective payment system are described, including the case rate methodology, compliance percentage, data collection via the Patient Assessment Instrument, case mix group structure, and provisions for additional payments in certain situations. Classification of patients into case mix groups determines the reimbursement amount an IRF receives.

1. © 2018 American Health Information Management Association© 2018 American Health Information Management Association
Principles of Healthcare Reimbursement
Sixth Edition
Anne B. Casto, RHIA, CCS

2. © 2018 American Health Information Management Association
Chapter 8
Medicare-Medicaid Prospective Payment
Systems for Postacute Care
• Learning Objectives
– Describe Medicare’s prospective payment
system for inpatient rehabilitation facilities
– Differentiate the specialized collection
instruments that exist in postacute care
– Explain the classification models and payment
formulae associated with reimbursement
under Medicare and Medicaid prospective
payment systems in postacute care
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3. © 2018 American Health Information Management Association
Inpatient Rehabilitation Facility Prospective
Payment System
• Key Terms
– Inpatient rehabilitation facility (IRF)
– Compliance percentage
– Etiologic diagnosis
– Functional independence assessment tool
– Functional status
– Inpatient rehabilitation validation and entry (IRVEN)
– Case Mix Groups (CMGs)
– Standard payment conversion factor
– Impairment group code (IGC)
– Rehabilitation impairment category (RIC)
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IRF PPS
• Inpatient rehabilitation facility
– Services
• Provide intense multidisciplinary services to inpatients
• Purpose is to restore or enhance patients’ function after injury or illness
• Members of multidisciplinary term provide services
• Services are medically necessary, based on assessment, and individualized
for each patient’s needs
– Licensed under applicable state laws to provide skilled nursing
care to inpatients 24 hours per day
– Types
• Free standing
• Specialized units within acute care hospitals
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Reimbursement Methodology
• Case rate methodology
– All services are included in one payment for
the admission
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Compliance Percentage
• At least 60% of
an IRF’s
inpatients must
require intensive
rehabilitation
services in one
of the qualifying
conditions,
including
comorbidities
• AKA “60% rule”
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Qualifying Conditions
1. Stroke
2. Spinal cord injury
3. Congenital deformity
4. Amputation
5. Major multiple trauma
6. Facture of the femur (hip)
7. Brain injury
8. Certain neurological conditions
9. Burns
10. Designated arthritis and
arthropathies
11. Systemic vasculitides with joint
inflammation
12. Severe or advanced osteoarthritis 2
or more weight bearing joints
13. Knee or hip replacement during
preceding acute care admission

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IRF Admission Eligibility
Patient
• Must be able to
tolerate and
benefit from 3
hours of rehab
per day or 15
hours per week
(7 consecutive
days)
CMS
• Admission must
be reasonable
and medically
necessary
Facility
• Must submit
required
“coverage
criteria”
documentation
to CMS in
accordance with
established
timeframes
• See figure 8.8 in
text
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8. © 2018 American Health Information Management Association
Data Collection
• IRF Patient Assessment Instrument (PAI)
– Completed twice for each Part A and Part C
patient
• Admission
• Discharge
– PAI requires a lot of patient information
including payer, medical, functional
independence, therapy, quality indicators
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9. © 2018 American Health Information Management Association
PAI Assignment of Codes
Reason for
Admission
• Impairment group
code
• Code unique to
IRF
Etiology
• Etiologic
diagnosis –
etiology of the
problem that led
to the condition
requiring the
admission
• ICD-10-CM code
Complications and
Comorbidities
• ICD-10-CM codes
• Impact
reimbursement
levels
• Divided into “tiers”
that in part
establish resource
consumption
Functional
independence
assessment tool
• 18-tiem
instrument that
reflects patient
characteristics
• Captures
functional status –
ability to perform
ADL
• See figure 8.9 in
text
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Structure of Payment
• Standard payment conversion factor
– Covers all operating and capital costs
– Updated each year
– FY 2018 is $15,838
• Wage index adjusted
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Structure of Payment
• Case Mix Groups (CMGs)
– Accounts for variations in the use of resources to
care for and provide therapy to patients in IRF
– Groups represent similar functional-related
patient discharges
• Impairment
• Functional capability
• Age
• Comorbidity
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CMGs
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Administrative
CMGs
• 1 for short-
stay cases
• 4 for expired
patients
• Based on
condition
and LOS
Special
Circumstances
• Interrupted
Stays
• Patients
discharged
and
readmitted
within 3
days equals
one
admission
• Transfers
• Per diem
payment
100 CMGs
95 Clinical
CMGs
5
Administrative
CMGs

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Determining CMG
Impairment Group
Code (IGC)
Rehabilitation
Impairment
Category (RIC)
Case Mix Group
(CMG)
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IGC
Reason for
admission
See table 8.9
RIC
Reason for
rehabilitation
See table 8.10
CMG
Determines
Reimbursement
See table 8.11
Comorbidity Tiers
are applied at the
CMG level and
impact RW
See tables 8.11
and 8.12

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IRF PPS Provisions
Rural
Location
Fewer cases
Longer LOS
Higher average costs
Increase payment by
14.9% (FY 2018)
Low Income
Patient (LIP)
Based on IPPS DSH
ratio
Power established in
Final Rule
Increases payment
Teaching
Hospital
Increase for indirect
costs of providing
graduate medical
education
Based on ratio of full-
time medical
residents training in
the IRF to the IRF’s
average daily census
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15. © 2018 American Health Information Management Association
IRF PPS Provisions
• High-cost outlier
– Add-on payment when costs for the
admission exceed the outlier fixed-loss
threshold amount
– Add-on payment equals 80% of the difference
between the costs and the fixed-loss
threshold
– FY 2018 fixed loss threshold is $8,679
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Payment
• See table 8.14 in text
– Wage index adjust standard payment
conversion factor
– Multiply adjusted CF by CMG RW
– Apply applicable provisions
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