CMS has published its proposed 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 rates would increase by 1.6% overall ($125 million) under the proposed rule compared to FY 2016 levels based on all policies and updates in the proposed rule.

CMS proposes a 1.45% increase factor, derived from a 2.7% IRF-specific market basket update that is reduced by a 0.5 percentage point multi-factor productivity adjustment and an additional 0.75 percentage point reduction required by the Affordable Care Act. Rates would be further increased by approximately 0.2 percentage points as a result of an update to the outlier threshold. Note that an IRF that does not submit required quality data to CMS is subject to a 2.0 percentage point decrease in its annual update. CMS also proposes updates to the IRF wage index and case-mix group relative weights in a budget-neutral manner.

CMS proposes revisions to the quality measures under the IRF quality reporting program, including measures related to potentially-preventable readmissions and a post-acute care/IRF Medicare Spending per Beneficiary (MSPB) measure, among others. CMS also proposes revisions to policies related to the exception and extension requests and corrections periods. CMS is not proposing changes to the facility-level adjustment factors for FY 2017; CMS will continue to monitor the effects of FY 2014 adjustments.

The proposed rule was published in the Federal Register on April 25, 2016. Comments on the proposed rule will be accepted until June 20, 2016.