[Federal Register: September 9, 2003 (Volume 68, Number 174)]
[Proposed Rules]
[Page 53265-53280]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09se03-33]
[[Page 53265]]
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Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 412
Medicare Program; Changes to the Criteria for Being Classified as an
Inpatient Rehabilitation Facility; Proposed Rule
[[Page 53266]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 412
[CMS-1262-P]
RIN 0938-AM72
Medicare Program; Changes to the Criteria for Being Classified as
an Inpatient Rehabilitation Facility
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise the classification criterion,
commonly known as the ``75 percent rule,'' used to classify a hospital
as an inpatient rehabilitation facility (IRF). This proposed rule would
also modify and expand the medical conditions listed in the 75 percent
rule regulatory requirements as well as lower the percentage of
patients required to fall within one of the specified list of medical
criteria.
DATES: We will consider comments if we receive them at the appropriate
address, as provided below, no later than 5 p.m. on November 3, 2003.
ADDRESSES: In commenting, please refer to file code CMS-1262-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission or e-mail. Mail written comments (one
original and two copies) to the following address only: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1262-P, P.O. Box 8010, Baltimore, MD 21244-8010.
Please allow sufficient time for mailed comments to be timely
received in the event of delivery delays.
If you prefer, you may deliver (by hand or courier) your written
comments (one original and two copies) to one of the following
addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security
Boulevard, Baltimore, MD 21244-1850. (Because access to the interior of
the HHH Building is not readily available to persons without Federal
Government identification, commenters are encouraged to leave their
comments in the CMS drop slots located in the main lobby of the
building. A stamp-in clock is available for persons wishing to retain a
proof of filing by stamping in and retaining an extra copy of the
comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and could be considered late. For
information on viewing public comments, see the beginning of the
SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Robert Kuhl, (410) 786-4597; or Pete
Diaz, (410) 786-1235; or Nora Hoban, (410) 786-0675.
SUPPLEMENTARY INFORMATION:
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.
I. Condition for Classification as an IRF
Background
A. Overview of the Inpatient Rehabilitation Facility Prospective
Payment System
Section 1886(j) of the Social Security Act (the Act) provides for
the implementation of a prospective payment system (PPS) under Medicare
for inpatient hospital services furnished by a rehabilitation hospital
or a rehabilitation unit of a hospital (referred to as an inpatient
rehabilitation facility (IRF)). Sections 1886(d)(1)(B) and
1886(d)(1)(B)(ii) of the Act give the Secretary the discretion to
define a rehabilitation hospital and unit. The regulations at 42 CFR
412.23(b), 412.25, and 412.29, specify the criteria for a provider to
be classified as a rehabilitation hospital or rehabilitation unit.
Hospitals and units meeting those criteria are eligible to be paid on a
prospective payment basis as an IRF under the IRF PPS.
Payments made under the IRF PPS cover inpatient operating and
capital costs of furnishing covered intensive rehabilitation services
(that is, routine, ancillary, and capital costs), but do not cover
costs of approved educational activities, bad debts, and other services
or items outside the scope of the IRF PPS. Covered intensive
rehabilitation services include services for which benefits are
provided under Medicare Part A (Hospital Insurance).
Payments under the IRF PPS are made on a per discharge basis. A
patient classification system is used to assign patients in IRFs into
case-mix groups (CMGs). The IRF PPS uses Federal prospective payment
rates across distinct CMGs. We construct a majority of the CMGs using
rehabilitation impairment categories (RICs), functional status (both
motor and cognitive), and age (though some CMGs do not use cognitive
status or age in their definition). We construct special CMGs to
account for very short stays and for patients who expire during the IRF
stay.
For each CMG, we develop relative weighting factors to account for
a patient's clinical characteristics and expected resource consumption.
Thus, the weighting factors account for the relative difference in
resource use across all CMGs. Within each CMG, the weighting factors
are ``tiered'' based on the estimated effect that the comorbidities
from appendix C of the August 7, 2001 final rule (66 FR 41414) have on
resource use.
The Federal prospective payment rates are established using a
standard payment amount (also referred to as the budget neutral
conversion factor). For each of the tiers within a CMG, we apply the
relative weighting factors to the budget neutral conversion factor to
compute the unadjusted Federal prospective payment rates.
Adjustments that account for geographic variations in wages (wage
index), for the percentage of low-income patients, and for facilities
located in a rural area are applied to the unadjusted Federal
prospective payment rates. In addition, adjustments are made for early
transfers of patients to other facilities, interrupted stays, and high-
cost outliers (cases with usually extraordinarily high costs).
The regulations implementing the IRF PPS provisions are presently
in 42 CFR part 412, subpart P. Regulations governing the requirements
for classification of hospitals as IRFs are located in Sec. 412.22,
Sec. 412.23, Sec. 412.25, and Sec. 412.29. Section 412.23(b)(2) is
commonly known as the ``75 percent
[[Page 53267]]
rule'' and specifies one of the criteria Medicare uses for classifying
a hospital or unit of a hospital as an IRF. This regulation provides
that during its most recent cost reporting period 75 percent of an
IRF's total patient population required intensive rehabilitation
services for treatment of one or more of the medical conditions
specified in Sec. 412.23(b)(2).
For a more complete discussion of the development of the IRF PPS
see our August 7, 2001 final rule (66 FR 41316). We also have
established a CMS website that contains useful information regarding
the IRF PPS. The website URL is http://www.cms.hhs.gov/providers/irfpps/default.asp
and may be accessed to download or view
publications, software, and other information pertinent to the IRF PPS.
B. Recent Developments on the 75 Percent Rule
1. May 2003 Proposed Rule
On May 16, 2003, we published a proposed rule titled ``Medicare
Program; Changes to the Inpatient Rehabilitation Facility Prospective
Payment System and Fiscal Year 2004 Rates'' in the Federal Register (68
FR 26786) to propose updates to the IRF Federal prospective payment
rates for FY 2004, to be effective for discharges occurring on or after
October 1, 2003 and before October 1, 2004. We published the final rule
on August 1, 2003 (68 FR 45674). The final rule specified the comments
we received in response to our proposed policies and the final
regulations regarding the proposed update to IRF PPS for FY 2004.
In the May 16, 2003 proposed rule, we solicited public comments on
the regulatory requirements in Sec. 412.23(b)(2). As stated previously
and discussed more fully in section I.B.2. of this preamble, Sec.
412.23(b)(2) provides that the requirements of 75 percent rule be met
for a provider to be classified as an IRF. On May 19, 2003, we held a
Town Hall meeting at our headquarters in Baltimore, MD, in which views
regarding all aspects of the IRF PPS could be expressed. Hundreds of
people participated in the Town Hall meeting either by attending at CMS
headquarters or by a conference call. Most of the participants,
however, limited their testimony to the 75 percent rule.
In response to the May 16, 2003 proposed rule, we received over
6,000 timely public comments regarding the regulatory requirements in
Sec. 412.23(b)(2). The primary issues discussed during the Town Hall
meeting and in the public comments are summarized as follows:
[sbull] The regulatory requirement specifying the 10 medical
conditions contained in Sec. 412.23(b)(2) should be repealed or
amended.
[sbull] The 10 medical conditions specified in Sec. 412.23(b)(2)
do not adequately reflect current care in IRFs.
[sbull] The medical conditions specified in Sec. 412.23(b)(2) have
not been updated in 20 years and should be revised or re-written to
include other diagnoses.
[sbull] Some of the medical conditions specified in Sec.
412.23(b)(2) are vague; they have little clinical relevance; and are
inconsistently interpreted by our fiscal intermediaries who are charged
with enforcing the 75 percent rule.
[sbull] CMS administrative data indicate most IRFs are not in
compliance with Sec. 412.23(b)(2).
[sbull] Classification as an IRF should be based on 20 of the 21
RICs.
[sbull] Enforcement of the rule could force many IRFs to close.
[sbull] Enforcement of the rule limits access to care.
[sbull] Treatment in other rehabilitation treatment settings is
inferior to treatment furnished in an IRF.
In the May 16, 2003 proposed rule, we did not propose amending the
regulatory requirements in Sec. 412.23(b)(2). In this proposed rule,
we are proposing amending the requirements in Sec. 412.23(b)(2) as
discussed in section II of the preamble.
2. Classification as an IRF Under the 75 Percent Rule
As stated in the August 7, 2001 final rule, we did not change the
survey and certification procedures for classification as an IRF.
Currently, a hospital or unit of a hospital must first be deemed
excluded from the diagnosis-related group (DRG)-based acute care
hospital PPS to be paid under the IRF PPS and must meet the general
requirements in subpart B of part 412. Secondly, the excluded hospital
or unit of the hospital must meet the conditions for payment under the
IRF PPS at Sec. 412.604. As specified at Sec. 412.604(b), a provider,
among other things, must be in compliance with all the criteria
specified in Sec. 412.23(b) to be classified as an IRF.
Under Sec. 412.23(b)(2) of the existing regulations, a facility
may be classified as an IRF if it can show that, during its most recent
12-month cost reporting period, it served an inpatient population of
whom at least 75 percent required intensive rehabilitation services for
the treatment of one or more of the following conditions:
[sbull] Stroke.
[sbull] Spinal cord injury.
[sbull] Congenital deformity.
[sbull] Amputation.
[sbull] Major multiple trauma.
[sbull] Fracture of femur (hip fracture).
[sbull] Brain injury.
[sbull] Polyarthritis, including rheumatoid arthritis.
[sbull] Neurological disorders, including multiple sclerosis, motor
neuron diseases, polyneuropathy, muscular dystrophy, and Parkinson's
disease.
[sbull] Burns.
C. Statutory and Regulatory Background on the 75 Percent Rule
We initially stipulated the ``75 percent'' requirement in the
September 1, 1983, interim final rule with comment period entitled
``Medicare Program; Prospective Payments for Medicare Inpatient
Hospital Services'' (48 FR 39752). That interim final rule implemented
the Social Security Amendments of 1983 (Pub. L. 98-21), changing the
method of payment for inpatient hospital services from a cost-based,
retrospective reimbursement system to a diagnosis-specific inpatient
PPS. However, the rule stipulated that, in accordance with sections
1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act, both a rehabilitation
unit, which is a distinct part of a hospital, and a rehabilitation
hospital would be excluded from the IPPS. We noted that sections
1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act also gave the Secretary
broad discretion to define a ``rehabilitation unit'' and a
``rehabilitation hospital.''
