On August 6, 2015, CMS published its final rule to update Medicare PPS rates for inpatient rehabilitation facilities for FY 2016, which begins October 1, 2015.  CMS estimates that rates will increase by 1.8% overall ($135 million) under the final rule compared to FY 2015 levels.  This increase reflects a 2.4% market basket update (using a new IRF-specific market basket) that is reduced by a 0.5 percentage point multi-factor productivity adjustment and an additional 0.2 percentage point reduction required by the Affordable Care Act, with an additional 0.1% decrease resulting from an update to the outlier threshold.  The standard payment conversion factor for discharges for FY 2016 will be $15,478, compared to the FY 2015 conversion factor of $15,198. In this final rule CMS adopts for the first time a IRF-specific market basket to replace the 2008-based market basket for rehabilitation, psychiatric, and long-term care facilities.

The final rule adopts changes to quality measures and reporting requirements under the IRF quality reporting program, including adopting measures to satisfy the Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act).  Specifically, the rule adopts measures in the following three domains for FY 2016:  (1) skin integrity and changes in skin integrity; (2) incidence of major falls; and (3) functional status, cognitive function, and changes in function and cognitive function.  These measures are also being implemented for long-term care hospitals, skilled nursing facilities, and home health agencies.  The final rule also adopts other IRF quality program changes, including a new IRF quality data public reporting requirement beginning in 2016 and a temporary suspension of the process used to validate data submitted for quality purposes.  In addition, the final rule phases in revised wage index changes.  CMS did not adopt (or propose) any changes to the facility-level adjustment factors for FY 2016; CMS will maintain the facility-level adjustment factors at FY 2014 levels as CMS continues to monitor the effects of FY 2014 changes.