On July 31, the Centers for Medicare & Medicaid Services (CMS) released the fiscal year (FY) 2025 Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) final rule. CMS released a fact sheet accompanying the rule.
In this rule, CMS:
- Increases IRF payment rates by 3.0% percent,
- Finalizes updates to case-mix group (CMG) and average length of stay (ALOS) values,
- Maintains outlier payments at 3% of total payments,
- Updates the IRF PPS wage index using the latest core-based statistical areas (CBSAs) from the 2020 Decennial census,
- Establishes a phase-out plan for rural adjustments for IRFs transitioning to urban status,
- Updates the IRF Quality Reporting Program (QRP) with new SDOH assessment items, and
- Acknowledges comments submitted in response to requests for information on IRF QRP future measure concepts and the development of an IRF QRP star rating system.
This proposed rule is scheduled to be published in the Federal Register on August 6, 2024.
CMS INCREASES IRF PAYMENTS FOR FY 2025 BY 3.0%
For FY 2025, CMS finalizes a 3.0% adjustment to the IRF PPS payment rates. This reflects a market basket increase of 3.5%, offset by a 0.5% productivity adjustment as mandated by the Social Security Act. This adjustment is based on the most recent data and economic forecasts, considering both historical and projected changes in the costs of goods and services required by IRFs. Despite public concerns regarding inflation and rising costs, CMS reiterated that the statutory framework limits its ability to adjust payment rates beyond the productivity-adjusted market basket update. The finalized updates will be effective from October 1, 2024, to September 30, 2025.
Additionally, CMS updates the CMG relative weights and ALOS values, maintaining budget neutrality in overall payments. This update uses the most recent FY 2023 IRF claims and FY 2022 IRF cost report data to ensure payments are reflective of the relative resource needs of different inpatient rehabilitation cases. The revisions result in minimal changes to most CMGs, with 99.2% of IRF cases experiencing less than a 5% change in relative weight. The finalized CMG relative weights and ALOS values will apply to discharges from October 1, 2024, to September 30, 2025.
CMS also finalizes adjustments to the outlier threshold to ensure that outlier payments remain at 3% of total payments. The anticipated result of these technical rate-setting changes is an estimated $280 million increase in IRF payments for FY 2025. This includes a $300 million increase from updates to the payment rates, offset by a $20 million decrease from the updated outlier threshold.
CMS FINALIZES UPDATES TO THE IRF WAGE INDEX BASED ON REVISED CENSUS DATA AND PHASES OUT THE RURAL ADJUSTMENT FOR IRFsTRANSITIONING FROM RURAL TO URBAN STATUS
CMS finalizes updates to the IRF PPS wage index using the Office of Management & Budget (OMB) most recent statistical area delineations, which are based on 2020 Decennial Census data.[1] CMS believes that the adoption of these new delineations will result in wage index values more accurately representing the actual local costs of labor. CMS analysis shows that 54 counties currently part of an urban CBSA will be considered located in a rural area, and another 54 currently part of a rural CBSA will be considered located in an urban area.[2] Several counties would also switch from one urban CBSA to another, altering the wage index values based on the new delineations.[3] The permanent five percent cap on negative wage index changes, which applies regardless of the reason for the decline and was finalized in the FY 2023 IRF PPS final rule, will mitigate any significant wage index decreases that result from this update.
CMS also finalizes its proposals to phase out the rural adjustment for IRFs that transition from rural to urban status under new CBSAs over three years. Impacted IRFs would receive two-thirds of the rural adjustment in FY 2025, one-third of the rural adjustment in FY 2026, and no rural adjustment in FY 2027. CMS estimates that eight IRFs will change their status from rural to urban for FY 2025. The transition is intended to reduce the impact the loss of the FY 2024 rural adjustment of 14.9 percent would have on these IRFs.
CMS finalizes similar changes in the FY 2025 Inpatient Psychiatric Facility (IPF) PPS and Hospice Wage Index final rules.
CMS HIGHLIGHTS SOCIAL DETERMINANTS OF HEALTH IN UPDATES TO THE IRF QUALITY REPORTING PROGRAM
The IRF QRP requires that IRFs submit required quality data or be subject to a 2.0 percentage point reduction in their Annual Increase Factor (AIF). Measures are publicly reported by CMS on the Care Compare website. All IRFs are required to report standardized patient assessment data as part of the IRF QRP. This data is collected via the Inpatient Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI).
To better standardize the collection of SDOH data across programs, CMS expands the existing SDOH related measures[4] reported via the IRF-PAI to include four new items: living situation, utilities, and two food items. Additionally, the agency finalizes modifications to the transportation item and removes the admission class item collected via the IRF-PAI.
The changes will go into effect beginning with the FY 2028 IRF QRP, meaning they would impact admissions taking place October 1, 2026, or later. CMS states that the agency will provide training resources in advance of the initial collection of the new SDOH assessment items to reduce the burden to IRFs having to create their own training materials.
New SDOH Measures to be Collected Using IRF-PAI
Living Situation
Housing instability can damage a patient’s health by restricting their access to care and, if left unaddressed, can lead to homelessness, which is associated with increased premature death. CMS believes that IRFs could use information on a patient’s living situation to better inform discharge planning and to help refer the patient to community organizations or other healthcare organizations that could address this SDOH.
