[Federal Register Volume 79, Number 88 (Wednesday, May 7, 2014)]
[Proposed Rules]
[Pages 26308-26354]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10321]



[[Page 26307]]

Vol. 79

Wednesday,

No. 88

May 7, 2014

Part II





Department of Health and Human Services





-----------------------------------------------------------------------





Centers for Medicare & Medicaid Services





-----------------------------------------------------------------------





42 CFR Part 412





 Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for Federal Fiscal Year 2015; Proposed Rule

  Federal Register / Vol. 79 , No. 88 / Wednesday, May 7, 2014 / 
Proposed Rules  

[[Page 26308]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1608-P]
RIN 0938-AS09


Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for Federal Fiscal Year 2015

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would update the prospective payment rates 
for inpatient rehabilitation facilities (IRFs) for federal fiscal year 
(FY) 2015 (for discharges occurring on or after October 1, 2014 and on 
or before September 30, 2015) as required by the statute. We are also 
proposing to collect data on the amount and mode (that is, Individual, 
Group, and Co-Treatment) of therapy provided in the IRF setting 
according to therapy discipline, revise the list of impairment group 
codes that presumptively meet the ``60 percent rule'' compliance 
criteria, provide for a new item on the Inpatient Rehabilitation 
Facility-Patient Assessment Instrument (IRF-PAI) form to indicate 
whether the prior treatment and severity requirements have been met for 
arthritis cases to presumptively meet the ``60 percent rule'' 
compliance criteria, and revise and update quality measures and 
reporting requirements under the IRF quality reporting program (QRP). 
In this proposed rule, we also address the implementation of the 
International Classification of Diseases, 10th Revision, Clinical 
Modification (ICD-10-CM), for the IRF prospective payment system (PPS), 
effective when ICD-10-CM becomes the required medical data code set for 
use on Medicare claims and IRF-PAI submissions.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 30, 2014.

ADDRESSES: In commenting, please refer to file code CMS-1608-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-1608-P, P.O. Box 8016, Baltimore, MD 
21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-1608-P, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments ONLY to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey 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.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Gwendolyn Johnson, (410) 786-6954, for 
general information. Charles Padgett, (410) 786-2811, for information 
about the quality reporting program. Kadie Thomas, (410) 786-0468, or 
Susanne Seagrave, (410) 786-0044, for information about the payment 
policies and the proposed payment rates.

SUPPLEMENTARY INFORMATION: The IRF PPS Addenda along with other 
supporting documents and tables referenced in this proposed rule are 
available through the Internet on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Executive Summary

A. Purpose

    This proposed rule updates the payment rates for inpatient 
rehabilitation facilities (IRFs) for federal fiscal year (FY) 2015 
(that is, for discharges occurring on or after October 1, 2014, and on 
or before September 30, 2015) as required under section 1886(j)(3)(C) 
of the Social Security Act (the Act). Section 1886(j)(5) of the Act 
requires the Secretary to publish in the Federal Register on or before 
the August 1 that precedes the start of each fiscal year, the 
classification and weighting factors for the IRF prospective payment 
system's (PPS) case-mix groups and a description of the methodology and 
data used in computing the prospective payment rates for that fiscal 
year.

B. Summary of Major Provisions

    In this proposed rule, we use the methods described in the FY 2014 
IRF PPS final rule (78 FR 47860) to update the federal prospective 
payment rates for FY 2015 using updated FY 2013 IRF claims and the most 
recent available IRF cost report data. We are also proposing to collect 
data on the amount and mode

[[Page 26309]]

(that is, Individual, Group, and Co-Treatment) of therapy provided in 
the IRF setting according to therapy discipline, revise the list of 
impairment group codes that presumptively meet the ``60 percent rule'' 
compliance criteria, provide for a new item on the Inpatient 
Rehabilitation Facility-Patient Assessment Instrument (IRF-PAI)form to 
indicate whether the prior treatment and severity requirements have 
been met for arthritis cases to presumptively meet the ``60 percent 
rule'' compliance criteria, and revise and update quality measures and 
reporting requirements under the IRF QRP. In this proposed rule, we 
also address the implementation of the International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-10-CM), for the IRF 
prospective payment system (PPS), effective when ICD-10-CM becomes the 
required medical data code set for use on Medicare claims and IRF-PAI 
submissions.

C. Summary of Impacts

------------------------------------------------------------------------
        Provision description                      Transfers
------------------------------------------------------------------------
FY 2015 IRF PPS payment rate update..  The overall economic impact of
                                        this proposed rule is an
                                        estimated $160 million in
                                        increased payments from the
                                        Federal government to IRFs
                                        during FY 2015.
------------------------------------------------------------------------
        Provision description                        Costs
------------------------------------------------------------------------
New quality reporting program          The total costs in FY 2015 for
 requirements.                          IRFs as a result of the proposed
                                        new quality reporting
                                        requirements are estimated to be
                                        $852,238.
------------------------------------------------------------------------
New Individual, Group, and Co-         The total costs in FY 2016 for
 Treatment therapy reporting            IRFs as a result of the proposed
 requirements.                          new Individual, Group, and Co-
                                        Treatment reporting requirements
                                        are estimated to be $1.2
                                        million.
------------------------------------------------------------------------

    To assist readers in referencing sections contained in this 
document, we are providing the following Table of Contents.

Table of Contents

I. Background
    A. Historical Overview of the Inpatient Rehabilitation Facility 
Prospective Payment System (IRF PPS)
    B. Provisions of the Affordable Care Act Affecting the IRF PPS 
in FY 2012 and Beyond
    C. Operational Overview of the Current IRF PPS
II. Summary of Provisions of the Proposed Rule
III. Proposed Update to the Case-Mix Group (CMG) Relative Weights 
and Average Length of Stay Values for FY 2015
IV. Proposal to Freeze the Facility-Level Adjustment Factors at FY 
2014 Levels
    A. Background on Facility-Level Adjustments
    B. Proposal to Freeze the Facility-Level Adjustment Factors at 
FY 2014 Levels
V. Proposed FY 2015 IRF PPS Federal Prospective Payment Rates
    A. Proposed Market Basket Increase Factor, Productivity 
Adjustment, and Other Adjustment for FY 2015
    B. Development of an IRF-Specific Market Basket
    C. Secretary's Proposed Recommendation
    D. Proposed Labor-Related Share for FY 2015
    E. Proposed Wage Adjustment
    F. Description of the Proposed IRF Standard Conversion Factor 
and Payment Rates for FY 2015
    G. Example of the Methodology for Adjusting the Proposed Federal 
Prospective Payment Rates
VI. Proposed Update to Payments for High-Cost Outliers under the IRF 
PPS
    A. Proposed Update to the Outlier Threshold Amount for FY 2015
    B. Proposed Update to the IRF Cost-to-Charge Ratio Ceiling and 
Urban/Rural Averages
VII. Proposed Refinements to the Presumptive Compliance Methodology
    A. Background on the Compliance Percentage
    B. Proposed Changes to the Diagnosis Codes That Are Used To 
Determine Presumptive Compliance
    C. Proposed Changes to the Impairment Group Codes That Meet 
Presumptive Compliance Criteria
VIII. Proposed Data Collection of the Amount and Mode (Individual, 
Group, and Co-Treatment) of Therapy Provided in IRFs According to 
Occupational, Speech, and Physical Therapy Disciplines
IX. Proposed Revision to the IRF-PAI to Add Data Item for Arthritis 
Conditions
X. International Classification of Diseases, 10th Revision, Clinical 
Modification (ICD-10-CM), Conversion
    A. Background on the Use of Diagnosis Information in the IRF PPS
    B. Conversion of Diagnosis Information from ICD-9-CM to ICD-10-
CM for the IRF PPS
XI. Proposed Revisions and Updates to the Quality Reporting Program 
for IRFs
    A. Background and Statutory Authority
    B. Quality Measures Previously Finalized for and Currently Used 
in the IRF Quality Reporting Program
    C. Proposed New IRF QRP Quality Measures Affecting the FY 2017 
Adjustments to the IRF PPS Annual Increase Factor and Beyond General 
Considerations Used for Selection of Quality Measures for the IRF 
QRP
    D. IRF QRP Quality Measures and Concepts under Consideration for 
Future Years
    E. Proposed Timeline for Data Submission for New IRF QRP Quality 
Measures Affecting the FY 2017 Adjustments to the IRF PPS Annual 
Increase Factor
    F. Proposed Timing for New IRFs to Begin Reporting Quality Data 
under the IRF QRP Affecting the FY 2017 Adjustments to the IRF PPS 
Annual Increase Factor and Beyond
    G. Proposed IRF QRP Data Submission Exception or Extension 
Requirements for the FY 2017 Adjustments to the IRF PPS Annual 
Increase Factor and Beyond
    H. Proposed IRF QRP Data Submission Exception or Extension 
Requirements for the FY 2017 Adjustments to the IRF PPS Annual 
Increase Factor and Beyond
    I. Public Display of Quality Measure Data for the IRF QRP
    J. Proposed IRF QRP Data Completion Thresholds for the FY 2016 
Adjustments to the IRF PPS Annual Increase Factor and Beyond
    K. Proposed Data Validation Process for the FY 2017 Adjustments 
to the IRF PPS Annual Increase Factor and Beyond
    L. Application of the 2 Percentage Point Reduction for IRF 
Providers that Fail to Meet the Above Proposed Data Accuracy 
Threshold
    M. Electronic Health Record and Health Information Exchange
    N. Proposed Method for Applying the Reduction to the FY 2015 IRF 
Increase Factor for IRFs That Fail to Meet the Quality Reporting 
Requirements
XII. Collection of Information Requirements
    A. ICRs Regarding the IRF QRP
    B. ICRs Regarding Individual, Group, and Co-Treatment Therapy 
Data on the IRF-PAI
XIII. Response to Public Comments
XIV. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impacts
    C. Detailed Economic Analysis
    D. Alternatives Considered
    E. Accounting Statement
    F. Conclusion

Acronyms, Abbreviations, and Short Forms

    Because of the many terms to which we refer by acronym, 
abbreviation, or short form in this proposed rule, we are listing the 
acronyms, abbreviation, and short forms used and their

[[Page 26310]]

corresponding terms in alphabetical order below.

The Act The Social Security Act
ADC Average Daily Census
The Affordable Care Act Patient Protection and Affordable Care Act 
(Pub. L. 111-148, enacted on March 23, 2010)
AHA American Hospital Association
AHIMA American Health Information Management Association
ASCA Administrative Simplification Compliance Act (Pub. L. 107-105, 
enacted on December 27, 2002)
BLS U.S. Bureau of Labor Statistics
CAH Critical Access Hospitals
CAUTI Catheter-Associated Urinary Tract Infection
CBSA Core-Based Statistical Area
CCR Cost-to-Charge Ratio
CDC The Centers for Disease Control and Prevention
CDI Clostridium difficile Infection
CFR Code of Federal Regulations
CMG Case-Mix Group
CMS Centers for Medicare & Medicaid Services
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171, enacted February 
8, 2006)
DSH Disproportionate Share Hospital
DSH PP Disproportionate Share Patient Percentage
EHR Electronic Health Record
ESRD End-Stage Renal Disease
FR Federal Register
FY Federal Fiscal Year
GEMs General Equivalence Mappings
HAI Healthcare Associated Infection
HCP Health Care Personnel
HHS U.S. Department of Health & Human Services
HIE Health Information Exchange
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191, enacted on August 21, 1996)
ICD-9-CM The International Classification of Diseases, 9th Revision, 
Clinical Modification
ICD-10-CM The International Classification of Diseases, 10th 
Revision, Clinical Modification
ICRs Information Collection Requirements
IGC Impairment Group Code
IGI IHS Global Insight
IPF Inpatient Psychiatric Facility
IPPS Inpatient Prospective Payment System
IQR Inpatient Quality Reporting Program
IRF Inpatient Rehabilitation Facility
IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment 
Instrument
IRF PPS Inpatient Rehabilitation Facility Prospective Payment System
IRVEN Inpatient Rehabilitation Validation and Entry
LIP Low-Income Percentage
LPN Licensed Practical Nurse
LTCH Long-Term Care Hospital
MAC Medicare Administrative Contractor
MAP Measure Applications Partnership
MA (Medicare Part C) Medicare Advantage
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review
MDS Minimum Data Set
MFP Multifactor Productivity
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L. 
110-173, enacted on December 29, 2007)
MRSA Methicillin-Resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MUC Measures under Consideration
NHSN National Healthcare Safety Network
NPP National Priorities Partnership
NQF National Quality Forum
OMB Office of Management and Budget
ONC Office of the National Coordinator for Health Information 
Technology
PAI Patient Assessment Instrument
PPI Producer Price Index
PPS Prospective Payment System
PRA Paperwork Reduction Act of 1995 (Pub. L. 104-13, enacted on May 
22, 1995)
PRRB Provider Reimbursement Review Board
QM Quality Measure
QRP Quality Reporting Program
RIA Regulatory Impact Analysis
RIC Rehabilitation Impairment Category
RFA Regulatory Flexibility Act (Pub. L. 96-354, enacted on September 
19, 1980)
RN Registered Nurse
RPL Rehabilitation, Psychiatric, and Long-Term Care market basket
UMRA Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, enacted on 
March 22, 1995)

I. Background

A. Historical Overview of the Inpatient Rehabilitation Facility 
Prospective Payment System (IRF PPS)

    Section 1886(j) of the Act provides for the implementation of a 
per-discharge prospective payment system (PPS) for inpatient 
rehabilitation hospitals and inpatient rehabilitation units of a 
hospital (collectively, hereinafter referred to as IRFs).
    Payments under the IRF PPS encompass inpatient operating and 
capital costs of furnishing covered rehabilitation services (that is, 
routine, ancillary, and capital costs), but not direct graduate medical 
education costs, costs of approved nursing and allied health education 
activities, bad debts, and other services or items outside the scope of 
the IRF PPS. Although a complete discussion of the IRF PPS provisions 
appears in the original FY 2002 IRF PPS final rule (66 FR 41316) and 
the FY 2006 IRF PPS final rule (70 FR 47880), we are providing below a 
general description of the IRF PPS for fiscal years (FYs) 2002 through 
2013.
    Under the IRF PPS from FY 2002 through FY 2005, as described in the 
FY 2002 IRF PPS final rule (66 FR 41316), the federal prospective 
payment rates were computed across 100 distinct case-mix groups (CMGs). 
We constructed 95 CMGs using rehabilitation impairment categories 
(RICs), functional status (both motor and cognitive), and age (in some 
cases, cognitive status and age may not be a factor in defining a CMG). 
In addition, we constructed five special CMGs to account for very short 
stays and for patients who expire in the IRF.
    For each of the CMGs, we developed relative weighting factors to 
account for a patient's clinical characteristics and expected resource 
needs. Thus, the weighting factors accounted for the relative 
difference in resource use across all CMGs. Within each CMG, we created 
tiers based on the estimated effects that certain comorbidities would 
have on resource use.
    We established the federal PPS rates using a standardized payment 
conversion factor (formerly referred to as the budget-neutral 
conversion factor). For a detailed discussion of the budget-neutral 
conversion factor, please refer to our FY 2004 IRF PPS final rule (68 
FR 45684 through 45685). In the FY 2006 IRF PPS final rule (70 FR 
47880), we discussed in detail the methodology for determining the 
standard payment conversion factor.
    We applied the relative weighting factors to the standard payment 
conversion factor to compute the unadjusted federal prospective payment 
rates under the IRF PPS from FYs 2002 through 2005. Within the 
structure of the payment system, we then made adjustments to account 
for interrupted stays, transfers, short stays, and deaths. Finally, we 
applied the applicable adjustments to account for geographic variations 
in wages (wage index), the percentage of low-income patients, location 
in a rural area (if applicable), and outlier payments (if applicable) 
to the IRFs' unadjusted federal prospective payment rates.
    For cost reporting periods that began on or after January 1, 2002, 
and before October 1, 2002, we determined the final prospective payment 
amounts using the transition methodology prescribed in section 
1886(j)(1) of the Act. Under this provision, IRFs transitioning into 
the PPS were paid a blend of the federal IRF PPS rate and the payment 
that the IRFs would have received had the IRF PPS not been implemented. 
This provision also allowed IRFs to elect to bypass this blended 
payment and immediately be paid 100 percent of the federal IRF PPS 
rate. The transition methodology expired as of cost reporting periods 
beginning on or after October 1, 2002 (FY 2003), and payments for all 
IRFs now consist of 100 percent of the federal IRF PPS rate.
    We established a CMS Web site as a primary information resource for 
the IRF PPS which is available at http://www.cms.gov/Medicare/Medicare-
Fee-for-ServicePayment/

[[Page 26311]]

InpatientRehabFacPPS/index.html. The Web site may be accessed to 
download or view publications, software, data specifications, 
educational materials, and other information pertinent to the IRF PPS.
    Section 1886(j) of the Act confers broad statutory authority upon 
the Secretary to propose refinements to the IRF PPS. In the FY 2006 IRF 
PPS final rule (70 FR 47880) and in correcting amendments to the FY 
2006 IRF PPS final rule (70 FR 57166) that we published on September 
30, 2005, we finalized a number of refinements to the IRF PPS case-mix 
classification system (the CMGs and the corresponding relative weights) 
and the case-level and facility-level adjustments. These refinements 
included the adoption of the Office of Management and Budget's (OMB) 
Core-Based Statistical Area (CBSA) market definitions, modifications to 
the CMGs, tier comorbidities, and CMG relative weights, implementation 
of a new teaching status adjustment for IRFs, revision and rebasing of 
the market basket index used to update IRF payments, and updates to the 
rural, low-income percentage (LIP), and high-cost outlier adjustments. 
Beginning with the FY 2006 IRF PPS final rule (70 FR 47908 through 
47917), the market basket index used to update IRF payments is a market 
basket reflecting the operating and capital cost structures for 
freestanding IRFs, freestanding inpatient psychiatric facilities 
(IPFs), and long-term care hospitals (LTCHs) (hereafter referred to as 
the rehabilitation, psychiatric, and long-term care (RPL) market 
basket). Any reference to the FY 2006 IRF PPS final rule in this 
proposed rule also includes the provisions effective in the correcting 
amendments. For a detailed discussion of the final key policy changes 
for FY 2006, please refer to the FY 2006 IRF PPS final rule (70 FR 
47880 and 70 FR 57166).
    In the FY 2007 IRF PPS final rule (71 FR 48354), we further refined 
the IRF PPS case-mix classification system (the CMG relative weights) 
and the case-level adjustments, to ensure that IRF PPS payments would 
continue to reflect as accurately as possible the costs of care. For a 
detailed discussion of the FY 2007 policy revisions, please refer to 
the FY 2007 IRF PPS final rule (71 FR 48354).
    In the FY 2008 IRF PPS final rule (72 FR 44284), we updated the 
federal prospective payment rates and the outlier threshold, revised 
the IRF wage index policy, and clarified how we determine high-cost 
outlier payments for transfer cases. For more information on the policy 
changes implemented for FY 2008, please refer to the FY 2008 IRF PPS 
final rule (72 FR 44284), in which we published the final FY 2008 IRF 
federal prospective payment rates.
    After publication of the FY 2008 IRF PPS final rule (72 FR 44284), 
section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 
(Pub. L. 110-173, enacted on December 29, 2007) (MMSEA), amended 
section 1886(j)(3)(C) of the Act to apply a zero percent increase 
factor for FYs 2008 and 2009, effective for IRF discharges occurring on 
or after April 1, 2008. Section 1886(j)(3)(C) of the Act required the 
Secretary to develop an increase factor to update the IRF federal 
prospective payment rates for each FY. Based on the legislative change 
to the increase factor, we revised the FY 2008 federal prospective 
payment rates for IRF discharges occurring on or after April 1, 2008. 
Thus, the final FY 2008 IRF federal prospective payment rates that were 
published in the FY 2008 IRF PPS final rule (72 FR 44284) were 
effective for discharges occurring on or after October 1, 2007, and on 
or before March 31, 2008; and the revised FY 2008 IRF federal 
prospective payment rates were effective for discharges occurring on or 
after April 1, 2008, and on or before September 30, 2008. The revised 
FY 2008 federal prospective payment rates are available on the CMS Web 
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html.
    In the FY 2009 IRF PPS final rule (73 FR 46370), we updated the CMG 
relative weights, the average length of stay values, and the outlier 
threshold; clarified IRF wage index policies regarding the treatment of 
``New England deemed'' counties and multi-campus hospitals; and revised 
the regulation text in response to section 115 of the MMSEA to set the 
IRF compliance percentage at 60 percent (the ``60 percent rule'') and 
continue the practice of including comorbidities in the calculation of 
compliance percentages. We also applied a zero percent market basket 
increase factor for FY 2009 in accordance with section 115 of the 
MMSEA. For more information on the policy changes implemented for FY 
2009, please refer to the FY 2009 IRF PPS final rule (73 FR 46370), in 
which we published the final FY 2009 IRF federal prospective payment 
rates.
    In the FY 2010 IRF PPS final rule (74 FR 39762) and in correcting 
amendments to the FY 2010 IRF PPS final rule (74 FR 50712) that we 
published on October 1, 2009, we updated the federal prospective 
payment rates, the CMG relative weights, the average length of stay 
values, the rural, LIP, teaching status adjustment factors, and the 
outlier threshold; implemented new IRF coverage requirements for 
determining whether an IRF claim is reasonable and necessary; and 
revised the regulation text to require IRFs to submit patient 
assessments on Medicare Advantage (MA) (Medicare Part C) patients for 
use in the 60 percent rule calculations. Any reference to the FY 2010 
IRF PPS final rule in this proposed rule also includes the provisions 
effective in the correcting amendments. For more information on the 
policy changes implemented for FY 2010, please refer to the FY 2010 IRF 
PPS final rule (74 FR 39762 and 74 FR 50712), in which we published the 
final FY 2010 IRF federal prospective payment rates.
    After publication of the FY 2010 IRF PPS final rule (74 FR 39762), 
section 3401(d) of the Patient Protection and Affordable Care Act (Pub. 
L. 111-148, enacted on March 23, 2010), as amended by section 10319 of 
the same Act and by section 1105 of the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152, enacted on March 30, 2010) 
(collectively, hereafter referred to as ``The Affordable Care Act''), 
amended section 1886(j)(3)(C) of the Act and added section 
1886(j)(3)(D) of the Act. Section 1886(j)(3)(C) of the Act requires the 
Secretary to estimate a multi-factor productivity adjustment to the 
market basket increase factor, and to apply other adjustments as 
defined by the Act. The productivity adjustment applies to FYs from 
2012 forward. The other adjustments apply to FYs 2010 to 2019.
    Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(i) of the Act 
defined the adjustments that were to be applied to the market basket 
increase factors in FYs 2010 and 2011. Under these provisions, the 
Secretary was required to reduce the market basket increase factor in 
FY 2010 by a 0.25 percentage point adjustment. Notwithstanding this 
provision, in accordance with section 3401(p) of the Affordable Care 
Act, the adjusted FY 2010 rate was only to be applied to discharges 
occurring on or after April 1, 2010. Based on the self-implementing 
legislative changes to section 1886(j)(3) of the Act, we adjusted the 
FY 2010 federal prospective payment rates as required, and applied 
these rates to IRF discharges occurring on or after April 1, 2010, and 
on or before September 30, 2010. Thus, the final FY 2010 IRF federal 
prospective payment rates that were published in the FY 2010 IRF PPS 
final rule (74 FR 39762) were used for discharges occurring on or after 
October

[[Page 26312]]

1, 2009, and on or before March 31, 2010, and the adjusted FY 2010 IRF 
federal prospective payment rates applied to discharges occurring on or 
after April 1, 2010, and on or before September 30, 2010. The adjusted 
FY 2010 federal prospective payment rates are available on the CMS Web 
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html.
    In addition, sections 1886(j)(3)(C) and (D) of the Act also 
affected the FY 2010 IRF outlier threshold amount because they required 
an adjustment to the FY 2010 RPL market basket increase factor, which 
changed the standard payment conversion factor for FY 2010. 
Specifically, the original FY 2010 IRF outlier threshold amount was 
determined based on the original estimated FY 2010 RPL market basket 
increase factor of 2.5 percent and the standard payment conversion 
factor of $13,661. However, as adjusted, the IRF prospective payments 
are based on the adjusted RPL market basket increase factor of 2.25 
percent and the revised standard payment conversion factor of $13,627. 
To maintain estimated outlier payments for FY 2010 equal to the 
established standard of 3 percent of total estimated IRF PPS payments 
for FY 2010, we revised the IRF outlier threshold amount for FY 2010 
for discharges occurring on or after April 1, 2010, and on or before 
September 30, 2010. The revised IRF outlier threshold amount for FY 
2010 was $10,721.
    Sections 1886(j)(3)(c)(ii)(II) and 1886(j)(3)(D)(i) of the Act also 
required the Secretary to reduce the market basket increase factor in 
FY 2011 by a 0.25 percentage point adjustment. The FY 2011 IRF PPS 
notice (75 FR 42836) and the correcting amendments to the FY 2011 IRF 
PPS notice (75 FR 70013) described the required adjustments to the FY 
2011 and FY 2010 IRF PPS federal prospective payment rates and outlier 
threshold amount for IRF discharges occurring on or after April 1, 
2010, and on or before September 30, 2011. It also updated the FY 2011 
federal prospective payment rates, the CMG relative weights, and the 
average length of stay values. Any reference to the FY 2011 IRF PPS 
notice in this proposed rule also includes the provisions effective in 
the correcting amendments. For more information on the FY 2010 and FY 
2011 adjustments or the updates for FY 2011, please refer to the FY 
2011 IRF PPS notice (75 FR 42836 and 75 FR 70013).
    In the FY 2012 IRF PPS final rule (76 FR 47836), we updated the IRF 
federal prospective payment rates, rebased and revised the RPL market 
basket, and established a new quality reporting program for IRFs in 
accordance with section 1886(j)(7) of the Act. We also revised 
regulation text for the purpose of updating and providing greater 
clarity. For more information on the policy changes implemented for FY 
2012, please refer to the FY 2012 IRF PPS final rule (76 FR 47836), in 
which we published the final FY 2012 IRF federal prospective payment 
rates.
    The FY 2013 IRF PPS notice (77 FR 44618) described the required 
adjustments to the FY 2013 federal prospective payment rates and 
outlier threshold amount for IRF discharges occurring on or after 
October 1, 2012, and on or before September 30, 2013. It also updated 
the FY 2013 federal prospective payment rates, the CMG relative 
weights, and the average length of stay values. For more information on 
the updates for FY 2013, please refer to the FY 2013 IRF PPS notice (77 
FR 44618).
    In the FY 2014 IRF PPS final rule (78 FR 47860), we updated the 
federal prospective payment rates, the CMG relative weights, and the 
outlier threshold amount. We also updated the facility-level adjustment 
factors using an enhanced estimation methodology, revised the list of 
diagnosis codes that count toward an IRF's ``60 percent rule'' 
compliance calculation to determine ``presumptive compliance,'' revised 
sections of the Inpatient Rehabilitation Facility-Patient Assessment 
Instrument (IRF-PAI), revised requirements for acute care hospitals 
that have IRF units, clarified the IRF regulation text regarding 
limitation of review, updated references to previously changed sections 
in the regulations text, and revised and updated quality measures and 
reporting requirements under the IRF quality reporting program. For 
more information on the policy changes implemented for FY 2014, please 
refer to the FY 2014 IRF PPS final rule (78 FR 47860), in which we 
published the final FY 2014 IRF federal prospective payment rates.

B. Provisions of the Affordable Care Act Affecting the IRF PPS in FY 
2012 and Beyond

    The Affordable Care Act included several provisions that affect the 
IRF PPS in FYs 2012 and beyond. In addition to what was discussed 
above, section 3401(d) of the Affordable Care Act also added section 
1886(j)(3)(C)(ii)(I) (providing for a ``productivity adjustment'' for 
fiscal year 2012 and each subsequent fiscal year). The proposed 
productivity adjustment for FY 2015 is discussed in section V.A. of 
this proposed rule. Section 3401(d) of the Affordable Care Act requires 
an additional 0.2 percentage point adjustment to the IRF increase 
factor for FY 2015, as discussed in section V.A. of this proposed rule. 
Section 1886(j)(3)(C)(ii)(II) of the Act notes that the application of 
these adjustments to the market basket update may result in an update 
that is less than 0.0 for a fiscal year and in payment rates for a 
fiscal year being less than such payment rates for the preceding fiscal 
year.
    Section 3004(b) of the Affordable Care Act also addressed the IRF 
PPS program. It reassigned the previously designated section 1886(j)(7) 
of the Act to section 1886(j)(8) and inserted a new section 1886(j)(7), 
which contains requirements for the Secretary to establish a quality 
reporting program for IRFs. Under that program, data must be submitted 
in a form and manner and at a time specified by the Secretary. 
Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires the 
application of a 2 percentage point reduction of the applicable market 
basket increase factor for IRFs that fail to comply with the quality 
data submission requirements. Application of the 2 percentage point 
reduction may result in an update that is less than 0.0 for a fiscal 
year and in payment rates for a fiscal year being less than such 
payment rates for the preceding fiscal year. Reporting-based reductions 
to the market basket increase factor will not be cumulative; they will 
only apply for the FY involved.
    Under section 1886(j)(7)(D)(i) and (ii) of the Act, the Secretary 
is generally required to select quality measures for the IRF quality 
reporting program from those that have been endorsed by the consensus-
based entity which holds a performance measurement contract under 
section 1890(a) of the Act. This contract is currently held by the 
National Quality Forum (NQF). So long as due consideration is given to 
measures that have been endorsed or adopted by a consensus-based 
organization, section 1886(j)(7)(D)(ii) of the Act authorizes the 
Secretary to select non-endorsed measures for specified areas or 
medical topics when there are no feasible or practical endorsed 
measure(s).
    Section 1886(j)(7)(E) of the Act requires the Secretary to 
establish procedures for making the IRF PPS quality reporting data 
available to the public. In so doing, the Secretary must ensure that 
IRFs have the opportunity to review any such data prior to its release 
to the public. Future rulemaking will address these public reporting 
obligations.