We consulted with the Joint Commission on Accreditation of
Hospitals (JCAH), and other accrediting organizations (JCAH is
currently known as the Joint Commission on Accreditation of Healthcare
Organizations (JCAHO)) to define a rehabilitation hospital. The
criteria we included in our definition of a rehabilitation hospital
incorporated some of the accreditation requirements of these
organizations. The definition also included other criteria, which we
believed distinguished a rehabilitation hospital from a hospital that
furnished general medical and surgical services as well as some
rehabilitation services. One criterion was that ``The hospital must be
primarily engaged in furnishing intensive rehabilitation services as
demonstrated by patient medical records showing that, during the
hospital's most recently completed 12-month cost reporting period, at
least 75 percent of the hospital's inpatients were treated for one or
more conditions specified in these regulations that typically require
intensive inpatient rehabilitation'' (48 FR 39756). This requirement
was originally specified in
[[Page 53268]]
Sec. 405.471(c)(2)(ii). We included this requirement, as a defining
feature of a rehabilitation hospital, because we believed ``that
examining the types of conditions for which a hospital's inpatients are
treated, and the proportion of patients treated for conditions that
typically require intensive inpatient rehabilitation, will help
distinguish those hospitals in which the provisions of rehabilitation
services is a primary, rather than a secondary, goal'' (48 FR 39756).
Likewise, the 75 percent rule was a criterion for a rehabilitation
unit.
The original medical conditions specified in Sec.
405.471(c)(2)(ii) were stroke, spinal cord injury, congenital
deformity, amputation, major multiple trauma, fracture of femur (hip
fracture), brain injury, and polyarthritis, including rheumatoid
arthritis. This list of eight medical conditions was partly based upon
the information contained in a document entitled ``Sample Screening
Criteria for Review of Admissions to Comprehensive Medical
Rehabilitation Hospitals/Units.'' This document was a product of the
Committee on Rehabilitation Criteria for the Professional Standards
Review Organization of the American Academy of Physical Medicine and
Rehabilitation and the American Congress of Rehabilitation Medicine. In
addition, we received input from the National Association of
Rehabilitation Facilities and the American Hospital Association. The
requirement that 75 percent of an IRF's patient population must have
one or more of the medical conditions listed in the regulation was due
to the finding that the listed medical conditions accounted for
approximately 75 percent of the admissions to IRFs at the time.
On January 3, 1984, we published a final rule entitled ``Medicare
Program; Prospective Payment for Medicare Inpatient Hospital Services''
(49 FR 234). On page 240 of that final rule, we summarized comments
that requested inclusion of neurological disorders, burns, chronic
pain, pulmonary disorders, and cardiac disorders in the list of medical
conditions under the 75 percent rule. Our analysis of these comments
led us to agree that neurological disorders (including multiple
sclerosis, motor neuron diseases, polyneuropathy, muscular dystrophy,
and Parkinson's disease) and burns should be added to the original list
of eight medical conditions under the 75 percent rule (49 FR 240). We
did not agree with comments that we lower from 75 to 60 the percentage
of patients that must meet one of the medical conditions. Nor did we
agree with comments urging us to use IRF resource consumption, instead
of a percentage of patients that must have one or more of the specified
medical conditions, to help define what is an IRF (49 FR 239-240). We
also rejected suggestions that when an IRF could not meet the 75
percent rule, the facility should still be defined as an IRF based on
the types of services it furnished.
On August 31, 1984, we published a final rule entitled ``Medicare
Program; Changes to the Inpatient Hospital Prospective Payment System
and Fiscal Year 1985 Rates'' (49 FR 34728). In that rule, we explained
how the 75 percent rule applied to a new rehabilitation unit or
rehabilitation hospital or to an increase in beds of an existing
rehabilitation unit.
On March 29, 1985, we published a final rule entitled ``Medicare
Program; Prospective Payment System for Hospital Inpatient Services;
Redesignation of Rules'' (50 FR 12740). That rule redesignated
provisions of Sec. 405.471 that addressed the 75 percent rule as
provisions under Sec. 412.23.
On August 30, 1991, we published a final rule entitled ``Medicare
Program; Changes to the Inpatient Hospital Prospective Payment System
and Fiscal Year 1992 Rates'' (56 FR 43196). Since October 1, 1983, the
regulations allowed a new rehabilitation hospital or a new
rehabilitation unit, or an existing excluded rehabilitation unit that
was to be expanded by the addition of new beds, to be excluded from the
hospital inpatient PPS if, in addition to meeting other requirements,
it submitted a written certification that during its first cost
reporting period it would be in compliance with the 75 percent rule.
The August 30, 1991, rule specified that, if these facilities were
later found to have not complied with the 75 percent rule, we would
determine the amount of actual payment under the exclusion, compute
what we would have paid for the facility's services to Medicare
patients under the IPPS, and recover any difference in accordance with
the rules on the recoupment of overpayments.
On September 1, 1992, we published a final rule entitled ``Medicare
Program; Changes to Hospital Inpatient Prospective Payment Systems and
Fiscal Year 1993 Rates'' (57 FR 39746). In the rule, we acknowledged
that, for various reasons, a new rehabilitation hospital or a new
rehabilitation unit might need to begin operations at some time other
than at the start of its regular cost reporting period. Therefore, we
specified that an IRF could submit a written certification that it
would comply with the 75 percent rule for both a partial cost reporting
period of up to 11 months and the subsequent full 12-month cost
reporting period.
On September 1, 1994, we published a final rule entitled ``Medicare
Program; Changes to the Hospital Inpatient Prospective Payment Systems
and FY 1995 Rates'' (59 FR 45330). In that final rule, we stated that
we had miscellaneous comments requesting that oncology cases, pulmonary
disorders, cardiac disorders, and chronic pain be added to the list of
medical conditions under the 75 percent rule (59 FR 45393). We
responded that, although the 75 percent rule had not been addressed in
the associated May 27, 1994, proposed rule, we would take these
miscellaneous comments into consideration if we decided to make changes
to the 75 percent rule.
When we published the August 7, 2001 final rule (66 FR 41316), we
acknowledged we had received comments requesting that we update the
list of medical conditions specified in Sec. 412.23(b)(2) or eliminate
the regulation (66 FR 41321). We responded that in the November 3, 2000
IRF PPS proposed rule, we had not proposed amending the requirements in
Sec. 412.23(b)(2), and we believed the existing regulation was
appropriate and, therefore, we would not be revising the requirements
in Sec. 412.23(b)(2). However, we also stated that data obtained after
we implemented the IRF PPS could lead us to reconsider amending the
requirements in Sec. 412.23(b)(2).
D. CMS Evaluation of Compliance With the 75 Percent Rule Regulatory
Requirements in Sec. 412.23(b)(2)
In the spring of 2002, we surveyed the Medicare fiscal
intermediaries (FIs) in order to ascertain what methods were being used
to verify whether IRFs were complying with the requirements in Sec.
412.23(b)(2). Analysis of the survey data made us aware that
inconsistent methods were being used to determine whether an IRF was in
compliance with the regulation. Also, some IRFs were not being reviewed
to determine whether they were in compliance with the regulation. These
survey results led us to become concerned that some IRFs may be out of
compliance with the regulation and inappropriately classified as an
IRF. In addition, we were concerned that some FIs might be using
different methods to verify compliance with the requirements in Sec.
412.23(b)(2). This practice may have resulted in an IRF being
incorrectly considered out of compliance with the regulation. Thus,
this practice had the potential to cause an IRF to inappropriately lose
its classification as
[[Page 53269]]
an IRF. Therefore, on June 7, 2002, we suspended enforcement of the
regulatory requirements Sec. 412.23(b)(2) until we conducted a careful
examination of this area and determined whether the regulation should
be changed and the operating procedures to verify compliance with the
regulation.
In addition to our review of the administrative procedures used by
our FIs, we conducted an analysis of CMS administrative data to attempt
to estimate overall compliance with the regulation. We examined both
the inpatient rehabilitation facility-patient assessment instrument
(IRF-PAI) data and claims from the years 1998, 1999, and 2002. The
patient assessment data was from January to August of 2002. We
estimated that the percent of facilities with 75 percent of cases
falling into the 10 conditions was 13.35 percent. We note that the
analysis has a number of limitations. For example, it is not possible
to discern from the diagnosis data on IRF-PAI or the claim whether
there was a medical need to furnish the patient ``intensive
rehabilitation.'' The diagnosis describes only some aspects of a
patient's clinical status, but the diagnosis alone does not determine
the medical necessity of treating a patient in an IRF as opposed to
another type of treatment setting. In addition, all the information
necessary to classify a case under 1 of the 10 conditions may not be
present on the claim (for example, polyarthritis).
In the May 16, 2003 proposed rule, we indicated that we would be
instructing FIs to re-institute appropriate enforcement action if they
were to determine that an IRF has not complied with the requirements in
Sec. 412.23(b)(2). We realize that an IRF may need time to come into
compliance with the regulation. An IRF's cost reporting period is the
time period used to ascertain compliance with the requirements in Sec.
412.23(b)(2). Therefore, we indicated that we were instructing the FIs
that they must use cost reporting periods that begin on or after
October 1, 2003, as the time period to ascertain an IRF's compliance
with the requirements in Sec. 412.23(b)(2). While in the May 16, 2003
proposed rule, we did not propose changes to Sec. 412.23(b)(2), we
indicated that we expect that improved enforcement and compliance with
the existing rule will have varying impacts on providers and
beneficiaries.
In the May 16, 2003 proposed rule, we indicated that while it is
difficult to predict the aggregate impact of improved compliance on
provider payments, we expect that IRFs or their parent hospitals, or
both (80 percent of IRFs are units of acute care hospitals), will
change their behavior in a variety of ways. IRFs may change admission
practices to alter their case-mix, either Medicare or total patient
population, by admitting patients with more intensive rehabilitative
needs that fall into the 10 conditions. This practice could have the
effect of elevating the facility's revenues because cases requiring
more intensive rehabilitation care generally receive higher Medicare
payments than less complex cases. On the other hand, enforcement of the
75 percent rule may cause some IRFs to reduce the number of beds and/or
reduce the number of admissions that may result in a reduction of the
facility's revenues.
The existing regulation reflects the fact that up to 25 percent of
medically necessary admissions may fall outside of the 10 conditions.
