On July 29, 2011, CMS released an advance copy of its final rule updating Medicare IRF PPS rates and policies for FY 2012 (affecting discharges and cost reporting periods beginning on or after October 1, 2011 and through September 30, 2012). The rule, which will be published in the Federal Register on August 5, 2011, is expected to increase IRF PPS rates by 2.2% nationwide ($150 million). This rate increase reflects a 2.9% market basket increase (using a revised and rebased index) that is partially offset by a -1% productivity adjustment and 0.1% rate cut mandated by the ACA, increased by 0.4% due to an updated outlier threshold amount that increases estimated outlier payments from 2.6% in FY 2011 to 3% in FY 2012. In addition to these rate changes, the rule implements a new quality reporting program, also required by the ACA, that reduces the annual IRF PPS increase factor by 2 percentage points for facilities that fail to report quality data, beginning in 2014. Under the final rule, IRFs initially will submit data on two quality measures: “urinary catheter-associated urinary tract infection” and “pressure ulcers that are new or have worsened.” CMS is considering for future rulemaking a third measure under development on “30-day Comprehensive All Cause, Risk Standardized Readmission.” The final rule also, among other things: updates case-mix group relative weights; uses final FY 2011 inpatient PPS pre-reclassified and pre-floor wage data; freezes the facility-level adjustment factors for FY 2012 at FY 2011 levels for one additional year; allows IRFs to receive temporary adjustments to their full-time equivalent intern and resident caps if interns/residents are unable to complete their training in certain situations; and allows IRF and inpatient psychiatric facility units to expand during a cost reporting period (not just at the beginning of a cost reporting period). The rule is effective October 1, 2011.