The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 amended the Medicare statute by placing limits on payments for patients discharged from IRFs. Amendments to the Social Security Act in 1983 established a PPS for hospitals, but specifically excluded most PAC settings. TEFRA remained the payment system for IRFs from 1982 to 2001. TEFRA reimbursed PAC providers on a cost basis, based on reasonable costs incurred while providing services. However, costs were limited to a base-line facility-specific target amount per discharge, which sometimes led to disparities in reimbursements between older and newer rehabilitation facilities.
Significant congressional action affecting reimbursement for IRFs since TEFRA includes the BBA of 1997, the BBRA of 1999, the BIPA of 2000, all of which are referenced in the Introduction and Background section of this report, and the Medicare, Medicaid, and SCHIP Extension Act (MMSEA) of 2007.
The BBA of 1997 (Public Law 105-33) required the development of PPS for PAC settings, including implementation of a PPS for medical rehabilitation hospitals by October 1, 2000. The BBRA of 1999 (Public Law 106-113) required the Secretary of HHS to use the discharge as the payment unit for IRFs and to establish classes of patient discharges by Functional Related Groups (FRGs). The BIPA of 2000 (Public Law 106-554) allowed rehabilitation facilities to elect how they wanted to be paid during the transition period between TEFRA and the IRF PPS.113
The IRF PPS utilizes information collected in the IRF-PAI to classify patients into distinct groups based on clinical characteristics and expected resource needs. Separate payments are calculated for each group, with adjustments for case and facility level.114 CMS' goal for facilities to qualify as an IRF under the PPS was that by July 1, 2008, at least 75% of the inpatients in the facility had to be being treated for at least one of a number of qualifying medical conditions.115 However, the Medicare, Medicaid, and SCHIP Extension Act of 2007 stipulated that CMS could set the compliance rate at no higher than 60%.
The Proposed Rule establishing the IRF PPS was published in the November 3, 2000 Federal Register. At the time the rule was published, HCFA entered into agreements with both the UBFA and CareData.com, Inc. to obtain UDSMR® and Clinical Outcomes System patient assessment data, both based on the Functional Independence Measure (FIM). In the Final Rule, published in the August 7, 2001 Federal Register, the agency, now the CMS,referred to this assessment data collectively as "FIM data."116 In the proposed rule, HCFA had proposed adoption of the MDS-PAC as the instrument to be used for patient assessment. However, following a comparison study of MDS-PAC with the FIM, and responding to concerns expressed about the length of time it took to complete the MDS-PAC and the burden of collecting data using a separate instrument, given that some facilities were already using the FIM for accreditation purposes, CMS announced in the Final Rule that the assessment instrument would be based on the FIM. The instrument was termed "a slightly modified version of the UDSMR patient assessment instrument", which was to be incorporated into the IRF-PAI to serve as the data collection instrument on which the PPS would be based.117
The Final Rule for a Prospective Payment System for Inpatient Rehabilitation Facilities was published August 7, 2001. In the rule, along with the announcement that the assessment instrument would be based on the Functional Independence Measure, HCFA wrote: "We have by no means abandoned our goal of ultimately establishing a common system to assess patient characteristics and care needs for all post-acute care services and pursing [sic] more integrated approaches to their payment and delivery."118
Electronic submission of data, using software provided by HCFA, was also required in the final rule. Assessment data was to be submitted via the Medicare Data Collection Network (MDCN). In compliance with the Paperwork Reduction Act, the "Notice of New System of Records," for the IRF PAI was published in the Federal Registeron November 9, 2001.119
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