[[Page 26313]]

C. Operational Overview of the Current IRF PPS

    As described in the FY 2002 IRF PPS final rule, upon the admission 
and discharge of a Medicare Part A Fee-for-Service patient, the IRF is 
required to complete the appropriate sections of a patient assessment 
instrument (PAI), designated as the Inpatient Rehabilitation Facility-
Patient Assessment Instrument (IRF-PAI). In addition, beginning with 
IRF discharges occurring on or after October 1, 2009, the IRF is also 
required to complete the appropriate sections of the IRF-PAI upon the 
admission and discharge of each Medicare Part C (Medicare Advantage) 
patient, as described in the FY 2010 IRF PPS final rule. All required 
data must be electronically encoded into the IRF-PAI software product. 
Generally, the software product includes patient classification 
programming called the Grouper software. The Grouper software uses 
specific IRF-PAI data elements to classify (or group) patients into 
distinct CMGs and account for the existence of any relevant 
comorbidities.
    The Grouper software produces a 5-character CMG number. The first 
character is an alphabetic character that indicates the comorbidity 
tier. The last 4 characters are numeric characters that represent the 
distinct CMG number. Free downloads of the Inpatient Rehabilitation 
Validation and Entry (IRVEN) software product, including the Grouper 
software, are available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Software.html.
    Once a Medicare Fee-for-Service Part A patient is discharged, the 
IRF submits a Medicare claim as a Health Insurance Portability and 
Accountability Act of 1996 (Pub. L. 104-191, enacted on August 21, 
1996) (HIPAA) compliant electronic claim or, if the Administrative 
Simplification Compliance Act of 2002 (Pub. L. 107-105, enacted on 
December 27, 2002) (ASCA) permits, a paper claim (a UB-04 or a CMS-1450 
as appropriate) using the five-character CMG number and sends it to the 
appropriate Medicare Administrative Contractor (MAC). In addition, once 
a Medicare Advantage patient is discharged, in accordance with the 
Medicare Claims Processing Manual, chapter 3, section 20.3 (Pub. 100-
04), hospitals (including IRFs) must submit an informational-only bill 
(TOB 111), which includes Condition Code 04 to their Medicare 
contractor. This will ensure that the Medicare Advantage days are 
included in the hospital's Supplemental Security Income (SSI) ratio 
(used in calculating the IRF low-income percentage adjustment) for 
Fiscal Year 2007 and beyond. Claims submitted to Medicare must comply 
with both ASCA and HIPAA.
    Section 3 of the ASCA amends section 1862(a) of the Act by adding 
paragraph (22) which requires the Medicare program, subject to section 
1862(h) of the Act, to deny payment under Part A or Part B for any 
expenses for items or services ``for which a claim is submitted other 
than in an electronic form specified by the Secretary.'' Section 
1862(h) of the Act, in turn, provides that the Secretary shall waive 
such denial in situations in which there is no method available for the 
submission of claims in an electronic form or the entity submitting the 
claim is a small provider. In addition, the Secretary also has the 
authority to waive such denial ``in such unusual cases as the Secretary 
finds appropriate.'' For more information, see the ``Medicare Program; 
Electronic Submission of Medicare Claims'' final rule (70 FR 71008). 
Our instructions for the limited number of Medicare claims submitted on 
paper are available at http://www.cms.gov/manuals/downloads/clm104c25.pdf.
    Section 3 of the ASCA operates in the context of the administrative 
simplification provisions of HIPAA, which include, among others, the 
requirements for transaction standards and code sets codified in 45 
CFR, parts 160 and 162, subparts A and I through R (generally known as 
the Transactions Rule). The Transactions Rule requires covered 
entities, including covered health care providers, to conduct covered 
electronic transactions according to the applicable transaction 
standards. (See the CMS program claim memoranda at http://www.cms.gov/ElectronicBillingEDITrans/ and listed in the addenda to the Medicare 
Intermediary Manual, Part 3, section 3600).
    The MAC processes the claim through its software system. This 
software system includes pricing programming called the ``Pricer'' 
software. The Pricer software uses the CMG number, along with other 
specific claim data elements and provider-specific data, to adjust the 
IRF's prospective payment for interrupted stays, transfers, short 
stays, and deaths, and then applies the applicable adjustments to 
account for the IRF's wage index, percentage of low-income patients, 
rural location, and outlier payments. For discharges occurring on or 
after October 1, 2005, the IRF PPS payment also reflects the teaching 
status adjustment that became effective as of FY 2006, as discussed in 
the FY 2006 IRF PPS final rule (70 FR 47880).

II. Summary of Provisions of the Proposed Rule

    In this proposed rule, we propose to update the IRF Federal 
prospective payment rates, collect data on the amount and mode (that 
is, Individual, Group, and Co-Treatment) of therapies provided in the 
IRF setting according to therapy discipline, revise the list of 
impairment group codes that presumptively meet the ``60 percent rule'' 
compliance criteria, provide for a new item on the IRF-PAI form to 
indicate whether the prior treatment and severity requirements have 
been met for arthritis cases to presumptively meet the ``60 percent 
rule'' compliance criteria, and revise and update quality measures and 
reporting requirements under the IRF QRP. In this proposed rule, we 
also address the implementation of the International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-10-CM), for the IRF 
prospective payment system (PPS), effective when ICD-10-CM becomes the 
required medical data code set for use on Medicare claims and IRF-PAI 
submissions.
    The proposed updates to the IRF federal prospective payment rates 
for FY 2015 are as follows:
     Update the FY 2015 IRF PPS relative weights and average 
length of stay values using the most current and complete Medicare 
claims and cost report data in a budget-neutral manner, as discussed in 
section III of this proposed rule.
     Discuss our rationale for freezing the IRF facility-level 
adjustment factors at FY 2014 levels, as discussed in section IV of 
this proposed rule.
     Update the FY 2015 IRF PPS payment rates by the proposed 
market basket increase factor, based upon the most current data 
available, with a 0.2 percentage point reduction as required by 
sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act and a 
proposed productivity adjustment required by section 
1886(j)(3)(C)(ii)(I) of the Act, as described in section V of this 
proposed rule.
     Discuss the Secretary's Proposed Recommendation for 
updating IRF PPS payments for FY 2015, in accordance with the statutory 
requirements, as described in section V of this proposed rule.
     Update the FY 2015 IRF PPS payment rates by the FY 2015 
wage index and the labor-related share in a budget-neutral manner, as 
discussed in section V of this proposed rule.

[[Page 26314]]

     Describe the calculation of the IRF Standard Payment 
Conversion Factor for FY 2015, as discussed in section V of this 
proposed rule.
     Update the outlier threshold amount for FY 2015, as 
discussed in section VI of this proposed rule.
     Update the cost-to-charge ratio (CCR) ceiling and urban/
rural average CCRs for FY 2015, as discussed in section VI of this 
proposed rule.
     Describe proposed revisions to the list of eligible 
diagnosis codes that are used to determine presumptive compliance under 
the 60 percent rule in section VII of this proposed rule.
     Describe proposed revisions to the list of eligible 
impairment group codes that presumptively meet the ``60 percent rule'' 
compliance criteria in section VII of this proposed rule.
     Describe proposed data collection of the amount and mode 
(that is, of Individual, Group, and Co-Treatment) of therapies provided 
in IRFs according to occupational, speech, and physical therapy 
disciplines via the IRF-PAI in section VIII of this proposed rule.
     Describe a proposed revision to the IRF-PAI to add a new 
data item for arthritis conditions in section IX of this proposed rule.
     Describe the conversion of the IRF PPS to ICD-10-CM, 
effective when ICD-10-CM becomes the required medical data code set for 
use on Medicare claims and IRF-PAI submissions, in section X of this 
proposed rule.
     Describe proposed revisions and updates to quality 
measures and reporting requirements under the quality reporting program 
for IRFs in accordance with section 1886(j)(7) of the Act, as discussed 
in section XI of this proposed rule.

III. Proposed Update to the Case-Mix Group (CMG) Relative Weights and 
Average Length of Stay Values for FY 2015

    As specified in Sec.  412.620(b)(1), we calculate a relative weight 
for each CMG that is proportional to the resources needed by an average 
inpatient rehabilitation case in that CMG. For example, cases in a CMG 
with a relative weight of 2, on average, will cost twice as much as 
cases in a CMG with a relative weight of 1. Relative weights account 
for the variance in cost per discharge due to the variance in resource 
utilization among the payment groups, and their use helps to ensure 
that IRF PPS payments support beneficiary access to care, as well as 
provider efficiency.
    In this proposed rule, we propose to update the CMG relative 
weights and average length of stay values for FY 2015. As required by 
statute, we always use the most recent available data to update the CMG 
relative weights and average lengths of stay. For FY 2015, we propose 
to use the FY 2013 IRF claims and FY 2012 IRF cost report data. These 
data are the most current and complete data available at this time. 
Currently, only a small portion of the FY 2013 IRF cost report data are 
available for analysis, but the majority of the FY 2013 IRF claims data 
are available for analysis.
    In this proposed rule, we propose to apply these data using the 
same methodologies that we have used to update the CMG relative weights 
and average length of stay values each fiscal year since we implemented 
an update to the methodology to use the more detailed cost-to-charge 
ratio (CCRs) data from the cost reports of IRF subprovider units of 
primary acute care hospitals, instead of CCR data from the associated 
primary care hospitals, to calculate IRFs' average costs per case, as 
discussed in the FY 2009 IRF PPS final rule (73 FR 46372). In 
calculating the CMG relative weights, we use a hospital-specific 
relative value method to estimate operating (routine and ancillary 
services) and capital costs of IRFs. The process used to calculate the 
CMG relative weights for this proposed rule is as follows:
    Step 1. We estimate the effects that comorbidities have on costs.
    Step 2. We adjust the cost of each Medicare discharge (case) to 
reflect the effects found in the first step.
    Step 3. We use the adjusted costs from the second step to calculate 
CMG relative weights, using the hospital-specific relative value 
method.
    Step 4. We normalize the FY 2015 CMG relative weights to the same 
average CMG relative weight from the CMG relative weights implemented 
in the FY 2014 IRF PPS final rule (78 FR 47860).
    Consistent with the methodology that we have used to update the IRF 
classification system in each instance in the past, we propose to 
update the CMG relative weights for FY 2015 in such a way that total 
estimated aggregate payments to IRFs for FY 2015 are the same with or 
without the changes (that is, in a budget-neutral manner) by applying a 
budget neutrality factor to the standard payment amount. To calculate 
the appropriate budget neutrality factor for use in updating the FY 
2015 CMG relative weights, we use the following steps:
    Step 1. Calculate the estimated total amount of IRF PPS payments 
for FY 2015 (with no changes to the CMG relative weights).
    Step 2. Calculate the estimated total amount of IRF PPS payments 
for FY 2015 by applying the changes to the CMG relative weights (as 
discussed above).
    Step 3. Divide the amount calculated in step 1 by the amount 
calculated in step 2 to determine the budget neutrality factor (1.0000) 
that would maintain the same total estimated aggregate payments in FY 
2015 with and without the changes to the CMG relative weights.
    Step 4. Apply the budget neutrality factor (1.0000) to the FY 2014 
IRF PPS standard payment amount after the application of the budget-
neutral wage adjustment factor.
    In section V.F. of this proposed rule, we discuss the proposed use 
of the existing methodology to calculate the standard payment 
conversion factor for FY 2015.
    Table 1, ``Relative Weights and Average Length of Stay Values for 
Case-Mix Groups,'' presents the CMGs, the comorbidity tiers, the 
corresponding relative weights, and the average length of stay values 
for each CMG and tier for FY 2015. The average length of stay for each 
CMG is used to determine when an IRF discharge meets the definition of 
a short-stay transfer, which results in a per diem case level 
adjustment.

                                Table 1--Proposed Relative Weights and Average Length of Stay Values for Case-Mix Groups
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Relative weight                             Average length of stay
            CMG               CMG description (M=motor,  -----------------------------------------------------------------------------------------------
                                 C=cognitive, A=age)         Tier1       Tier2       Tier3       None        Tier1       Tier2       Tier3       None
--------------------------------------------------------------------------------------------------------------------------------------------------------
0101......................  Stroke M>51.05..............      0.7860      0.7173      0.6524      0.6255           9          10           8           8
0102......................  Stroke M>44.45 and M<51.05        0.9836      0.8977      0.8165      0.7829          11          11          10          10
                             and C>18.5.
0103......................  Stroke M>44.45 and M<51.05        1.1645      1.0627      0.9666      0.9268          12          14          12          12
                             and C<18.5.

[[Page 26315]]

 
0104......................  Stroke M>38.85 and M<44.45..      1.2109      1.1051      1.0052      0.9638          13          13          12          12
0105......................  Stroke M>34.25 and M<38.85..      1.4154      1.2917      1.1750      1.1266          14          14          14          14
0106......................  Stroke M>30.05 and M<34.25..      1.6119      1.4710      1.3381      1.2829          16          16          15          15
0107......................  Stroke M>26.15 and M<30.05..      1.8023      1.6448      1.4961      1.4345          17          19          17          17
0108......................  Stroke M<26.15 and A>84.5...      2.2450      2.0488      1.8636      1.7868          22          23          21          21
0109......................  Stroke M>22.35 and M<26.15        2.0545      1.8749      1.7055      1.6352          19          20          19          19
                             and A<84.5.
0110......................  Stroke M<22.35 and A<84.5...      2.6893      2.4542      2.2324      2.1404          28          27          24          24
0201......................  Traumatic brain injury            0.8151      0.6688      0.6000      0.5714          10           9           8           8
                             M>53.35 and C>23.5.
0202......................  Traumatic brain injury            1.0534      0.8644      0.7755      0.7385          12          10           9          10
                             M>44.25 and M<53.35 and
                             C>23.5.
0203......................  Traumatic brain injury            1.2101      0.9930      0.8909      0.8484          13          12          12          11
                             M>44.25 and C<23.5.
0204......................  Traumatic brain injury            1.3295      1.0909      0.9788      0.9321          12          13          12          12
                             M>40.65 and M<44.25.
0205......................  Traumatic brain injury            1.5842      1.2999      1.1663      1.1106          14          15          14          14
                             M>28.75 and M<40.65.
0206......................  Traumatic brain injury            1.9178      1.5737      1.4119      1.3445          19          18          16          16
                             M>22.05 and M<28.75.
0207......................  Traumatic brain injury            2.5453      2.0885      1.8738      1.7844          32          24          21          20
                             M<22.05.
0301......................  Non-traumatic brain injury        1.1082      0.9337      0.8460      0.7804          10          11          10          10
                             M>41.05.
0302......................  Non-traumatic brain injury        1.3856      1.1674      1.0578      0.9757          13          13          12          12
                             M>35.05 and M<41.05.
0303......................  Non-traumatic brain injury        1.6437      1.3849      1.2548      1.1575          16          15          14          14
                             M>26.15 and M<35.05.
0304......................  Non-traumatic brain injury        2.1604      1.8202      1.6492      1.5213          23          21          18          17
                             M<26.15.
0401......................  Traumatic spinal cord injury      1.0303      0.8804      0.8112      0.7252          12          12          10           9
                             M>48.45.
0402......................  Traumatic spinal cord injury      1.4049      1.2005      1.1061      0.9889          15          14          14          12
                             M>30.35 and M<48.45.
0403......................  Traumatic spinal cord injury      2.3117      1.9754      1.8200      1.6271          26          21          20          20
                             M>16.05 and M<30.35.
0404......................  Traumatic spinal cord injury      4.0674      3.4756      3.2022      2.8628          55          39          33          33
                             M<16.05 and A>63.5.
0405......................  Traumatic spinal cord injury      3.2778      2.8009      2.5807      2.3071          26          34          29          25
                             M<16.05 and A<63.5.
0501......................  Non-traumatic spinal cord         0.8442      0.6777      0.6206      0.5621           9          10           9           8
                             injury M>51.35.
0502......................  Non-traumatic spinal cord         1.1667      0.9367      0.8578      0.7769          11          12          10          10
                             injury M>40.15 and M<51.35.
0503......................  Non-traumatic spinal cord         1.4465      1.1613      1.0635      0.9632          15          13          13          12
                             injury M>31.25 and M<40.15.
0504......................  Non-traumatic spinal cord         1.7058      1.3695      1.2541      1.1359          17          15          15          14
                             injury M>29.25 and M<31.25.
0505......................  Non-traumatic spinal cord         1.9486      1.5644      1.4326      1.2976          20          17          17          16
                             injury M>23.75 and M<29.25.

[[Page 26316]]

 
0506......................  Non-traumatic spinal cord         2.7276      2.1898      2.0054      1.8164          26          25          23          21
                             injury M<23.75.
0601......................  Neurological M>47.75........      1.0352      0.8161      0.7540      0.6868           9          10           9           9
0602......................  Neurological M>37.35 and          1.3349      1.0522      0.9722      0.8856          12          12          11          11
                             M<47.75.
0603......................  Neurological M>25.85 and          1.6799      1.3242      1.2235      1.1146          15          15          13          13
                             M<37.35.
0604......................  Neurological M<25.85........      2.2001      1.7343      1.6023      1.4597          21          19          17          17
0701......................  Fracture of lower extremity       0.9713      0.8055      0.7715      0.7028          10           9          10           9
                             M>42.15.
0702......................  Fracture of lower extremity       1.2457      1.0330      0.9894      0.9013          13          12          12          11
                             M>34.15 and M<42.15.
0703......................  Fracture of lower extremity       1.5091      1.2514      1.1986      1.0918          15          15          14          13
                             M>28.15 and M<34.15.
0704......................  Fracture of lower extremity       1.9413      1.6099      1.5419      1.4045          18          18          17          17
                             M<28.15.
0801......................  Replacement of lower              0.7445      0.6092      0.5625      0.5185           8           8           7           7
                             extremity joint M>49.55.
0802......................  Replacement of lower              0.9928      0.8124      0.7502      0.6915          10          10           9           9
                             extremity joint M>37.05 and
                             M<49.55.
0803......................  Replacement of lower              1.3412      1.0975      1.0134      0.9341          13          13          12          12
                             extremity joint M>28.65 and
                             M<37.05 and A>83.5.
0804......................  Replacement of lower              1.1854      0.9700      0.8957      0.8256          12          12          11          10
                             extremity joint M>28.65 and
                             M<37.05 and A<83.5.
0805......................  Replacement of lower              1.4747      1.2067      1.1142      1.0271          14          14          13          12
                             extremity joint M>22.05 and
                             M<28.65.
0806......................  Replacement of lower              1.7716      1.4496      1.3386      1.2339          16          17          15          14
                             extremity joint M<22.05.
0901......................  Other orthopedic M>44.75....      0.9402      0.7560      0.7057      0.6382          10           9           9           8
0902......................  Other orthopedic M>34.35 and      1.2419      0.9985      0.9321      0.8430          12          12          11          10
                             M<44.75.
0903......................  Other orthopedic M>24.15 and      1.5603      1.2546      1.1711      1.0591          15          14          14          13
                             M<34.35.
0904......................  Other orthopedic M<24.15....      1.9832      1.5946      1.4885      1.3462          19          18          17          16
1001......................  Amputation, lower extremity       1.0277      0.9349      0.8076      0.7385          11          12          10          10
                             M>47.65.
1002......................  Amputation, lower extremity       1.3191      1.1999      1.0365      0.9478          14          14          12          12
                             M>36.25 and M<47.65.
1003......................  Amputation, lower extremity       1.8856      1.7152      1.4816      1.3549          18          19          17          16
                             M<36.25.
1101......................  Amputation, non-lower             1.2651      1.0161      1.0058      0.8582          12          13          12          10
                             extremity M>36.35.
1102......................  Amputation, non-lower             1.8940      1.5211      1.5058      1.2848          17          19          16          15
                             extremity M<36.35.
1201......................  Osteoarthritis M>37.65......      1.0766      0.9493      0.8872      0.8243          10          11          11          10
1202......................  Osteoarthritis M>30.75 and        1.2812      1.1296      1.0557      0.9809          11          12          12          12
                             M<37.65.
1203......................  Osteoarthritis M<30.75......      1.6274      1.4349      1.3410      1.2459          13          16          15          15
1301......................  Rheumatoid, other arthritis       1.2259      0.9876      0.8693      0.8186          12          12          10          10
                             M>36.35.
1302......................  Rheumatoid, other arthritis       1.5967      1.2864      1.1323      1.0662          17          14          13          13
                             M>26.15 and M<36.35.

[[Page 26317]]

 
1303......................  Rheumatoid, other arthritis       2.0339      1.6386      1.4424      1.3582          18          19          16          15
                             M<26.15.
1401......................  Cardiac M>48.85.............      0.9056      0.7331      0.6668      0.6050           9          10           8           8
1402......................  Cardiac M>38.55 and M<48.85.      1.1970      0.9689      0.8814      0.7997          12          11          11          10
1403......................  Cardiac M>31.15 and M<38.55.      1.4753      1.1943      1.0863      0.9857          14          13          12          12
1404......................  Cardiac M<31.15.............      1.8546      1.5013      1.3656      1.2391          18          17          15          14
1501......................  Pulmonary M>49.25...........      0.9973      0.8152      0.7533      0.7276          10          10           9           8
1502......................  Pulmonary M>39.05 and             1.2978      1.0608      0.9802      0.9468          13          11          11          10
                             M<49.25.
1503......................  Pulmonary M>29.15 and             1.5925      1.3017      1.2028      1.1618          15          14          13          13
                             M<39.05.
1504......................  Pulmonary M<29.15...........      1.9673      1.6081      1.4859      1.4352          21          17          15          15
1601......................  Pain syndrome M>37.15.......      0.9503      0.8819      0.8110      0.7629          10          10           9          10
1602......................  Pain syndrome M>26.75 and         1.2558      1.1654      1.0717      1.0081          13          13          13          12
                             M<37.15.
1603......................  Pain syndrome M<26.75.......      1.5878      1.4735      1.3549      1.2746          14          17          16          15
1701......................  Major multiple trauma             1.0417      0.9291      0.8579      0.7871          11          11          10          10
                             without brain or spinal
                             cord injury M>39.25.
1702......................  Major multiple trauma             1.3092      1.1676      1.0782      0.9892          13          14          13          12
                             without brain or spinal
                             cord injury M>31.05 and
                             M<39.25.
1703......................  Major multiple trauma             1.5348      1.3689      1.2640      1.1597          16          16          15          14
                             without brain or spinal
                             cord injury M>25.55 and
                             M<31.05.
1704......................  Major multiple trauma             1.9831      1.7687      1.6333      1.4984          20          20          18          17
                             without brain or spinal
                             cord injury M<25.55.
1801......................  Major multiple trauma with        1.0808      0.9559      0.8116      0.7275          11          12          10           9
                             brain or spinal cord injury
                             M>40.85.
1802......................  Major multiple trauma with        1.7023      1.5056      1.2782      1.1459          17          16          15          14
                             brain or spinal cord injury
                             M>23.05 and M<40.85.
1803......................  Major multiple trauma with        2.8280      2.5012      2.1235      1.9036          32          28          22          22
                             brain or spinal cord injury
                             M<23.05.
1901......................  Guillain Barre M>35.95......      1.0531      0.9468      0.9297      0.8892          15          10          13          11
1902......................  Guillain Barre M>18.05 and        1.8830      1.6929      1.6623      1.5899          24          19          18          19
                             M<35.95.
1903......................  Guillain Barre M<18.05......      3.3756      3.0347      2.9799      2.8501          43          31          36          31
2001......................  Miscellaneous M>49.15.......      0.8847      0.7262      0.6693      0.6110           9           8           8           8
2002......................  Miscellaneous M>38.75 and         1.1882      0.9753      0.8990      0.8206          12          11          11          10
                             M<49.15.
2003......................  Miscellaneous M>27.85 and         1.5077      1.2376      1.1407      1.0412          15          14          13          12
                             M<38.75.
2004......................  Miscellaneous M<27.85.......      1.9511      1.6015      1.4761      1.3474          20          18          16          15
2101......................  Burns M>0...................      1.8268      1.7144      1.5550      1.3502          27          18          17          16
5001......................  Short-stay cases, length of   ..........  ..........  ..........      0.1545  ..........  ..........  ..........           2
                             stay is 3 days or fewer.
5101......................  Expired, orthopedic, length   ..........  ..........  ..........      0.6809  ..........  ..........  ..........           7
                             of stay is 13 days or fewer.
5102......................  Expired, orthopedic, length   ..........  ..........  ..........      1.5543  ..........  ..........  ..........          16
                             of stay is 14 days or more.

[[Page 26318]]

 
5103......................  Expired, not orthopedic,      ..........  ..........  ..........      0.7274  ..........  ..........  ..........           8
                             length of stay is 15 days
                             or fewer.
5104......................  Expired, not orthopedic,      ..........  ..........  ..........      1.9267  ..........  ..........  ..........          21
                             length of stay is 16 days
                             or more.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Generally, updates to the CMG relative weights result in some 
increases and some decreases to the CMG relative weight values. Table 2 
shows how we estimate that the application of the proposed revisions 
for FY 2015 would affect particular CMG relative weight values, which 
would affect the overall distribution of payments within CMGs and 
tiers. Note that, because we propose to implement the CMG relative 
weight revisions in a budget-neutral manner (as described above), total 
estimated aggregate payments to IRFs for FY 2015 would not be affected 
as a result of the proposed CMG relative weight revisions. However, the 
proposed revisions would affect the distribution of payments within 
CMGs and tiers.

   Table 2--Distributional Effects of the Proposed Changes to the CMG
                            Relative Weights
              (FY 2014 Values Compared with FY 2015 Values)
------------------------------------------------------------------------
                                                 Number of    Percentage
               Percentage change                   cases       of cases
                                                  affected     affected
------------------------------------------------------------------------
Increased by 15% or more......................            0          0.0
Increased by between 5% and 15%...............        1,096          0.3
Changed by less than 5%.......................      379,524         99.3
Decreased by between 5% and 15%...............        1,610          0.4
Decreased by 15% or more......................           24          0.0
------------------------------------------------------------------------

    As Table 2 shows, more than 99 percent of all IRF cases are in CMGs 
and tiers that we estimate would experience less than a 5 percent 
change (either increase or decrease) in the CMG relative weight value 
as a result of the proposed revisions for FY 2015. The largest 
estimated increase in the proposed CMG relative weight values that 
would affect the largest number of IRF discharges is a 1.2 percent 
increase in the CMG relative weight value for CMG 0704--Fracture of 
lower extremity, with a motor score less than 28.15--in the ``no 
comorbidity'' tier. In the FY 2013 claims data, 19,867 IRF discharges 
(5.2 percent of all IRF discharges) were classified into this CMG and 
tier.
    The largest estimated decrease in a CMG relative weight value that 
would affect the largest number of IRF cases is a 0.9 percent decrease 
in the CMG relative weight for CMG 0604--Neurological, with a motor 
score less than 25.85--in the ``no comorbidity'' tier. In the FY 2013 
IRF claims data, this change would have affected 8,737 cases (2.3 
percent of all IRF cases).
    The proposed changes in the average length of stay values for FY 
2015, compared with the FY 2014 average length of stay values, are 
small and do not show any particular trends in IRF length of stay 
patterns.
    We invite public comment on our proposed update to the CMG relative 
weights and average length of stay values for FY 2015.

IV.. Proposal To Freeze the Facility-Level Adjustment Factors at FY 
2014 Levels

A. Background on Facility-Level Adjustments

    Section 1886(j)(3)(A)(v) of the Act confers broad authority upon 
the Secretary to adjust the per unit payment rate ``by such . . . 
factors as the Secretary determines are necessary to properly reflect 
variations in necessary costs of treatment among rehabilitation 
facilities.'' For example, we adjust the federal prospective payment 
amount associated with a CMG to account for facility-level 
characteristics such as an IRF's LIP, teaching status, and location in 
a rural area, if applicable, as described in Sec.  412.624(e).
    In the FY 2010 IRF PPS final rule (74 FR 39762), we updated the 
adjustment factors for calculating the rural, LIP, and teaching status 
adjustments based on the most recent three consecutive years' worth of 
IRF claims data (at that time, FY 2006, FY 2007, and FY 2008) and the 
most recent available corresponding IRF cost report data. As discussed 
in the FY 2010 IRF PPS proposed rule (74 FR 21060 through 21061), we 
observed relatively large year-to-year fluctuations in the underlying 
data used to compute the adjustment factors, especially the teaching 
status adjustment factor. Therefore, we implemented a 3-year moving 
average approach to updating the facility-level adjustment factors in 
the FY 2010 IRF PPS final rule (74 FR 39762) to provide greater 
stability and predictability of Medicare payments for IRFs.
    Each year, we review the major components of the IRF PPS to 
maintain and enhance the accuracy of the payment system. For FY 2010, 
we implemented a change to our methodology that was designed to 
decrease the IRF PPS volatility by using a 3-year moving average to 
calculate the facility-level adjustment factors. For FY 2011, we issued 
a notice to update the payment rates, which did not include any policy 
changes or changes to the IRF facility-level adjustments. As we found 
that the implementation of the 3-year moving average did not fully 
address year-to-year fluctuations, in the FY 2012 IRF PPS proposed rule 
(76 FR 24214, 24225 through 24226), we analyzed the effects of having 
used a weighting methodology. The methodology assigned greater weight 
to some facilities than to others in the regression analysis used to 
estimate the facility-level adjustment factors. As we found that this 
weighting methodology inappropriately exaggerated the cost differences 
among different types of IRF facilities, we proposed to remove the 
weighting factor from our analysis and update the IRF facility-level 
adjustment factors for FY 2012 using an unweighted regression analysis. 
However, after carefully considering all of the comments that we 
received on the proposed FY 2012 updates to the facility-level 
adjustment factors, we decided to hold the facility-level adjustment 
factors at FY 2011 levels for FY 2012 to conduct further research on 
the underlying data and the best methodology for calculating the 
facility-level adjustment factors. We based this decision, in part, on 
comments we received about the financial hardships

[[Page 26319]]

that the proposed updates would create for facilities with teaching 
programs and a higher disproportionate share of low-income patients.