This measure would ask patients “What is your living situation today?” CMS finalizes the following response options: (1)I have a steady place to live; (2) I have a place to live today, but I am worried about losing it in the future; (3) I do not have a steady place to live; (7) Patient declines to respond; and (8) Patient unable to respond.
Food
Food insecurity is associated with several negative health outcomes, including cardiovascular disease. By gathering patient information on food insecurity, CMS aims to increase coordination between IRFs and providers to address food insecurity during transitions of care. This information could also be used to refer patients to government programs like the Supplemental Nutrition Assistance Program (SNAP).
Accordingly, CMS finalizes two food related measures:
- “Within the past 12 months, you worried that your food would run out before you got money to buy more.”
- “Within the past 12 months, the food you bought just didn’t last and you didn’t have money to get more.”
Patients would choose between the following responses for both questions: (1) Often true; (2) Sometimes true; (3) Never True; (7) Patient declines to respond; and (8) Patient unable to respond.
Utilities
The inability to cover the cost of utilities places patients at risk of living without adequate heat or air conditioning. These living conditions can lead to negative health outcomes, for example, increased risk of respiratory conditions. Accordingly, CMS believes IRFs should have access to information regarding a patient’s utility insecurity.
This measure would ask patients, “In the past 12 months, has the electric, gas, oil, or water company threatened to shut off services in your home?”
Patients would respond with one of the following proposed options: (1) Yes; (2) No; (3) Already shut off; (7) Patient declines to respond; and (8) Patient unable to respond.
CMS Modifies to Transportation Item
CMS finalizes the modification of the existing transportation item, which has been collected by IRFs under the IRF-PAI since October 1, 2022, to better align this item with the Accountable Health Communities Health-Related Social Needs (AHC HRSN) Screening Tool. The proposed modifications would make the lookback period for the measure clearer and simplify the response options available to patients.
The measure is modified from “Has lack of transportation kept you from medical appointments, meetings, work, or from getting things needed for daily living?” to “In the past 12 months, has a lack of reliable transportation kept you from medical appointments, meetings, work or from getting things needed for daily living?”
The response options will be simplified from: (A) Yes, it has kept me from medical appointments or from getting my medications; (B) Yes, it has kept me from non-medical meetings, appointments, work, or from getting things that I need; (C) No; (X) Patient unable to respond; and (Y) Patient declines to respond, to: (0) Yes; (1) No; (7) Patient declines to respond; and (8) Patient unable to respond.
CMS Removes of the Admission Class Item from the IRF-PAI
The Admission Class item measures whether a patient’s admission is considered, (i) Initial Rehab; (iii) Readmission; (iv) Unplanned Discharge; or (v) Continuing Rehabilitation. While the item has been collected since the IRF-PAI was first introduced, CMS has determined that it is not used to calculate quality measures under the IRF QRP or for payment, survey, or care planning. CMS finalizes its proposal to remove the Admission Class item effective October 1, 2026, and will additionally no longer require IRFs to collect it beginning with patients admitted on October 1, 2024.
CMS Responds to Comments on Potential Concepts for IRF QRP
In the proposed rule, CMS solicited feedback on potential measures that could be incorporated into the IRF QRP to better align the program with CMS’s “Universal Foundation” of quality measures. Specifically, CMS sought comments on vaccination composite, pain management, and depression as potential concepts for inclusion.
CMS received comments both in support of and against the inclusion of a composite vaccination measure, the pain management measure concept, and the concept of depression for a future IRF QRP measure. Additionally, many commenters suggested IRFs will have difficulty implementing and addressing these measures. CMS will consider this feedback in the future development of measures for the IRF QRP.
CMS Responds to Comments on a Future IRF Star Rating System
While IRF QRP data is publicly reported on Care Compare, there are currently no star ratings available for IRFs as there are for other provider types such as nursing homes and home health providers. CMS sees star ratings as a valuable tool for patients to compare quality across providers and is interested in creating a star rating measure for IRFs. In the proposed rule, the agency was specifically interested in comments relevant to considerations for measure selection and the presentation of star ratings information to consumers.
In response, CMS received many comments highlighting the need to include measures that are patient-centered and strongly recommended CMS engage with patients, providers, and other stakeholders to inform the development of the IRF star ratings system. CMS plans to take these recommendations into consideration in its future star rating development efforts.
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This Applied Policy® Summary was prepared by Meghan Basler with support from the Applied Policy team of health policy experts. If you have any questions or need more information, please contact her at mbasler@appliedpolicy.com or at (908) 752-9875.
[1] OMB Bulletin No. 23-01
[2] Table 5 on pages 45-46 of the final rule lists the counties that will switch from urban to rural per the adoption of the new OMB delineations. Table 6 on pages 47-48 of the final rule lists the counties that will switch from rural to urban.
[3] Table 7 on pages 49-50 of the final rule show the list of counties that will change to different CBSAs.
[4] Currently, IRFs report on the following 7 SDOH measures: ethnicity, race, preferred language, interpreter services, health literacy, transportation, and social isolation.