Inpatient Rehabilitation: FY2025 Proposed Rule & IRF-PAI Updates

Written by Janet Patrick, Clinical Consulting Manager, McBee

The Centers for Medicare & Medicaid Services (CMS) released its proposed rule for Fiscal Year 2025 at the end of March 2024, outlining updates to Medicare payment policies and the Inpatient Rehabilitation Facility (IRF) Quality Reporting Program (QRP). This proposal is part of CMS’s routine process of updating regulations and seeking feedback before finalizing rules. The final rule is expected to be published in early August 2024, with implementation slated for October 1, 2024.

Proposed Updates to Medicare Payment Policies and Rates

Payment Rate Increase:

CMS proposes a 2.8% increase in IRF Prospective Payment System rates, driven by the updated IRF market basket. This change is estimated to result in a $255 million increase in payments across the field for FY 2025.

Outlier Threshold Adjustment:

The outlier threshold will be updated to maintain outlier payments at 3% of total payments. This adjustment ensures that high-cost cases continue to receive appropriate compensation without disproportionately affecting the overall payment pool.

Wage Index Updates:

The wage index will be revised using the latest Office of Management and Budget (OMB) statistical area delineations. This update will notably impact 54 rural counties, reclassifying them as urban.

To cushion the impact of wage index decreases, CMS proposes a permanent 5% cap on negative wage index changes, irrespective of the underlying causes.

There will be a three-year phase-out of the rural adjustment for IRFs transitioning from rural to urban status.

Proposed Changes to IRF Quality Reporting Program (QRP)

New Quality Reporting Measures:

Effective from October 1, 2026, for FY 2028, CMS plans to introduce four new items under the Social Determinants of Health category in the IRF Patient Assessment Instrument (IRF-PAI). These include questions on living situation, food and utility access.

Modification of Existing Measures:

The transportation question in the IRF-PAI will be revised to simplify responses and adjust the look-back period for more accurate reporting.

Removal of Existing Field:

CMS proposes to eliminate the admission class field (Item 14) from the IRF-PAI to streamline data collection.

Feedback on Future Measure Concepts:

CMS is actively seeking feedback on potential future measure concepts for the IRF QRP. These concepts include measures for vaccination composite, pain management and depression.

Development of a Five-Star Rating System

CMS is developing a five-star rating methodology for IRFs, aimed at helping consumers identify quality differences among providers quickly. This system is intended to foster competition and improve overall healthcare quality. CMS is soliciting industry feedback on the criteria for these measures to ensure the rating system is robust and effective.

CMS welcomes feedback on these proposed changes, emphasizing the importance of stakeholder input in refining and finalizing the rule. The comments received will be considered before the final rule is published.

The FY 2025 proposed rule for IRFs includes significant updates to payment rates, wage index adjustments and quality reporting measures. These changes are designed to enhance the accuracy of payments, reflect current economic conditions and improve the quality of care provided in IRFs. Stakeholders are encouraged to review the proposals and provide their feedback to help shape the final regulations.

Examining IRF-PAI Version 4.2

CMS has released the Inpatient Rehabilitation Facility Patient Assessment Instrument (IRF-PAI) Version 4.2, and while the changes from Version 4.0 may seem minimal at first glance, they are significant for accurate reporting and compliance.

Edits to Coding Instructions and Clarifications

CMS has made several edits to the coding instructions for existing IRF-PAI items. These changes provide additional clarity, making it easier to accurately code and report data. Some of these edits are subtle, but they are crucial for proper documentation and compliance.

To help users understand these updates, CMS has published a change table that compares the contents of IRF-PAI Version 4.0 with Version 4.2. This table highlights all the edits and updates, including:

• Updated Language: The change table specifies instances where language has been updated, explaining what was in the previous manual and what the new manual contains.
• New Guidance: It includes any new guidance or updates to current guidance, indicating new sections and providing explanations for these additions.
• Expanded Definitions: The manual now features an expanded chapter of terms and definitions, which offers additional clarity and helps with completing the IRF-PAI.
• Rationale for Changes: CMS has added rationales for certain items, explaining revisions for better clarity or to eliminate redundancy.
• Typographical Corrections: Any typographical errors identified in the previous version have been corrected.

It is highly recommended that users review the change table and compare the new manual with the previous version. Understanding these changes is vital for adapting practices and ensuring data is collected and reported accurately. Keeping abreast of these updates will help maintain compliance and improve the quality of data reported.

By familiarizing yourself with IRF-PAI Version 4.2 and the detailed change table, you can ensure that your reporting practices are up to date, accurate, and in line with CMS guidelines.

FY 2026 Annual Increase Factor Determination

Starting October 1, 2024, CMS will require the submission of IRF-PAIs for all patients, regardless of payer. This new requirement applies to all discharges occurring on or after this date. CMS will evaluate IRF-PAIs for Q4 of the calendar year 2024—from October 1, 2024, to December 31, 2024—to determine if an IRF meets the Annual Increase Factor (AIF) minimum data completion threshold, which mandates no less than 95% completion of IRF-PAI assessments.

For some facilities, this may seem minor if their assessment and data collection practices are consistent across all payer types. However, for others with varied practices depending on the payer, this change could present some challenges. It’s crucial not to be caught off guard by these new requirements.

Steps to Prepare:

1. Review Assessment and Data Collection Processes:
   • Examine how each patient is assessed.
   • Ensure that data collection methods are consistent and thorough across all payer types.
   • Verify that your EMR practices align with these new requirements.
2. Plan for Transitional Period:
   • Be prepared to submit IRF-PAIs for patients admitted before October 1, 2024, but discharged on or after this date.
   • Ensure all necessary assessments are completed for these transitional cases to achieve a fully compliant IRF-PAI submission to CMS.

Meeting the AIF minimum data completion threshold is critical for compliance and securing the annual increase factor. Failing to adapt your practices could lead to significant issues with data submission and potential penalties.

By planning and reviewing your current processes, you can work towards a smooth transition to these new requirements and maintain compliance with CMS regulations.

Click here to listen to our recent IRF Industry Insights webisode on the proposed rule and IRF-PAI updates