The Centers for Medicare and Medicaid Services (“CMS”) published the FFY 2012 Final Rule for the Inpatient Rehabilitation Facility (“IRF”) Prospective Payment System (“PPS”) in the Federal Register on August 5, 2011. The Final Rule provides for a 2.2% increase to IRF payment rates for FFY 2012 and implements other adjustments, including updates to the wage index, outlier threshold amount and cost-to charge ratio ceilings. Most notably, the Final Rule liberalizes prior restrictions on changes in the bed size and square footage of IRFs (also applicable to excluded psychiatric units) to allow increases or decreases once per cost reporting period. The Final Rule also implements a new Quality Reporting Program which is required by the Affordable Care Act (“ACA”) that will affect payment beginning in FFY 2014. Further highlights of the Final Rule are discussed below.
Revisions to the Number and Size of Beds and Square Footage
CMS acknowledges in its commentary that the current restrictions on bed and square footage changes were driven primarily by cost reimbursement concerns. Since IRFs are no longer paid on costs, it is appropriate to ease these restrictions. Therefore, the Final Rule allows IRFs (and in-patient psychiatric facilities) to add new beds one time at any point during a cost report period, instead of simply at the start of a cost report period, as long the IRF notifies the CMS Regional Office at least thirty (30) days before the date of the proposed change, and maintains the information needed to accurately determine costs that are attributable to the excluded unit. This regulation is subject to certain constraints if the IRF has had beds delicensed or decertified. CMS also revises the regulations regarding new IRF beds. Under the Final Rule, IRF beds would be considered “new” if they meet all State Certification of Need and State licensure laws and if they get written approval from the appropriate CMS Regional Office. Hospitals are no longer required to receive approval for an increase in its bed capacity that is greater than fifty (50) percent of the number of beds it seeks to add to the IRF unit. These changes eliminate the concept of “converted bed capacity” and the requirement of demonstrating that the additional beds were used to treat the requisite IRF patient population for a one year period prior to being paid for the services in the additional beds under the IRF PPS.
New Definition of a “New” IRF
Prior to the Final Rule, an IRF facility was only considered “new” if the hospital never had a rehabilitation unit before. CMS encountered many circumstances involving hospitals that had closed a rehabilitation unit and then over five (5) years later sought to reopen the rehabilitation unit. CMS believes it is reasonable to consider these facilities “new.” Therefore, an IRF can now be considered “new” if it has not been paid under the IRF PPS in at least five (5) calendar years. CMS believes that five (5) calendar years will allow a sufficient amount of time between an IRF closing and an IRF reopening to prevent IRFs from making annual changes to avoid meeting certain requirements. The advantage of being deemed a new unit is the hospital may provide a certification indicating it intends that the unit’s patients will satisfy the rehab diagnosis requirements and gain excluded status (payment under the IRF PPS) upon opening, rather than operating for a one year period to demonstrate that it treats the requisite patient population, while getting paid under acute care DRGs.
Quality Reporting Program for IRFs
The Final Rule implements Section 3004(B) of the ACA, which requires the Secretary to implement a quality reporting program for IRFs that provides for a 2% reduction to the annual increase factor beginning in FFY 2014 for any hospital that fails to report quality data. As required by the ACA, this quality reporting data will be made available to the public. However, IRFs will have the opportunity to review data before it is made public. CMS has not yet proposed a specific date to begin this public reporting process.
Beginning in 2014, IRFs will be required to report on two (2) quality measures. Measure #1 concerns Urinary Catheter-Associated Urinary Tract Infections (“CAUTI”), which was originally developed by the Center for Disease Control (“CDC”) to measure the percentage of patients with urinary catheter associated urinary tract infections in the Intensive Care Unit. Data for Measure #1 will be collected for all patients regardless of payor and will be submitted through the CDC National Healthcare Safety Network. Measure #2 relates to pressure ulcers and will measure the percentage of patients who have one or more stage 2 to 4 pressure ulcers that are new or worsened, when assessed at the time of discharge as compared with the patient’s condition upon admission. IRFs will be required to submit data for Measure #2 to CMS through the Inpatient Rehabilitation Facility-Assessment Instrument.
A third quality measure is currently under development, which will involve a 30-day comprehensive all-cause risk-standardized readmission measure. This readmission measure, which is expected to be completed in late 2011, will likely cover the maximum number of patient conditions possible. Additionally, CMS expects to expand the list of quality measures and has multiple measure topics under consideration.
Temporary Adjustment to FTE Cap to Reflect Displaced Residents Due to an IRF Closure
Beginning on or after October 1, 2011, an IRF may receive a temporary adjustment to the FTE cap to reflect interns and residents added because of another IRF’s closure. The temporary cap adjustment is intended to account for medical interns and residents who have partially completed a medical residency training program at an IRF that has closed or ended its program and may be unable to complete their training at another IRF because that IRF is up to or in excess of its cap. Requests for the temporary adjustment generally must be submitted no later than sixty (60) days after the hospital first begins training the displaced interns and residents.
Consolidation and Simplification of IRF Regulations
Both rehabilitation hospitals and units are paid the same and subject to most of the same rules. Therefore, to eliminate confusion, the Final Rule revises and consolidates the regulations for rehabilitation hospitals (42 CFR § 412.23(b)) and rehabilitation units (42 CFR § 412.29 and 412.39) into a revised § 412.29 that contains the requirements for all IRFs. Regulations that apply uniquely to rehabilitation units will not be consolidated and will remain at 42 CFR § 412.25.
CMS also notes in the Final Rule that it has made some regulatory revisions for purposes of consistency between the IRF classification, payment and coverage requirements. Specifically, the Final Rule makes revisions to IRF payment requirements by incorporating some of the added specificity from the coverage requirements into the same requirement for payment.
Revisions to the Change of Ownership Rules
The change of ownership or leasing rules are clarified and simplified. The Final Rule clarifies that if the new owner accepts assignment of the provider agreement covering the IRF hospital or unit, then the IRF hospital or unit retains its excluded status and continues to be paid as an IRF. If the new owner does not accept assignment of the previous owner’s provider agreement, then it would be considered a voluntary termination of IRF status, and the new owner will need to reapply to the Medicare program as an initial applicant to operate a new IRF. However, the new owner will not be required to wait for five (5) calendar years to reapply to operate a new IRF, but will be required to complete the initial hospital certification process to participate in Medicare as a new IRF.
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