B. Proposal To Freeze the Facility-Level Adjustment Factors at FY 2014 
Levels

    Since the FY 2012 final rule (76 FR 47836), we have conducted 
further research into the best methodology to use to estimate the IRF 
facility-level adjustment factors, to ensure that the adjustment 
factors reflect as accurately as possible the costs of providing IRF 
care across the full spectrum of IRF providers. Our recent research 
efforts reflect the significant differences that exist between the cost 
structures of freestanding IRFs and the cost structures of IRF units of 
acute care hospitals (and critical access hospitals, otherwise known as 
``CAHs''). We have found that these cost structure differences 
substantially influence the estimates of the adjustment factors. 
Therefore, we believe that it is important to control for these cost 
structure differences between hospital-based and freestanding IRFs in 
our regression analysis, so that these differences do not 
inappropriately influence the adjustment factor estimates. In 
Medicare's payment system for the treatment of end-stage renal disease 
(ESRD), we already control for the cost structure differences between 
hospital-based and freestanding facilities in the regression analyses 
that are used to set payment rates. Also, we received comments from an 
IRF industry association on the FY 2012 IRF PPS proposed rule 
suggesting that the addition of this particular control variable to the 
model could improve the methodology for estimating the IRF facility-
level adjustment factors.
    Thus, in the FY 2014 IRF PPS proposed rule, we proposed to add an 
indicator variable to our 3-year moving average methodology for 
updating the IRF facility-level adjustments that would have an assigned 
value of ``1'' if the facility is a freestanding IRF hospital or would 
have an assigned value of ``0'' if the facility is an IRF unit of an 
acute care hospital (or CAH). Adding this variable to the regression 
analysis enables us to control for the differences in costs that are 
primarily due to the differences in cost structures between 
freestanding and hospital-based IRFs, so that those differences do not 
become inappropriately intertwined with our estimates of the 
differences in costs between rural and urban facilities, high-LIP 
percentage and low-LIP percentage facilities, and teaching and non-
teaching facilities. Further, by including this variable in the 
regression analysis, we greatly improve our ability to predict an IRF's 
average cost per case (that is, the R-squared of the regression model 
increases from about 11 percent to about 41 percent). In this way, it 
enhances the precision with which we can estimate the IRF facility-
level adjustments.
    In the FY 2014 IRF PPS final rule (78 FR 47860), we finalized our 
decision to add an indicator variable for a facility's freestanding/
hospital-based status to the payment regression, and, with that change, 
to update the IRF facility-level adjustment factors for FY 2014 using 
the same methodology, with the exception of adding the indicator 
variable, that we used in updating the FY 2010 IRF facility-level 
adjustment factors, including the 3-year moving average approach. Thus, 
in the FY 2014 IRF PPS final rule, we finalized a rural adjustment of 
14.9 percent, a LIP adjustment factor of 0.3177, and a teaching status 
adjustment factor of 1.0163 for FY 2014.
    Based on the substantive changes to the facility-level adjustment 
factors that were adopted in the FY 2014 final rule, we propose to 
freeze the facility-level adjustment factors for FY 2015 and all 
subsequent years at the FY 2014 levels while we continue to monitor the 
most current IRF claims data available and evaluate the effects of the 
FY 2014 changes. Additionally, we want to allow providers time to 
acclimate to the FY 2014 changes. At such future time as our data 
analysis may indicate the need for further updates to the facility-
level adjustment factors, we would propose to update the adjustment 
factors through notice and comment rulemaking.
    We invite public comment on our proposal to freeze the facility-
level adjustment factors at FY 2014 levels for FY 2015 and all 
subsequent years (unless and until we propose to update them again 
through future notice and comment rulemaking).

V. Proposed FY 2015 IRF PPS Federal Prospective Payment Rates

A. Proposed Market Basket Increase Factor, Productivity Adjustment, and 
Other Adjustment for FY 2015

    Section 1886(j)(3)(C) of the Act requires the Secretary to 
establish an increase factor that reflects changes over time in the 
prices of an appropriate mix of goods and services included in the 
covered IRF services, which is referred to as a market basket index. 
According to section 1886(j)(3)(A)(i) of the Act, the increase factor 
shall be used to update the IRF federal prospective payment rates for 
each FY. Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the 
Act required the application of a 0.2 percentage point reduction to the 
market basket increase factor for FY 2015. In addition, section 
1886(j)(3)(C)(ii)(I) of the Act requires the application of a 
productivity adjustment, as described below. Thus, in this proposed 
rule, we propose to update the IRF PPS payments for FY 2015 by a market 
basket increase factor based upon the most current data available, with 
a productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) 
of the Act as described below and a 0.2 percentage point reduction as 
required by sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the 
Act.
    For this proposed rule, we propose to use the same methodology 
described in the FY 2012 IRF PPS final rule (76 FR 47836 at 47848 
through 47863) to compute the FY 2015 market basket increase factor and 
labor-related share. In that final rule, we described the market basket 
(referred to as the RPL market basket) as reflecting a FY 2008 base 
year. Based on IHS Global Insight's first quarter 2014 forecast, the 
most recent estimate of the 2008-based RPL market basket increase 
factor for FY 2015 is 2.7 percent. IHS Global Insight (IGI) is an 
economic and financial forecasting firm that contracts with CMS to 
forecast the components of providers' market baskets.
    In accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and 
using the methodology described in the FY 2012 IRF PPS final rule (76 
FR 47836, 47858 through 47859), we propose to apply a productivity 
adjustment to the FY 2015 RPL market basket increase factor. The 
statute defines the productivity adjustment to be equal to the 10-year 
moving average of changes in annual economy-wide private nonfarm 
business multifactor productivity (MFP) (as projected by the Secretary 
for the 10-year period ending with the applicable FY cost reporting 
period, or other annual period) (the ``MFP adjustment''). The Bureau of 
Labor Statistics (BLS) is the agency that publishes the official 
measure of private nonfarm business MFP. We refer readers to the BLS 
Web site at http://www.bls.gov/mfp to obtain the historical BLS-
published MFP data. The projection of MFP is currently produced by IGI, 
using the methodology described in the FY 2012 IRF PPS final rule (76 
FR 47836, 47859). The most recent estimate of the MFP adjustment for FY 
2015 (the 10-year moving average of MFP for the period ending FY 2015) 
is 0.4 percent, which was calculated using the methodology described in 
the FY 2012 IRF PPS final rule (76 FR 47836, 47858 through 47859) and 
is based on IGI's first quarter 2014 forecast.

[[Page 26320]]

    Thus, in accordance with section 1886(j)(3)(C) of the Act, we 
propose to base the FY 2015 market basket update, which is used to 
determine the applicable percentage increase for the IRF payments, on 
the most recent estimate of the FY 2008-based RPL market basket 
(currently estimated to be 2.7 percent based on IGI's first quarter 
2014 forecast). We propose to then reduce this percentage increase by 
the current estimate of the MFP adjustment for FY 2015 of 0.4 
percentage point (the 10-year moving average of MFP for the period 
ending FY 2015 based on IGI's first quarter 2014 forecast), which was 
calculated as described in the FY 2012 IRF PPS final rule (76 FR 47836, 
47859). Following application of the MFP, we propose to further reduce 
the applicable percentage increase by 0.2 percentage point, as required 
by sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act. 
Therefore, the current estimate of the proposed FY 2015 IRF update is 
2.1 percent (2.7 percent market basket update, less 0.4 percentage 
point MFP adjustment, less 0.2 percentage point legislative 
adjustment). Furthermore, we also propose that if more recent data are 
subsequently available (for example, a more recent estimate of the 
market basket and MFP adjustment), we would use such data, if 
appropriate, to determine the FY 2015 market basket update and MFP 
adjustment in the final rule.
    We invite public comment on these proposals.

B. Development of an IRF-Specific Market Basket

    In the FY 2010 IRF PPS proposed rule (74 FR 21062), we expressed 
our interest in exploring the possibility of creating a stand-alone, or 
IRF-specific, market basket that reflects the cost structures of only 
IRF providers. We noted that, of the available options, one would be to 
join the Medicare cost report data from freestanding IRF providers with 
data from hospital-based IRF providers. We indicated that an 
examination of the Medicare cost report data comparing freestanding and 
hospital-based IRFs revealed considerable differences between the two 
for cost levels and cost structures. At that time, we stated that we 
were unable to fully explain the differences in costs between 
freestanding and hospital-based IRFs and solicited comments regarding 
our findings. We summarized and responded to several public comments we 
received on the potential creation of a stand-alone IRF market basket 
in the FY 2010 IRF final rule (74 FR 39776 through 39778). At that 
time, we stated the need for further research regarding the differences 
in cost levels and cost structures between freestanding IRFs and 
hospital-based IRFs.
    Since the FY 2010 IRF PPS final rule was published, we have made 
significant progress on the development of a stand-alone, or IRF-
specific, market basket. Our research has focused on addressing several 
concerns regarding the use of the hospital-based IRF Medicare cost 
report data in the calculation of the major market basket cost weights. 
As discussed above, one concern is the cost level differences for 
hospital-based IRFs relative to freestanding IRFs that were not readily 
explained by the specific characteristics of the individual providers 
and the patients that they serve (for example, characteristics related 
to case mix, urban/rural status, teaching status). Furthermore, we are 
concerned about the variability in the cost report data among these 
hospital-based IRF providers and the potential impact on the market 
basket cost weights. These concerns led us to consider whether it is 
appropriate to use the universe of IRF providers to derive an IRF-
specific market basket.
    Recently, we have investigated the use of regression analysis to 
evaluate the effect of including hospital-based IRF Medicare cost 
report data in the calculation of cost distributions. We created 
preliminary regression models to try to explain variations in costs per 
discharge across both freestanding and hospital-based IRFs. These 
models were intended to capture the effects of facility-level and 
patient-level characteristics (for example, wage index, urban/rural 
status, ownership status, length-of-stay, occupancy rate, case mix, and 
Medicare utilization) on IRF costs per discharge. Using the results 
from the preliminary regression analyses, we identified smaller subsets 
of hospital-based and freestanding IRF providers where the predicted 
costs per discharge using the regression model closely matched the 
actual costs per discharge for each IRF. We then derived different sets 
of cost distributions using (1) these subsets of IRF providers and (2) 
the entire universe of freestanding and hospital-based IRF providers 
(including those IRFs for which the variability in cost levels remains 
unexplained). After comparing these sets of cost distributions, the 
differences were not substantial enough for us to conclude that the 
inclusion of those IRF providers with unexplained variability in costs 
in the calculation of the cost distributions is a major cause of 
concern.
    Another concern with incorporating the hospital-based IRF data in 
the derivation of an IRF-specific market basket is the complexity of 
the Medicare cost report data for these providers. The freestanding 
IRFs independently submit a Medicare cost report for their facilities, 
making it relatively straightforward to obtain the cost categories 
necessary to determine the major market basket cost weights. However, 
cost report data submitted for a hospital-based IRF are embedded in the 
Medicare cost report submitted for the entire hospital facility in 
which the IRF is located. Therefore, adjustments would have to be made 
to obtain cost weights that represent just the hospital-based IRF (as 
opposed to the hospital as a whole). For example, ancillary costs for 
services such as therapy, radiology, and laboratory services for the 
entire hospital would need to be appropriately converted to a value 
that only represents the hospital-based IRF unit's costs. The 
preliminary method we have developed to allocate these costs is complex 
and still needs to be fully evaluated before we are ready to propose an 
IRF-specific market basket that would reflect both hospital-based and 
freestanding IRF data.
    In our ongoing research, we are also evaluating the differences in 
salary costs as a percent of total costs for both hospital-based and 
freestanding IRFs. Salary costs are historically the largest component 
of the market baskets. Based on our review of the data reported on the 
applicable Medicare cost reports, our initial findings (using the 
preliminary allocation method as discussed above) have shown that the 
hospital-based IRF salary costs as a percent of total costs tend to be 
lower than those of freestanding IRFs. We are still evaluating the 
method for deriving salary costs as a percent of total costs, and one 
of the main issues is to further investigate the percentage of 
ancillary costs that should be appropriately allocated to the IRF 
salary costs for the hospital-based IRF, as discussed above.
    Also, as stated in the FY 2012 IRF PPS final rule (76 FR 47836, 
47851), effective for cost reports beginning on or after May 1, 2010, 
we finalized a revised Hospital and Hospital Health Care Complex Cost 
Report, Form CMS 2552-10 (74 FR 31738). The report is available for 
download from the CMS Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/CostReports/Hospital-2010-form.html. The revised Hospital and Hospital Health Care Complex Cost 
Report includes a new worksheet (Worksheet S-3, part V) that identifies 
the contract labor costs and benefit costs for the

[[Page 26321]]

hospital/hospital care complex, is applicable to sub-providers and 
units. As we gain access to the data reported by IRFs on this new form, 
we plan to evaluate the appropriateness of using these data to derive 
benefits and contract labor cost weights for the market basket instead 
of the data and methods currently used for the RPL market basket. This 
includes comparing these data with costs submitted on the other forms 
composing the Medicare cost report.
    For the reasons discussed above, while we believe we have made 
significant progress on the development of an IRF-specific market 
basket, we believe that further research is required at this time. As a 
result, we are not proposing an IRF-specific market basket for FY 2015. 
We plan to complete our research during the remainder of this year and, 
provided that we are prepared to draw conclusions from our research, 
may propose an IRF-specific market basket for the FY 2016 rulemaking 
cycle. We welcome public comments on the initial findings discussed 
above.

C. Secretary's Proposed Recommendation

    For FY 2015, the Medicare Payment Advisory Commission (MedPAC) 
recommends that a 0 percent update be applied to IRF PPS payment rates. 
As discussed above, and in accordance with sections 1886(j)(3)(C) and 
1886(j)(3)(D) of the Act, the Secretary proposes to update IRF PPS 
payment rates for FY 2015 by an adjusted market basket increase factor 
of 2.1 percent, as section 1886(j)(3)(C) of the Act does not provide 
the Secretary with the authority to apply a different update factor to 
IRF PPS payment rates for FY 2015.
    We invite public comment on the Secretary's proposed 
recommendation.

D. Proposed Labor-Related Share for FY 2015

    We propose to update the labor-related share for FY 2015 using the 
methodology described in the FY 2012 IRF PPS final rule (76 FR 47836, 
47860 through 47863). Using this method and IGI's first quarter 2014 
forecast of the 2008-based RPL market basket, the proposed IRF labor-
related share for FY 2015 is the sum of the FY 2015 relative importance 
of each labor-related cost category. This figure reflects the different 
rates of price change for these cost categories between the base year 
(FY 2008) and FY 2015. As shown in Table 3, the proposed FY 2015 labor-
related share is 69.538 percent. We propose that if a more recent 
estimate of the FY 2015 labor-related share is subsequently available, 
we would use such data, if appropriate, to determine the FY 2015 labor-
related share in the final rule.

     Table 3--Proposed FY 2015 IRF RPL Labor-Related Share Relative
                               Importance
------------------------------------------------------------------------
                                                             Proposed FY
                                                                 2015
                                                               relative
                                                              importance
                                                                labor-
                                                               related
                                                                share
------------------------------------------------------------------------
Wages and Salaries.........................................       48.409
Employee Benefits..........................................       13.016
Professional Fees: Labor-Related...........................        2.065
Administrative and Business................................        0.417
Support Services...........................................
All Other: Labor-Related Services..........................        2.070
                                                            ------------
    Subtotal...............................................       65.977
                                                            ------------
Labor-Related Portion of Capital Costs (.46)...............        3.561
                                                            ------------
        Total Labor-Related Share..........................       69.538
------------------------------------------------------------------------
Source: IHS Global Insight, Inc. First quarter 2014 forecast; Historical
  Data through 4th quarter 2013.

    We invite public comment on the proposed IRF labor-related share 
for FY 2015.

E. Proposed Wage Adjustment

    Section 1886(j)(6) of the Act requires the Secretary to adjust the 
proportion of rehabilitation facilities' costs attributable to wages 
and wage-related costs (as estimated by the Secretary from time to 
time) by a factor (established by the Secretary) reflecting the 
relative hospital wage level in the geographic area of the 
rehabilitation facility compared to the national average wage level for 
those facilities. The Secretary is required to update the IRF PPS wage 
index on the basis of information available to the Secretary on the 
wages and wage-related costs to furnish rehabilitation services. Any 
adjustment or updates made under section 1886(j)(6) of the Act for a FY 
are made in a budget-neutral manner.
    For FY 2015, we propose to maintain the policies and methodologies 
described in the FY 2012 IRF PPS final rule (76 FR 47836, at 47863 
through 47865) related to the labor market area definitions and the 
wage index methodology for areas with wage data. Thus, we propose to 
use the CBSA labor market area definitions and the FY 2014 pre-
reclassification and pre-floor hospital wage index data. In accordance 
with section 1886(d)(3)(E) of the Act, the FY 2014 pre-reclassification 
and pre-floor hospital wage index is based on data submitted for 
hospital cost reporting periods beginning on or after October 1, 2009, 
and before October 1, 2010 (that is, FY 2010 cost report data).
    The labor market designations made by the OMB include some 
geographic areas where there are no hospitals and, thus, no hospital 
wage index data on which to base the calculation of the IRF PPS wage 
index. We propose to continue to use the same methodology discussed in 
the FY 2008 IRF PPS final rule (72 FR 44299) to address those 
geographic areas where there are no hospitals and, thus, no hospital 
wage index data on which to base the calculation for the FY 2015 IRF 
PPS wage index.
    In accordance with our established methodology, we have 
historically adopted any CBSA changes that are published in the OMB 
bulletin that corresponds with the hospital wage data used to determine 
the IRF PPS wage index. The OMB bulletins are available at http://www.whitehouse.gov/omb/bulletins/index.html.
    In keeping with the established IRF PPS wage index policy, we 
propose to use the prior year's (FY 2014) pre-floor, pre-reclassified 
hospital wage index data to derive the FY 2015 applicable IRF PPS wage 
index. We anticipate using the FY 2014 pre-floor, pre-reclassified 
hospital wage index data to derive the applicable IRF PPS wage index 
for FY 2015. We note, however, that the FY 2014 pre-floor, pre-
reclassified hospital wage index does not use OMB's new 2010 Census-
based area delineations, which were outlined in the February 28, 2013, 
OMB Bulletin 13-01, as we did not receive these changes in time to 
incorporate them into the FY 2014 hospital wage index. We therefore 
intend to consider the incorporation of these CBSA changes during the 
development of the FY 2015 hospital wage index. Assuming that we would 
continue to follow our established methodology for the IRF PPS wage 
index, this means that the 2010 Census-based CBSA changes would not be 
considered for inclusion in the IRF PPS wage index until FY 2016.
    To calculate the wage-adjusted facility payment for the payment 
rates set forth in this proposed rule, we multiply the unadjusted 
Federal payment rate for IRFs by the FY 2015 labor-related share based 
on the FY 2008-based RPL market basket (69.538 percent) to determine 
the labor-related portion of the standard payment amount. We then 
multiply the labor-related portion by the applicable IRF wage index 
from the tables in the addendum to this proposed rule. These

[[Page 26322]]

tables are available through the Internet on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. Table A is for urban areas, and Table B is for 
rural areas.
    Adjustments or updates to the IRF wage index made under section 
1886(j)(6) of the Act must be made in a budget-neutral manner. We 
calculate a proposed budget-neutral wage adjustment factor as 
established in the FY 2004 IRF PPS final rule (68 FR 45689), codified 
at Sec.  412.624(e)(1), as described in the steps below. We use the 
listed steps to ensure that the proposed FY 2015 IRF standard payment 
conversion factor reflects the update to the wage indexes (based on the 
FY 2010 hospital cost report data) and the proposed labor-related share 
in a budget-neutral manner:
    Step 1. Determine the total amount of the estimated FY 2014 IRF PPS 
rates, using the FY 2014 standard payment conversion factor and the 
labor-related share and the wage indexes from FY 2014 (as published in 
the FY 2014 IRF PPS final rule (78 FR 47860)).
    Step 2. Calculate the total amount of estimated IRF PPS payments 
using the FY 2015 standard payment conversion factor and the proposed 
FY 2015 labor-related share and CBSA urban and rural wage indexes.
    Step 3. Divide the amount calculated in step 1 by the amount 
calculated in step 2. The resulting quotient is the FY 2015 budget-
neutral wage adjustment factor of 1.0018.
    Step 4. Apply the FY 2015 budget-neutral wage adjustment factor 
from step 3 to the FY 2014 IRF PPS standard payment conversion factor 
after the application of the adjusted market basket update to determine 
the FY 2015 standard payment conversion factor.
    We discuss the calculation of the proposed standard payment 
conversion factor for FY 2015 in section V.F. of this proposed rule.
    We invite public comment on the proposed IRF wage adjustment for FY 
2015.

F. Description of the Proposed IRF Standard Conversion Factor and 
Payment Rates for FY 2015

    To calculate the proposed standard payment conversion factor for FY 
2015, as illustrated in Table 4, we begin by applying the proposed 
adjusted market basket increase factor for FY 2015 that was adjusted in 
accordance with sections 1886(j)(3)(C) and (D) of the Act, to the 
standard payment conversion factor for FY 2014 ($14,846). Applying the 
proposed 2.1 percent adjusted market basket increase factor for FY 2015 
to the standard payment conversion factor for FY 2014 of $14,846 yields 
a standard payment amount of $15,158. Then, we apply the proposed 
budget neutrality factor for the FY 2015 wage index and labor-related 
share of 1.0018, which results in a standard payment amount of $15,185. 
We next apply the proposed budget neutrality factors for the revised 
CMG relative weights of 1.0000, which results in the proposed standard 
payment conversion factor of $15,185 for FY 2015.

Table 4--Calculations to Determine the Proposed FY 2015 Standard Payment
                            Conversion Factor
------------------------------------------------------------------------
               Explanation for adjustment                  Calculations
------------------------------------------------------------------------
Standard Payment Conversion Factor for FY 2014..........         $14,846
Market Basket Increase Factor for FY 2015 (2.7 percent),        x 1.0210
 reduced by a 0.4 percentage point reduction for the
 productivity adjustment as required by section
 1886(j)(3)(C)(ii)(I) of the Act, and reduced by 0.2
 percentage points in accordance with paragraphs
 1886(j)(3)(C) and (D) of the Act.......................
Budget Neutrality Factor for the Wage Index and Labor-          x 1.0018
 Related Share..........................................
Budget Neutrality Factor for the Revisions to the CMG           x 1.0000
 Relative Weights.......................................
Proposed FY 2015 Standard Payment Conversion Factor.....       = $15,185
------------------------------------------------------------------------

    We invite public comment on the proposed FY 2015 standard payment 
conversion factor.
    After the application of the proposed CMG relative weights 
described in Section III of this proposed rule, to the proposed FY 2015 
standard payment conversion factor ($15,185), the resulting proposed 
unadjusted IRF prospective payment rates for FY 2015 are shown in Table 
5.

                                     Table 5--Proposed FY 2015 Payment Rates
----------------------------------------------------------------------------------------------------------------
                                            Payment rate      Payment rate      Payment rate     Payment rate no
                   CMG                         Tier 1            Tier 2            Tier 3          comorbidity
----------------------------------------------------------------------------------------------------------------
0101....................................        $11,935.41        $10,892.20         $9,906.69         $9,498.22
0102....................................         14,935.97         13,631.57         12,398.55         11,888.34
0103....................................         17,682.93         16,137.10         14,677.82         14,073.46
0104....................................         18,387.52         16,780.94         15,263.96         14,635.30
0105....................................         21,492.85         19,614.46         17,842.38         17,107.42
0106....................................         24,476.70         22,337.14         20,319.05         19,480.84
0107....................................         27,367.93         24,976.29         22,718.28         21,782.88
0108....................................         34,090.33         31,111.03         28,298.77         27,132.56
0109....................................         31,197.58         28,470.36         25,898.02         24,830.51
0110....................................         40,837.02         37,267.03         33,898.99         32,501.97
0201....................................         12,377.29         10,155.73          9,111.00          8,676.71
0202....................................         15,995.88         13,125.91         11,775.97         11,214.12
0203....................................         18,375.37         15,078.71         13,528.32         12,882.95
0204....................................         20,188.46         16,565.32         14,863.08         14,153.94
0205....................................         24,056.08         19,738.98         17,710.27         16,864.46
0206....................................         29,121.79         23,896.63         21,439.70         20,416.23
0207....................................         38,650.38         31,713.87         28,453.65         27,096.11
0301....................................         16,828.02         14,178.23         12,846.51         11,850.37
0302....................................         21,040.34         17,726.97         16,062.69         14,816.00
0303....................................         24,959.58         21,029.71         19,054.14         17,576.64
0304....................................         32,805.67         27,639.74         25,043.10         23,100.94
0401....................................         15,645.11         13,368.87         12,318.07         11,012.16
0402....................................         21,333.41         18,229.59         16,796.13         15,016.45
0403....................................         35,103.16         29,996.45         27,636.70         24,707.51

[[Page 26323]]

 
0404....................................         61,763.47         52,776.99         48,625.41         43,471.62
0405....................................         49,773.39         42,531.67         39,187.93         35,033.31
0501....................................         12,819.18         10,290.87          9,423.81          8,535.49
0502....................................         17,716.34         14,223.79         13,025.69         11,797.23
0503....................................         21,965.10         17,634.34         16,149.25         14,626.19
0504....................................         25,902.57         20,795.86         19,043.51         17,248.64
0505....................................         29,589.49         23,755.41         21,754.03         19,704.06
0506....................................         41,418.61         33,252.11         30,452.00         27,582.03
0601....................................         15,719.51         12,392.48         11,449.49         10,429.06
0602....................................         20,270.46         15,977.66         14,762.86         13,447.84
0603....................................         25,509.28         20,107.98         18,578.85         16,925.20
0604....................................         33,408.52         26,335.35         24,330.93         22,165.54
0701....................................         14,749.19         12,231.52         11,715.23         10,672.02
0702....................................         18,915.95         15,686.11         15,024.04         13,686.24
0703....................................         22,915.68         19,002.51         18,200.74         16,578.98
0704....................................         29,478.64         24,446.33         23,413.75         21,327.33
0801....................................         11,305.23          9,250.70          8,541.56          7,873.42
0802....................................         15,075.67         12,336.29         11,391.79         10,500.43
0803....................................         20,366.12         16,665.54         15,388.48         14,184.31
0804....................................         18,000.30         14,729.45         13,601.20         12,536.74
0805....................................         22,393.32         18,323.74         16,919.13         15,596.51
0806....................................         26,901.75         22,012.18         20,326.64         18,736.77
0901....................................         14,276.94         11,479.86         10,716.05          9,691.07
0902....................................         18,858.25         15,162.22         14,153.94         12,800.96
0903....................................         23,693.16         19,051.10         17,783.15         16,082.43
0904....................................         30,114.89         24,214.00         22,602.87         20,442.05
1001....................................         15,605.62         14,196.46         12,263.41         11,214.12
1002....................................         20,030.53         18,220.48         15,739.25         14,392.34
1003....................................         28,632.84         26,045.31         22,498.10         20,574.16
1101....................................         19,210.54         15,429.48         15,273.07         13,031.77
1102....................................         28,760.39         23,097.90         22,865.57         19,509.69
1201....................................         16,348.17         14,415.12         13,472.13         12,517.00
1202....................................         19,455.02         17,152.98         16,030.80         14,894.97
1203....................................         24,712.07         21,788.96         20,363.09         18,918.99
1301....................................         18,615.29         14,996.71         13,200.32         12,430.44
1302....................................         24,245.89         19,533.98         17,193.98         16,190.25
1303....................................         30,884.77         24,882.14         21,902.84         20,624.27
1401....................................         13,751.54         11,132.12         10,125.36          9,186.93
1402....................................         18,176.45         14,712.75         13,384.06         12,143.44
1403....................................         22,402.43         18,135.45         16,495.47         14,967.85
1404....................................         28,162.10         22,797.24         20,736.64         18,815.73
1501....................................         15,144.00         12,378.81         11,438.86         11,048.61
1502....................................         19,707.09         16,108.25         14,884.34         14,377.16
1503....................................         24,182.11         19,766.31         18,264.52         17,641.93
1504....................................         29,873.45         24,419.00         22,563.39         21,793.51
1601....................................         14,430.31         13,391.65         12,315.04         11,584.64
1602....................................         19,069.32         17,696.60         16,273.76         15,308.00
1603....................................         24,110.74         22,375.10         20,574.16         19,354.80
1701....................................         15,818.21         14,108.38         13,027.21         11,952.11
1702....................................         19,880.20         17,730.01         16,372.47         15,021.00
1703....................................         23,305.94         20,786.75         19,193.84         17,610.04
1704....................................         30,113.37         26,857.71         24,801.66         22,753.20
1801....................................         16,411.95         14,515.34         12,324.15         11,047.09
1802....................................         25,849.43         22,862.54         19,409.47         17,400.49
1803....................................         42,943.18         37,980.72         32,245.35         28,906.17
1901....................................         15,991.32         14,377.16         14,117.49         13,502.50
1902....................................         28,593.36         25,706.69         25,242.03         24,142.63
1903....................................         51,258.49         46,081.92         45,249.78         43,278.77
2001....................................         13,434.17         11,027.35         10,163.32          9,278.04
2002....................................         18,042.82         14,809.93         13,651.32         12,460.81
2003....................................         22,894.42         18,792.96         17,321.53         15,810.62
2004....................................         29,627.45         24,318.78         22,414.58         20,460.27
2101....................................         27,739.96         26,033.16         23,612.68         20,502.79
5001....................................  ................  ................  ................          2,346.08
5101....................................  ................  ................  ................         10,339.47
5102....................................  ................  ................  ................         23,602.05
5103....................................  ................  ................  ................         11,045.57
5104....................................  ................  ................  ................         29,256.94
----------------------------------------------------------------------------------------------------------------


[[Page 26324]]

G. Example of the Methodology for Adjusting the Proposed Federal 
Prospective Payment Rates

    Table 6 illustrates the methodology for adjusting the proposed 
federal prospective payments (as described in sections V.A. through 
V.F. of this proposed rule). The following examples are based on two 
hypothetical Medicare beneficiaries, both classified into CMG 0110 
(without comorbidities). The proposed unadjusted federal prospective 
payment rate for CMG 0110 (without comorbidities) appears in Table 6.
    Example: One beneficiary is in Facility A, an IRF located in rural 
Spencer County, Indiana, and another beneficiary is in Facility B, an 
IRF located in urban Harrison County, Indiana. Facility A, a rural non-
teaching hospital has a Disproportionate Share Hospital (DSH) 
percentage of 5 percent (which would result in a LIP adjustment of 
1.0156), a wage index of 0.8513, and a rural adjustment of 14.9 
percent. Facility B, an urban teaching hospital, has a DSH percentage 
of 15 percent (which would result in a LIP adjustment of 1.0454 
percent), a wage index of 0.8852, and a teaching status adjustment of 
0.0784.
    To calculate each IRF's labor and non-labor portion of the Federal 
prospective payment, we begin by taking the unadjusted Federal 
prospective payment rate for CMG 0110 (without comorbidities) from 
Table 5. Then, we multiply the proposed labor-related share for FY 2015 
(69.538 percent) described in section V.D. of this proposed rule by the 
proposed unadjusted federal prospective payment rate. To determine the 
non-labor portion of the proposed federal prospective payment rate, we 
subtract the labor portion of the proposed federal payment from the 
proposed unadjusted federal prospective payment.
    To compute the proposed wage-adjusted federal prospective payment, 
we multiply the labor portion of the proposed federal payment by the 
appropriate wage index found in tables A and B. These tables are 
available through the Internet on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/. The resulting figure is the wage-adjusted labor 
amount. Next, we compute the proposed wage-adjusted federal payment by 
adding the wage-adjusted labor amount to the non-labor portion.
    Adjusting the proposed wage-adjusted federal payment by the 
facility-level adjustments involves several steps. First, we take the 
wage-adjusted Federal prospective payment and multiply it by the 
appropriate rural and LIP adjustments (if applicable). Second, to 
determine the appropriate amount of additional payment for the teaching 
status adjustment (if applicable), we multiply the teaching status 
adjustment (0.0784, in this example) by the wage-adjusted and rural-
adjusted amount (if applicable). Finally, we add the additional 
teaching status payments (if applicable) to the wage, rural, and LIP-
adjusted federal prospective payment rates. Table 6 illustrates the 
components of the adjusted payment calculation.