These cases can continue to be admitted and treated under the
regulation. Other cases may appropriately receive rehabilitative care
in alternative settings. For certain medically complex cases, it may be
appropriate to lengthen the patient's stay in an acute care setting in
order to stabilize his or her condition to prepare the patient to
participate in rehabilitation. Alternative settings for rehabilitative
care could include the acute care hospital, skilled nursing facilities,
long-term care hospitals, outpatient rehabilitation facilities, and
home health care. For this reason, we did not expect to see reduced
access to care for Medicare beneficiaries as a result of improved
compliance. In addition, because many hospitals having a Medicare
certified IRF unit also have one or more other subunits that provide
rehabilitation, revenues from these cases may be generated elsewhere
within the same hospital.
As noted above, on June 7, 2002, we suspended enforcement of the 75
percent rule under Sec. 412.23(b)(2). We accomplished the suspension
of enforcement by the issuance of instructions to the FIs and,
therefore, it was a method that was administrative and operational. The
suspension of enforcement was communicated to the IRFs by CMS Regional
Offices, the FIs, or other means such as regular telephone conferences
between CMS and providers. Although the May 16, 2003 proposed rule
stated that we would be re-instituting enforcement of Sec.
412.23(b)(2) for cost reporting periods that start on or after October
1, 2003, we decided to revisit this issue due to the extensive public
comments received on this issue. We are now proposing to amend Sec.
412.23(b)(2) in this proposed rule. Therefore, we will not be re-
instituting enforcement of the regulation for cost reporting periods
beginning on or after October 1, 2003 as stated in the May 16, 2003
proposed rule. Instead, we are now proposing that the proposed
amendments in Sec. 412.23(b)(2) would be applicable to cost reporting
periods that start on or after the effective date specified in the
final rule that will be published subsequent to this proposed rule. We
anticipate that the effective date of the final rule would be January
1, 2004.
The intent of the policy specified at Sec. 412.23(b)(2), and of
other policy criteria for IRFs, is to ensure that these facilities are
unique compared to other hospitals in that they provide intensive
rehabilitative services in an inpatient setting. The uniqueness of
these facilities is the justification for paying them under a separate
payment system rather than paying them with the same payment system for
acute care inpatient PPS. We believe it is crucial that Medicare
maintain criteria to ensure that only facilities providing intensive
rehabilitation are identified as IRFs so that services are paid
appropriately under the IRF PPS. In addition, we believe it is
imperative to identify conditions that would ``typically require
intensive inpatient rehabilitation'' in IRFs because rehabilitation in
general can be delivered in a variety of settings such as acute care
hospitals, skilled nursing facilities, and outpatient settings.
II. Provisions of the Proposed Rule
For the reasons set forth in the preamble, in section II.A., we are
proposing in Sec. 412.23(b)(2) ``Excluded hospitals:
Classifications,'' to remove the reference to ``75 percent.'' We are
proposing a new Sec. 412.23(b)(2)(i) that specifies for cost reporting
periods beginning on or after January 1, 2004 and before January 1,
2007, the hospital has served an inpatient population of whom at least
65 percent required intensive rehabilitative services for treatment of
one or more of the conditions specified at paragraph (b)(2)(iii) of
this section. A patient with a comorbidity, as defined at Sec.
412.602, may be included in the inpatient population that counts
towards the required 65 percent if--
[sbull] The patient is admitted for inpatient rehabilitation for a
condition that is not one of the conditions specified at paragraph
(b)(2)(iii) of this section;
[sbull] The patient has a comorbidity that falls in one of the
conditions specified at paragraph (b)(2)(iii) of this section; and
[[Page 53270]]
[sbull] The comorbidity has caused significant functional ability
decline in the individual such that, even in the absence of the
admitting condition, the individual would require the intensive
rehabilitation treatment that is unique to inpatient rehabilitation
facilities paid under subpart P of this part and which cannot be
appropriately performed in another care setting covered under this
title.
We are also proposing a new Sec. 412.23(b)(2)(ii) that specifies
for cost reporting periods beginning on or after January 1, 2007, the
hospital has served an inpatient population of whom at least 75 percent
required intensive rehabilitative services for treatment of one or more
of the conditions specified at paragraph (b)(2)(iii) of this section.
In proposed Sec. 412.23(b)(2)(iii), we are proposing to retain the
existing conditions except for polyarthritis, which we are proposing to
replace with the following three new conditions:
[sbull] Active, polyarticular rheumatoid arthritis, psoriatic
arthritis, and seronegative arthropathies resulting in significant
functional impairment of ambulation and other activities of daily
living, which has not improved after an appropriate, aggressive, and
sustained course of outpatient therapy services or services in other
less intensive rehabilitation settings immediately preceding the
inpatient rehabilitation admission or which results from a systemic
disease activation immediately before admission, but has the potential
to improve with more intensive rehabilitation.
[sbull] Systemic vasculidities with joint inflammation, resulting
in significant functional impairment of ambulation and other activities
of daily living, which has not improved after an appropriate,
aggressive, and sustained course of outpatient therapy services or
services in other less intensive rehabilitation settings immediately
preceding the inpatient rehabilitation admission or which results from
a systemic disease activation immediately before admission, but has the
potential to improve with more intensive rehabilitation.
[sbull] Severe or advanced osteoarthritis (osteoarthrosis or
degenerative joint disease) involving three or more major joints
(elbow, shoulders, hips, or knees) with joint deformity and substantial
loss of range of motion, atrophy, significant functional impairment of
ambulation and other activities of daily living, which has not improved
after an appropriate, aggressive, and sustained course of outpatient
therapy services or services in other less intensive rehabilitation
settings immediately preceding the inpatient rehabilitation admission
but has the potential to improve with more intensive rehabilitation. (A
joint replaced by a prosthesis no longer is considered to have
osteoarthritis, or other arthritis, even though this condition was the
reason for the joint replacement.)
Furthermore, in section II.C., we are proposing the possible use of
comorbidities to verify compliance with proposed Sec. 412.23(b)(2).
We are also proposing to phase-out the reduction from 75 percent to
65 percent and the use of commorbities to verify compliance, as
discussed in section II.D., on January 1, 2007 with the intention of
using data acquired and analysis performed during this period to revise
the rule, if necessary, prior to the phase-out date. Lastly, in section
II.E., we are proposing to change the time period used to determine
compliance with the proposed 65 percent rule.
A. Change of the Percentage of the Inpatient Population
Under proposed Sec. 412.23(b)(2)(i), we are proposing, starting
with the effective date of the final rule and subject to the proposed
phase-out provision discussed in section II.D., to change the
percentage of the total IRF patient population used as a criterion to
distinguish an IRF from an acute care hospital from 75 percent to 65
percent.
We recognize that rehabilitation practice may have changed since we
developed the original list of conditions. We are, however, concerned
that in some cases, patients may have been transferred inappropriately
from the inpatient setting and, thus, these inappropriate responses may
be responsible for some of these changes in rehabilitation practice
rather than medical advances.
We believe that the list of medical conditions we are proposing in
this rule identifies patients who typically can benefit from the type
of intensive inpatient rehabilitation services provided by IRFs. We do,
however, recognize that there may be certain atypical patients admitted
for other conditions who may be appropriate for care in an IRF. As a
precaution to mitigate any unintended effects on access to care while
we perform the analysis discussed in section II.D, we are proposing to
lower the percentage of cases to 65 percent. We welcome the development
and presentation of objective evidence that shows the type of patients
most appropriately treated in the IRF setting, compared to other
settings.
As reflected in both the present and now proposed policies, we do
not believe it is necessary that an IRF must treat patients only with
the medical conditions listed in proposed Sec. 412.23(b)(2)(iii) to
distinguish it from other inpatient settings as an inpatient hospital
setting that is primarily engaged in furnishing intensive
rehabilitation services. Patients may have a variety of medical
conditions that require rehabilitation treatment and the rehabilitation
treatment may be furnished by a variety of rehabilitation programs.
However, while an IRF is one of the settings that is available to
furnish rehabilitation, it may not be the most appropriate setting to
treat a medical condition not listed in proposed Sec.
412.23(b)(2)(iii).
Patients with the medical conditions not listed in proposed Sec.
412.23(b)(2)(iii) have always had, and will continue to have,
rehabilitation programs in IRFs and other settings available to them
that we believe can furnish the type of treatment that is commensurate
to the need they have for rehabilitation. While being a prudent
purchaser of health care services for Medicare beneficiaries is an
important factor, the most important determination is which
rehabilitation program is the most appropriate in relation to the
patient's medical condition and rehabilitation needs, that is, the
rehabilitation services furnished by the most appropriate
rehabilitation program.
Although the previous analysis of impairment group and diagnoses
data from the IRF-PAI suggests that IRFs are treating a patient
population with more than 35 percent of cases with medical conditions
other than those specified in proposed Sec. 412.23(b)(2)(iii), this
does not in and of itself provide evidence that the IRF is the most
appropriate rehabilitation treatment modality for these patients. We
welcome evidence or studies demonstrating that patients with medical
conditions not included in proposed Sec. 412.23(b)(2)(iii) generally
require intensive inpatient rehabilitation and have better outcomes
compared to other settings.
Although there may have been ``medical advances'' in rehabilitation
or at least changes in practice patterns since the medical conditions
listed at proposed Sec. 412.23(b)(2)(iii) were developed, it is not
clear that there is evidence supporting a clinical basis for these
changes. Instead, in some cases, patients may have been transferred
inappropriately from the inpatient setting which may have played a
major role in changing practice patterns and in deciding which patients
are admitted to IRFs. We note that the general trend has been the
migration of care from the acute inpatient hospital setting to
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another treatment setting. However, we recognize that the conditions
listed in proposed Sec. 412.23(b)(2)(iii) describe groups of patients
who typically require intensive inpatient rehabilitation. To allow IRFs
to care for some atypical patients who require intensive inpatient
rehabilitation and still maintain their status as an IRF, we would
allow the percentage of cases in the conditions specified in proposed
Sec. 412.23(b)(2)(iii) to be lowered to 65 percent. As part of our
ongoing analysis described in section II.D., we would both periodically
monitor the literature and analyze the data obtained from assessments
of beneficiaries to determine whether it would be appropriate to modify
any of the conditions that are listed in proposed Sec.
412.23(b)(2)(iii).
Various commenters have suggested that we add cancer, cardiac,
pulmonary, and pain to the list of conditions defining IRFs. We note
that patients with cancer affecting the brain and spinal cord may be
considered under the proposed clarification of the existing conditions
to have non-traumatic brain or spinal cord injuries and can be counted
in defining IRFs.
