On August 5, 2016, CMS is publishing its final rule to update Medicare prospective payment system (PPS) rates for inpatient rehabilitation facilities (IRFs) for FY 2017, which begins October 1, 2016. CMS estimates that payments to IRFs will increase by 1.9% overall ($145 million) in FY 2017 compared to FY 2016 levels based on all policies and updates in the final rule. Specifically, CMS finalized a 1.65% increase factor, derived from a 2.7% IRF-specific market basket update that is reduced by a 0.3 percentage point multi-factor productivity adjustment and an additional 0.75 percentage point reduction required by the Affordable Care Act. Rates will be further increased by approximately 0.3 percentage points due to an update to the outlier threshold. Note that an IRF that does not submit required quality data to CMS under the IRF Quality Reporting Program (QRP) is subject to a 2.0 percentage point decrease in its annual update.

The final rule updates case-mix group relative weights and average length of stay values. CMS is not making changes to the facility-level adjustment factors for FY 2017; CMS will continue to monitor the effects of FY 2014 adjustments. In addition, CMS finalized a budget-neutral wage adjustment factor, and it continues to phase out an adjustment for rural IRF providers that were transitioned from rural to urban designations under a FY 2016 rule policy.

CMS finalized four new quality measures to align with certain other post-acute care providers pursuant to the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act): Specifically, CMS finalized three measures for the payment determination for 2018 and subsequent years: Discharge to Community – Post Acute Care (PAC) IRF QRP; Medicare Spending Per Beneficiary (MSPB) – PAC IRF QRP; and Potentially Preventable 30 Day Post-Discharge Readmission Measure – IRF QRP. CMS also adopted the measure “Drug Regimen Review Conducted with Follow-Up for Identified Issues” for the FY 2020 and subsequent year payment determinations. In addition, CMS adopted a separate measure, “Potentially Preventable within Stay Readmission for IRFs,” for payment determinations beginning with FY 2018. In the final rule, CMS also adopted revisions to policies related to public reporting of quality data, exception and extension request periods, data correction procedures, and confidential feedback reports.