    Table 6--Example of Computing the IRF FY 2015 Federal Prospective
                                 Payment
------------------------------------------------------------------------
 
------------------------------------------------------------------------
     Step                         Rural facility A
                                 (Spencer Co., IN)
                 Urban facility B
                 (Harrison Co., IN)
------------------------------------------------------------------------
1............  Unadjusted       ...      $32,501.97  ...      $32,501.97
                Federal
                Prospective
                Payment.
2............  Labor Share....   x          0.69538   x          0.69538
3............  Labor Portion     =       $22,601.22   =       $22,601.22
                of Federal
                Payment.
4............  CBSA-Based Wage   x           0.8513   x           0.8852
                Index (shown
                in the
                Addendum,
                Tables 1 and
                2).
5............  Wage-Adjusted     =       $19,240.42   =       $20,006.60
                Amount.
6............  Non-Labor         +        $9,900.75   +        $9,900.75
                Amount.
7............  Wage-Adjusted     =       $29,141.17   =       $29,907.35
                Federal
                Payment.
8............  Rural             x            1.149   x            1.000
                Adjustment.
9............  Wage- and Rural-  =       $33,483.20   =       $29,907.35
                Adjusted
                Federal
                Payment.
10...........  LIP Adjustment.   x           1.0156   x           1.0454
11...........  FY 2015 Wage-,    =       $34,005.54   =       $31,265.14
                Rural- and LIP-
                Adjusted
                Federal
                Prospective
                Payment Rate.
12...........  FY 2015 Wage-    ...      $33,483.20  ...      $29,907.35
                and Rural-
                Adjusted
                Federal
                Prospective
                Payment.
13...........  Teaching Status   x                0   x           0.0784
                Adjustment.
14...........  Teaching Status   =            $0.00   =        $2,344.74
                Adjustment
                Amount.
15...........  FY 2015 Wage-,    +       $34,005.54   +       $31,265.14
                Rural-, and
                LIP-Adjusted
                Federal
                Prospective
                Payment Rate.
16...........  Total FY 2015     =       $34,005.54   =       $33,609.88
                Adjusted
                Federal
                Prospective
                Payment.
------------------------------------------------------------------------

    Thus, the proposed adjusted payment for Facility A would be 
$34,005.54, and the proposed adjusted payment for Facility B would be 
$33,609.88.

VI. Proposed Update to Payments for High-Cost Outliers under the IRF 
PPS

A. Proposed Update to the Outlier Threshold Amount for FY 2015

    Section 1886(j)(4) of the Act provides the Secretary with the 
authority to make payments in addition to the basic IRF prospective 
payments for cases incurring extraordinarily high costs. A case 
qualifies for an outlier payment if the estimated cost of the case 
exceeds the adjusted outlier threshold. We calculate the adjusted 
outlier threshold by adding the IRF PPS payment for the case (that is, 
the CMG payment adjusted by all of the relevant facility-level 
adjustments) and the adjusted threshold amount (also adjusted by all of 
the relevant facility-level adjustments). Then, we calculate the 
estimated cost of a case by multiplying the IRF's overall CCR by the 
Medicare allowable covered charge. If the estimated cost of the case is 
higher than the adjusted outlier threshold, we make an outlier payment 
for the case equal to 80 percent of the difference between the 
estimated cost of the case and the outlier threshold.
    In the FY 2002 IRF PPS final rule (66 FR 41362 through 41363), we 
discussed our rationale for setting the outlier threshold amount for 
the IRF PPS so that estimated outlier payments would equal 3 percent of 
total estimated payments. For the 2002 IRF PPS final rule, we analyzed 
various outlier policies using 3, 4, and 5 percent of the total 
estimated payments, and we concluded that an outlier policy set at 3 
percent of total estimated payments would optimize the extent to which 
we could reduce the financial risk to IRFs of caring for high-cost 
patients, while still providing for adequate payments for all other 
(non-high cost outlier) cases.
    Subsequently, we updated the IRF outlier threshold amount in the 
FYs

[[Page 26325]]

2006 through 2014 IRF PPS final rules and the FY 2011 and FY 2013 
notices (70 FR 47880, 71 FR 48354, 72 FR 44284, 73 FR 46370, 74 FR 
39762, 75 FR 42836, 76 FR 47836, 76 FR 59256, and 77 FR 44618, 78 FR 
47860, respectively) to maintain estimated outlier payments at 3 
percent of total estimated payments. We also stated in the FY 2009 
final rule (73 FR 46370 at 46385) that we would continue to analyze the 
estimated outlier payments for subsequent years and adjust the outlier 
threshold amount as appropriate to maintain the 3 percent target.
    To update the IRF outlier threshold amount for FY 2015, we propose 
to use FY 2013 claims data and the same methodology that we used to set 
the initial outlier threshold amount in the FY 2002 IRF PPS final rule 
(66 FR 41316 and 41362 through 41363), which is also the same 
methodology that we used to update the outlier threshold amounts for 
FYs 2006 through 2014. Based on an analysis of this updated data, we 
estimate that IRF outlier payments as a percentage of total estimated 
payments are approximately 2.9 percent in FY 2014. Therefore, we 
propose to update the outlier threshold amount to $9,149 to maintain 
estimated outlier payments at approximately 3 percent of total 
estimated aggregate IRF payments for FY 2015.
    We invite public comment on the proposed update to the FY 2015 
outlier threshold amount to maintain estimated outlier payments at 
approximately 3 percent of total estimated IRF payments.

B. Proposed Update to the IRF Cost-to-Charge Ratio Ceiling and Urban/
Rural Averages

    In accordance with the methodology stated in the FY 2004 IRF PPS 
final rule (68 FR 45674, 45692 through 45694), we apply a ceiling to 
IRFs' CCRs. Using the methodology described in that final rule, we 
propose to update the national urban and rural CCRs for IRFs, as well 
as the national CCR ceiling for FY 2015, based on analysis of the most 
recent data that is available. We apply the national urban and rural 
CCRs in the following situations:
     New IRFs that have not yet submitted their first Medicare 
cost report.
     IRFs whose overall CCR is in excess of the national CCR 
ceiling for FY 2015, as discussed below.
     Other IRFs for which accurate data to calculate an overall 
CCR are not available.
    Specifically, for FY 2015, based on our estimates, we propose a 
national average CCR of 0.571 for rural IRFs, which we calculated by 
taking an average of the CCRs for all rural IRFs using their most 
recently submitted cost report data. Similarly, based on our estimates, 
we propose a national average CCR of 0.456 for urban IRFs, which we 
calculated by taking an average of the CCRs for all urban IRFs using 
their most recently submitted cost report data. We apply weights to 
both of these averages using the IRFs' estimated costs, meaning that 
the CCRs of IRFs with higher costs factor more heavily into the 
averages than the CCRs of IRFs with lower costs. For this proposed 
rule, we have used the most recent available cost report data (FY 
2012). This includes all IRFs whose cost reporting periods begin on or 
after October 1, 2011, and before October 1, 2012. If, for any IRF, the 
FY 2012 cost report was missing or had an ``as submitted'' status, we 
used data from a previous fiscal year's (that is, FY 2004 through FY 
2011) settled cost report for that IRF. We do not use cost report data 
from before FY 2004 for any IRF because changes in IRF utilization 
since FY 2004 resulting from the 60 percent rule and IRF medical review 
activities suggest that these older data do not adequately reflect the 
current cost of care.
    In accordance with past practice, we propose to set the national 
CCR ceiling at 3 standard deviations above the mean CCR. Using this 
method, the proposed national CCR ceiling would be 1.64 for FY 2015. 
This means that, if an individual IRF's CCR exceeds this proposed 
ceiling of 1.64 for FY 2015, we would replace the IRF's CCR with the 
appropriate proposed national average CCR (either rural or urban, 
depending on the geographic location of the IRF). We calculated the 
proposed national CCR ceiling by:
    Step 1. Taking the national average CCR (weighted by each IRF's 
total costs, as discussed above) of all IRFs for which we have 
sufficient cost report data (both rural and urban IRFs combined).
    Step 2. Estimating the standard deviation of the national average 
CCR computed in step 1.
    Step 3. Multiplying the standard deviation of the national average 
CCR computed in step 2 by a factor of 3 to compute a statistically 
significant reliable ceiling.
    Step 4. Adding the result from step 3 to the national average CCR 
of all IRFs for which we have sufficient cost report data, from step 1.
    We propose that the proposed national average rural and urban CCRs 
and the proposed national CCR ceiling in this section will be updated 
in the final rule if more recent data become available to use in these 
analyses.
    We invite public comment on the proposed update to the IRF CCR 
ceiling and the urban/rural averages for FY 2015.

VII. Proposed Refinements to the Presumptive Compliance Methodology

A. Background on the Compliance Percentage

    The compliance percentage has been part of the criteria for 
defining IRFs since implementation of the Inpatient Prospective Payment 
System (IPPS) in 1983. In the September 1, 1983, interim final rule 
with comment period (48 FR 39752), which allowed IRFs to be paid 
separately from the IPPS, the initial compliance percentage was set at 
75 percent. The 1983 interim rule stipulated that in accordance with 
sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act, a 
rehabilitation hospital and a rehabilitation unit were excluded from 
the IPPS. Sections 1886(d)(1)(B) and 1886(d)(1)(B)(ii) of the Act also 
give the Secretary the discretion to define a rehabilitation hospital 
and unit.
    A hospital or unit deemed excluded from the IPPS and paid under the 
IRF PPS must meet the general requirements in subpart B and subpart P 
of part 412. Subject to the special payment provisions of Sec.  
412.22(c), a hospital or unit must meet the general criteria set forth 
in Sec.  412.22 and in the regulations at Sec.  412.23(b), Sec.  
412.25, and Sec.  412.29 that specify the criteria for a provider to be 
classified as a rehabilitation hospital or unit. Hospitals and units 
meeting these criteria are eligible to be paid on a prospective payment 
basis as an IRF under the IRF PPS.
    The 1983 interim final rule stipulated that one of the criteria for 
being classified as an IRF was that, during the facility's most 
recently completed 12-month cost reporting period, the hospital must be 
primarily engaged in furnishing intensive rehabilitation services, as 
demonstrated by patient medical records, indicating that at least 75 
percent of the IRF's patient population were treated for one or more of 
the 10 medical conditions specified in the regulation that typically 
required the intensive inpatient rehabilitation treatment provided in 
an IRF. These criteria, along with other related criteria, 
distinguished an inpatient rehabilitation hospital or unit from a 
hospital that furnished general medical or surgical services, as well 
as rehabilitation services. We believed then, as we do now, that by 
examining the types of conditions for which a hospital's inpatients are 
treated, and the proportion of patients treated for

[[Page 26326]]

conditions that typically require intensive inpatient rehabilitation, 
we would be able to distinguish those hospitals in which the provision 
of rehabilitation services was primary rather than secondary. Thus, 
Medicare pays for rehabilitation services at IRFs at a higher rate than 
other hospitals because IRFs are designed to offer specialized 
inpatient rehabilitation care to patients with intensive needs.
    The original medical conditions specified under the compliance 
percentage, or ``75 percent rule,'' were stroke, spinal cord injury, 
congenital deformity, amputation, major multiple trauma, fracture of 
femur (hip fracture), brain injury, and polyarthritis (including 
rheumatoid arthritis). In the January 3, 1984, final rule (49 FR 234), 
we expanded the list of eligible medical conditions to include 
neurological disorders (including multiple sclerosis, motor neuron 
diseases, polyneuropathy, muscular dystrophy, and Parkinson's disease) 
and burns. In the May 7, 2004 final rule (69 FR 25752), we modified and 
expanded the list of eligible medical conditions by removing 
polyarthritis and substituting three more clearly defined arthritis-
related conditions. The three conditions that replaced polyarthritis 
included the following:
     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.
     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.
     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 is no longer considered to have 
osteoarthritis, or other arthritis, even though this condition was the 
reason for the joint replacement.)
    In the May 7, 2004 final rule (69 FR 25752), a 13th condition was 
also added to include patients who undergo knee and/or hip joint 
replacement during an acute hospitalization immediately preceding the 
inpatient rehabilitation stay and also meet at least one of the 
following specific criteria:
     Underwent bilateral knee or hip joint replacement surgery 
during the acute hospitalization immediately preceding the IRF 
admission.
     Are extremely obese patients as measured by the patient's 
Body Mass Index (BMI) of at least 50, at the time of admission to the 
IRF.
     Are patients considered to be ``frail elderly,'' as 
determined by a patient's age of 85 or older, at the time of admission 
to the IRF (the provision currently states only that the patients be 
age 85 or older at the time of admission to the IRF).
    In 2002, we surveyed Medicare fiscal intermediaries to determine 
how they were enforcing the 75 percent rule. Although the 75 percent 
rule was one of the criteria that were used to distinguish an IRF from 
an acute care hospital from 1983 to 2004, we found evidence that 
different fiscal intermediaries were enforcing the rule differently. We 
found fiscal intermediaries were using inconsistent methods to 
determine whether IRFs were in compliance with the regulation, and that 
some IRFs were not being reviewed for compliance at all. This led to 
concerns that some IRFs might have been out of compliance with the 
regulation and inappropriately classified as IRFs, while other IRFs may 
have been held to overly high standards. Because of these concerns we 
sought to establish a more uniform enforcement of the 75 percent rule.
    In the May 16, 2003, IRF PPS proposed rule (68 FR 26786), we 
solicited comments on the regulatory requirements of the 75 percent 
rule. Though we did not, at that time, propose amending the regulatory 
requirements for the 75 percent rule located in then Sec.  
412.23(b)(2), we did propose to amend these requirements in the 
September 9, 2003, proposed rule titled, ``Medicare Program; Changes to 
the Criteria for Being Classified as an Inpatient Rehabilitation 
Facility'' (68 FR 53266). In that rule, we proposed some revisions to 
the 75 percent rule, including lowering the compliance percentage to 65 
percent during a 3-year transition period for cost reporting periods 
between January 1, 2004, and January 1, 2007. Also, in response to 
comments on the September 9, 2003, proposed rule and as stated above, 
the May 7, 2004, final rule (69 FR 25752) expanded the number of 
medical conditions that would meet the compliance percentage from 10 to 
13 and provided that patient comorbidities may also be included in 
determining an IRF's compliance with the requirements during the 
transition period.
    In the September 9, 2003, proposed rule, we defined a 
``comorbidity'' as a specific patient condition that is secondary to 
the patient's principal diagnosis or impairment that is the primary 
reason for the inpatient rehabilitation stay. In the May 7, 2004, rule, 
we adopted the provision to use a patient with a comorbidity counting 
towards the compliance threshold during the transition period. In the 
determination of the compliance percentage, a patient comorbidity 
counts toward the percentage if the comorbidity falls in one of the 
conditions specified at Sec.  412.29(b)(2) and has caused significant 
decline in functional ability in the individual that even in the 
absence of the admitting condition, the individual would require the 
intensive rehabilitation treatment that is unique to IRFs.
    Anticipating that IRFs needed some time to adjust and adapt their 
processes to the changes in the enforcement of the 75 percent rule, in 
the May 7, 2004 final rule, we provided IRFs with a 3-year phase-in 
period (cost reporting periods beginning on or after July 1, 2004, 
through July 1, 2007) to establish the compliance threshold of 75 
percent of the IRF's total patient population. The 3-year phase-in 
period was intended to begin with cost reporting periods on or after 
July 1, 2004, with the threshold at 50 percent of the IRF's population 
and gradually increase to 60 percent, then to 65 percent, and then to 
expire with cost reporting periods beginning on or after July 1, 2007, 
when the compliance percentage would once again be at 75 percent.
    Section 5005 of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 
109-171, enacted February 8, 2006) and section 1886(d)(1)(B) of the Act 
modified the

[[Page 26327]]

provisions of the 75 percent rule originally specified in the May 7, 
2004, final rule. To reflect these statutory changes, in the August 7, 
2007, final rule (72 FR 44284), we revised the regulations to prolong 
the overall duration of the phased transition to the full 75 percent 
threshold by stipulating that an IRF must meet the full 75 percent 
compliance threshold as of its first cost reporting period that starts 
on or after July 1, 2008. We also extended the policy of using a 
patient's comorbidities to the extent they met the conditions as 
outlined in the regulations to determine compliance with the 
classification criteria at then Sec.  412.23(b)(2)(1) to the first cost 
reporting period that starts on or after July 1, 2008.
    Subsequently, section 115 of the MMSEA amended section 5005 of the 
DRA to revise elements of the 75 percent rule that are used to classify 
IRFs. In accordance with the statute, in the August 8, 2008, final rule 
(73 FR 46370), we revised the compliance rate that IRFs must meet to be 
excluded from the IPPS and be paid under the IRF PPS to 60 percent for 
cost reporting periods beginning in or after July 1, 2006. Also, in 
accordance with the statute, we required that patient comorbidities 
that satisfy the criteria as specified at then Sec.  412.23(b)(2)(i) 
[now located at Sec.  412.29(b)(1) and Sec.  412.29(b)(2)] be included 
in calculations used to determine whether an IRF meets the 60 percent 
compliance percentage for cost reporting periods beginning on or after 
July 1, 2007. As a result of these changes, the requirements started 
being referred to as the ``60 percent rule,'' instead of the ``75 
percent rule.'' The regulations finalized in the FY 2009 IRF PPS Final 
Rule (73 FR 46370) continue to be in effect.
    Though an IRF must serve an inpatient population of whom at least 
60 percent meet the compliance percentage criteria specified at Sec.  
412.29(b), the existing regulation allows for 40 percent of reasonable 
and necessary admissions to an IRF to fall outside of the 13 qualifying 
medical conditions. Still, the ``60 percent rule'' is one of the 
primary ways we distinguish an IRF from an acute care hospital. As 
Medicare payments for IRF services are generally significantly higher 
than Medicare payments for similar services provided in acute care 
hospital settings, we believe that it is important to maintain and 
enforce the criteria for medical conditions that may be counted toward 
an IRF's compliance calculation for the 60 percent rule to ensure that 
the higher Medicare payments are appropriately allocated to those 
providers that are providing IRF-level services.

B. Proposed Changes to the Diagnosis Codes That Are Used To Determine 
Presumptive Compliance

    In the FY 2014 IRF PPS final rule (78 FR 47860, 47881 through 
47895), we revised the list of ICD-9-CM diagnosis codes that are used 
to determine presumptive compliance, effective for compliance review 
periods beginning on or after October 1, 2014. These revisions were 
based on an analysis of the ICD-9-CM code list that determined the 
clinical appropriateness of each individual ICD-9-CM code's inclusion 
on the list. As a result of this analysis, we also intended to remove 
all of the status post-amputation diagnoses codes, but these codes were 
inadvertently omitted from the FY 2014 IRF PPS proposed and final 
rules. These codes, listed in Table 7, are used to indicate that a 
patient has the sequela or residual effect of a condition.
    As we stated in the FY 2014 IRF PPS final rule (78 FR 47860, at 
47881), the ICD-9-CM diagnosis codes included on the ``ICD-9-CM Codes 
That Meet Presumptive Compliance Criteria'' list are ones that 
demonstrate that the patient meets criteria for the medical conditions 
that may be counted toward an IRF's compliance percentage under the 
presumptive compliance methodology. Further, we stated that the 
underlying premise of the presumptive compliance methodology list is 
that it represents particular diagnosis codes that, if applicable to a 
given patient, would more than likely mean that the patient required 
intensive rehabilitation services in an IRF for treatment of one or 
more of the conditions specified at Sec.  412.29(b)(2) or that they had 
a comorbidity that caused significant decline in functional ability 
such that, even in the absence of the admitting condition, the patient 
would require the intensive rehabilitation treatment that is unique to 
IRFs and cannot be appropriately treated in another care setting. For 
the reasons described below, we do not believe that the ICD-9-CM 
diagnosis codes listed in Table 7 meet either of these criteria. We 
believe it is impossible to determine, from the presence of such 
diagnosis codes alone, whether a patient with an amputation status or 
prosthetic fitting and adjustment needs has a condition for which he or 
she would qualify for treatment in an IRF. Some patients with an 
amputation status or prosthetic fitting and adjustment needs will not 
require close medical supervision by a physician or weekly 
interdisciplinary team conferences to achieve their goals, while others 
may require these services. We believe that rehabilitation associated 
with an amputation status or prosthetic fitting and adjustment needs 
does not necessarily need to be accompanied by the close medical 
management provided in IRFs, as long as the patient does not have any 
additional comorbidities that have caused significant decline in his or 
her functional ability that, in the absence of an amputation status or 
prosthetic fitting and adjustment needs, would necessitate treatment in 
an IRF. That is to say, a patient's need for intensive rehabilitation 
services provided in an IRF may depend on other conditions which cannot 
be solely identified through the presence of an amputation status or 
prosthetic fitting and adjustment diagnosis code. If a patient with one 
of the diagnosis codes listed in Table 7 has additional comorbidities 
that would necessitate treatment in an IRF, then those additional 
comorbidities would qualify the patient for inclusion in the 
calculation of the IRF's compliance percentage under the presumptive 
compliance methodology. Thus, we propose the removal of the status 
post-amputation diagnosis codes listed in Table 7 from the list of 
``ICD-9-CM Codes That Meet Presumptive Compliance Criteria.'' This 
proposed removal would be effective for compliance review periods 
beginning on or after October 1, 2014, and the changes would be 
incorporated into the ICD-10 lists (discussed below) when ICD-10-CM 
becomes the required medical data code set for use on Medicare claims 
and IRF-PAI submissions. We invite public comment on the proposed 
changes to the diagnosis codes that are used to determine presumptive 
compliance.

  Table 7--ICD-9-CM Codes Proposed To Be Removed From ``ICD-9-CM Codes
               That Meet Presumptive Compliance Criteria''
------------------------------------------------------------------------
           ICD-9-CM code                          Diagnosis
------------------------------------------------------------------------
V49.65............................  Below elbow amputation status.
V49.66............................  Above elbow amputation status.
V49.67............................  Shoulder amputation status.
V49.73............................  Foot amputation status.
V49.74............................  Ankle amputation status.
V49.75............................  Below knee amputation status.
V49.76............................  Above knee amputation status.
V49.77............................  Hip amputation status.
V52.0.............................  Fitting and adjustment of artificial
                                     arm (complete) (partial).
V52.1.............................  Fitting and adjustment of artificial
                                     leg (complete) (partial).
------------------------------------------------------------------------


[[Page 26328]]

C. Proposed Changes to the Impairment Group Codes That Meet Presumptive 
Compliance Criteria

    An ``impairment group code'' is not an ICD diagnosis code, but part 
of a separate unique set of codes specifically developed for the IRF 
PPS for assigning the primary reason for admission to an IRF. These 
codes are listed in the IRF-PAI Training Manual (see section II, item 
21, and Appendix A). The IRF-PAI Training Manual is available 
through the Internet on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    If an IRF is eligible to use the presumptive methodology to 
evaluate its compliance with the 60 percent rule, all of its IRF-PAI 
assessments from the most recently completed 12-month compliance review 
period are examined (with the use of a computer program) to determine 
whether they contain any of the codes listed on the presumptive 
methodology lists (that is, ``ICD-9-CM Codes That Meet Presumptive 
Compliance Criteria'' and ``Impairment Groups That Meet Presumptive 
Compliance Criteria''). Each selected assessment is presumptively 
categorized as either meeting or not meeting the IRF 60 percent rule 
requirements based upon the primary reason for the patient to be 
treated in the IRF (the impairment group) and the ICD diagnosis codes 
listed as either the etiologic diagnosis (the etiologic problem that 
led to the condition for which the patient is receiving rehabilitation) 
or one of 25 comorbidities on the assessment.
    Not all impairment group codes (IGC) meet the presumptive 
compliance criteria. The underlying premise of the list of eligible 
IGCs that are used to determine presumptive compliance (similar to the 
diagnosis codes listed in ``ICD-9-CM Codes That Meet Presumptive 
Compliance Criteria'') includes particular IGCs that, if applicable to 
a given patient, would more than likely mean that the patient required 
intensive rehabilitation services for treatment of one or more of the 
conditions specified at Sec.  412.29(b)(2). The current list of 
eligible IGCs that meet presumptive compliance criteria, Appendix B: 
Impairment Group Codes That Meet Presumptive Compliance Criteria, can 
be downloaded from the October 1, 2007, IRF Compliance Rule 
Specification Files on the Medicare IRF PPS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Criteria.html. Again, this list contains only 
those IGCs that meet the presumptive compliance criteria.
1. Proposed Removal of IGCs for Unilateral Upper Extremity Amputations 
and Arthritis From Appendix B: Impairment Group Codes That Meet 
Presumptive Compliance Criteria
    In the FY 2014 IRF PPS final rule (78 FR 47889 through 47895), we 
finalized (applicable for compliance review periods beginning on or 
after October 1, 2014) the removal of certain ICD-9-CM codes for 
unilateral upper extremity amputations from the list of ``ICD-9-CM 
Codes That Meet Presumptive Compliance Criteria'' because we believed 
that it is impossible to determine, from the presence of such ICD-9-CM 
codes alone, whether a patient with such a unilateral upper extremity 
amputation has a condition for which he or she would need intensive 
rehabilitation services for treatment of one or more of the conditions 
specified in Sec.  412.29(b)(2). Further, we stated that a patient's 
need for intensive inpatient rehabilitative services for the treatment 
of one or more of these conditions would depend on the presence of 
additional comorbidities that caused significant decline in his or her 
functional ability to an extent that would necessitate treatment in an 
IRF. If the patient has one or more of the comorbidities on the list of 
``ICD-9-CM Codes That Meet Presumptive Compliance Criteria,'' then the 
patient would already qualify as meeting the presumptive compliance 
criteria. We concluded that if the diagnosis codes for such a patient's 
comorbidities do not appear on the list of ``ICD-9-CM Codes That Meet 
Presumptive Compliance Criteria,'' then the patient could still be 
considered for inclusion in the IRF's compliance percentage following 
medical review and confirmation that they meet the criteria for one or 
more of the medical conditions in the regulations.
    In the FY 2014 IRF PPS final rule (78 FR 47887 through 47895), we 
also finalized (applicable for compliance review periods beginning on 
or after October 1, 2014) the removal of ICD-9-CM diagnosis codes for 
arthritis conditions from the list of ``ICD-9-CM Codes That Meet 
Presumptive Compliance Criteria'' because the inclusion of patients 
with these medical conditions in the presumptive compliance calculation 
of the IRF's compliance percentage is conditioned on those patients 
meeting the described severity and prior treatment requirements. 
However, the ICD-9-CM diagnosis codes that reflect these arthritis and 
arthropathy conditions do not provide any information about the 
severity of the condition or whether the prior treatment requirements 
were met. Therefore, we stated in the FY 2014 IRF PPS final rule that 
we believe that additional information beyond the presence of the code 
is necessary to determine if the medical record would support inclusion 
of individuals with the arthritis and arthropathy conditions outlined 
in our regulations under Sec.  412.29(b)(2)(x) through Sec.  
412.29(b)(2)(xii) in the presumptive compliance calculation of the 
facility's compliance percentage. For this reason, we finalized the 
removal of the ICD-9-CM diagnosis codes associated with the medical 
conditions outlined in our regulations under Sec.  412.29(b)(2)(x) 
through Sec.  412.29(b)(2)(xii) from the list of ``ICD-9-CM Codes That 
Meet Presumptive Compliance Criteria.'' However, we also stated that we 
expect that the MACs will be able, upon medical review, to include 
those patients in a facility's compliance percentage upon confirmation 
that the severity and prior treatment requirements were met.
    Consistent with our rationale in the FY 2014 IRF PPS final rule for 
removing the ICD-9-CM diagnoses codes for unilateral upper extremity 
amputations and the arthritis and arthropathy conditions, we propose to 
make conforming changes to the IGCs by proposing the removal of four 
IGCs from Appendix B: Impairment Group Codes That Meet Presumptive 
Compliance Criteria. Thus, we propose to remove the following codes 
from Appendix B: Impairment Group Codes That Meet Presumptive 
Compliance Criteria:
     IGC 0005.1--Unilateral Upper Limb Above the Elbow (AE),
     IGC 0005.2--Unilateral Upper Limb Below the Elbow (BE),
     IGC 0006.1--Rheumatoid Arthritis, and
     IGC 0006.9--Other Arthritis.
2. Other Proposed Changes to Appendix B: Impairment Group Codes That 
Meet Presumptive Compliance Criteria
    We propose to revise Appendix B: Impairment Group Codes That Meet 
Presumptive Compliance Criteria by revising the diagnosis codes listed 
as exclusions on the table and by revising the title of the table.
    In the FY 2014 IRF PPS final rule (78 FR 47860, 47881 through 
47895), we finalized (applicable for compliance review periods 
beginning on or after October 1, 2014) the removal of certain ICD-9-CM 
codes from the list of ``ICD-9-CM Codes That Meet Presumptive 
Compliance Criteria.'' Accordingly, we

[[Page 26329]]

propose to exclude these diagnosis codes from counting if they are the 
patient's Etiologic Diagnosis (that is, the etiologic problem that led 
to the condition for which the patient is receiving rehabilitation). 
That is, a given IGC that would otherwise meet the presumptive 
compliance criteria will not meet such criteria if the patient has one 
of the ``excluded'' Etiologic Diagnoses for that IGC.
    In addition, in the FY 2014 IRF PPS final rule (78 FR 47860, 
47883), we implemented a change in the titles of some tables used in 
the presumptive compliance methodology to no longer use alphabet 
characters or the ``Appendix'' labels to identify these tables. 
Consistent with the intent to reduce confusion among tables, and 
effective October 1, 2014, we propose to identify Appendix B: 
Impairment Group Codes That Meet Presumptive Compliance Criteria as 
``Impairment Group Codes That Meet Presumptive Compliance Criteria.''
    This new proposed table, ``Impairment Group Codes That Meet 
Presumptive Compliance Criteria,'' also lists Etiologic Diagnosis codes 
that are excluded from counting under related IGCs in ICD-10-CM code 
format. For example, ICD-10-CM code G72.3, ``Periodic Paralysis'' is an 
excluded Etiologic Diagnosis code under IGC 0003.8, ``Neuromuscular 
Disorders.'' Further, to accommodate the proposed Etiologic Diagnosis 
code exclusions, we have reformatted this table. A revised table 
containing the proposed ``Impairment Group Codes That Meet Presumptive 
Compliance Criteria,'' with the additional proposed ICD-10-CM Etiologic 
Diagnosis exclusions described in this section, can be viewed on the 
Medicare IRF PPS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html. The proposed 
changes to the table, ``Impairment Group Codes That Meet Presumptive 
Compliance Criteria,'' would be effective for compliance review periods 
beginning on or after October 1, 2014. We invite public comment on the 
proposed changes to the impairment group codes that meet presumptive 
compliance criteria.