As has been commented on in the past, the result of adding cancer,
cardiac, pulmonary, and pain conditions would be that almost all
patients admitted to acute hospitals would qualify as being the types
of patients that would be used to distinguish IRFs from acute care
hospitals. Furthermore, we have seen no studies that demonstrate that
patients from these categories have improved outcomes when cared for in
IRFs as compared to other settings. We have reviewed studies that show
that cardiac and pulmonary patients improve when treated in IRFs, but
none of the studies provided evidence that the improvement required the
unique characteristics of IRFs and compared the improvements of
equivalent patients in other settings.
We continue to believe it is the total patient population that
should determine whether a facility is classified as an IRF. This is
the best indication that a facility (as a whole) is primarily engaged
in furnishing intensive rehabilitation services. For a provider to be
primarily engaged in furnishing intensive rehabilitation services
implies that it is furnishing these services to its entire patient
population. Therefore, we believe it is appropriate for Medicare to
continue to use the entire IRF patient population as one of the
criteria used to classify a facility as an IRF. This approach is part
of CMS' existing policy that we plan to maintain.
In proposing 65 percent of an IRF's total patient population to
determine compliance with proposed Sec. 412.23(b)(2)(i) we still
wanted to find methods of verification for the FIs that were not
difficult operationally to automate. RAND's analysis of IRF compliance
with existing requirements at Sec. 412.23(b)(2) found that Medicare
cases were highly predictive of the percentage of an IRF's total
patient population with respect to the medical conditions specified in
the regulation. We plan to instruct the FIs to initially utilize a
presumptive eligibility test that uses Medicare data to assess
compliance with proposed Sec. 412.23(b)(2)(i). However, if an IRF
appears to comply with proposed Sec. 412.23(b)(2)(i) using only
Medicare data, we may still consider other available information before
making a final compliance determination. If the IRF does not comply
with proposed Sec. 412.23(b)(2)(i) based on the presumptive
eligibility test that uses Medicare data, we would consider the IRF's
total case-mix. In any case, we expect individual IRFs to notify their
FI if the IRF believes that its Medicare population is not wholly
representative of the total facility patient population. We believe
that the compliance verification method described above offers Medicare
adequate program protection and may reduce the burden on IRFs and the
FIs related to enforcement of proposed Sec. 412.23(b)(2)(i).
B. Change in the Medical Conditions
As noted in the May 16, 2003 proposed rule, we were concerned that
some FIs inappropriately were using methods to verify compliance with
the 75 percent rule. These inappropriate methods included incorrectly
interpreting which patient diagnoses met the medical conditions listed
in the 75 percent rule.
As in the present policies under the proposed IRF-PPS policies,
Medicare will pay for the services an IRF furnishes to some patients
who have a medical need for intensive inpatient rehabilitation services
but do not have one of the medical conditions specified in proposed
Sec. 412.23(b)(2)(iii). The medical conditions specified in proposed
Sec. 412.23(b)(2)(iii) are used to determine whether a facility
qualifies as an IRF and, thus, may be paid under the IRF PPS. However,
the criteria for admission of any individual patient is based upon
medical necessity; as a result, some patients with conditions listed in
proposed Sec. 412.23(b)(2)(iii) may still not meet the medical
necessity criteria. Providers also have discretion over which patients
are admitted, so we believe an IRF can manage its case-mix and, thus,
ensure that its patient population during a cost reporting period would
allow it to achieve compliance with proposed Sec. 412.23(b)(2)(i).
We recognize, however, that one of the listed conditions in the
existing regulation at Sec. 412.23(b)(2), specifically polyarthritis,
has been a source of confusion and is acknowledged by many not to
represent any clearly defined clinical condition. We are proposing to
remove this term from the list of 10 conditions and substitute instead
3 more clearly defined arthritis-related conditions, as specified above
in the introduction to section II of this preamble, that comprise the
range of diagnoses that the term ``polyarthritis'' was intended to
encompass. This clarification was developed in part from information
gathered from experts in rheumatology and rehabilitation as well as a
review of the literature. We are proposing to adopt in Sec.
412.23(b)(2)(iii) the other conditions currently listed in Sec.
412.23(b)(2) because we believe these other conditions are the most
appropriate conditions for treatment in an IRF. We are limiting the
conditions to those that are sufficiently severe and in which intensive
inpatient rehabilitation may be an appropriate modality of treatment.
Although we acknowledge that ``arthritis'' may affect joints other than
those specified (shoulders, elbows, hips and knees), such as those in
the hands or spine, we do not believe these conditions require
intensive rehabilitation care. Thus, we are limiting the focus to
conditions that more commonly require intensive inpatient
rehabilitation treatment. For this reason, conditions other than the
types specified in this proposed rule are not included in the
identified conditions to be listed in proposed Sec. 412.23(b)(2)(iii).
If a patient has a type of ``arthritis'' not included in the proposed
conditions that we described earlier in this section then that patient
would be included in the percent of cases that IRFs can admit which are
not included in the proposed 65 percent of the proposed Sec.
412.23(b)(2)(iii) conditions (assuming the care is medically
necessary).
We acknowledge that the industry has interpreted polyarthritis to
include hip and knee joint replacement cases and these should be
included in the conditions counted in existing Sec. 412.23(b)(2).
Although some joint replacement cases are currently being treated in
IRFs, we are not aware of any research that identifies the factors
determining which patients are more appropriately treated in the
intensive
[[Page 53272]]
inpatient rehabilitation setting provided in an IRF. Although it has
been asserted that patients at risk for thrombosis, pressure ulcers, or
infections should be treated in IRFs, all hip and knee joint
replacement patients are at risk for those conditions. Likewise the
presence of comorbidities such as diabetes and hypertension are common
conditions that can generally be managed in the outpatient setting. We
believe that there have been strong reimbursement incentives to send
patients to IRFs and that these considerations have influenced the
choice of setting for patients' care. We welcome data or studies that
might provide evidence about whether certain patients had better
outcomes as a result of care in IRFs.
We are also aware of proposals from the public that Medicare should
count cases with lower functional status in RICs for joint replacement,
cardiac, osteoarthritis, and pulmonary as cases that meet proposed
Sec. 412.23(b)(2)(iii). We are not proposing such a policy because the
lower score of function on admission does not generally reflect a need
for intensive inpatient rehabilitation services for patients with these
medical conditions. Some patients may improve without rehabilitation,
and others may not have the capability to improve even with
rehabilitation.
We believe other conditions listed in proposed Sec.
412.23(b)(2)(iii) also need to be clarified. The categories of brain
and spinal cord injuries could appropriately be defined to include
neoplasms of the brain, spinal cord, or meninges that result in
substantial functional deficits as non-traumatic brain injuries and
non-traumatic spinal cord injuries, since the course of rehabilitation
for these conditions is very similar to the rehabilitation for other
brain or spinal cord injuries. Although patients presenting with these
conditions are currently paid under RIC 20, we believe that these
patients can be counted towards the categories of cases listed in
proposed Sec. 412.23(b)(2)(iii) and invite comments of our
interpretation.
Another category described in proposed Sec. 412.23(b)(2)(iii) that
requires clarification is major multiple trauma. Our contractors have
noticed that some patients with relatively minor injuries at times are
counted as having this condition. To clarify which patients should be
counted, the IRF can determine if the acute care hospital service for a
patient at the time of the initial injury was identified by diagnosis-
related groups 484, 485, 486, or 487. We recognize that not all
patients whose acute hospitalization was classified into DRG 484, 485,
486, or 487 will be admitted to an IRF immediately after the injury,
because some may require a period of recuperation and healing before
beginning the intensive inpatient rehabilitation care. We are
soliciting comments regarding this methodology.
C. Proposal To Consider Using a Comorbidity To Verify Compliance
In this section of the proposed rule, we discuss the possible use
of comorbidities to verify compliance with proposed Sec.
412.23(b)(2)(i). Under the IRF PPS, we defined a comorbidity at Sec.
412.602 as a specific patient condition that is secondary to the
patient's principal diagnosis that is the primary reason for the
inpatient rehabilitation stay.
Section II.C.1 below describes a proposed methodology in which
cases other than those admitted with a principal diagnosis matching one
or more of the 12 conditions specified in proposed Sec.
412.23(b)(2)(iii) could be considered to satisfy the proposed 65
percent rule if certain additional criteria are met. Section II.C.2
below describes another alternative, in which a case that has a
comorbidity that matches one of the conditions in proposed Sec.
412.23(b)(2)(iii) could be considered to satisfy the proposed 65
percent rule only if the patient is admitted to an IRF for
postoperative care immediately following a hip or knee replacement. We
are soliciting comments on both of these proposed methodologies.
1. Proposed Methodology
Under proposed Sec. 412.23(b)(2)(i), we are proposing that
starting with the effective date of the final rule and subject to the
proposed phase-out provision discussed in section II.D., a case with a
principal diagnosis that does not match one of the proposed 12
conditions be considered as meeting proposed Sec. 412.23(b)(2)(i) if
all of the following criteria are met: (1) The patient is admitted for
rehabilitation for a condition that is not one of the conditions listed
in proposed Sec. 412.23(b)(2)(iii); (2) The patient also has a
comorbidity that falls in one of the conditions listed in proposed
Sec. 412.23(b)(2)(iii); and (3) The comorbidity has caused significant
functional ability decline in the individual such that, even in the
absence of the admitting condition, the individual would require
intensive rehabilitation treatment that is unique to inpatient
rehabilitation facilities and which cannot be appropriately performed
in another setting, such as inpatient hospital, skilled nursing
facility, home health, or outpatient setting.
The following explanation provides guidance regarding classifying
the proposed ``arthritis-related'' conditions as comorbidities which
may be counted as complying with proposed Sec. 412.23(b)(2)(i). If the
comorbidity is active, polyarticular rheumatoid arthritis, psoriatic
arthritis, seronegative arthropathies, or systemic vasculidities with
joint replacement, the patient must have undergone an appropriate,
aggressive, and sustained course of outpatient therapy immediately
preceding the inpatient rehabilitation or have experienced a systemic
disease activation immediately before admission in order for the
admission to be included in cases complying with proposed Sec.
412.23(b)(2)(i). If the comorbidity is severe or advanced
osteoarthritis involving three or more joints, the patient must have
undergone an appropriate, aggressive, and sustained course of
outpatient therapy immediately preceding the inpatient rehabilitation
in order for the admission to be included in cases complying with
proposed Sec. 412.23(b)(2)(i).
