June 8, 2007

Inpatient Rehabilitation Facility Prospective Payment System & the 75% Rule

This memorandum, prepared by The Centers for Medicare and Medicaid  Services (CMS), gives an overview of the updated analysis of Medicare Inpatient Rehabilitation Facility (IRF). It is intended to help improve the understanding of Medicare's policies for IRFs and CMSs responsibilities in evaluating and managing these policies .

Medicare pays IRFs at a higher rate than other hospitals because IRFs are designed to offer specialized rehabilitation care to patients with the most intensive needs. CMS maintains criteria, such as the 75% rule, in order to distinguish between IRFs and acute inpatient hospitals that are paid under the inpatient hospital PPS (IPPS). CMSs primary concerns in managing the IRF payment system are ensuring that Medicare's payments are accurate and that beneficiaries have access to high quality care in the appropriate setting.

The new data illustrates that the ongoing implementation of the 75% rule continues to have the desired effect of ensuring that the most appropriate Medicare beneficiaries have access to are in IRFs, while those with lower acuity cases are increasingly being served in settings that are both less intensive and less costly.