VIII. Proposed Data Collection of the Amount and Mode (Individual, 
Group, and Co-Treatment) of Therapy Provided in IRFs According to 
Occupational, Speech, and Physical Therapy Disciplines

    Prior to the implementation of the IRF PPS in January 2002, 
Medicare payment for IRF services under section 101(a) of the Tax 
Equity and Fiscal Responsibility Act of 1982 (Pub. L. 97-248, enacted 
September 3, 1982) was based on the reasonable costs incurred in 
furnishing services to Medicare beneficiaries, subject to a limit on 
allowable costs per discharge. Thus, for therapy services, Medicare 
reimbursed IRFs based on the reasonable costs incurred in furnishing 
appropriate levels of Individual Therapy or Group Therapy, which meant 
that IRFs had limited financial incentives to provide more of one type 
of therapy than another. We presumed that decisions about the mode of 
therapy delivery were likely to be based on the needs of the patient 
and on the best way to assist patients in meeting their individualized 
rehabilitation goals. With the advent of the IRF PPS beginning in 
January 2002, Medicare began reimbursing IRFs using a set prospective 
payment amount that was intended to cover the costs of all treatment 
and services, including therapy services, provided to patients in the 
IRF. This increased the financial incentives for IRFs to give patients 
more Group Therapy and less Individual Therapy, because Individual 
Therapy is more costly to provide. Although we know that the financial 
incentives for the provision of Individual Therapy and Group Therapy 
changed, we do not know whether IRFs provided different modes of 
therapy in response to the new incentives or how much Individual 
Therapy and Group Therapy IRFs currently provide. Medicare does not 
currently collect data on the amount of Individual, Group, and Co-
Treatment Therapies, according to therapy discipline, that IRFs are 
currently providing. We believe that it is important to begin 
collecting these data to determine what services Medicare is paying for 
under the IRF prospective payment system, which would allow us to 
analyze whether we are paying appropriately for services currently 
rendered by IRFs. Medicare administrative data (such as the IRF claims 
data) do not currently provide the level of detailed information about 
the mode and type of therapy provided that we require to perform these 
analyses. Thus, this proposed new data collection will assist us in the 
development of appropriate coverage and payment criteria for the 
provision of Group Therapy in the IRF setting. We believe that these 
coverage and payment criteria are important to balance the beneficial 
aspects of Group Therapy for certain patients in certain instances with 
the IRF requirements for an intensive rehabilitation therapy program.
    In the FY 2010 IRF PPS proposed rule (74 FR 21070, 21071) in which 
we proposed a revised set of Medicare coverage requirements for IRF 
services, we discussed the relative value of Individual Therapy versus 
Group Therapy in the IRF setting. To improve our understanding of when 
Group Therapy is most appropriate in IRFs, we solicited comments in 
that proposed rule on the types of patients for whom Group Therapy is 
appropriate, and the specific amount of Group Therapy that may be 
beneficial for these types of patients. Subsequently, we discussed the 
comments in the FY 2010 IRF PPS final rule (74 FR 39796, 39797). 
Although the comments on the FY 2010 IRF PPS proposed rule did not 
offer any clinical study results or any data that would be helpful to 
us in developing coverage and payment criteria for the provision of 
Group Therapy in IRFs, the comments did suggest an important role for 
Group Therapy in the provision of therapies in IRFs. However, the 
majority of commenters remarked that Group Therapy should be limited in 
some way. Many commenters agreed that Group Therapy is a good adjunct 
to Individual Therapy, but should not be the primary source of therapy 
services provided in IRFs. Several commenters recommended that we limit 
the amount of Group Therapies provided in IRFs, and that we also limit 
the number of patients who can participate in a Group Therapy session. 
Commenters also suggested that Group Therapy sessions should be 
comprised of patients with similar diagnoses. We agreed with the 
commenters that Group Therapy should not be the primary source of 
therapy given to patients in IRFs. Group Therapy should be used in IRFs 
primarily as an adjunct to Individual Therapy services, which is the 
standard of care in IRFs, as Group Therapy may not uniformly represent 
the level of intensive rehabilitation therapy required and paid for in 
the IRF setting. In the final rule, we also stated that we would 
consider adopting specific coverage and payment criteria for Group 
Therapy practice in IRFs through future rulemaking.
    When an authorized clinician deems it to be necessary, we continue 
to believe that Group Therapy can serve as an appropriate mode of 
therapy delivery that can be beneficial to the particular needs of IRF 
patients as an adjunct to Individual Therapy. Anecdotally, we 
understand that Group Therapy remains a widely used mode of therapy in 
the IRF setting. But as we stated in the FY 2010 IRF PPS final rule, we 
believe that it would be inappropriate for IRFs to

[[Page 26330]]

provide essentially all therapy in the form of Group Therapy because we 
do not believe that this is in the best interest of the patients, or 
that it reflects the services for which the IRF prospective payment 
system was established to pay. Therefore, to better understand the ways 
in which therapy services are currently being provided in IRFs, we 
propose to add a new Therapy Information Section to the IRF-PAI to 
record the amount and mode of therapy (that is, Individual, Group, Co-
Treatment) patients receive in each therapy discipline (that is, 
physical therapy, occupational therapy, and speech-language pathology).
    For purposes of recording therapy services in IRFs, we propose to 
define Individual Therapy as the provision of therapy services by one 
licensed or certified therapist (or licensed therapy assistant, under 
the appropriate direction of a licensed or certified therapist) to one 
patient at a time (this is sometimes referred to as ``one-on-one'' 
therapy). We propose to define Group Therapy as the provision of 
therapy services by one licensed or certified therapist (or licensed 
therapy assistant, under the appropriate direction of a licensed or 
certified therapist) to between 2 and 6 IRF patients at one time, 
regardless of whether those 2 to 6 IRF patients are performing the same 
activity or different activities. We propose to define Co-Treatment as 
the provision of therapy services by more than one licensed or 
certified therapist (or licensed therapy assistant, under the 
appropriate direction of a licensed therapist) from different therapy 
disciplines to one patient at the same time. For example, Co-Treatment 
could involve one physical therapist and one occupational therapist 
working with one patient at the same time to achieve the patient's 
goals. Because Co-Treatment is appropriate for specific clinical 
circumstances and is not suitable for all patients, its use should be 
limited.
    We propose to collect this information in a new Therapy Information 
Section on the IRF-PAI, which would be effective for IRF discharges 
beginning on or after October 1, 2015. The proposed new Therapy 
Information Section would be completed as part of the patient's 
discharge assessment. In this new proposed section, the IRF would 
record how many minutes of Individual, Group, and Co-Treatment 
therapies the patient received, according to each therapy discipline 
(that is, physical therapy, occupational therapy, and speech-language 
pathology), during the first week (7 calendar day period) of the IRF 
stay; how many minutes of Individual, Group, and Co-Treatment therapies 
the patient received, according to each therapy discipline, during the 
second week (7 calendar day period) of the IRF stay; and the average 
number of minutes of Individual, Group, and Co-Treatment therapies the 
patient received, according to each therapy discipline, during all 
subsequent weeks (7 calendar day periods) of the IRF stay, beginning 
with the third week. For Co-Treatment, each therapist would record the 
amount of time spent with the patient. That is, if a physical therapist 
and an occupational therapist both worked with the patient from 9:00 
a.m. to 9:30 a.m., then each therapist would record 30 minutes with the 
patient in the Co-Treatment section of the IRF-PAI. The draft of the 
proposed IRF-PAI for FY 2016 that would include this new proposed 
Therapy Information Section is available for download from the IRF PPS 
Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html in conjunction with the 
publication of this proposed rule. We propose to use these data for the 
following purposes:
     To analyze the types of therapy services Medicare is 
currently paying for under the IRF prospective payment system; and
     To monitor the amount of therapy given and the use of 
different therapy modes in IRFs to support future rulemaking in this 
area.
    For example, we are considering using these data to propose limits 
on the amount of Group Therapy that may be provided in IRFs through 
future rulemaking. One such limit that we are currently considering is 
that an IRF patient may receive no more than 25 percent of his or her 
total therapy treatment time in Group Therapy, similar to the limit 
that currently exists in the skilled nursing facility (SNF) setting, as 
discussed in the SNF PPS and Consolidated Billing final rule (64 FR 
41644, 41662). We specifically solicit public comment on all of these 
proposals, including whether 25 percent is the most appropriate limit 
to establish for the IRF setting.

IX. Proposed Revision to the IRF-PAI To Add Data Item for Arthritis 
Conditions

    In the FY 2014 IRF PPS final rule (78 FR 47860, 47881 through 
47895), we revised the list of ICD-9-CM diagnosis codes that are used 
to determine presumptive compliance, effective for compliance review 
periods beginning on or after October 1, 2014. As part of these 
revisions, we removed all of the ICD-9-CM codes for arthritis 
conditions because we found that such codes did not provide any 
information as to whether the patients met the severity and prior 
treatment requirement portions of the criteria for the medical 
conditions that may be counted toward an IRF's compliance percentage 
under the presumptive compliance method. As we said in the FY 2014 IRF 
PPS final rule, we did not adopt any and all arthritis conditions in 
the May 7, 2004, final rule (69 FR 25752). Rather, we only provided for 
those patients with certain kinds of arthritic conditions that met 
defined severity and prior treatment requirements. We anticipated that 
less severe arthritic conditions could be satisfactorily managed 
outside of IRFs since these cases would not require the intensive 
therapy provided in the inpatient rehabilitation setting.
    We received a number of comments on the removal of the ICD-9-CM 
codes for arthritis, with the majority of commenters suggesting that 
these changes would increase the use of the medical review method, 
which is more burdensome for both CMS and for IRFs. Several commenters 
suggested that IRFs should not be required to undergo a ``full medical 
review'' if they fail to meet the required compliance percentage using 
the presumptive compliance method. Instead, they suggested use of a 
``limited medical review'' in which only arthritis and systemic 
vasculidities cases would be reviewed. We said in the FY 2014 IRF PPS 
final rule that we would use the time afforded by the 1-year delayed 
implementation to consider the feasibility of minimizing any burdens 
created by the operational aspects of this policy.
    In keeping with what we stated in the FY 2014 IRF PPS final rule, 
we propose to add an item to the IRF-PAI form for an IRF to record the 
specific arthritis diagnosis code(s) for each patient that meets the 
severity and prior treatment requirements outlined in the regulation. 
By coding arthritis diagnosis codes in this section, the IRF would be 
indicating that the patient's arthritis conditions have met all of the 
severity and prior treatment requirements (as outlined in regulation at 
Sec.  412.29(b)(2)(x) through Sec.  412.29(b)(2)(xii)) to be counted 
toward an IRF's compliance percentage under the presumptive compliance 
method. This new proposed item would be added to the IRF-PAI form for 
IRF discharges occurring on or after October 1, 2015. The purpose of 
this new proposed item is to provide us with the additional severity 
and prior treatment information necessary for us to identify the 
arthritis diagnoses that are appropriate to count toward an IRF's

[[Page 26331]]

compliance percentage under the presumptive compliance method, thus 
reducing the medical review burden. If an IRF's presumptive compliance 
percentage is below the compliance threshold (currently, 60 percent), 
but inclusion of the arthritis codes reported in this new proposed data 
item would result in the IRF's presumptive compliance percentage 
meeting or exceeding the compliance threshold, then we propose to 
perform a ``limited'' medical review on a statistically valid random 
sample of the cases documented under this new item to ensure that the 
severity and prior treatment requirements were actually met. The number 
of cases from the statistically valid random sample that are found to 
meet the severity and prior treatment requirements will be extrapolated 
to the total number of cases documented under this new item (that is, 
if 70 percent of the cases in the statistically valid random sample are 
found to meet the severity and prior treatment requirements, then we 
will presume that 70 percent of all of the cases documented in the new 
item met the severity and prior treatment requirements). If the IRF's 
presumptive compliance percentage meets or exceeds the compliance 
threshold (currently, 60 percent) with the addition of the compliant 
cases documented under the new item, then the IRF will be presumed to 
meet the 60 percent rule requirements and will not be subject to 
additional medical review for that compliance review period. However, 
if the number of compliant cases documented under the new item does not 
result in the IRF's presumptive compliance percentage meeting or 
exceeding the compliance threshold (currently 60 percent), then the 
normal medical review procedures for IRFs not meeting the compliance 
threshold (currently 60 percent) under the presumptive compliance 
method will apply. A draft of the proposed IRF-PAI for FY 2016, with 
the proposed new item, is available for download on the IRF PPS Web 
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html in conjunction with the release of 
this proposed rule.
    We believe that the proposed new item, supported by the reduced 
medical review burden, minimizes the increase in burden from this 
policy while still allowing us to ensure that the arthritis diagnosis 
codes that are included in the calculation of an IRF's compliance 
percentage under the presumptive compliance method actually meet the 
severity and prior treatment regulatory requirements.

X. International Classification of Diseases, 10th Revision, Clinical 
Modification (ICD-10-CM), Conversion

A. Background on the Use of Diagnosis Information in the IRF PPS

    As described in section I.C. of this proposed rule, IRFs are 
required to complete the appropriate sections of a patient assessment 
instrument (PAI), designated as the Inpatient Rehabilitation Facility-
Patient Assessment Instrument (IRF-PAI), upon the admission and 
discharge of a Medicare Part A Fee-for-Service patient. In addition, 
beginning with IRF discharges occurring on or after October 1, 2009, 
the IRF is also required to complete the appropriate sections of the 
IRF-PAI upon the admission and discharge of each Medicare Part C 
(Medicare Advantage) patient, as described in the FY 2010 IRF PPS final 
rule (74 FR 39762, 39798 through 39800). Several sections of the IRF-
PAI (currently, items 22, 24, 46, and 47) require IRFs to 
report diagnosis information for patients. Until ICD-10-CM becomes the 
required medical data code set for use on Medicare claims and IRF-PAI 
submissions, we will continue to use the ICD-9-CM medical data code 
set. Medicare uses the diagnosis information recorded on the IRF-PAI 
for the following purposes:
    1. To case-mix adjust the IRF PPS payment for a patient by 
assigning the patient to an appropriate payment tier based on the 
patient's comorbidities.
    2. To determine, using the presumptive compliance method, whether 
an IRF presumptively meets the 60 percent rule requirements in Sec.  
412.29(b).
    As described in more detail in the FY 2002 IRF PPS final rule (66 
FR 41316), we developed a list of diagnosis codes (previously, ICD-9-CM 
codes) that, if coded as a comorbidity in item 22 on a 
patient's IRF-PAI, result in that patient being assigned to one of 
three higher-paying payment tiers under the IRF PPS. In the FY 2006 IRF 
PPS final rule (70 FR 57166), we updated and revised the list of 
diagnosis codes (at that time, ICD-9-CM codes). We refer to the current 
list of diagnosis codes that, if present on a patient's IRF-PAI, result 
in the patient being assigned to a higher-paying tier as the ``List of 
Comorbidities'' in this proposed rule.
    In addition to determining the appropriate tier assignment for 
case-mix adjusting IRF PPS payments, the diagnosis coding on the IRF-
PAI is also used within the presumptive compliance method that 
typically serves as the first step in determining an IRF's compliance 
with the 60 percent rule. As discussed in more detail in section VII. 
of this proposed rule, the presumptive compliance method is one of two 
ways that Medicare's contractors may evaluate an IRF's compliance with 
the 60 percent rule (the other method is called the medical review 
method). The diagnosis coding on the IRF-PAI assessments from an IRF's 
most recently completed 12-month compliance review period are examined 
(with the use of a computer program) to determine whether they contain 
any of the diagnosis codes that are listed in the ``ICD-9-CM Codes That 
Meet Presumptive Compliance Criteria'' (which is also known as the 
presumptive methodology list).
    Additionally, the computer program examines the impairment group 
codes, which are not ICD-9-CM or ICD-10-CM codes, but are instead part 
of a separate unique set of codes specifically developed for the IRF 
PPS for assigning the primary reason for admission to an IRF. The 
computer program compares the impairment group codes listed in item 
21 to the list of ``Impairment Group Codes That Meet 
Presumptive Compliance Criteria'' to determine whether the patient's 
impairment group code presumptively meets the 60 percent rule 
requirements. In certain cases, the list of ``Impairment Group Codes 
That Meet Presumptive Compliance Criteria'' contain Etiologic Diagnosis 
exclusions. For example, impairment group code 0005.4, which represents 
a unilateral lower limb amputation below the knee is included on the 
list of ``Impairment Group Codes that Meet Presumptive Compliance 
Criteria,'' unless the associated Etiologic Diagnosis recorded on the 
patient's IRF-PAI in item 22 is 895.0 (under ICD-9-CM), which 
indicates a traumatic amputation of the toe or toes. Therefore, the 
list of ``Impairment Group Codes That Meet Presumptive Compliance 
Criteria'' contains diagnosis code information (currently ICD-9-CM 
codes) in addition to impairment group codes.
    As these lists all contain diagnosis code information (currently in 
the form of ICD-9-CM diagnosis codes) that is used to case-mix adjust 
payments, to determine an IRF's presumptive compliance with the 60 
percent rule, and to assist IRFs in accurately completing the 
impairment group code information on the IRF-PAI, the lists must all be 
converted to ICD-10-CM for the IRF PPS to assign payments and classify 
IRF facilities appropriately when ICD-10-CM becomes the required

[[Page 26332]]

medical data code set for use on Medicare claims and IRF-PAI 
submissions.

B. Conversion of Diagnosis Information From ICD-9-CM to ICD-10-CM for 
the IRF PPS

    In the September 5, 2012, final rule, ``Administrative 
Simplification: Adoption of a Standard for a Unique Health Plan 
Identifier; Addition to the National Provider Identifier Requirements; 
and a Change to the Compliance Date for the International 
Classification of Diseases, 10th Edition (ICD-10-CM and ICD-10-PCS) 
Medical Data Code Sets'' (77 FR 54664), The Department of Health and 
Human Services announced a delay in the implementation of the ICD-10-CM 
and ICD-10-PCS code sets from October 1, 2013 to October 1, 2014. The 
transition to the ICD-10 code sets is required for entities covered by 
the Health Insurance Portability and Accountability Act of 1996 
(HIPAA). On April 1, 2014, the Protecting Access to Medicare Act of 
2014 (PAMA) (Pub. L. 113-93) was enacted. Section 212 of PAMA, titled 
``Delay in Transition from ICD-9 to ICD-10 Code Sets,'' provides that 
``[t]he Secretary of Health and Human Services may not, prior to 
October 1, 2015, adopt ICD-10 code sets as the standard for code sets 
under section 1173(c) of the Social Security Act (42 U.S.C. 1320d-2(c)) 
and section 162.1002 of title 45, Code of Federal Regulations.'' As of 
now, the Secretary has not implemented this provision under HIPAA.
    We are addressing the conversion of ICD-9-CM to ICD-10-CM codes for 
the IRF PPS in this proposed rule, but in light of PAMA, the effective 
date of those changes would be the date when ICD-10-CM becomes the 
required medical data code set for use on Medicare claims and IRF-PAI 
submissions. Until that time, we would continue to require use of the 
ICD-9-CM codes for the IRF PPS.
    CMS, along with our support contractor 3M, has spent several years 
implementing a process for the transition from the use of ICD-9-CM 
diagnosis codes to ICD-10-CM codes within both the IRF PPS Grouper and 
the software for evaluating IRFs' compliance with the 60 percent rule. 
As this will be the first time that ICD-10-CM codes have been used for 
the IRF PPS, we invite public comment on our translation of the 
diagnosis code lists into ICD-10-CM.
    To ensure a smooth transition from the use of ICD-9-CM diagnosis 
codes to ICD-10-CM codes for the IRF PPS, we propose to use the 
converted ICD-10-CM lists that are available for download from the CMS 
Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html when ICD-10-CM becomes the 
required medical data code set for use on Medicare claims and IRF-PAI 
submissions. To convert these lists from ICD-9-CM to ICD-10-CM, we used 
the General Equivalence Mappings (GEMs) that were developed as a tool 
to assist in converting ICD-9-CM-based applications to ICD-10-CM. The 
GEMs tool is a comprehensive translation dictionary that was developed 
over a 3-year period by CMS and the Centers for Disease Control and 
Prevention (CDC), with input from both the American Hospital 
Association and the American Health Information Management Association 
(AHIMA). They can be used to translate any ICD-9-CM-based data into 
ICD-10-CM. For more information on GEMs, please refer to the General 
Equivalence Mappings Frequently Asked Questions Booklet, which is 
available for download from the CMS Web site at http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. Like a 
translation dictionary, the GEMs tool is based on the complete meaning 
of a given code, where ``meaning'' refers to the correspondence between 
the official documents (tabular and index) that define each code set. 
The GEMs tool contains a complete and comprehensive bidirectional set 
of mappings between ICD-9-CM and ICD-10-CM.
    Our intention in converting the ICD-9-CM diagnosis codes to ICD-10-
CM diagnosis codes within the IRF PPS was for the converted codes to 
reflect the same ``meaning'' as the original codes. That is, except for 
the specific changes to the ``Impairment Group Codes that Meet 
Presumptive Compliance Criteria'' list and to the ``ICD-9-CM Codes that 
Meet Presumptive Compliance Criteria'' list described in section VII of 
this proposed rule, we did not intend to add conditions to, or delete 
conditions from, the ICD-9-CM codes used in the IRF PPS. Thus, for all 
IRF lists containing an ICD-9-CM code, we used the 2014 GEMs, which can 
be downloaded from the CMS Web site at http://www.cms.gov/Medicare/Coding/ICD10/2014-ICD-10-CM-and-GEMs.html to create a translation list, 
and then we reviewed and revised that translation list to ensure that 
all of the codes on the new ICD-10-CM list reflect as closely as 
possible the same ``meaning'' as the codes that were present on the old 
ICD-9-CM list. We invite public comment on our translation of the lists 
into ICD-10-CM for the IRF PPS.
    The majority of ICD-9-CM codes have straightforward translation 
alternative(s) in ICD-10-CM, where the diagnoses classified to a given 
ICD-9-CM code are replaced by one or more ICD-10-CM codes. Wherever 
possible, we erred on the side of including a given ICD-10-CM code if 
we believed that a patient coded with that ICD-10-CM code would have 
been correctly coded with the associated ICD-9-CM prior to the 
transition from ICD-9-CM to ICD-10-CM. Our intent is that the meaning 
of the diagnosis codes is thereby unchanged because all of the patient 
records that would have been correctly coded using the ICD-9-CM codes 
are correctly coded using one or more of the specific ICD-10-CM codes. 
For example, the ICD-9-CM code 582.1, ``Human herpesvirus 6 
encephalitis,'' translates directly to the ICD-10-CM code B1001, 
``Human herpesvirus 6 encephalitis.''
    Below, we note two issues within ICD-10-CM coding that differ from 
ICD-9-CM coding, and therefore, require special attention to ensure 
correct coding of patient diagnoses under ICD-10-CM.
     Combination Diagnosis Codes in ICD-9-CM and ICD-10-CM--
Both ICD-9-CM and ICD-10-CM contain diagnosis codes called combination 
codes, meaning that one code contains two or more diagnoses. Typically, 
one diagnosis in the combination code is a chronic disease, such as 
diabetes, and the other diagnosis is an associated manifestation or 
complication of the disease, such as diabetic nephropathy.
    ICD-10-CM contains many new combination codes that are not 
contained in ICD-9-CM. In terms of a coded record, this means that the 
same diagnoses coded with one ICD-10-CM combination code may require 
two or more ICD-9-CM codes to capture a comparable level of detail. In 
addition, ICD-9-CM contains combination codes with diagnosis 
terminology that was revised or deleted from ICD-10-CM, with the result 
that the same diagnoses coded with one ICD-9-CM code may require two or 
more ICD-10-CM codes to capture a comparable level of detail. For 
example, ICD-9-CM code 115.11, ``Infection by Histoplasma duboisii, 
meningitis'' translates to a pair of ICD-10-CM codes, ``B39.5--
Histoplasmosis duboisii'' and code ``G02--Meningitis in other 
infectious and parasitic diseases classified elsewhere.'' In such 
instances, the intent of our policy is unchanged because the patient 
records that would have been correctly coded using the single ICD-9-CM 
code will now be correctly coded using a combination of ICD-10-CM 
codes. Furthermore, in

[[Page 26333]]

such instances, to maintain the same meaning and reflect the same 
diagnoses as the ICD-9-CM code, we require the patient's IRF-PAI record 
to have all of the relevant combination of ICD-10-CM codes present to 
reflect the condition on the list. If only one of the ICD-10-CM codes 
that is required to reflect the condition on the list is included on 
the IRF-PAI, then the record will not accurately reflect the same 
diagnoses as the ICD-9-CM code. We note that, in some cases, IRFs may 
need to use a combination of ICD-10-CM codes to represent an Etiologic 
Diagnosis on the IRF-PAI form. For this reason, we will add additional 
spaces to the Etiologic Diagnosis field (Item 22) on the IRF-
PAI, effective October 1, 2015. The new IRF-PAI form for IRF discharges 
occurring on or after October 1, 2015, is available for download from 
the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
     Seventh Character Extensions in ICD-10-CM--Certain codes 
in ICD-10-CM require the use of a seventh character in the code, where 
each seventh character of the code has one of the following meanings:
    ++ The seventh character ``A'' in the code indicates that the 
diagnosis is an initial encounter.
    ++ The seventh character ``D'' in the code indicates that the 
patient is receiving aftercare for the injury or illness.
    ++ The seventh character ``S'' in the code indicates that the 
patient no longer requires care for any aspect of the initial injury or 
illness itself, but that the patient is receiving care for a late 
effect of the injury or illness.
    In the IRF PPS context, these seventh character extensions only 
apply to ICD-10-CM diagnosis codes related to certain types of 
injuries. The corresponding ICD-9-CM diagnosis codes that are currently 
listed on the ``List of Comorbidities,'' ``ICD-9-CM Codes That Meet 
Presumptive Compliance Criteria,'' and ``Impairment Group Codes That 
Meet Presumptive Compliance Criteria'' only map to the seventh 
character extensions of ``A'' and ``S,'' but not to the seventh 
character extension of ``D,'' using the GEMs tool. Thus, including 
codes under ICD-10-CM with the seventh character extension of ``D'' 
would mean adding conditions to the lists that were not included on the 
lists under ICD-9-CM. As we indicated previously, we did not intend to 
add, delete, or alter the conditions included on these lists in 
transitioning from ICD-9-CM to ICD-10-CM. Thus, we are not including 
ICD-10-CM codes with the seventh character extension of ``D'' on the 
ICD-10-CM versions of the ``List of Comorbidities,'' ``ICD-9-CM Codes 
That Meet Presumptive Compliance Criteria,'' or ``Impairment Group 
Codes That Meet Presumptive Compliance Criteria.'' In the IRF context, 
we define the patient as having a current diagnosis requiring the use 
of the seventh character extension of ``A'' if the patient requires 
current treatment for the injury and if the diagnosis has a direct 
effect on the patient's rehabilitation therapy program in the IRF.
    In addition, ICD-10-CM injury codes specify that traumatic 
fractures are coded using the appropriate seventh character extension 
for an initial encounter, where each seventh character of the code has 
one of the following meanings:
     The seventh character ``A'' in the code indicates that the 
diagnosis is an initial encounter for closed fracture.
     The seventh character ``B'' in the code indicates that the 
diagnosis is an initial encounter for open fracture.
     The seventh character ``C'' in the code indicates that the 
diagnosis is an initial encounter for open fracture type IIIA, IIIB, or 
IIIC.
    We used the GEMs tool and the guiding rationales described above to 
translate the following lists of ICD-9-CM diagnosis codes for the IRF 
PPS into lists of ICD-10-CM diagnosis codes:
     List of Comorbidities--This file contains the list of 
comorbidities (ICD-9-CM codes) that are used to determine placement in 
tiers within the IRF Grouper software. Placement in one of the higher-
paying tiers, which is triggered by the presence of one of the 
comorbidities on this list, results in a higher prospective payment 
amount for the IRF.
     ICD-9-CM Codes that Meet Presumptive Compliance Criteria--
This file contains the list of diagnoses (ICD-9-CM codes) that are used 
for determining presumptive compliance with the IRF 60 percent rule.
     Impairment Group Codes that Meet Presumptive Compliance 
Criteria--This file contains the list of IGCs that meet presumptive 
compliance criteria for the 60 percent rule. While the IGC codes 
themselves are not ICD-9-CM diagnosis codes, the file contains a list 
of Etiologic Diagnosis codes (ICD-9-CM codes) that are excluded from 
particular IGCs. That is, a given IGC that would otherwise meet the 
presumptive compliance criteria will not meet such criteria if the 
patient has one of the ``excluded'' Etiologic Diagnoses for that IGC.
    The converted ICD-10-CM code tables associated with each of these 
lists are available for download from the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html in conjunction with this proposed 
rule. We invite public comment on our proposed translation of the lists 
into ICD-10-CM, effective when ICD-10-CM becomes the required medical 
data code set for use on Medicare claims and IRF-PAI submissions.