The following provides clinical examples of diagnoses which
indicate when a comorbidity would and would not be considered in
determining compliance with the proposed 65 percent rule. These
examples are for illustrative purposes only and are not meant to be the
only scenarios where comorbidities would or would not be considered in
determining compliance with the proposed 65 percent rule. Furthermore,
these examples are not intended to represent, define, or establish
clinical criteria for benefit coverage determinations.
Examples of Clinical Scenarios That Are Likely To Be Included Under
This Policy
(1) A patient who has severe arthritis in both shoulders and in his
right knee has his left hip replaced with a non-cemented total hip
prosthesis. Although before his joint replacement, he received an
aggressive and sustained course of outpatient physical and occupational
therapy, at the time of discharge from the acute care hospital, he
still has considerable atrophy and weakness in his right quadriceps and
hamstring muscles such that he is unable to support his entire weight
on his right lower limb. He also has very restricted forward flexion in
his right shoulder so that he is limited to 15 degrees of forward
flexion. He has severe pain with weight-bearing through his upper limbs
in both shoulders. Since after surgery, he can only have partial
weight-bearing on his left lower limb, he requires
[[Page 53273]]
inpatient rehabilitation for daily occupational and physical therapy
sessions to strengthen his right lower limb to bear his entire weight
and to improve the function of both shoulders as well as therapy for
his joint replacement.
(2) A patient undergoes emergency coronary artery bypass graft
surgery for sudden onset of ischemic chest pain (unstable angina)
unresponsive to medical management. During the operation she suffers a
stroke and wakes up after surgery unable to speak, swallow, or move her
right arm and leg. Over the next several days, she regains some partial
movements in her leg and arm with minimal speech return. At the time of
discharge, she still has significant weakness of the right arm and leg
such that she is unable to walk without a walker and therapist by her
side and she is unable to make coordinated movements with her right arm
to feed and dress herself. She also cannot swallow liquids and solid
food without choking spells. She, therefore, requires inpatient
rehabilitation of at least 3 hours daily of physical therapy to
strengthen her leg and arm, occupational therapy to improve right arm
and hand coordination for activities of daily living (that is, eating,
dressing, transfer, and bathing), and speech therapy to learn how to
swallow her meals without choking.
Examples of Clinical Scenarios That Would Not Be Included Under This
Policy
(1) A patient with a motor polyneuropathy who wears an ankle foot
orthosis on the right lower limb elects to undergo a knee replacement
due to severe osteoarthritis of the knee. Although the rehabilitation
of the knee replacement may be complicated by the polyneuropathy, this
patient would not be counted as satisfying the proposed change in Sec.
412.23(b)(2)(i) because the comorbidity does not, by itself, require
intensive inpatient rehabilitation.
(2) A patient had a stroke 5 years ago with residual weakness and
lack of motor control in the left lower leg and that requires the use
of a walking cane. She is involved in a car accident and undergoes
surgery for a broken bone in her right arm (humerus) and a broken bone
in her right ankle. At the time of discharge 2 days later, her dominant
arm (right) is immobilized so she still has difficulty feeding herself
and transferring from bed to chair. Also, she must learn to use a
rolling walker because she cannot bear weight on her right leg and she
can't reach the handle on her cane with her immobilized right arm.
Although the rehabilitation of the right arm and right foot fracture
may be complicated by the stroke, this patient would not be counted as
satisfying the proposed change in Sec. 412.23(b)(2)(i) because the
comorbidity does not, by itself, require intensive inpatient
rehabilitation. She has no caregiver (family or friend) support person
at home so she is transferred to a skilled nursing facility where, over
the next 5 days, she receives a daily physical therapy session to learn
how to ambulate with a rolling walker and she receives a daily
occupational therapy session to learn how to feed herself with her non-
dominant left hand. She is then discharged home for follow-up with
Outpatient Rehabilitation Therapy.
2. Proposed Alternative Methodology
As stated in the May 16, 2003 proposed rule (68 FR 26794), our
analysis indicated the largest group of patients treated in IRFs that
was not considered as matching one of the 10 conditions in the existing
75 percent rule is patients with major joint replacements, specifically
knee and hip replacements. Thus, as an alternative to the proposed
methodology above, we are also proposing an approach that would only
apply to patients admitted to an IRF after hip or knee replacements.
Under this alternative approach, only admissions to an IRF that are
post-operative hip or knee joint replacements cases would be considered
to count towards meeting the proposed 65 percent rule if the case also
had a comorbidity that matches one or more of the 12 proposed
conditions in proposed Sec. 412.23(b)(2)(iii). Specifically, under
this method we would count a case as meeting the proposed 65 percent
rule if the patient matched all of the following criteria:
[sbull] Was postoperative following one or more hip or knee joint
replacements that immediately preceded the transfer to an IRF.
[sbull] Had a condition at time of admission to an IRF that was
complicated by an active comorbidity specified in proposed Sec.
412.23(b)(2)(iii).
[sbull] Had an active comorbidity that resulted in a decline in the
patient's function beyond the decline generally observed for other
patients in that impairment category.
[sbull] Had an active comorbidity that substantially complicated
the patient's rehabilitation to the point that it would improve only
with the intensive, multidisciplinary rehabilitation treatment that is
unique to inpatient rehabilitation facilities and that could not be
performed in another setting (for example, skilled nursing facility,
inpatient hospital, home health, or outpatient).
D. Ongoing Assessment of Implementing the Proposed Policies and
Potential Scheduled Phase-Out of the Proposed Policies
In proposing these changes to the criteria for classifying
hospitals as IRFs, our intent is to clarify the conditions typically
requiring intensive inpatient rehabilitation therapy under the IRF PPS.
These proposals do not represent an expansion of existing coverage
criteria, but provide clear, clinically meaningful guidance on the
conditions that are most appropriately treated in IRFs as distinguished
from care furnished in other settings.
The policy changes proposed in this rule represent one of the next
steps in an ongoing process since the May 16, 2003 proposed rule and
the May 19, 2003 Town Hall meeting to identify potential policy changes
to enhance the effectiveness of the IRF PPS. We are aware of the
intricacies of implementing these changes to the IRF compliance
criteria, both in terms of the time needed for providers to make any
necessary adjustments to their operations and in the risk of
unanticipated changes impacting providers, beneficiaries, and the
Medicare program.
Comments received on the proposed change to the compliance
percentage and on the proposed clinical criteria to determine
compliance will be an important step in our planned ongoing assessment
of the effect these proposed changes may have on--
[sbull] The IRF industry; and
[sbull] The Medicare beneficiaries who require rehabilitative care.
The final rule will reflect all relevant comments received and
relevant data obtained through the comment period that may result in us
adopting the proposed policies or adopting alternative policies.
As part of the next step in our ongoing assessment, during the 3-
year period after the final rule is effective, we intend to closely
review both claims and patient assessment data to examine trends in
admissions and overall utilization in IRFs. These analyses will allow
us to monitor and evaluate the effect the policies adopted in the final
rule had on utilization and beneficiary access. Specifically, we will
use these data to determine the effectiveness that the adopted final
policies had in achieving the objectives stated in this proposed rule,
and we will assess the need for any future policy development related
to provider compliance. Also, we will review whether the adopted
[[Page 53274]]
final policies (including considering comorbidities in determining
compliance if we adopt that policy) have led to significant shifts in
the site of treatment of beneficiaries with particular conditions, and
whether the adopted final policies have led to inadvertent and
substantial expansions in either the number of IRFs or in aggregate
utilization and expenditures.
In addition, we are encouraging rehabilitation professionals, the
rehabilitation industry, researchers, academia, and other relevant
sources to consider the 3-year period after the effective date of the
final rule as an opportunity to conduct literature reviews, clinical
studies, and other objective analyses so that we may be better informed
about the situations in which patients require the intensive inpatient
rehabilitation treatment available in an IRF compared to other
settings. Furthermore, during this 3-year period, we plan to seek
information and obtain data from rehabilitation experts, the
rehabilitation industry, researchers, academia, and other relevant
sources. The data we plan to obtain include clinical data, data from
clinical outcomes analyses, and data from well-designed analytical
studies specific to rehabilitative care. We believe that significant,
objective data obtained from these sources would be informative as we
deliberate whether changes to the clinical criteria and/or to the
compliance percentage adopted in the final rule are justified.
However, no later than 3 years after the effective date of our
final rule, in the absence of any significant, objective data as
described above, we are proposing to change the classification criteria
under proposed Sec. 412.23(b)(2)(ii) as follows: In place of the
proposed 65 percent compliance threshold discussed in section II.A., we
would determine compliance by verifying that 75 percent of all
inpatients have one of the 12 proposed conditions listed in proposed
Sec. 412.23(b)(2)(iii), and we would phase-out the use of the proposed
comorbidity compliance policy discussed in section II.C. If, as we
anticipate, the effective date of the final rule will apply to cost
reporting periods that begin on or after January 1, 2004, this proposed
change to the classification criteria, as noted below, would be
effective for cost reporting periods beginning on or after January 1,
2007. Accordingly, the proposed changes specified in proposed Sec.
412.23(b)(2)(ii) would occur automatically for cost reporting periods
beginning on or after January 1, 2007 unless before that date we
propose new criteria to determine compliance or validate the criteria
as adopted in our final rule for identifying an IRF based on the data
that CMS has obtained over the preceding 3 years including data from
rehabilitation experts, the rehabilitation industry, researchers,
academia, or other relevant sources.
As a future step in our ongoing assessment, we plan every 3 years
after the initial 3 year assessment described above, to obtain
objective updated clinical data from relevant sources and, if
appropriate and justified, we may propose changes to the clinical
criteria and/or the compliance percentage based on that updated data.
E. Proposed Change to the Time Period To Determine Compliance
Except for new IRFs, Sec. 412.23(b)(2) for freestanding IRFs and
Sec. 412.30 for IRF converted/expanded units would require the use of
the most recent 12-month cost reporting period to determine if the IRF
was compliant with existing Sec. 412.23(b)(2). In addition, existing
Sec. 412.23(i) and Sec. 412.25(f) state that the classification of a
hospital or unit, respectively, is effective for the hospital's or
unit's entire cost reporting period and that any changes in the
classification of a hospital or unit are made only at the start of a
cost reporting period. We believe that the application of both of these
regulations has resulted in much confusion as to the data used to
determine compliance with existing Sec. 412.23(b)(2). For example, if
an IRF's cost reporting period begins January 1, 2005 and ends December
31, 2005, this period would represent the most recent 12-month cost
reporting period used to determine if the classification of the IRF is
correct for the next cost reporting period that begins on January 1,
2006 in accordance with existing Sec. 412.23(b)(2) and Sec. 412.23(i)
or Sec. 412.25(f). However, the process of reviewing the data, making
a determination of compliance with existing Sec. 412.23(b)(2), and
notifying the IRF of its non-compliance (and de-certification as an
IRF) may take at least 3 to 4 months. Therefore, in order to make a
determination of compliance and implement any changes before the start
of the January 1, 2006 cost reporting period, data for only the first 8
to 9 months from the most recent 12-month cost reporting period would
be available.
In order to have the proposed regulation more precisely reflect the
necessary operational procedures of our FIs, we are proposing to change
Sec. 412.23(b)(2), Sec. 412.30(c), and Sec. 412.30(d)(2)(ii) to
specify that data from the most recent, consecutive, and appropriate
12-month period of time be used to determine compliance with the
proposed policies set forth in this proposed rule. Accordingly, using
the example above, the last 3 to 4 months of data from the cost
reporting period ending December 31, 2004, and the first 8 to 9 months
of data from the cost reporting period ending December 31, 2005, could
be used (for a total of 12-months of data from the most recent,
consecutive, and appropriate period of time) to determine compliance
with the proposed policies set forth in this proposed rule. These time
periods may be different depending on the workload of the FIs and CMS
Regional Offices. We believe that this change will give FIs and CMS
Regional Offices the flexibility to make a determination and give the
IRF sufficient time to adjust to any Medicare de-certification action.
We are not proposing to make a similar change to the regulatory
policies for new freestanding IRFs or new IRF units, because they can
provide written certification for the first full 12-month cost
reporting period after Medicare certification that they intend to meet
the requirements of proposed Sec. 412.23(b)(2).
The intent of this proposed change is to ensure that the patient
data used to determine compliance with the requirements of proposed
Sec. 412.23(b)(2) are from the most recent, consecutive, and
appropriate 12-month period of time. However, we recognize that 12
months of patient data for the initial cost reporting periods affected
by these proposed changes will be from a period that is before the
effective date of the final rule. Therefore, it will be necessary to
institute a transition period for those cost reporting periods where
the most recent 12-month period of time includes admissions that occur
before the effective date of the final rule. Accordingly, to ensure
that admissions that occur before the effective date of the final rule
are not counted in an IRF's compliance percentage, the FIs and affected
IRFs will be given the specific procedures regarding what time period
the FIs will use to verify compliance during the transition from the
existing requirements at Sec. 412.23(b)(2) to the proposed changes
specified in proposed Sec. 412.23(b)(2).
F. General FI Operational Instructions
We will take the necessary action to ensure that the proposed
compliance policies are consistently enforced on IRFs across all FIs.
We will issue instructions to the FIs and provide guidance to the
clinical/medical FI personnel responsible for performing the compliance
reviews to ensure that they use a method that consistently counts only
cases with a diagnosis that both serves as the basis for the intensive
rehabilitation services that the IRF
[[Page 53275]]
would furnish, and meets one of the medical conditions specified in
proposed Sec. 412.23(b)(2)(iii). In addition, as discussed in section
II.A, we plan to instruct the FIs in the use of a presumptive
eligibility test for verifying compliance with proposed Sec.
412.23(b)(2)(i) that includes only Medicare cases determined to be
``reasonable and necessary.''
G. Conclusion
We believe that the changes we are proposing to Sec. 412.23(b)(2)
will help ensure the following:
[sbull] The incentives are appropriate for IRFs to admit patients
that need and would benefit the most from intensive inpatient
rehabilitation.
[sbull] The preservation of access to intensive inpatient
rehabilitation services.
[sbull] IRFs provide distinct services and continue to be
compensated with payment rates appropriate for their type of facility.
[sbull] The most prudent use of Medicare funds.
[sbull] More consistent implementation and enforcement by
specifying more clearly what conditions are included in proposed Sec.
412.23(b)(2).
III. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995.
IV. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and, if we proceed with a subsequent
document, we will respond to the major comments in the preamble to that
document.
V. Regulatory Impact Analysis
A. Introduction
In this proposed rule, we are proposing changes to the 75 percent
rule for IRFs. Specifically, we are proposing that 65 percent of all
patients treated in an IRF meet one of the proposed specified
conditions, as discussed earlier in this preamble. We are also
proposing to count comorbidities under certain conditions, as specified
in this preamble, towards meeting the proposed 65 percent rule.
We have examined the impacts of this proposed rule as required by
Executive Order 12866 (September 1993, Regulatory Planning and Review),
the Regulatory Flexibility Act (RFA), (September 16, 1980, Pub. L. 96-
354), section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
B. Executive Order 12866
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more).
In this proposed rule, we are proposing changes to the 75 percent
rule as described above. We estimate the savings to the Medicare
program would be greater than $100 million. Therefore, this proposed
rule would be considered a major rule.
C. Regulatory Flexibility Act (RFA) and Impact on Small Hospitals
The RFA requires agencies to analyze the economic impact of our
regulations on small entities. If we determine that the regulation will
impose a significant burden on a substantial number of small entities,
we must examine options for reducing the burden. For purposes of the
RFA, small entities include small businesses, nonprofit organizations,
and governmental agencies. Most hospitals are considered small
entities, either by nonprofit status or by having receipts of $6
million to $29 million in any 1 year. (For details, see the Small
Business Administration's regulation, at 65 FR 69432, that set forth
size standards for health care industries.) Because we lack data on
individual hospital receipts, we cannot determine the number of small
proprietary IRFs. Therefore, we assume that all IRFs are considered
small entities for the purpose of the analysis that follows. Medicare
fiscal intermediaries and carriers are not considered to be small
entities. Individuals and States are not included in the definition of
a small entity. Accordingly, we have determined that this proposed rule
would have a significant impact on a substantial number of small
entities.
Section 1102(b) of the Act requires us to prepare a regulatory
impact analysis for any rule that will have a significant impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area (MSA) and has fewer than 100 beds. This proposed rule
would have a significant impact on the operations of small rural
hospitals.
D. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in an expenditure in any 1 year by
State, local, or tribal governments, in the aggregate, or by the
private sector, of at least $110 million. This proposed rule would not
have a substantial effect on the governments mentioned, or on private
sector costs.
E. Executive Order 13132
We examined this proposed rule in accordance with Executive Order
13132 and determined that it would not have a substantial impact on the
rights, roles, or responsibilities of State, local, or tribal
governments.
F. Overall Impact
For the reasons stated above, we have prepared an analysis under
the RFA and section 1102(b) of the Act because we have determined that
this proposed rule is a major rule and the proposed policies set forth
in this proposed rule would have a significant impact on all IRFs
(small entities and small rural hospitals).
G. Anticipated Effects of the Proposed Rule
One of the primary purposes of the regulatory impact analysis is to
understand the effects policies would have on facilities. As we analyze
the impacts of our proposed policies, we assess the extent to which
these policies may unduly harm facilities. If there is evidence that we
are unduly harming facilities, we make attempts to mitigate these
effects, while ensuring that the proposed policies are fair and achieve
the intended policy objectives. The intent of the policy objective of
proposed Sec. 412.23(b)(2) and of other policy criteria for IRFs is to
ensure the distinctiveness of facilities providing intensive
rehabilitative services in an inpatient setting. The distinctiveness of
these facilities is what justifies paying them under a separate payment
system
[[Page 53276]]
as opposed to under another payment system, such as the acute care
IPPS, which may not adequately compensate these facilities for the
intensive rehabilitative services they are to provide. We believe it is
crucial to ensure that IRFs are indeed providing intensive
rehabilitation so that we pay for these services appropriately under
the IRF PPS. In addition, we believe it is imperative to identify
conditions that would ``typically require intensive inpatient
rehabilitation'' in IRFs because rehabilitation in general can be
delivered in a variety of settings such as acute care hospitals,
skilled nursing facilities, outpatient or home health.
This policy objective is not new. However, the manner in which the
existing regulations have been implemented and enforced may not have
enabled CMS to accomplish these objectives to the extent we hoped. The
policies set forth in this proposed rule are intended to accomplish
these same policy objectives, clarify interpretational issues that have
led to inconsistent implementation, and improve the extent to which
IRFs can admit patients that would need and benefit from intensive
inpatient rehabilitative services. Therefore, although the impacts of
the proposed policy changes shown below illustrate that IRFs may
experience reduced Medicare payments from these proposed policies, we
believe the impacts would show a greater reduction in Medicare payments
to IRFs if the existing policies were more effectively enforced.
We discuss below the Medicare impact of this proposed rule on IRFs.
We used the following data and assumptions to estimate the impacts of
the proposed policies set forth in this preamble.
[sbull] As stated in section I.D. of this proposed rule, we used
patient assessment data from January to August 2002 to estimate
compliance with the 75 percent rule in the May 16, 2003 proposed rule.
We are using the same patient assessment data to construct the impact
analysis set forth in this proposed rule.
[sbull] We used data described in the report titled Case Mix
Certification Rule for Inpatient Rehabilitation Facilities'', published
in May 2003, developed by the Rand Corporation. This report states, on
page XIV, that 70 percent of all cases treated in IRFs are those of
Medicare beneficiaries.
[sbull] In addition to Medicare patients, this proposed rule may
have an effect on the 30 percent, or approximately 200,000, of the
cases in IRFS that are non-Medicare. While there are numerous
approaches a facility might take, and it is impossible to predict
either the specific course of treatment or the financial impact, the
facility could change both its Medicare and non-Medicare case mix in
order to remain an IRF.
[sbull] We used regression results from page 25 of the Rand report
to estimate that the percentage of total cases that meet the specified
conditions for each IRF will be approximately 5 percent more than the
percentage of Medicare cases that meet the specified conditions.
However, other than an estimate of the size of the non-Medicare
population in this proposed rule may affect, CMS does not have enough
information to quantitatively estimate the impact to non-Medicare IRF
cases, and encourages comments on this issue.
[sbull] 10 percent of the cases that did not meet the proposed
criteria would meet the proposed criteria due to more accurate coding
and removing the moratorium of the classification rule.
[sbull] 10 percent of the cases that did not meet the proposed
criteria with the limited Medicare administrative data used in our
analysis would meet the proposed criteria using more extensive medical
record data.