XI. Proposed Revisions and Updates to the Quality Reporting Program for 
IRFs

A. Background and Statutory Authority

    Section 3004(b) of the Affordable Care Act added section 1886(j)(7) 
to the Act, which requires the Secretary to implement a quality 
reporting program (QRP) for IRFs. This program applies to freestanding 
IRF hospitals, as well as IRF units that are affiliated with acute care 
facilities, which includes critical access hospitals (CAHs).
    Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires 
the reduction of the applicable IRF PPS annual increase factor, as 
previously modified under section 1886(j)(3)(D) of the Act, by 2 
percentage points for any IRF that fails to submit data to the 
Secretary in accordance with requirements established by the Secretary 
for that fiscal year. Section 1886(j)(7)(A)(ii) of the Act notes that 
this reduction may result in the increase factor being less than 0.0 
for a fiscal year, and in payment rates under subsection (j) for a 
fiscal year being less than such payment rates for the preceding fiscal 
year. Any reduction based on failure to comply with the reporting 
requirements is, in accordance with section 1886(j)(7)(B) of the Act, 
limited to the particular fiscal year involved. The reductions are not 
to be cumulative and will not be taken into account in computing the 
payment amount under subsection (j) for a subsequent fiscal year.
    Section 1886(j)(7)(C) of the Act requires that each IRF submit data 
to the Secretary for quality measures specified by the Secretary. The 
required quality measure data must be submitted to the Secretary in a 
form, manner, and time specified by the Secretary.
    The Secretary is generally required to specify measures that have 
been endorsed by the entity with a contract under section 1890(a) of 
the Act. This contract is currently held by the National Quality Forum 
(NQF), which is a voluntary consensus standard-setting organization. 
The NQF was established to standardize health care quality measurement 
and reporting through its

[[Page 26334]]

consensus development process. Additional information regarding NQF and 
its consensus development process is available at http://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx.
    We have generally adopted NQF-endorsed measures in our reporting 
programs. However, section 1886(j)(7)(D)(ii) of the Act provides that 
``[i]n the case of a specified area or medical topic determined 
appropriate by the Secretary for which a feasible and practical measure 
has not been endorsed by the entity with a contract under section 
1890(a) [of the Act], the Secretary may specify a measure that is not 
so endorsed as long as due consideration is given to measures that have 
been endorsed or adopted by a consensus organization identified by the 
Secretary.''
    Section 1886(j)(7)(E) of the Act requires the Secretary to 
establish procedures for making data submitted under the IRF QRP 
available to the public. The Secretary must ensure that each IRF is 
given the opportunity to review the data that is to be made public 
prior to the publication or posting of this data.
    We seek to promote higher quality and more efficient health care 
for all patients who receive care in acute and post-acute care 
settings. Our efforts are, in part, effectuated by quality reporting 
programs coupled with the public reporting of data collected under 
those programs. The initial framework of the IRF QRP was established in 
the FY 2012 IRF PPS final rule (76 FR 47873).

B. Quality Measures Previously Finalized for and Currently Used in the 
IRF Quality Reporting Program

1. Measures Finalized in the FY 2012 IRF PPS Final Rule
    In the FY 2012 IRF PPS final rule (76 FR 47874 through 47878), we 
adopted applications of 2 quality measures for use in the first data 
reporting cycle of the IRF QRP: (1) An application of Catheter-
Associated Urinary Tract Infection (CAUTI) for Intensive Care Unit 
Patients (NQF0138); and (2) an application of Percent of 
Residents with Pressure Ulcers That Are New or Worsened (Short-Stay) 
(NQF 0678). We adopted applications of these 2 measures 
because neither of them, at the time, was endorsed by the NQF for the 
IRF setting. We also discussed our plans to propose a 30-Day All-Cause 
Risk-Standardized Post-IRF Discharge Hospital Readmission Measure.
2. Measures Finalized in the CY 2013 OPPS/ASC Final Rule
    In the CY 2013 OPPS/ASC final rule (77 FR 68500 through 68507), we 
adopted:
     Updates to the CAUTI measure to reflect the NQF's 
expansion of this quality measure to the IRF setting, replacing our 
previous adoption of an application of the quality measure for the IRF 
QRP;
     A policy that would allow any quality measure adopted for 
use in the IRF QRP to remain in effect until the measure was actively 
removed, suspended, or replaced (and specifically applied this policy 
to the CAUTI and Pressure Ulcer measures that had already been adopted 
for use in the IRF QRP); and
     A subregulatory process to incorporate NQF updates to IRF 
quality measure specifications that do not substantively change the 
nature of the measure.
    At the time of the CY 2013 OPPS/ASC final rule, the NQF had 
endorsed the Pressure Ulcer measure for the IRF setting, and retitled 
it to cover both residents and patients within Long-Term Care Hospitals 
(LTCH) and IRF settings, in addition to the Nursing Home/Skilled 
Nursing Facility setting. Although the quality measure had been 
expanded to the IRF setting, we concluded that it was not possible to 
adopt the NQF-endorsed measure Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF 
0678) because it is a risk-adjusted measure, and the ``Quality 
Indicator'' section of the IRF-PAI did not contain the data elements 
that would be needed to calculate a risk-adjusted quality measure. As a 
result, we decided to: (1) adopt an application of the Pressure Ulcer 
measure that was a non-risk-adjusted Pressure Ulcer measure (numerator 
and denominator data only); (2) collect the data required for the 
numerator and the denominator using the current version of the IRF-PAI; 
(3) delay public reporting of Pressure Ulcer measure results until we 
could amend the IRF-PAI to add the data elements necessary for risk-
adjusting the Pressure Ulcer measure, and then (4) adopt the NQF-
endorsed version of the measure covering the IRF setting through 
rulemaking (77 FR 68507).
a. National Healthcare Safety Network (NHSN) Catheter Associated 
Urinary Tract Infection (CAUTI) Outcome Measure (NQF 0138)
    In the CY 2013 OPPS/ASC final rule, we adopted the current version 
of NHSN CAUTI Outcome Measure (NQF 0138) (replacing an 
application of this measure that we initially adopted in the FY 2012 
IRF PPS (76 FR 47874 through 47886)). The NQF-endorsed measure applies 
to the FY 2015 adjustments to the IRF PPS annual increase factor and 
all subsequent annual increase factors (77 FR 68504 through 68505).
    Since the publication of the CY 2013 OPPS/ASC final rule, the NHSN 
CAUTI quality measure has not changed, and it remains an active part of 
the IRF QRP. Additional information about this measure can be found at 
http://www.qualityforum.org/QPS/0138. Our procedures for data 
submission for this measure have also remained the same. IRFs should 
continue to submit their CAUTI measure data to the Centers for Disease 
Control and Prevention (CDC) NHSN. Details regarding submission of IRF 
CAUTI data to the NHSN can be found at the NHSN Web site at http://www.cdc.gov/nhsn/inpatient-rehab/index.html.
b. Application of Percent of Residents or Patients With Pressure Ulcers 
That Are New or Worsened (Short-Stay) (NQF 0678)
    In the CY 2013 OPPS/ASC final rule (77 FR 68500 through 68507), we 
adopted a non-risk-adjusted application of this measure using the 2012 
version of the IRF-PAI.
3. Measures Finalized in the FY 2014 IRF/PPS Final Rule
    For the FY 2016 adjustments to the IRF PPS annual increase factor, 
in addition to retaining the previously discussed CAUTI and Pressure 
Ulcer measures, we finalized the adoption of one new measure: Influenza 
Vaccination Coverage among Healthcare Personnel (NQF 0431) (78 
FR 47902 through 47921). In addition, for the FY 2017 adjustments to 
the IRF PPS annual increase factor, we adopted three quality measures: 
(1) All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge 
from Inpatient Rehabilitation Facilities; (2) Percent of Residents or 
Patients Who Were Assessed and Appropriately Given the Seasonal 
Influenza Vaccine (Short-Stay) (NQF 0680); and (3) the NQF-
endorsed version of Percent of Residents or Patients with Pressure 
Ulcers That are New or Worsened (Short-Stay) (NQF 0678).
a. Influenza Vaccination Coverage Among Healthcare Personnel (NQF 
0431)
    In the FY 2014 IRF PPS final rule (78 FR 47905 through 47906), we 
adopted the CDC developed Influenza

[[Page 26335]]

Vaccination Coverage among Healthcare Personnel (NQF 0431) 
quality measure that is currently collected by the CDC via the NHSN. 
This measure reports on the percentage of IRF health care personnel 
(HCP) who receive the influenza vaccination.
    In the FY 2014 IRF PPS final rule, we finalized that the Influenza 
Vaccination Coverage among Healthcare Personnel (NQF 0431) 
measure have its own reporting period to align with the influenza 
vaccination season, which is defined by the CDC as October 1 (or when 
the vaccine becomes available) through March 31. We further finalized 
that IRFs will submit their data for this measure to the NHSN (http://www.cdc.gov/nhsn/). The National Healthcare Safety Network (NHSN) is a 
secure Internet-based healthcare-associated infection tracking system 
maintained by the CDC and can be utilized by all types of health care 
facilities in the United States, including IRFs. The NHSN collects data 
via a web-based tool hosted by the CDC. Information on the NHSN system, 
including protocols, report forms, and guidance documents, can be found 
at http://www.cdc.gov/nhsn/. NHSN will submit the HCP influenza 
vaccination adherence percentage data to CMS on behalf of the facility. 
We also finalized that for the FY 2016 adjustments to the IRF PPS 
annual increase factor, data collection will cover the period from 
October 1, 2014 (or when the vaccine becomes available) through March 
31, 2015.
    Details related to the use of the NHSN for data submission and 
information on definitions, numerator data, denominator data, data 
analyses, and measure specifications for the Influenza Vaccination 
Coverage among Healthcare Personnel (NQF 0431) measure can be 
found at http://www.cdc.gov/nhsn/inpatient-rehab/hcp-vacc/index.html. 
Because IRFs are already using the NHSN for the submission of CAUTI 
measure data, the additional administrative burden related to data 
collection and submission for this measure under the IRF QRP should be 
minimal.
    While IRFs can enter information in NHSN at any point during the 
influenza vaccination season for the Influenza Vaccination Coverage 
among Healthcare Personnel (NQF 0431) measure, data submission 
is only required once per influenza vaccination season, unlike the 
CAUTI measure, which is the other quality measure finalized for the IRF 
QRP that utilizes the CDC NHSN. We finalized that the final deadline 
for data submission associated with this quality measure will be May 
15th of each year.
    Also, the data collection period for this quality measure is not 12 
months, as with other measures, but is approximately 6 months (that is, 
October 1, or when the vaccine becomes available, through March 31 of 
the following year). This data collection period is applicable only to 
Influenza Vaccination Coverage among Healthcare Personnel (NQF 
0431), and is not applicable to any other IRF QRP measures, 
proposed or adopted, unless explicitly stated. The measure 
specifications for this measure can be found at http://www.cdc.gov/nhsn/inpatient-rehab/hcp-vacc/index.html and at http://www.qualityforum.org/QPS/0431.
b. All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge 
From Inpatient Rehabilitation Facilities (NQF 2502, Review 
Pending)
    In the FY 2014 IRF PPS final rule (78 FR 47906 through 47910), we 
adopted an All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from Inpatient Rehabilitation Facilities. This quality 
measure estimates the risk-standardized rate of unplanned, all-cause 
hospital readmissions for cases discharged from an IRF who were 
readmitted to a short-stay acute care hospital or LTCH, within 30 days 
of an IRF discharge. We noted that this is a claims-based measure that 
will not require reporting of new data by IRFs and thus will not be 
used to determine IRF reporting compliance for the IRF QRP. Please note 
that this measure is not NQF-endorsed, but it was submitted by CMS to 
the NQF for review on February 5, 2014 (http://www.qualityforum.org/All-Cause_Admissions_and_Readmissions_Measures.aspx).
c. Percent of Residents or Patients Who Were Assessed and Appropriately 
Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 0680)
    In the FY 2014 IRF PPS final rule (78 FR 47906 through 47911), we 
adopted the Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 
#0680) measure for the IRF QRP, and we will collect the data for this 
measure through the addition of data items to the ``Quality Indicator'' 
section of the IRF-PAI.
    We also added the data elements needed for this measure, as an 
influenza data item set, to the ``Quality Indicator'' section of the 
IRF-PAI, and data for this measure will be collected using this revised 
version of the IRF-PAI. The revised IRF-PAI will become effective on 
October 1, 2014. These data elements are harmonized with data elements 
(O0250: Influenza Vaccination Status) from the Minimum Data Set (MDS) 
3.0 and the LTCH CARE Data Set Version 2.01, and the specifications and 
data elements for this measure are available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    For purposes of this quality measure, the influenza vaccination 
season takes place from October 1 (or when the vaccine becomes 
available) through March 31 each year. The measure calculation and 
public reporting of this measure (once public reporting is implemented) 
will also be based on the influenza vaccination season, starting on 
October 1 (or when the vaccine becomes available) and ending on March 
31 of the subsequent year.
    The IRF-PAI Training Manual indicates how providers should complete 
these items during the time period outside of the vaccination season 
(that is, prior to October 1, or when the vaccine becomes available, 
and after March 31 of the following year). The measure specifications 
for this measure, Percent of Residents or Patients Who Were Assessed 
and Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) 
(NQF 0680), can be found on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/NursingHomeQualityInits/NHQIQualityMeasures.html. 
Additional information on this measure can also be found at http://www.qualityforum.org/QPS/0680.
d. Percent of Residents or Patients With Pressure Ulcers That Are New 
or Worsened (Short-Stay) (NQF 0678)--Adoption of the NQF-
Endorsed Version of This Measure
    In the FY 2014 IRF PPS final rule (78 FR 47911 through 47912), we 
adopted the NQF-endorsed version of the Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) 
(NQF 0678), with data collection beginning October 1, 2014, 
using the revised version of the IRF-PAI, for quality reporting 
affecting the FY 2017 adjustments to the IRF PPS annual increase factor 
and subsequent year annual increase factors. We noted in the rule that, 
until September 30, 2014, IRFs should continue to submit pressure ulcer 
data using the version of the IRF-PAI released on October 1, 2012, for 
the purposes of data submission requirements for the FY 2015 and FY 
2016 adjustments to the annual IRF PPS increase factor.
    In the FY 2014 IRF PPS final rule (78 FR 47912 through 47916), we 
also

[[Page 26336]]

adopted a revised version of the IRF-PAI starting October 1, 2014, for 
the FY 2017 adjustments to the IRF PPS annual increase factor and 
subsequent year annual increase factors.

  Table 8--Quality Measures Finalized in the FY 2014 IRF PPS Final Rule
  Affecting the FY 2016 and 2017 Adjustments to the IRF Annual Increase
              Factors and Subsequent Year Increase Factors
------------------------------------------------------------------------
      NQF measure ID                       Measure title
------------------------------------------------------------------------
NQF 0431........  Influenza Vaccination Coverage among
                            Healthcare Personnel\+\.
NQF 0680........  Percent of Residents or Patients Who Were
                            Assessed and Appropriately Given the
                            Seasonal Influenza Vaccine (Short-Stay).
NQF 0678........  Percent of Residents or Patients with
                            Pressure Ulcers That Are New or Worsened
                            (Short-Stay)*--Adoption of the NQF-Endorsed
                            Version of this Measure.
NQF 2502**......  All-Cause Unplanned Readmission Measure for
                            30 Days Post-Discharge from Inpatient
                            Rehabilitation Facilities.
------------------------------------------------------------------------
\+\ Using the CDC NHSN
* Using October 1, 2014, release of the IRF-PAI
** Not NQF-endorsed, CMS submitted for NQF review on February 5, 2014.

C. Proposed New IRF QRP Quality Measures Affecting the FY 2017 
Adjustments to the IRF PPS Annual Increase Factor and Beyond General 
Considerations Used for Selection of Quality Measures for the IRF QRP

    In the FY 2014 IRF PPS final rule (78 FR 47094) we noted that the 
successful development of an IRF quality reporting program that 
promotes the delivery of high-quality health care services in IRFs is 
our paramount concern. We discussed several of the factors we had taken 
into account in selecting measures to propose and finalize. We do wish 
to note here that, in our measure selection activities for the IRF QRP, 
we must take into consideration input we receive from a multi-
stakeholder group, the Measure Applications Partnership (MAP), which is 
convened by the NQF as part of a pre-rulemaking process that we have 
established and are required to follow under section 1890A of the Act. 
The MAP is a public-private partnership comprised of multi-stakeholder 
groups convened by the NQF for the primary purpose of providing input 
to CMS on the selection of certain categories of quality and efficiency 
measures, as required by section 1890A(a)(3) of the Act. By February 1 
of each year, the NQF must provide MAP input to CMS. We have taken the 
MAP's input into consideration in selecting measures for this rule. 
Input from the MAP is located at https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx. We also take into account national priorities, such as 
those established by the National Priorities Partnership (NPP) at 
http://www.qualityforum.org/Setting_Priorities/NPP/National_Priorities_Partnership.aspx, the HHS Strategic Plan at http://www.hhs.gov/secretary/about/priorities/priorities.html, the National 
Strategy for Quality Improvement in Health Care at http://www.ahrq.gov/workingforquality/nqs/nqs2012annlrpt.pdf, and the CMS Quality Strategy 
at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
    To the extent practicable, we have sought to adopt measures that 
have been endorsed by a national consensus organization, recommended by 
multi-stakeholder organizations, and developed with the input of 
providers, purchasers/payers, and other stakeholders.
    For the FY 2017 adjustments to the IRF PPS annual increase factor, 
in addition to retaining the previously discussed CAUTI, Pressure 
Ulcer, Patient Influenza (NQF 0680), Healthcare Personnel 
Influenza (NQF 0431), and Hospital Readmission (NQF 
2502) quality measures, we propose to adopt two new quality 
measures: (1) National Healthcare Safety Network (NHSN) Facility-Wide 
Inpatient Hospital-Onset Methicillin-Resistant Staphylococcus aureus 
(MRSA) Bacteremia Outcome Measure (NQF 1716), and (2) National 
Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 
Clostridium difficile Infection (CDI) Outcome Measure (NQF 
1717). These quality measures are discussed in more detail 
below.
1. Proposed Quality Measure 1: National Healthcare Safety 
Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-
Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF 
1716)
    NHSN Facility-Wide Inpatient Hospital-Onset MRSA Bacteremia Outcome 
Measure (NQF 1716) is a measure of hospital-onset unique blood 
source MRSA laboratory-identified events among all inpatients in the 
facility. This measure was adopted by the Hospital Inpatient Quality 
Reporting (IQR) Program in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51630, 51645) for the FY 2015 payment determination, with data 
collection beginning on January 1, 2013. It was also adopted by the 
LTCH Quality Reporting Program in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50712 through 50717) for the FY 2017 payment determination, with 
data collection beginning on January 1, 2015. This measure was 
developed by the CDC and is NQF-endorsed. We included the proposed MRSA 
measure in the December 1, 2013, Measures under Consideration (MUC) 
list. The MAP conditionally supported the direction of this quality 
measure, noting that the measure is not ready for implementation and 
suggesting that we harmonize this measure with other infection 
measures. We respectfully disagree with the position of the MAP, as the 
MRSA measure is fully endorsed by the NQF for various settings, 
including the IRF setting, which speaks to its suitability for use in 
that setting. Methicillin-resistant Staphylococcus aureus (S. aureus) 
infections are caused by a strain of S. aureus bacteria that has become 
resistant to antibiotics commonly used to treat S. aureus infections. 
Between 2003 and 2004, an estimated 4.1 million persons in the United 
States had nasal colonization with MRSA.\1\ In addition, in 2005 there 
were an estimated 94,000 invasive MRSA infections in the United States, 
which were associated with an estimated 18,000 deaths.\2\ Healthcare-

[[Page 26337]]

associated MRSA infections occur frequently in patients whose treatment 
involves the use of invasive devices, such as catheters or ventilators.
---------------------------------------------------------------------------

    \1\ Gorwitz RJ, Kruszon-Moran D, McAllister SK, et al. Changes 
in the prevalence of nasal colonization with Staphylococcus aureus 
in the United States, 2001-2004. J Infect Dis 2008; 197: 1226-34.
    \2\ Department of Health and Human Services. National Action 
Plan to Prevent Healthcare-Associated Infections: Roadmap to 
Elimination. Available at http://www.hhs.gov/ash/initiatives/hai/infection.html.
---------------------------------------------------------------------------

    Currently, there are 22 States that have implemented a MRSA 
Prevention Collaborative, and at least 15 states that have reporting 
mandates for MRSA bacteremia in NHSN.\3\ For Medicare populations, MRSA 
infection is associated with increased cost, hospital length of stay, 
morbidity, and mortality. MRSA infections can be a consequence of poor 
quality of care.4 5 Older adults and patients in health care 
settings are most vulnerable to MRSA infections, as these patients may 
have weakened immune systems. A recent study reported that 9.2 percent 
of patients without a history of MRSA tested positive for MRSA at the 
time of the IRF admission.\6\ We also recently analyzed IRF claims 
submitted to Medicare during CY 2009. According to our analysis, IRFs 
reported a total of 3,464 cases of MRSA in 2009, including cases either 
present on admission or acquired during the IRF stay (``present on 
admission'' indicators for ICD-9 codes are not available on the IRF 
claims) \7\. We believe it is important to collect data on MRSA 
infections acquired during the IRF stay, because MRSA infection is 
associated with increased cost, hospital length of stay, morbidity, and 
mortality.
---------------------------------------------------------------------------

    \3\ Centers for Disease Control and Prevention. State Has 
Implemented a MRSA Prevention Collaborative. Available at http://www.cdc.gov/hai/stateplans/states-w-MRSA-collaborative.html.
    \4\ Centers for Disease Control and Prevention. People at Risk 
of Acquiring MRSA Infections. Available at http://www.cdc.gov/mrsa/index.html.
    \5\ Centers for Disease Control and Prevention. Management of 
Multidrug-Resistant Organisms in Healthcare Settings, 2006. 
Available at http://www.cdc.gov/hicpac/pdf/guidelines/MDROGuideline2006.pdf.
    \6\ Rabinowitz RP, Kufera JA, Makely MJ. A Hidden Reservoir of 
Methicillin-resistant Staphylococcus aureus and Vancomyvin-resistant 
Enterococcus in Patients Newly Admitted to an Acute Rehabilitation 
Hospital. Physical Medicine & Rehabilitation 2012 (4):18-22.
    \7\ Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, 
Sorensen AV, Thaker S, West ND. Study to support a CMS Report to 
Congress: Assess feasibility of extending the hospital-acquired 
conditions--present on admission IPPS payment policy to non-IPPS 
payment environments. Prepared for the Centers for Medicare & 
Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011.
---------------------------------------------------------------------------

    We propose to use the CDC/NHSN data collection and submission 
framework for reporting of the proposed NHSN Facility-Wide Inpatient 
Hospital-Onset MRSA Bacteremia Outcome Measure (NQF 1716). 
This is the same framework currently used for reporting the CAUTI (NQF 
0138) and Influenza Vaccination Coverage among Healthcare 
Personnel (NQF 0431) quality measures. Details related to the 
procedures for using the NHSN for data submission and information on 
definitions, numerator data, denominator data, data analyses, and 
measure specifications for the proposed NHSN Facility-Wide Inpatient 
Hospital-Onset MRSA Bacteremia Outcome Measure (NQF 1716) can 
be found at http://www.qualityforum.org/QPS/1716 and http://www.cdc.gov/nhsn/inpatient-rehab/mdro-cdi/index.html. For January 2012 
through January 2013, an estimated 15 IRFs reported laboratory-
identified MRSA event data into NHSN. We refer readers to section 
XI.B.3.a. of this proposed rule for more information on data collection 
and submission. We invite public comment on this proposed measure and 
on data collection and submission procedures for the proposed measure 
for the FY 2017 adjustments to the IRF PPS annual increase factor and 
subsequent year increase factors.
2. Proposed Quality Measure 2: National Healthcare Safety 
Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium 
difficile Infection (CDI) Outcome Measure (NQF 1717)
    NHSN Facility-Wide Inpatient Hospital-Onset CDI Outcome Measure 
(NQF 1717) is a measure of hospital-onset CDI laboratory-
identified events among all inpatients in the facility. This measure 
was adopted by the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51630 through 51631) for the FY 2015 payment 
determination, with data collection having begun on January 1, 2013. It 
was also adopted by the LTCHQR program in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50712 through 50717) for the FY 2017 payment 
determination, with data collection beginning on January 1, 2015. This 
measure was developed by the CDC and is NQF-endorsed. We included the 
proposed CDI measure in the December 1, 2013, MUC list. The MAP 
supported this measure.\8\ CDI can cause a range of serious symptoms, 
including diarrhea, serious intestinal conditions, sepsis, and 
death.\9\ In the United States, CDI is responsible for an estimated 
337,000 infections and 14,000 deaths annually.\10\ According to the HHS 
National Action Plan to Prevent Health Care-Associated Infections, CDI 
rates have increased in recent years.\11\ The CDC estimates that CDIs 
cost more than $1 billion in additional health care costs each 
year.\12\ In recent years, CDIs have become more frequent, more severe, 
and more difficult to treat. Mortality rates for CDIs are highest in 
elderly patients.\13\ Rates of CDI among hospitalized patients aged 65 
years and older increased 200 percent between 1996 and 2009, while 
deaths related to CDIs increased 400 percent between 2000 and 2007, 
partly attributed to a stronger germ strain.14 15 Further, 
the emergence and continued rise of CDI as a leading cause of 
gastroenteritis hospitalizations and deaths, particularly in the 
elderly, has been documented.\16\ CDI is associated with increased 
patient care costs, hospital lengths of stay, morbidity, and mortality. 
CDI can be a consequence of poor quality of care for Medicare 
patients.\17\
---------------------------------------------------------------------------