[sbull] The diagnosis listed in Appendix A in the ``Case Mix
Certification Rule for Inpatient Rehabilitation Facilities'' report,
published in May 2003, developed by Rand identified cases that would
meet the 75 percent rule. The report showed that a large number of
cases with possible arthritis-related joint replacements did not meet
the 75 percent rule. We believe that the proposed changes to the
conditions related to arthritis in this proposed rule may increase the
number of these cases that would count towards meeting the proposed 75
percent rule over those cases shown in the RAND report. However, it is
difficult to determine the exact number of joint replacement cases that
would meet the proposed criteria without extensive medical record data.
Therefore, to estimate the impacts on the various classifications of
IRFs shown in Chart 1, we chose the assumption that 35 percent of the
joint replacement cases would meet the proposed clinical criteria as
set forth in this proposed rule.
[sbull] We assume that a percentage of Medicare cases being
admitted under the current practices would not be admitted to an IRF
under the proposed criteria. We believe that these cases would be
admitted or treated in extended hospital inpatient stays, outpatient
departments, or other post acute care settings. We estimated that it
would be equally possible that the cases not admitted to IRFs may be
treated in inpatient hospitals, outpatient departments, or home health
care settings. We found that approximately 80 percent of IRFs are units
within a hospital complex and that approximately 60 percent of these
hospital complexes include a skilled nursing facility. Accordingly, we
estimated that skilled nursing facilities will have a higher
possibility than other settings to absorb the cases not admitted to
IRFs. Since long term care hospitals need to meet the average 25-day
length of stay requirement and the average IRF length of stay is 14
Days, we estimated that long term care hospitals will absorb a smaller
portion of the cases not admitted to IRFs.
Based on the above assumptions and the average payments for their
respective settings, we have estimated that the average payment for
these hospital inpatient, outpatient, and other post acute care
settings to be approximately $7,000 per case. Thus, for Medicare
patients, the difference between the IRF standardized payment per case
($12,525) and the estimated average per case amount for hospital
inpatient, outpatient, and other post acute care settings ($7,000)
results in a net savings to the Medicare program of approximately
$5,525 per case.
Note that this result also depends on the assumption that all IRFs
will continue to want to be classified as an IRF and admit those
patients that will allow them to meet the proposed changes set forth in
this proposed rule.
1. Impact Summary
Dependent on the range of assumptions related to joint replacement
cases described above, we project a proposed net savings to the
Medicare program between $42 million and $161 million. Specifically,
the estimated net savings would be $161 million if we assume that 20
percent of joint replacement cases meet the proposed criteria, $98
million if 35 percent of joint replacement cases meet the proposed
criteria, and $42 million if 60 percent of joint replacement cases meet
the proposed criteria. This net savings to Medicare would be a net loss
of Medicare payments to IRFs or facilities that contain both an IRF and
an alternative treatment facility. Some alternative treatment
facilities, however, would experience an increase in Medicare payments
if they experience a net increase in cases.
2. Calculation of Impacts
To determine the estimated effects of implementing the policies in
this proposed rule, we have developed Chart 1 to show the estimated
impact on the
[[Page 53277]]
Medicare program among various classifications of IRFs. Chart 1 assumes
the middle estimate that 35 percent of joint replacement cases meet the
proposed criteria. The columns in Chart 1--Projected Impact of the
Proposed Changes to the 75 percent Rule on the Medicare Program are
defined as follows:
[sbull] The first column, Facility Classification, identifies the
type of facility. Where data were not available to classify an IRF into
a category, the IRF was identified as ``missing'' in the first column.
[sbull] The second column identifies the number of facilities for
each classification type.
[sbull] The third column lists the estimated number of Medicare
cases admitted to IRFs under the existing policies. We estimated the
number of Medicare cases from 8 months worth of post-IRF PPS data (the
available data at the time the analysis was done) to represent an
annual number of Medicare cases.
[sbull] The fourth column, Ratio of Medicare Cases Not Admitted,
represents an estimate of the percentage of Medicare cases that would
no longer be treated in an IRF due to the proposed policies set forth
in this proposed rule.
[sbull] The fifth column represents the Ratio of All Setting Cost/
Savings to IRF Medicare Payments. To estimate this amount we divide the
All Setting Cost/Saving in Millions in column six by the Current IRF
Medicare Payments in Millions in column eight.
[sbull] The sixth column, All Setting Cost/Saving in Millions,
indicates the savings impact to the Medicare program. To estimate the
savings, we consider that some Medicare cases would possibly be treated
in other settings and those settings would be paid accordingly. The
following steps illustrate how we estimate this amount.
[sbull] Step 1--First we estimate the number of Medicare cases that
may not be admitted to IRFs by multiplying the percentage in column
four, Ratio of Medicare Cases Not Admitted, by the Total Medicare Cases
reflected in column three.
[sbull] Step 2--We then take the number of cases calculated in the
Step 1 and multiply these cases by $12,525 (the standardized FY 2004
payment amount) to determine the estimated Medicare impact to IRFs.
[sbull] Step 3--Then we estimate the amount of Medicare payments
that these cases may generate in other settings. Specifically, we
multiply $7,000 by the number of Medicare cases estimate in the Step 1
(the number of Medicare cases that may not be admitted to IRFs).
[sbull] Step 4--Then we subtract the total amount calculated in
Step 3 by the total amount calculated in Step 2 in order to estimate
the total savings to the Medicare program.
[sbull] The seventh column, IRF Medicare Payment Impact in
Millions, shows the estimated Medicare impact specific to IRFs. We
calculate this estimate by multiplying the percentage of Medicare cases
that will not be admitted shown in column four by the Total Medicare
Cases shown in Column three and determine the number of Medicare cases
that will not be admitted to IRFs. We then take the total number of
Medicare cases that will not be admitted to IRFs and multiply it by
$12,525 to estimate column seven, IRF Medicare Payment Impact in
Millions.
[sbull] The eighth column, Current IRF Medicare Payments in
Millions, is the number of Medicare cases reflected in column three
multiplied by $12,525.
[sbull] The ninth column, Projected IRF Medicare Payments in
Millions, reflects the estimate of the total Medicare payments IRFs may
receive as a result of the policies set forth in this proposed rule.
This amount is calculated by subtracting the estimate of the IRF
Medicare Payment Impact in Millions (column seven) from the estimate of
the Current IRF Medicare Payments in Millions (column eight).
Chart 1.--Projected Impact of the Proposed Changes to the 75 Percent Rule on the Medicare Program
--------------------------------------------------------------------------------------------------------------------------------------------------------
In millions
Ratio of Ratio of all ---------------------------------------------------
Total Total Medicare setting cost/ IRF Projected
Facility classification number of Medicare cases not saving to IRF All setting Medicare Current IRF IRF
IRF cases admitted Medicare cost/saving payment Medicare Medicare
payments impact payments payments
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9
-----------------------------------------------
Total................................... 1,170 459,682 4% -2% -98 -223 5,758 5,534
------------
Census:
1: New England............................ 38 20,133 6% -3% -7 -16 252 236
2: Middle Atlantic........................ 170 87,639 7% -3% -35 -80 1,098 1,018
3: South Atlantic......................... 143 75,808 2% -1% -10 -23 949 926
4: East North Central..................... 220 74,361 3% -1% -13 -29 931 903
5: East South Central..................... 66 35,764 3% -1% -6 -13 448 435
6: West North Central..................... 99 26,672 2% -1% -2 -6 334 328
7: West South Central..................... 235 87,206 4% -2% -17 -39 1,092 1,054
8: Mountain............................... 78 24,522 5% -2% -7 -17 307 290
9: Pacific................................ 121 27,577 0% -0% 0 -1 345 344
============
Free Standing/Unit Facility:
Free...................................... 214 165,593 5% -2% -49 -111 2,074 1,963
Unit...................................... 956 294,089 3% -1% -50 -113 3,683 3,571
Teaching Status:
Missing................................... 180 37,039 3% -2% -7 -16 464 448
Non-teaching.............................. 845 344,216 4% -2% -70 -158 4,311 4,154
Teaching.................................. 145 78,427 5% -2% -22 -50 982 933
DSH:
<0.05..................................... 226 80,921 5% -2% -23 -51 1,014 962
=0.2........................... 145 45,549 2% -1% -4 -9 571 562
0.05-0.1.................................. 339 161,550 5% -2% -41 -92 2,023 1,932
0.1-0.2................................... 313 143,173 3% -1% -26 -60 1,793 1,734
Missing................................... 147 28,489 3% -1% -5 -12 357 345
Facility Control:
Government................................ 135 38,942 2% -1% -4 -9 488 478
Missing................................... 76 10,264 4% -2% -2 -5 129 123
Proprietary............................... 259 140,311 5% -2% -40 -90 1,757 1,667
Voluntary................................. 700 270,165 3% -2% -52 -118 3,384 3,266
[[Page 53278]]
Urban/Rural:
Large Urban............................... 493 209,489 4% -2% -48 -109 2,624 2,515
Missing................................... 103 18,881 4% -2% -4 -10 236 227
Other Urban............................... 404 188,494 4% -2% -42 -95 2,361 2,266
Rural..................................... 170 42,818 2% -1% -4 -9 536 527
Size:
Large..................................... 201 172,951 5% -2% -43 -99 2,166 2,068
Medium.................................... 502 198,451 4% -2% -41 -93 2,486 2,393
Missing................................... 158 31,400 3% -1% -5 -12 393 381
Small..................................... 309 56,880 3% -1% -9 -20 712 693
Size by Free Standing/Unit Facility:
Free:
Large................................... 74 91,409 6% -2% -28 -64 1,145 1,081
Medium.................................. 71 53,640 6% -3% -17 -38 672 633
Missing................................. 38 10,817 4% -2% -3 -6 135 130
Small................................... 31 9,727 2% -1% -1 -2 122 120
Unit:
Large................................... 127 81,542 3% -1% -15 -34 1,021 987
Medium.................................. 431 144,811 3% -1% -24 -54 1,814 1,759
Missing................................. 120 20,583 2% -1% -3 -6 258 252
Small................................... 278 47,153 3% -1% -8 -18 591 573
Chart 1 breaks down the Medicare impacts into many categories that
should serve to inform the public and interested parties of the
different types of impacts of the changes in this proposed rule. As
column seven in Chart 1 shows, IRFs are expected to experience a
reduction in Medicare payments from the proposed rule of approximately
$223 million, with a net savings to Medicare of approximately $98
million for all Medicare providers. Applying the different assumptions
regarding qualifying joint replacement cases yields a Medicare impact
range of $42 million (60 percent qualifying) to $161 million (20
percent qualifying).