    \8\ National Quality Forum. Measure Applications Partnership 
Pre-Rulemaking Report: 2014 Recommendations of Measures Under 
Consideration by HHS: February 2014. Available at: https://www.qualityforum.org/Publications/2014/01/MAP_Pre-Rulemaking_Report__2014_Recommendations_on_Measures_for_More_than_20_Federal_Programs.aspx.
    \9\ McDonald LC, Coignard B, Dubberke E, et al. Recommendations 
for surveillance of Clostridium difficile-associated disease. Infect 
Control Hosp Epidemiol 2007;28:140-145. Available at: http://www.jstor.org/stable/pdfplus/10.1086/511798.pdf?acceptTC=true.
    \10\ Centers for Disease Control and Prevention. Investigating 
Clostridium difficile Infections Across the U.S. Available at http://www.cdc.gov/hai/eip/pdf/Cdiff-factsheet.pdf.
    \11\ Department of Health and Human Services. National Action 
Plan to Prevent Health Care-Associated Infections: Roadmap to 
Elimination. Available at http://www.hhs.gov/ash/initiatives/hai/infection.html.
    \12\ Centers for Disease Control and Prevention. Making Health 
Care Safer: Stopping C. difficile Infections. Available at: http://www.cdc.gov/VitalSigns/HAI/index.html.
    \13\ Centers for Disease Control and Prevention. Investigating 
Clostridium difficile Infections Across the U.S. Available at: 
http://www.cdc.gov/hai/eip/pdf/Cdiff-factsheet.pdf.
    \14\ Centers for Disease Control and Prevention. QuickStats: 
Rates of Clostridium difficile Infection Among Hospitalized Patients 
Aged >=65 Years,* by Age Group--National Hospital Discharge Survey, 
United States, 1996-2009. MMWR, 60(34); 1171. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6034a7.htm.
    \15\ Centers for Disease Control and Prevention. Making Health 
Care Safer: Stopping C. difficile Infections. Available at: http://www.cdc.gov/VitalSigns/HAI/index.html.
    \16\ Aron J. Hall, Aaron T. Curns, L. Clifford McDonald, Umesh 
D. Parashar, and Ben A. Lopman. The Roles of Clostridium difficile 
and Norovirus Among Gastroenteritis-Associated Deaths in the United 
States, 1999-2007. Clinical Infectious Diseases 2012;55(2):216-23 
Published by Oxford University Press on behalf of the Infectious 
Diseases Society of America 2012. DOI: 10.1093/cid/cis386.
    \17\ Dubberke ER, Reske KA, Olsen MA, McDonald LC, Fraser VJ. 
Short- and long-term attributable costs of Clostridium difficile-
associated disease in nonsurgical inpatients. Clin Infect Dis 2008; 
46:497-504. Available at: http://cid.oxfordjournals.org/content/46/4/497.long.
---------------------------------------------------------------------------

    Illness from CDI most commonly affects older adults in hospitals or 
in facilities with longer lengths of stay, where germs spread more 
easily,

[[Page 26338]]

antibiotic use is more common, and people are especially vulnerable to 
infection.\18\ Considering CDIs are increasing in all health care 
facilities, and the IRF population is highly vulnerable to CDI, it is 
important to measure these rates in IRFs.\19\ According to an analysis 
of ICD-9 codes reported on Medicare claims, IRFs reported 7,720 cases 
of CDI-associated disease in 2009.\20\ Currently, the ``present on 
admission'' indicators for ICD-9 codes are not available on IRF claims. 
Therefore, we are unable to determine whether the 7,720 reported cases 
of CDI were present on admission or acquired during the IRF stay. There 
is evidence that CDIs are preventable, and therefore, surveillance and 
measuring infection rates is important to reducing infections and 
improving patient safety. Thirty-seven states have implemented a C. 
difficile Prevention Collaborative, and at least 15 states have 
reporting mandates for CDI LabID Events in NHSN.\21\ The goal for this 
proposed CDI measure is to collect and publicly report IRF data on CDIs 
so that IRFs will be better informed about the incidence of this 
condition and better equipped to prevent it.
---------------------------------------------------------------------------

    \18\ Centers for Disease Control and Prevention. Frequently 
Asked Questions about Clostridium difficile for Healthcare 
Providers. Available at: http://www.cdc.gov/HAI/organisms/cdiff/Cdiff_faqs_HCP.html.
    \19\ Marciniak C, Chen D, Stein A, et al. Prevalence of 
Clostridium Difficile Colonization at Admission to Rehabilitation. 
Archives of Physical Medicine and Rehabilitation 2006; 87(8):1086-
1090.
    \20\ Bernard SL, Dalton K, Lenfestey N F, Jarrett NM, Nguyen KH, 
Sorensen AV, Thaker S, West ND. Study to support a CMS Report to 
Congress: Assess feasibility of extending the hospital-acquired 
conditions--present on admission IPPS payment policy to non-IPPS 
payment environments. Prepared for the Centers for Medicare & 
Medicaid Services (CMS Contract No. HHSM-500-T00007). 2011.
    \21\ Centers for Disease Control and Prevention. State Has 
Implemented a C. diff Prevention Collaborative. Available at: http://www.cdc.gov/hai/stateplans/states-w-CDI-collaborative.html.
---------------------------------------------------------------------------

    We propose to use the CDC/NHSN data collection and submission 
framework for reporting of the proposed NHSN Facility-Wide Inpatient 
Hospital-Onset CDI Outcome Measure (NQF 1717). This framework 
is currently used for reporting the CAUTI (NQF 0138) and 
Influenza Vaccination Coverage among Healthcare Personnel (NQF 
0431) measures. Details related to the procedures for using 
the NHSN for data submission and information on definitions, numerator 
data, denominator data, data analyses, and measure specifications for 
the proposed NHSN Facility-Wide Inpatient Hospital-Onset CDI Outcome 
Measure (NQF 1717) can be found at http://www.qualityforum.org/QPS/1717 and http://www.cdc.gov/nhsn/inpatient-rehab/mdro-cdi/index.html. We invite public comment on this proposed 
quality measure and on data collection and submission procedures for 
the proposed quality measure for the FY 2017 adjustments to the IRF PPS 
annual increase factor and subsequent year increase factors.

D. IRF QRP Quality Measures and Concepts Under Consideration for Future 
Years

    We are considering whether to propose one or more of the quality 
measures and quality measure topics listed in Table 9 for future years 
in the IRF QRP. We invite public comment on these quality measures and 
quality measure topics, specifically comments regarding the clinical 
importance of reported measure data, the feasibility of measure data 
collection and implementation, current use of reported measure data, 
and usefulness of the reported measure data to inform quality of care 
delivered to IRF patients.

   Table 9--Future Measures and Measure Topics Under Consideration for
             Proposal for the IRF Quality Reporting Program
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
           National Quality Strategy Priority: Patient Safety
------------------------------------------------------------------------
 
Application of Percent of Residents Experiencing One or More Falls with
 Major Injury (Long-Stay) (NQF 0674).
------------------------------------------------------------------------
 
 National Quality Strategy Priority: Patient and Caregiver-Centered Care
------------------------------------------------------------------------
 
Application of Percent of Residents Who Self-Report Moderate to Severe
 Pain (Short-Stay) (NQF 0676).
Not Endorsed/Under Development--IRF Functional Outcome Measure: Change
 in Mobility Score for Medical Rehabilitation Patients.
Not Endorsed/Under Development--IRF Functional Outcome Measure: Change
 in Self-Care Score for Medical Rehabilitation Patients.
Not Endorsed/Under Development--IRF Functional Outcome Measure:
 Discharge Mobility Score for Medical Rehabilitation Patients.
Not Endorsed/Under Development--IRF Functional Outcome Measure:
 Discharge Self-Care Score for Medical Rehabilitation Patients.
------------------------------------------------------------------------

    In particular, we are considering whether to propose one or more of 
the following measures for future year IRP PPS increase factors: (1) 
IRF Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients; (2) IRF Functional Outcome Measure: Change in 
Self-Care Score for Medical Rehabilitation Patients; (3) IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients; (4) IRF Functional Outcome Measure: Discharge Self-Care Score 
for Medical Rehabilitation Patients; (5) Application of the Percent of 
Residents Experiencing One or More Falls with Major Injury (Long-Stay) 
(NQF 0674); and (6) Application of Percent of Residents Who 
Self-Report Moderate to Severe Pain (Short-Stay) (NQF 0676).
    IRFs are designed to provide intensive rehabilitation services to 
patients. Patients seeking care in IRFs are those whose illness, 
injury, or condition has resulted in a loss of function, and for whom 
rehabilitative care is expected to help regain that function. Examples 
of conditions treated in IRFs include stroke, spinal cord injury, hip 
fracture, brain injury, neurological disorders, and other diagnoses 
characterized by loss of function.
    Given that the primary goal of rehabilitation is improvement in 
functional status, IRF clinicians have traditionally assessed and 
documented patients' functional statuses at admission and discharge to 
evaluate the effectiveness of the rehabilitation care provided to 
individual patients, as well as the effectiveness of the rehabilitation 
unit or hospital overall. In addition, research results have found 
differences in IRF patients' functional outcomes, and thus we believe 
there is an opportunity for improvement in this area. Differences in 
IRF patients' functional outcomes have been found by geographic region, 
insurance type, and race/ethnicity after adjusting for key patient 
demographic characteristics and admission clinical status. This 
supports the need to monitor IRF patients'

[[Page 26339]]

functional outcomes. For example, Reistetter \22\ examined discharge 
motor function and functional gain among IRF patients with stroke and 
found statistically significant differences in functional outcomes by 
U.S. geographic region, by insurance type, and race/ethnicity group 
after risk adjustment. O'Brien and colleagues \23\ found differences in 
functional outcomes across race/ethnicity groups in their analysis of 
Medicare assessment data for patients with stroke after risk 
adjustment. O'Brien and colleagues \24\ also noted that the overall IRF 
length of stay decreased 1.8 days between 2002 and 2007 and that 
shorter IRF stays were significantly associated with lower functioning 
at discharge.
---------------------------------------------------------------------------

    \22\ Reistetter TA, Karmarkar AM, Graham JE, et al. Regional 
variation in stroke rehabilitation outcomes. Arch Phys Med 
Rehabil.95(1):29-38, Jan. 2014.
    \23\ O'Brien SR, Xue Y, Ingersoll G, et al. Shorter length of 
stay is associated with worse functional outcomes for medicare 
beneficiaries with stroke. Physical Therapy. 93(12):1592-1602, Dec. 
2013.
    \24\ O'Brien SR, Xue Y, Ingersoll G, et al. Shorter length of 
stay is associated with worse functional outcomes for medicare 
beneficiaries with stroke. Physical Therapy. 93(12):1592-1602, Dec. 
2013.
---------------------------------------------------------------------------

    We are currently developing 4 functional status quality measures 
for the IRF setting:
    (1) Quality Measure: IRF Functional Outcome Measure: Change in 
Mobility Score for Medical Rehabilitation Patients for Medical 
Rehabilitation Patients;
    (2) Quality Measure: IRF Functional Outcome Measure: Change in 
Self-Care Score for Medical Rehabilitation Patients for Medical 
Rehabilitation Patients;
    (3) Quality Measure: IRF Functional Outcome Measure: Discharge 
Mobility Score for Medical Rehabilitation Patients for Medical 
Rehabilitation Patients; and
    (4) Quality Measure: IRF Functional Outcome Measure: Discharge 
Self-Care Score for Medical Rehabilitation Patients for Medical 
Rehabilitation Patients.
    We invite public comment on our intent to propose these measures 
for the FY 2019 adjustments to the IRF PPS annual increase factor and 
subsequent year increase factors. The draft measure specifications for 
these measures are posted at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Details.html. The development of these 
measures is expected to be completed in 2014, at which time they will 
be submitted to the NQF, the entity with a contract under section 
1890(a) of the Act, for review.

E. Proposed Timeline for Data Submission for New IRF QRP Quality 
Measures Affecting the FY 2017 Adjustments to the IRF PPS Annual 
Increase Factor

    We propose the following data submission timeline for the quality 
measures that we have proposed for the FY 2017 adjustments to the IRF 
PPS annual increase factor. We propose that IRFs would be required to 
submit data on admissions and discharges occurring between January 1, 
2015, and December 31, 2015 (CY 2015), for the FY 2017 adjustments to 
the IRF PPS annual increase factor. We propose this proposed time frame 
because we believe this will provide sufficient time for IRFs and CMS 
to put processes and procedures in place to meet the additional quality 
reporting requirements. Given these measures are collected through the 
CDC's NHSN, and IRFs are already familiar with the NHSN reporting 
system, as they currently report the CAUTI measure, we believe this 
proposed timeframe will allow IRFs ample opportunity to begin reporting 
the newly proposed MRSA bacteremia and CDI measures, should they be 
finalized. We also propose that the quarterly data submission deadlines 
for the FY 2017 adjustments to the IRF PPS annual increase factor occur 
approximately 135 days after the end of each quarter, as outlined in 
the Table 10. Each quarterly deadline would be the date by which all 
data collected during the preceding quarter would be required to be 
submitted to us for measures using the IRF-PAI and to the CDC for 
measures using the NHSN. We invite public comment on these proposed 
timelines for data submission for the proposed IRF QRP quality measures 
for the FY 2017 adjustments to the IRF PPS annual increase factor.

   TABLE 10--Proposed Timelines for Submission of IRF QRP Quality Data
  Using CDC/NSHN for FY 2017 Adjustments to the IRF PPS Annual Increase
  Factor: National Health Safety Network (NHSN) Facility-Wide Inpatient
    Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA)
 Bacteremia Outcome Measure (NQF 1716) and National Healthcare
Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium
                           difficile Infection
               [(CDI) Outcome Measure (NQF 1717)]
------------------------------------------------------------------------
                              CDC/NHSN data
          Quarter               collection     CDC/NHSN data submission
                                  period               deadline
------------------------------------------------------------------------
                         FY 2017 Increase Factor
------------------------------------------------------------------------
Quarter 1..................  January 1,       August 15, 2015.
                              2015--March
                              31, 2015.
Quarter 2..................  April 1, 2015--  November 15, 2015.
                              June 30, 2015.
Quarter 3..................  July 1, 2015--   February 15, 2016.
                              September 30,
                              2015.
Quarter 4..................  October 1,       May 15, 2016.
                              2015--December
                              31, 2015.
------------------------------------------------------------------------


 Table 11--Summary of IRF QRP Measures Affecting the FY 2017 Adjustments
   to the IRF PPS Annual Increase Factor and Subsequent Year Increase
                                 Factors
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Continued IRF QRP Measure Affecting the FY 2015 Adjustments to the IRF
 PPS Annual Increase Factor and Subsequent Year Increase Factors:
     NQF 0138: National Health Safety Network (NHSN)
     Catheter-Associated Urinary Tract Infection (CAUTI) Outcome
     Measure\+\
Continued IRF QRP Measure Affecting the FY 2016 Adjustments to the IRF
 PPS Annual Increase Factor and Subsequent Year Increase Factors:
     NQF 0431: Influenza Vaccination Coverage among
     Healthcare Personnel\+\

[[Page 26340]]

 
Continued IRF QRP Measures Affecting the FY 2017 Adjustments to the IRF
 PPS Annual Increase Factor and Subsequent Year Increase Factors:
     NQF 2502: All-Cause Unplanned Readmission Measure
     for 30 Days Post-Discharge from Inpatient Rehabilitation
     Facilities^ **
     NQF 0680: Percent of Residents or Patients Who
     Were Assessed and Appropriately Given the Seasonal Influenza
     Vaccine (Short-Stay)*
     NQF 0678: Percent of Residents or Patients with
     Pressure Ulcers That Are New or Worsened (Short-Stay)*
New IRF QRP Measures Affecting the FY 2017 Adjustments to the IRF PPS
 Annual Increase Factor and Subsequent Year Increase Factors
     NQF 1716: National Healthcare Safety Network
     (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant
     Staphylococcus aureus (MRSA) Bacteremia Outcome Measure
     NQF 1717: National Healthcare Safety Network
     (NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile
     Infection (CDI) Outcome Measure
------------------------------------------------------------------------
+ Using CDC/NHSN.
* Using the IRF-PAI released October 1, 2014.
- Medicare Fee-for-Service claims data.
** Not NQF-endorsed, CMS submitted the measure for NQF review on
  February 5, 2014.

F. Proposed Timing for New IRFs To Begin Reporting Quality Data Under 
the IRF QRP Affecting the FY 2017 Adjustments to the IRF PPS Annual 
Increase Factor and Beyond

    For the FY 2017 FY 2017 adjustments to the IRF PPS annual increase 
factor and subsequent year increase factors, we propose that new IRFs 
be required to begin reporting quality data under the IRF QRP by no 
later than the first day of the calendar quarter subsequent to the 
quarter in which they have been designated as operating in the CASPER 
system. We invite public comment on this proposed timing for new IRFs 
to begin reporting quality data under the IRF QRP.

G. Proposed IRF QRP Reconsideration and Appeals Procedures for the FY 
2016 Adjustments to the IRF PPS Annual Increase Factor and Beyond

1. IRF QRP Reconsideration and Appeals for the FY 2014 and FY 2015 
Adjustments to the IRF PPS Annual Increase Factor
    In the FY 2014 IRF PPS final rule (78 FR 47919), we finalized a 
voluntary process that allowed IRF providers the opportunity to seek 
reconsideration of our initial noncompliance decision for the FY 2014 
and FY 2015 adjustments to the IRF PPS annual increase factor. We 
stated that we would notify IRFs found to be noncompliant with the IRF 
QRP reporting requirements that they may be subject to the 2-percentage 
point reduction to their IRF PPS annual increase factor. The purpose of 
this notification is to put the IRF on notice of the following: (1) 
that the IRF has been identified as being noncompliant with the IRF QRP 
reporting requirements for a given reporting period; (2) that the IRF 
will be scheduled to receive a 2-percentage point reduction to its IRF 
PPS annual increase factor for the applicable fiscal year; (3) that the 
IRF may file a request for reconsideration if it believes that the 
finding of noncompliance is erroneous, or that if it was noncompliant, 
it had a valid and justifiable excuse for this noncompliance; and (4) 
that, to receive reconsideration, the IRF must follow a defined process 
on how to file a request for reconsideration, which will be described 
in the notification. This defined process for filing a request for 
reconsideration was described on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/.
    We further stated that upon the conclusion of our review of each 
request for reconsideration, we would render a decision. We may reverse 
our initial finding of noncompliance if: (1) The IRF provides adequate 
proof of full compliance with all IRF QRP reporting requirements during 
the reporting period; or (2) the IRF provides adequate proof of a valid 
or justifiable excuse for noncompliance if the IRF was not able to 
comply with the requirements during the reporting period. We will 
uphold our initial finding of noncompliance if the IRF cannot show any 
justification for noncompliance.
    If an IRF is dissatisfied with either our initial finding of 
noncompliance or a CMS decision rendered at the reconsideration level, 
it can appeal the decision with the Provider Reimbursement Review Board 
(PRRB) under 42 CFR part 405, subpart R. We recommended, however, that 
IRF providers submit requests for reconsideration to us before 
submitting appeals to the PRRB. We noted that this order of appeals has 
had good success under other established quality reporting programs 
and, from an IRF perspective, it allows for the opportunity to resolve 
issues earlier in the process, when we have dedicated resources to 
consider all reconsideration requests before payment changes are 
applied to the IRF's annual payment.
2. IRF QRP Program Reconsideration and Appeals Procedures for the FY 
2016 Adjustments to the IRF PPS Annual Increase Factor and Beyond
    For the FY 2016 adjustments to the IRF PPS annual increase factor 
and subsequent year increase factors, we propose to adopt an updated 
process, as described below, that will enable an IRF to request a 
reconsideration of our initial noncompliance decision in the event that 
an IRF believes that it was incorrectly identified as being subject to 
the 2-percentage point reduction to its IRF PPS annual increase factor 
due to noncompliance with the IRF QRP reporting requirements for a 
given reporting period.
    For the FY 2016 adjustments to the IRF PPS annual increase factor 
and subsequent year increase factors, we propose that an IRF would 
receive a notification of noncompliance if we determine that the IRF 
did not submit data in accordance with section 1886(j)(7)(C) of the Act 
for the applicable fiscal year, and therefore, that the IRF is subject 
to a 2-percentage point reduction in the applicable IRF PPS annual 
increase factor as required by section 1886(j)(7)(A)(i) of the Act. We 
would only consider requests for reconsideration once a provider has 
been found to be noncompliant and not before. IRFs would have 30 days 
from the date of the initial notification of noncompliance to review 
the CMS determination and submit to us a request for reconsideration. 
This proposed time frame would allow us to balance our desire to ensure 
that IRFs have the opportunity to request reconsideration with our need 
to complete the reconsideration process and provide IRFs with our 
decision in a timely manner. Notifications of noncompliance and any 
subsequent

[[Page 26341]]

notifications from CMS would be sent via a traceable delivery method 
such as certified U.S. mail or registered U.S. mail. We would not 
accept any requests for reconsideration that are submitted after the 
30-day deadline.
    We further propose that as part of the IRF's request for 
reconsideration, the IRF would be required to submit all supporting 
documentation and evidence demonstrating (1) full compliance with all 
IRF QRP reporting requirements during the reporting period or (2) a 
valid or justifiable excuse for noncompliance if the IRF was not able 
to comply with the requirements during the reporting period. We would 
be unable to review any reconsideration request that fails to provide 
the necessary documentation and evidence along with the request. The 
documentation and evidence may include copies of any communications 
that demonstrate its compliance with all IRF QRP reporting 
requirements, as well as any other records that support the IRF's 
rationale for seeking reconsideration. A sample list of the proposed 
acceptable supporting documentation and evidence, as well as 
instructions for IRF providers to retrieve copies of the data submitted 
to CMS for the appropriate program year, can be found on the CMS Web 
site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html.
    We propose that providers may withdraw reconsideration requests at 
any time and may file new requests within the proposed 30-day deadline. 
We also propose that, in very limited circumstances, we may extend the 
proposed deadline for submitting reconsideration requests. It would be 
the responsibility of a provider to request an extension and 
demonstrate that extenuating circumstances existed that prevented the 
filing of the reconsideration request by the proposed deadline. We 
would not respond to any other types of requests, such as requests for 
administrative review of the methodology and standards that determine 
the quality reporting requirements.
    We propose that an IRF provider wishing to request a 
reconsideration of our initial noncompliance determination would be 
required to do so by submitting an email to the following email 
address: [email protected]. Any request for 
reconsideration submitted to us by an IRF would be required to follow 
the guidelines outlined on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html.
    Following receipt of a request for reconsideration, we will 
provide--
     An email acknowledgment, using the contact information 
provided in the reconsideration request, to the CEO or CEO-designated 
representative that the request has been received; and
     Once we have reached a decision regarding the 
reconsideration request, an email to the IRF CEO or CEO-designated 
representative, using the contact information provided in the 
reconsideration request, regarding our decision.
    We propose to require any IRF that believes it was incorrectly 
identified as being subject to the 2-percentage point reduction to its 
IRF PPS annual increase factor to submit a request for reconsideration 
and receive a decision on that request before the IRF can file an 
appeal with the PRRB, as authorized by the Administrative Procedure 
Act. If the IRF is dissatisfied with the decision rendered at the 
reconsideration level, the IRF could appeal the decision with the PRRB 
under Sec.  405.1835. We believe this proposed process is more 
efficient and less costly for us and for IRFs because it decreases the 
number of PRRB appeals by resolving issues earlier in the process. 
Additional information about the reconsideration process including 
requirements for submitting reconsideration request is posted on the 
CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html. We invite public comment on the 
proposed procedures for reconsideration and appeals.

G. Proposed IRF QRP Data Submission Exception or Extension Requirements 
for the FY 2017 Adjustments to the IRF PPS Annual Increase Factor and 
Beyond

    For the IRF QRP's data submission exception or extension 
requirements for the FY 2017 adjustments to the IRF PPS annual increase 
factor and subsequent year increase factors, we propose to continue 
using the IRF QRP's disaster waiver requirements that were adopted in 
the FY 2014 IRF PPS final rule (78 FR 47920) for the FY 2015 
adjustments to the IRF PPS annual increase factor and subsequent year 
increase factors, which are outlined below, with the exception that the 
phrase ``exception or extension'' will be substituted for the word 
``waiver.'' We also propose, for the FY 2017 adjustments to the IRF PPS 
annual increase factor and subsequent year increase factors, that we 
may grant an exception or extension to IRFs if we determine that a 
systemic problem with one of our data collection systems directly 
affected the ability of the IRF to submit data. Because we do not 
anticipate that these types of systemic errors will happen often, we do 
not anticipate granting an exception or extension on this proposed 
basis frequently. We propose that if we make the determination to grant 
an exception or extension, we would communicate this decision through 
routine communication channels to IRFs and vendors, including, but not 
limited to, issuing memos, emails, and notices on the CMS Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    In the FY 2014 IRF PPS final rule (78 FR 47920), we finalized a 
process for IRF providers to request and for us to grant exceptions or 
extensions for the quality data reporting requirements of the IRF QRP 
for one or more quarters, beginning with the FY 2015 adjustments to the 
IRF PPS annual increase factor and subsequent year increase factors, 
when there are extraordinary circumstances beyond the control of the 
provider.
    In the event that an IRF seeks to request an exception or extension 
for quality reporting purposes, the IRF must request an exception or 
extension within 30 days of the occurrence of an extraordinary event by 
submitting a written request to CMS via email to the IRF QRP mailbox at 
[email protected]. Exception or extension requests 
sent to us through any other channel will not be considered as a valid 
request for an exception or extension from the IRF QRP reporting 
requirements for any adjustment to the IRF PPS annual increase factor. 
The written request must contain all of the finalized requirements in 
the FY 2014 IRF PPS final rule (78 FR 47920) and on the CMS Web site at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html. When an exception or extension is granted, an IRF will 
not incur payment reduction penalties for failure to comply with the 
requirements of the IRF QRP, for the time frame specified by CMS. If an 
IRF is granted an exception, we will not require that the IRF submit 
any quality data for a given period of time. If we grant an extension 
to an IRF, the IRF will still remain responsible for submitting quality 
data collected during

[[Page 26342]]

the time frame in question, although we will specify a revised deadline 
by which the IRF must submit this quality data.
    It is important to note that requesting an exception or extension 
from the requirements of the IRF QRP is separate and distinct from 
purpose and requirements of Sec.  412.614, which outline the 
requirements to follow if an IRF is requesting a waiver regarding 
consequences of failure to submit complete and timely IRF-PAI payment 
data specified in that regulation. IRFs that have filed and were 
granted an IRF-PAI waiver in accordance with Sec.  412.614 may so 
indicate when requesting an exception or extension from the IRF QRP 
requirements, but the submission of an IRF-PAI waiver request pursuant 
to Sec.  412.614 will not be considered a valid request for an 
exception or extension from the IRF QRP requirements. To request an 
exception or extension from the IRF QRP requirements, the previously 
discussed process must be followed.
    Additionally, in the FY 2014 IRF PPS final rule (78 FR 47920), we 
finalized a policy that allowed us to grant waivers (which we are 
proposing to now call exceptions or extensions) to IRFs that have not 
requested them if we determine that an extraordinary circumstance, such 
as an act of nature, affects an entire region or locale. We stated that 
if this determination was made, we would communicate this decision 
through routine communication channels to IRFs and vendors, including, 
but not limited to, issuing memos, emails, and notices on the CMS Web 
site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    We invite public comment on these proposals regarding the IRF QRP's 
data submission exception or extension requirements for the FY 2017 
adjustments to the IRF PPS annual increase factor and subsequent year 
increase factors.

I. Public Display of Quality Measure Data for the IRF QRP

    Under section 1886(j)(7)(E) of the Act, the Secretary is required 
to establish procedures for making data submitted under the IRF QRP 
available to the public. Section 1886(j)(7)(E) of the Act also requires 
these procedures to ensure that each IRF provider has the opportunity 
to review the data that is to be made public for its facility, prior to 
such data being made public. Section 1886(j)(7)(E) of the Act requires 
the Secretary to report quality measures that relate to services 
furnished in IRFs on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/.
    Currently, the Agency is developing plans regarding the 
implementation of these provisions. We appreciate the need for 
transparency into the processes and procedures that will be implemented 
to allow for the public reporting of the IRF QRP data and to afford 
providers the opportunity to preview that data before it is made 
public. At this time, we have not established procedures or timelines 
for public reporting of data, but we intend to make the public aware of 
our strategy in the future. We welcome public comments on what we 
should consider when developing future proposals related to public 
reporting.