For the purposes of the RFA analysis, the next few paragraphs
discuss IRF impacts in more detail, and regulatory alternatives
considered by CMS to explore the impact of different options on IRFs.
There are distributional impacts among various IRFs due to existing
levels of compliance. The expected Medicare savings is due to the
percentage of patients admitted to IRFs that fall outside the
identified conditions in relation to what IRFs would be paid in FY 2004
for all Medicare discharges assuming status quo (varying levels of
compliance to the existing 75 percent rule). As we previously stated in
this proposed rule, although the impacts of the proposed policy changes
illustrate IRFs may experience a reduction in payments, we believe the
impacts would show a greater reduction in payments to IRFs if the
existing policies were more effectively enforced. Further, we believe
this reduction in Medicare payments is appropriate given the existing
policy objectives described above.
Because this rule is likely to have a significant impact on all
IRFs based on the RFA guidelines, we will discuss the alternative
changes to the 75 percent rule that we considered.
One option (Option A) would have been to consider all cases in
rehabilitation impairment categories (RICs) 1-19 and 21 as cases that
could be counted towards the 75 percent rule. This would leave only
miscellaneous cases (RIC 20) as cases that would not be considered to
satisfy the requirements in proposed Sec. 412.23(b)(2). The result
would have been that all existing IRFs would not only meet the
standard, but that they would have almost no restrictions on the type
of cases that they would admit. The intent of the policy specified in
proposed Sec. 412.23(b)(2) is to ensure that IRFs are unique compared
to other hospitals in that they provide intensive rehabilitative
services in an inpatient setting. The uniqueness of these facilities
justifies paying them under a separate payment system rather than
paying them with the same payment system for acute care inpatient PPS.
Thus, we believe it is crucial to Medicare to maintain criteria
ensuring that only facilities providing intensive rehabilitation are
identified as IRFs. In addition, we believe that it is imperative to
identify conditions that would typically require intensive inpatient
rehabilitation in IRFs because rehabilitation, in general, can be
delivered in a variety of other settings.
We have estimated that the average occupancy rate of all IRFs is
approximately 70 percent. If we were to implement option A, we believe
that IRFs with available capacity would increase their occupancy rate
because, as stated above, IRFs would have almost no restrictions on the
type of cases that they would admit. The following estimated effects of
implementing option A on the Medicare program assumes that IRFs would
increase their Medicare cases using the present ratio of 70 percent
Medicare beneficiaries to total patients. Thus, we estimate that in the
first year of implementing option A it would cause an increase in IRF
Medicare payments, and would cost the Medicare program, an additional
$2.7 billion dollars if occupancy increased to 100 percent, $1.9
billion if occupancy increased to 90 percent, and $1.2 billion if
occupancy increased to 80 percent. This range of additional costs to
the Medicare program represents up to 50 percent more than the current
total IRF Medicare expenditures.
A variant of option A is option B which would add joint
replacements, cardiac, pulmonary, pain, and cancer patients to the list
of conditions, as discussed previously in this preamble in section
II.A., which would also result in a significant impact on Medicare
[[Page 53279]]
expenditures and IRF Medicare payments. If we were to implement option
B, using the same assumptions described in option A, we estimate it
would have cost the Medicare program approximately $940 million dollars
in the first year.
Another option (Option C) would be to retain the compliance
percentage requirement at 75 percent, rather than lowering it to 65
percent, but recognize the comorbidities as proposed in section II.C.
of this proposed rule. This option is similar to enforcement of the
current policy and, thus, would further reduce Medicare payments to all
IRFs over the policies proposed in this rule. Specifically, total
estimated savings to Medicare from all IRFs would be increased from the
range of $42 to $161 million (under the proposed policies) to the range
of $154 to $357 million if we proposed 75 percent.
Another option (Option D) that we considered, similar to option C,
was to allow a comorbidity to count only for hip and joint replacement
patients as discussed previously in section II.C. of this proposed
rule. If the compliance requirement were to be held at 75 percent along
with this policy, the estimated reduction in Medicare payments for IRFs
and savings to Medicare would be approximately the same as in option C.
We believe that the proposed changes to the clinical criteria are
adequate to make the distinction of the intensive inpatient
rehabilitation provided in IRFs from rehabilitation services provided
in other settings, unlike the first alternative described above. In
addition, while the proposed changes to the clinical criteria and the
reduction in the compliance percentage to 65 percent do have a
significant impact on Medicare payments to IRFs ($42 to $161 million),
they are not as significant as the impact of the other alternatives
described above. It is also important to note, as previously mentioned
in section V.G., that approximately 80 percent of IRFs are units within
a hospital complex and that approximately 60 percent of these hospital
complexes include a skilled nursing facility. Thus, a majority of
hospital complexes (including rural hospitals) that maintain an IRF
unit may experience an increase in Medicare payments from the proposed
changes in this proposed rule in other settings within the complex.
In accordance with the provisions of Executive Order 12866, this
proposed rule was reviewed by the Office of Management and Budget
(OMB).
List of Subjects in 42 CFR Part 412
Administrative practice and procedure, Health facilities, Medicare,
Puerto Rico, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV, part 412 as
set forth below:
PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL
SERVICES
1. The authority citation for part 412 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart B--Hospital Services Subject to and Excluded From the
Prospective Payment Systems for Inpatient Operating Costs and
Inpatient Capital-Related Costs
2. In Sec. 412.23, paragraph (b)(2) is revised to read as follows:
Sec. 412.23 Excluded hospitals: Classifications.
* * * * *
(b) * * *
(2) Except in the case of a newly participating hospital seeking
classification under this paragraph as a rehabilitation hospital for
its first 12-month cost reporting period, as described in paragraph
(b)(8) of this section, a hospital must show that during its most
recent, consecutive, and appropriate 12-month time period (as defined
by CMS or the fiscal intermediary), it served an inpatient population
that meets the criteria under paragraph (b)(2)(i) or (b)(2)(ii) of this
section.
(i) For cost reporting periods beginning on or after January 1,
2004 and before January 1, 2007, the hospital has served an inpatient
population of whom at least 65 percent required intensive
rehabilitative services for treatment of one or more of the conditions
specified at paragraph (b)(2)(iii) of this section. A patient with a
comorbidity, as defined at Sec. 412.602, may be included in the
inpatient population that counts towards the required 65 percent if--
(A) The patient is admitted for inpatient rehabilitation for a
condition that is not one of the conditions specified at paragraph
(b)(2)(iii) of this section;
(B) The patient has a comorbidity that falls in one of the
conditions specified at paragraph (b)(2)(iii) of this section; and
(C) The comorbidity has caused significant functional ability
decline in the individual such that, even in the absence of the
admitting condition, the individual would require the intensive
rehabilitation treatment that is unique to inpatient rehabilitation
facilities paid under subpart P of this part and which cannot be
appropriately performed in another care setting covered under this
title.
(ii) For cost reporting periods beginning on or after January 1,
2007, the hospital has served an inpatient population of whom at least
75 percent required intensive rehabilitative services for treatment of
one or more of the conditions specified at paragraph (b)(2)(iii) of
this section.
(iii) List of conditions.
(A) Stroke.
(B) Spinal cord injury.
(C) Congenital deformity.
(D) Amputation.
(E) Major multiple trauma.
(F) Fracture of femur (hip fracture).
(G) Brain injury.
(H) Neurological disorders, including multiple sclerosis, motor
neuron diseases, polyneuropathy, muscular dystrophy, and Parkinson's
disease.
(I) Burns.
(J) Active, polyarticular rheumatoid arthritis, psoriatic
arthritis, and seronegative arthropathies resulting in significant
functional impairment of ambulation and other activities of daily
living, which have not improved after an appropriate, aggressive, and
sustained course of outpatient therapy services or services in other
less intensive rehabilitation settings immediately preceding the
inpatient rehabilitation admission or which result from a systemic
disease activation immediately before admission, but have the potential
to improve with more intensive rehabilitation.
(K) Systemic vasculidities with joint inflammation, resulting in
significant functional impairment of ambulation and other activities of
daily living, which have not improved after an appropriate, aggressive,
and sustained course of outpatient therapy services or services in
other less intensive rehabilitation settings immediately preceding the
inpatient rehabilitation admission or which result from a systemic
disease activation immediately before admission, but have the potential
to improve with more intensive rehabilitation.
(L) Severe or advanced osteoarthritis (osteoarthrosis or
degenerative joint disease) involving three or more major joints
(elbow, shoulders, hips, or knees) with joint deformity and substantial
loss of range of motion, atrophy, significant
[[Page 53280]]
functional impairment of ambulation and other activities of daily
living, which have not improved after an appropriate, aggressive, and
sustained course of outpatient therapy services or services in other
less intensive rehabilitation settings immediately preceding the
inpatient rehabilitation admission but have the potential to improve
with more intensive rehabilitation. (A joint replaced by a prosthesis
no longer is considered to have osteoarthritis, or other arthritis,
even though this condition was the reason for the joint replacement.)
* * * * *
3. Section 412.30 is amended by--
A. Revising paragraph (c).
B. Revising paragraph (d)(2)(ii).
The revisions read as follows:
Sec. 412.30 Exclusion of new rehabilitation units and expansion of
units already excluded.
* * * * *
(c) Converted units. A hospital unit is considered a converted unit
if it does not qualify as a new unit under paragraph (a) of this
section. A converted unit must have treated, for the hospital's most
recent, consecutive, and appropriate 12-month time period (as defined
by CMS or the fiscal intermediary), an inpatient population meeting the
requirements of Sec. 412.23(b)(2).
* * * * *
(d) * * *
(2) * * *
(ii) A hospital may increase the size of its excluded
rehabilitation unit through the conversion of existing bed capacity
only if it shows that, for the hospital's most recent, consecutive, and
appropriate 12-month time period (as defined by CMS or the fiscal
intermediary), the beds have been used to treat an inpatient population
meeting the requirements of Sec. 412.23(b)(2).
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance)
Dated: July 16, 2003.
Thomas A Scully,
Administrator, Centers for Medicare & Medicaid Services.
Approved: July 22, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-22658 Filed 9-2-03; 3:37 pm]
BILLING CODE 4120-01-P