J. Proposed IRF QRP Data Completion Thresholds for the FY 2016 
Adjustments to the IRF PPS Annual Increase Factor and Beyond

    Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires 
the reduction of the applicable IRF PPS annual increase factor, as 
previously modified under section 1886(j)(3)(D) of the Act, by 2 
percentage points for any IRF that fails to submit data on quality 
measures specified by the Secretary in accordance with the form and 
manner specified by the Secretary for that fiscal year. To date, we 
have not established a standard for compliance other than that IRF 
providers submit all applicable required data for all finalized IRF QRP 
quality measures, by the previously finalized quarterly deadlines. We 
have also specifically required monthly submission of such quality data 
for the healthcare-associated infection or vaccination data, which is 
reported to the CDC. In reaction to the input received from our 
stakeholders seeking additional specificity related to required IRF QRP 
compliance affecting FY annual increase factor determinations and, due 
to the importance of ensuring the integrity of quality data submitted 
to CMS, we are proposing to set specific IRF QRP thresholds for 
completeness of provider quality data beginning with data affecting the 
FY 2016 annual increase factor determination and beyond.
    1. The CMS IRF QRP, through the FY 2012 IRF PPS final rule, CY 2013 
OPPS/ASC final rule, and FY 2014 IRF PPS final rule, requires providers 
to submit quality data using 2 separate data collection/submission 
mechanisms; measures collected using the quality indicator section of 
the IRF-PAI are submitted through the CMS Quality Improvement 
Evaluation System (QIES); and measures stewarded by the Centers for 
Disease Control and Prevention (CDC) (Healthcare Acquired Infection 
(HAI) measures and vaccination measures) are submitted using the CDC's 
National Healthcare Safety Network (NHSN). While CMS has also 
previously finalized a claims-based measure (All-Cause Unplanned 
Readmission Measure for 30 Days Post Discharge from Inpatient 
Rehabilitation Facilities), such measures do not require IRFs to 
actually submit quality data to CMS, as they are calculated using 
claims data submitted to CMS for payment purposes. Thus, with claims-
based measures, there is no quality data to which we could apply the 
proposed data completion thresholds. To ensure that IRF providers are 
meeting an acceptable standard for completeness of submitted data, we 
are proposing that for the FY 2016 annual increase factor and beyond, 
IRF providers meet or exceed two separate program thresholds: one 
threshold for quality measures data collected using the quality 
indicator section of the IRF-PAI and submitted through QIES; and a 
second threshold for quality measures data collected and submitted 
using the CDC's NHSN. We are proposing that IRFs must meet or exceed 
both thresholds discussed below to avoid receiving a 2 percentage point 
reduction to their IRF PPS annual increase factor for a given FY 
beginning with FY 2016. We are proposing to hold IRF providers 
accountable for two different data completion thresholds for each of 
the two data submission mechanisms: a 95 percent data completion 
threshold for data collected using the quality indicator items on the 
IRF-PAI and submitted through QIES; and a 100 percent threshold for 
data collected and submitted through the CDC's NHSN. We have chosen to 
hold providers to the lower threshold of 95 percent for the quality 
indicator items on the IRF-PAI, as there has to be some margin for 
error related to IRF patients that have been discharged emergently or 
against medical advice, as these situations make it more difficult to 
collect and submit the mandatory IRF-PAI quality indicator items at 
discharge. We do not believe the same impediments exist for the 
infection, vaccination or other quality measures data that IRFs submit 
to the CDC's NHSN. Proposed IRF QRP Completion Threshold for the 
Required Quality Indicator Data Items on the IRF-PAI
    The quality indicator section of the IRF-PAI is composed of data 
collection items designed to inform quality measure calculations, 
including risk-

[[Page 26343]]

adjustment calculations as well as internal consistency checks for 
logical inaccuracies. We propose that beginning with quality data 
affecting the FY 2016 IRF PPS annual increase factor and beyond, IRF 
providers must meet or exceed a proposed IRF-PAI quality indicator data 
completion threshold of 95 percent. We propose to assess the 
completeness of submitted data by verifying that, for all IRF-PAI 
Assessments submitted by any given IRF, at least 95 percent of those 
IRF-PAI Assessments must have 100 percent of the mandatory quality 
indicator data items completed where, for the purposes of this proposed 
rule, ``completed'' is defined as having provided actual patient data 
as opposed to a non-informative response, such as a dash (-), that 
indicates the IRF was unable to provide patient data. The proposed 
threshold of 95 percent is based on the need for complete records, 
which allows appropriate analysis of quality measure data for the 
purposes of updating quality measure specifications as they undergo 
yearly and triennial measure maintenance reviews with the NQF. 
Additionally, complete data is needed to understand the validity and 
reliability of quality data items, including risk-adjustment models. 
Finally we want to ensure complete quality data from IRF providers, 
which will ultimately be reported to the public, allowing our 
beneficiaries to gain an understanding of provider performance related 
to these quality metrics, and helping them to make informed health care 
choices. Our data suggests that the majority of current IRF providers 
are in compliance with, or exceeding this proposed threshold already. 
However, we take comment on circumstances that might prevent IRFs from 
meeting this level of compliance. All items that we propose to require 
under the IRF QRP are identified in Chapter 4 of the IRF PAI Training 
Manual, which is available for download on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html?redirect=/IRF-Quality-
Reporting/. We additionally propose that any IRF that does not meet the 
proposed requirement that 95 percent of all IRF-PAI assessments 
submitted contain 100 percent of all required quality indicator data 
items, will be subject to a reduction of 2 percentage points to the 
applicable FY IRF PPS annual increase factor beginning with FY 2016. To 
establish this program threshold, we analyzed IRF-PAI quality indicator 
data item submissions from January 2013 through September 2013, and we 
believe that the majority of IRF providers will be able to meet the 
proposed 95 percent data completion threshold. It is our intent to 
raise this threshold over the next 2 years, through the rulemaking 
process. We are proposing that this threshold will have to be met by 
IRFs, in addition to the CDC NHSN threshold discussed below, to avoid 
receiving a 2 percentage point reduction to the applicable FY IRF PPS 
annual increase factor.
2. IRF QRP Data Completion Threshold for Measures Submitted Using the 
Centers for Disease Control and Prevention (CDC) National Healthcare 
Safety Network (NHSN)
    The CMS IRF QRP, through the FY 2012 IRF PPS final rule, CY 2013 
OPPS/ASC final rule, and FY 2014 IRF PPS final rule, requires that IRFs 
submit CDC-stewarded quality measure data using the CDC's NHSH, 
including data for the previously finalized CAUTI and Influenza 
Vaccination Coverage Among Healthcare Personnel (HCP) quality measures. 
More specifically, we require that IRFs follow CDC quality measure 
protocols, which require them to complete all data fields required for 
both numerator and denominator data within NHSN, including the ``no 
events'' field for any month during which no infection events were 
identified. IRFs are required to submit this data on a monthly basis 
(except for the HCP measure, which is only required to be reported once 
per year). However, IRFs have until the associated quarterly deadline 
(135 calendar days beyond the end of each CY quarter) by which to 
report infection data to the CDC for each of the 3 months within any 
give quarter. For more information on the IRF QRP quarterly deadlines, 
we refer you to Table 10 in section XI.E of this proposed rule. We are 
proposing that, beginning with FY 2016 IRF PPS annual increase factor 
and beyond, this previously finalized requirement for monthly reporting 
must be met, in addition to the proposed IRF-PAI quality indicator data 
item completion threshold discussed above, to avoid a 2 percentage 
point reduction to the applicable FY IRF PPS annual increase factor. 
That is, we propose that IRFs must meet a threshold of 100 percent for 
measures submitted via the NHSN, achieved by submitting relevant 
infection or vaccination data for each month of any given CY, in 
addition to meeting the above proposed data item completion threshold 
for required quality indicator items on the IRF-PAI. As the IRF QRP 
expands and IRFs begin reporting measures that were previously 
finalized, but not yet implemented, or newly proposed and finalized 
measures, we propose to apply this same threshold.
a. Application of the 2 Percentage Point Reduction for IRF Provider 
That Fail To Meet the Above Proposed Data Completion Thresholds
    Above we have proposed that IRFs must meet two separate data 
completion thresholds to avoid a 2 percentage point reduction to their 
applicable FY annual increase factor; a data completion threshold of 95 
percent for those mandatory data elements collected using the quality 
indicator items on the IRF-PAI and submitted through QIES; and a second 
data completion threshold of 100 percent for quality measure data 
submitted through the CDC's NHSN. We are proposing that these data 
completion thresholds must be met in addition to the below proposed 
data accuracy validation threshold of 75 percent, to avoid a 2 
percentage point reduction to their applicable FY annual increase 
factor. While we propose that IRFs must meet both the proposed data 
completion and data accuracy thresholds, IRFs cannot have their 
applicable annual increase factor reduced twice. That is, should an IRF 
provider fail to meet either one or both of the proposed thresholds, 
they will only receive one reduction of 2 percentage points to their 
applicable FY annual increase factor.
    We invite comment on this proposal.

K. Proposed Data Validation Process for the FY 2017 Adjustments to the 
IRF PPS Annual Increase Factor and Beyond

    Historically, we have built consistency and internal validation 
checks into our data submission specifications to ensure that the basic 
elements of the IRF-PAI assessment conform to requirements such as 
proper format and facility information. These internal validation 
checks are automated and occur during the provider submission process, 
and help ensure the integrity of the data submitted by providers by 
rejecting submissions or issuing warnings when provider data contain 
logical inconsistencies. These edit checks are further outlined in the 
Inpatient Rehabilitation Facility-Patient Assessment Instrument Data 
Submission Specifications, which are available for download at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Software.html.
    Validation is intended to provide added assurance of the accuracy 
of the data that will be reported to the public

[[Page 26344]]

as required by section 1886(j)(7)(E) of the Act. We propose, for the FY 
2016 adjustments to the IRF PPS annual increase factor and subsequent 
years, to validate the data submitted for quality purposes. Initially, 
for FY 2016 this data accuracy validation will apply only to the 
quality indicator items on the IRF-PAI that inform the measure Percent 
of Patients or Residents with Pressure Ulcers that are New or Worsened 
(NQF 0678), including those mandatory data elements that 
inform the measure calculation, as well as those that inform internal 
consistency checks for logical inaccuracies. As the IRF QRP expands, 
and as IRFs begin to submit additional data using the quality indicator 
section of the IRF-PAI, we propose to include those additional data 
elements in this validation process. We will inform any such expansion 
of this validation process prior to its occurrence through our routine 
channels of communication including, but not limited to the IRF QRP Web 
site, CMS open door forums, national IRF provider trainings, and the 
Medicare Learning Network Newsletter.
    We propose to validate the data elements submitted to CMS for 
Percent of Residents or Patients with Pressure Ulcers that are New or 
Have Worsened (Short-Stay) (NQF 0678) under the IRF QRP by 
requesting the minimum chart data necessary to confirm a statistically 
valid random sample of 260 providers. From those 260 providers, 5 IRF-
PAI assessments submitted through National Assessment Collection 
Database will be randomly selected. In accordance with Sec.  164.512 
(d)(1)(iii) of the HIPAA Privacy Rule, we will request from these 
providers the specified portions of the 5 Medicare patient charts that 
correspond to the randomly selected assessments, which will need to be 
copied and submitted via traceable mail to a CMS contractor for 
validation. We propose that the specific portions of the 5 beneficiary 
charts will be identified in the written request, but may include: 
admission and discharge assessments, relevant nursing notes following 
the admission, relevant nursing notes preceding the discharge, 
physician admission summary and discharge summary, and any Assessment 
of Pressure Ulcer Form the facility may utilize. We propose that the 
CMS contractor will utilize the portions of the patient charts to 
compare that information with the quality data submitted to CMS. 
Differences that would affect measure outcomes or measure rates would 
be identified and reported to CMS. These differences could include but 
are not limited to unreported worsened pressure ulcers.
    We propose that all data that has been submitted to the National 
Assessment Collection Database under the IRF QRP would be subject to 
the data validation process. Specifically, we propose that the 
contractor will request copies of the randomly selected medical charts 
from each facility via certified mail (or other traceable methods that 
require a facility representative to sign for CMS correspondence), and 
the facility will have 45 days from the date of the request (as 
documented on the request letter) to submit the requested records to 
the contractor. If the facility does not comply within 30 days, the 
contractor will send a second certified letter to the facility, 
reminding the facility that it must return copies of the requested 
medical records within 45 calendar days following the date of the 
initial contractor medical record request. If the facility still does 
not comply, then the contractor will assign a ``zero'' score to each 
measure in each missing record. If, however, the facility does comply, 
the contractor will review the data submitted by the facility using the 
IRF-PAI for the mandatory data elements associated with the Pressure 
Ulcer measure, until such time that IRFs begin to submit additional 
quality measures that are collected using the quality indicator section 
of the IRF-PAI. Initially, this review will consist solely of those 
mandatory data elements that inform the pressure ulcer measure 
calculations, as well as those that inform checks for logical 
inconsistencies. As IRFs begin to report additional finalized measures, 
CMS intends to propose expanding this validation process to other such 
measures at that time. The contractor will then calculate the 
percentage of matching data elements which will constitute a validation 
score. Because we would not be validating all records, we would need to 
calculate a confidence interval that incorporates a potential sampling 
error.
    To receive the full FY 2016 IRF annual increase factor, we are 
proposing that IRFs in the random sample must attain at least a 75 
percent validation score, based upon our validation process, which will 
use charts requested from patient assessments submitted for FY 2014. We 
will calculate a 95 percent confidence interval associated with the 
observed validation score. If the upper bound of this confidence 
interval is below the 75 percent cutoff point, we will not consider a 
hospital's data to be ``validated'' for payment purposes. For example, 
for a provider who submits all 5 of their charts, each with 9 elements, 
the provider's score will be based on 45 possible opportunities to 
report correctly or incorrectly. If the provider correctly scored on 40 
of the 45 elements, then their reliability would be 89 percent (40/45). 
The upper bound of the confidence interval takes into account sampling 
error and would be higher than this estimated reliability, in this case 
96 percent. This number is greater than or equal to 75 percent. 
Therefore the provider passes validation. We propose that providers 
failing the validation requirements would be subject to a 2 percentage 
point reduction to their applicable annual increase factor. In 
addition, all providers validated would receive educational feedback, 
including specific case details.

L. Application of the 2 Percentage Point Reduction for IRF Providers 
That Fail To Meet the Above Proposed Data Accuracy Threshold

    Above we have proposed that IRFs must meet a data accuracy 
threshold of 75 percent to avoid receiving a 2 percentage point 
reduction to their applicable FY annual increase factor. We are 
proposing that this proposed data accuracy threshold of 75 percent must 
be met in addition to the above proposed data completion thresholds (95 
percent for data collected using the quality indicator items on the 
IRF-PAI and submitted using QIES, and 100 percent for data submitted 
using the CDC's NHSN), to avoid receiving a 2 percentage point 
reduction to their applicable FY annual increase factor. While we 
propose that IRFs must meet both the proposed data accuracy and data 
completion thresholds, IRFs cannot have their applicable annual payment 
update reduced twice. That is, should an IRF provider fail to meet 
either one or both of the proposed thresholds (data completion and/or 
data accuracy), they will only receive one reduction of 2 percentage 
points to their applicable FY annual increase factor.
    We invite public comment on this proposal and suggestions to 
improve the utility of the approach and/or reduce the burden on 
facilities.

M. Electronic Health Record and Health Information Exchange

    We believe that all patients, their families, and their healthcare 
providers should have consistent and timely access to their health 
information in a standardized format that can be securely exchanged 
between the patient, providers, and others involved in the

[[Page 26345]]

patient's care.\25\ We are committed to accelerating health information 
exchange (HIE) through the use of electronic health records (EHRs) and 
other types of health information technology (HIT) across the broader 
care continuum through a number of initiatives including: (1) Alignment 
of incentives and payment adjustments to encourage provider adoption 
and optimization of HIT and HIE services through Medicare and Medicaid 
payment policies; (2) adoption of common standards and certification 
requirements for interoperable HIT; (3) support for privacy and 
security of patient information across all HIE-focused initiatives; and 
(4) governance of health information networks. These initiatives are 
designed to improve care delivery and coordination across the entire 
care continuum and encourage HIE among all health care providers, 
including professionals and hospitals eligible for the Medicare and 
Medicaid EHR Incentive Programs and those who are not eligible for the 
EHR Incentive programs. To increase flexibility in the regulations for 
certification and expand HIT certification, the Office of the National 
Coordinator for Health Information Technology (ONC) has issued a 
proposed rule concerning a voluntary 2015 Edition of EHR certification 
criteria that would more easily accommodate HIT certification for 
technology used in other types of health care settings where individual 
or institutional health care providers are not typically eligible for 
incentive payments under the EHR Incentive Programs, such as long-term 
and post-acute care and behavioral health settings.
---------------------------------------------------------------------------

    \25\ The Department of Health & Human Services August 2013 
Statement, ``Principles and Strategies for Accelerating Health 
Information Exchange.
---------------------------------------------------------------------------

    We believe that HIE and the use of certified EHRs by IRFs (and 
other providers ineligible for the Medicare and Medicaid EHR Incentive 
programs) can effectively and efficiently help providers improve 
internal care delivery practices, support management of patient care 
across the continuum, and enable the reporting of electronically 
specified clinical quality measures (eCQMs). More information on the 
identification of EHR certification criteria and development of 
standards applicable to IRFs can be found at:
     http://healthit.gov/policy-researchers-implementers/standards-and-certification-regulations
     http://www.healthit.gov/facas/FACAS/health-it-policy-committee/hitpc-workgroups/certificationadoption
     http://wiki.siframework.org/LCC+LTPAC+Care+Transition+SWG
     http://wiki.siframework.org/Longitudinal+Coordination+of+Care
    We are soliciting feedback during public comment to this FY 2015 
IRF PPS proposed rule on the feasibility and desirability of electronic 
health record adoption and use of HIE in IRFs. We are also interested 
in public comment on the need to develop electronic clinical quality 
measures, and the benefits and limitations of implementing these 
measures for IRF providers.

N. Proposed Method for Applying the Reduction to the FY 2015 IRF 
Increase Factor for IRFs That Fail To Meet the Quality Reporting 
Requirements

    As previously noted, section 1886(j)(7)(A)(i) of the Act requires 
the application of a 2-percentage point reduction of the applicable 
market basket increase factor for IRFs that fail to comply with the 
quality data submission requirements. In compliance with 
1886(j)(7)(A)(i) of the Act, we will apply a 2-percentage point 
reduction to the applicable FY 2015 market basket increase factor (2.1 
percent) in calculating an adjusted FY 2015 standard payment conversion 
factor to apply to payments for only those IRFs that failed to comply 
with the data submission requirements. As previously noted, application 
of the 2-percentage point reduction may result in an update that is 
less than 0.0 for a fiscal year and in payment rates for a fiscal year 
being less than such payment rates for the preceding fiscal year. Also, 
reporting-based reductions to the market basket increase factor will 
not be cumulative; they will only apply for the FY involved. Table 12 
shows the calculation of the adjusted FY 2015 standard payment 
conversion factor that will be used to compute IRF PPS payment rates 
for any IRF that failed to meet the quality reporting requirements for 
the period from January 1, 2013, through December 31, 2013.

    Table 12--Calculations To Determine the Adjusted FY 2015 Standard
   Payment Conversion Factor for IRFs That Failed To Meet the Quality
                          Reporting Requirement
------------------------------------------------------------------------
             Explanation for  adjustment                  Calculations
------------------------------------------------------------------------
Standard Payment Conversion Factor for FY 2014.......            $14,846
Market Basket Increase Factor for FY 2015 (2.7                  X 1.0010
 percent), reduced by 0.4 percentage point reduction
 for the productivity adjustment as required by
 section 1886(j)(3)(C)(ii)(I) of the Act, reduced by
 0.2 percentage point in accordance with sections
 1886(j)(3)(C) and (D) of the Act and further reduced
 by 2 percentage points for IRFs that failed to meet
 the quality reporting requirement...................
Budget Neutrality Factor for the Wage Index and Labor-          X 1.0018
 Related Share.......................................
Budget Neutrality Factor for the Revisions to the CMG           X 1.0000
 Relative Weights....................................
Proposed Adjusted FY 2015 Standard Payment Conversion          = $14,888
 Factor..............................................
------------------------------------------------------------------------

    We invite public comment on the proposed method for applying the 
reduction to the FY 2015 IRF increase factor for IRFs that fail to meet 
the quality reporting requirements.

XII. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60 days' notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. To 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the

[[Page 26346]]

affected public, including automated collection techniques.
    This proposed rule does not impose any new information collection 
requirements as outlined in the regulation text. However, this proposed 
rule does [propose changes to] associated information collections that 
are not discussed in the regulation text contained in this document. 
The following is a discussion of these information collections, some of 
which have already received OMB approval.
    We are soliciting public comments on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs).

A. ICRs Regarding the IRF QRP

1. Updates to IRF QRP
    We propose 2 new measures for use in the IRF QRP that will affect 
the increase factor for FY 2017. These quality measures are: National 
Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 
Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome 
Measure (NQF 1716) and National Healthcare Safety Network 
(NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile 
Infection (CDI) Outcome Measure (NQF 1717). We propose that 
these measures would be collected via the CDC's NHSN data submission 
system (http://www.cdc.gov/nhsn/). The NHSN is a secure, Internet-based 
healthcare-associated infection tracking system that is maintained and 
managed by the CDC.
    There are currently approximately 1,140 IRFs in the United States 
paid under the IRF PPS that are already required to submit CAUTI data 
to the CDC's NHSN. We believe that any burden increase related to 
complying with the IRF QRP requirements for submission of the MRSA 
bacteremia and CDI measures will be minimal for those IRFs that are 
already familiar with the NHSN submission process, for several reasons. 
First, these IRFs have already completed the initial setup and have 
become familiar with reporting data in the NHSN system due to the 
requirement to report the CAUTI measure. Second, due to their 
participation in a wide range of mandatory reporting and quality 
improvement programs, there are 15 states with mandate for IRFs to 
report MRSA bacteremia data and CDI data into the NHSN. The most 
significant burden associated with these quality measures is the time 
and effort associated with collecting and submitting the data on the 
MRSA and CDI measures for IRFs that are not currently reporting any 
measures data into the CDC's NHSN system.
    Based on submissions to the NHSN, we now estimate that each IRF 
will execute approximately 5 NHSN submissions per month: 1 MRSA 
bacteremia event, 1 C. difficile event and 3 CAUTI events (60 events 
per IRF annually). This equates to a total of approximately 68,400 
submissions of events to the NHSN from all IRFs per year. The CDC 
estimated the public reporting burden of the collection of information 
for each measure to include the time for reviewing instructions, 
searching existing data sources, gathering and maintaining the data 
needed, and completing and reviewing the collection of information. 
MRSA and C. difficile are estimated to be an average of 15 minutes per 
response (10 minutes of clinical (registered nurse) time, and 5 minutes 
of clerical (Medical Records or Health Information Technician); CAUTI 
is estimated to be an average of 29 minutes per response. Each IRF must 
also complete a Patient Safety Monthly Reporting Plan estimated at 35 
minutes and a Denominator for Specialty Care Area, which is estimated 
at 5 hours per month. Based on this estimate, we expect each IRF would 
expend 7.53 hours per month reporting to the NHSN. Additionally, each 
IRF must submit the Healthcare Worker Vaccination measure, which the 
CDC estimates will take 10 minutes of clerical time. Based on this 
estimate, we expect each IRF would expend 78.97 clinical hours per year 
reporting to the NHSN, or 90,026 hours for all IRFs. According to the 
US Bureau of Labor and Statistics, the mean hourly wage for a 
registered nurse (RN) is $33.13; the mean hourly wage for a medical 
records and health information technician is $16.81. However, to 
account for overhead and fringe benefits, we have double the mean 
hourly wage, making it $66.26 for an RN and $33.62 for a Medical Record 
or Health Information Technician. We estimate that the annual cost per 
each IRF would be $5,162.09 and that the total yearly cost to all IRFs 
for the submission of data to NHSN would be $5,882,782.60. While the 
quality measures previously discussed are subject to the PRA, we 
believe that the associated burden is approved under OMB control number 
0920-0666, with an expiration date of November, 31, 2016.
    In the FY 2014 IRF PPS rule (78 FR 47923 through 47925), we 
provided burden estimates for measures adopted in that rule. Updated 
Collection of Information Requirements for each of those measures is 
described below:
a. All-Cause Unplanned Readmission Measure for 30 Days Post Discharge 
From Inpatient Rehabilitation Facilities
    As stated in the FY 2014 IRF PPS rule (78 FR 47923 through 47925), 
data for this measure will be derived from Medicare claims, and 
therefore, will not add any additional reporting burden for IRFs.
b. Percent of Residents or Patients With Pressure Ulcers That Are New 
or Have Worsened (Short-Stay) (NQF 0678)
    We expect that the admission and discharge pressure ulcer data will 
be collected by a clinician such as an RN because the assessment and 
staging of pressure ulcers requires a high degree of clinical judgment 
and experience. We estimate that it will take approximately 10 minutes 
of time by the RN to perform the admission pressure ulcer assessment. 
We further estimate that it will take an additional 15 minutes of time 
to complete the discharge pressure ulcer assessment.
    We estimate that there are 359,000 IRF-PAI submissions per year\3\ 
and that there are 1,140 IRFs in the U.S. reporting quality data to 
CMS. Based on these figures, we estimate that each IRF will submit 
approximately 315 IRF-PAIs per year. Assuming that each IRF-PAI 
submission requires 25 minutes of time by an RN at an average hourly 
wage of $66.26 (including fringe benefits and overhead), to complete 
the ``Quality Indicator'' section, the yearly cost to each IRF would be 
$8,696.63 and the annualized cost across all IRFs would be 
$9,914,158.20.
    We also expect that most IRFs will use administrative personnel, 
such as a medical secretary or medical data entry clerk, to perform the 
task of entering the IRF-PAI pressure ulcer Assessment data. We 
estimate that this data entry task will take no more than 3 minutes for 
the ``Quality Indicator'' section of each IRF-PAI record or 15.75 hours 
for each IRF annually. The average hourly wage for a Medical Records & 
Health Information Technician is $33.62 (including fringe benefits and 
overhead). Again, as we noted above, there are approximately 359,000 
IRF-PAI submissions per year and 1,140 IRFs reporting quality data to 
CMS. Given this wage information, the estimated total annual cost 
across all reporting IRFs for the time required for entry of pressure 
ulcer data into the IRF-PAI by a medical record or health information 
technician (including fringe benefits and overhead) is $603,652.80. We 
further estimate the average yearly

[[Page 26347]]

cost to each individual IRF to be $529.52.
    We estimate that the combined annualized time burden related to the 
pressure ulcer data item set for work performed, by the both clinical 
and administrative staff, will be 147 hours for each individual IRF and 
167,580 hours across all IRFs. The total estimated annualized cost for 
collection and submission of pressure ulcer data is $9,226.15 for each 
IRF and $10,517,811 across all IRFs. We estimate the cost for each 
pressure ulcer submission to be $29.29.
c. Percent of Residents or Patients Who Were Assessed and Appropriately 
Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 0680)
    IRFs are already required to complete and transmit certain IRF-PAI 
data on all Medicare Part A Fee-for-Service and Medicare Part C 
(Medicare Advantage) patients to receive payment from Medicare. We 
estimate that completion of the Patient Influenza measure data items 
will take approximately 5 minutes to complete. The Patient Influenza 
item set consists of three data items (for example, questions). Each 
item is straightforward and does not require physical assessment of the 
patient for completion. We estimate that it will take approximately 0.7 
minutes to complete each item, or 2.1 minutes to complete all items 
related to the Patient Influenza measure. However, in some cases, the 
person completing this item set may need to consult the patient's 
medical record to obtain data about the patient's influenza 
vaccination. Therefore, we have allotted an additional 1.66 minutes per 
item, for a total of 7.1 minutes to complete the Patient Influenza 
measure data items.
    We have noted above that there are approximately 359,000 IRF-PAIs 
completed annually across all 1,140 IRFs that report IRF quality data 
to CMS. This breaks down to approximately 315 IRF-PAIs completed by 
each IRF yearly. We estimate that the annual time burden for reporting 
the Patient Influenza measure data is 42,481 hours across all IRFs in 
the U.S. and 37.26 hours for each individual IRF. Again, we have 
estimated the mean hourly wage for an RN (including fringe benefits and 
overhead) to be $66.26. Taking all of the above information into 
consideration, we estimate the annual cost across all IRFs for the 
submission of the Patient Influenza measure data to be $2,814,791.06. 
We further estimate the cost for each individual IRF to be $2,469.11.
    Lastly, we propose to validate data submitted to CMS by requesting 
portions of patient's charts be copied and mailed to a CMS validation 
contractor. We estimate the size of each section we propose to request 
as follows: We anticipate that the first 3 days of nurses notes will be 
approximately 15 pages; the last 3 days of nurses notes will be 
approximately 10 pages; the physician or physician's assistant's 
admission history and physical will be approximately 30 pages; the 
physician or physician's assistant's discharge summary will be 
approximately 15 pages; nurses admission database is approximately 40 
pages; pressure ulcer assessment assessments will be approximately 30 
pages; physicians progress notes will be approximately 30 pages; 
physicians orders will be approximately 30 pages and lab reports to be 
approximately 70 pages. We estimate the total submission to be 
approximately 270 pages in length. The FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53745) estimates the appropriate cost for chart submission to be 
12 cents per page and $4.00 shipping. Two hundred seventy pages at a 
rate of $0.12 per page with a $4.00 shipping cost would be $36.40 per 
chart. We propose that 260 providers will be randomly selected for 
validation, and we propose to request 5 charts from each selected 
provider for a total cost of $47,320 for all IRF providers, or $182.00 
for any randomly selected IRF provider.
2. Effects of Updates to the IRF QRP
    In section XI of this proposed rule, we propose to add 2 new 
quality measures to the IRF QRP. These measures include: National 
Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 
Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome 
Measure (NQF 1716) and National Healthcare Safety Network 
(NHSN) Facility-Wide Inpatient Hospital-Onset Clostridium difficile 
Infection (CDI) Outcome Measure (NQF 1717). As previously 
noted, we estimate that each IRF will execute approximately 2 NHSN 
submissions (1 MRSA bacteremia event and 1 C. difficile event) per 
month (24 events per IRF annually). This equates to a total of 
approximately 27,360 submissions of HAI data to NHSN from all IRFs per 
year. We estimate that each NHSN modules for the MRSA and C. difficile 
measures will take approximately 15 minutes to complete. This time 
estimate consists of 10 minutes of clinical time needed to collect the 
clinical data and 5 minutes of clerical time necessary to enter the 
data into the NHSN. Based on this estimate, we expect each IRF will 
expend 8 clinical hours and 4 clerical hours for a total of 12 hours 
per year reporting to NHSN for MRSA bacteremia and CDI. The total 
estimated annual hourly burden on all IRFs in the United States for 
reporting MRSA bacteremia and CDI data to NHSN is 13,680 hours. The 
average hourly wage for Medical Records or Health Information 
Technicians is $33.62 (including fringe benefits and overhead) and 
$66.26 (including fringe benefits and overhead) for a Registered Nurse. 
We estimate that the annual cost per each IRF will be $664.56 and the 
total yearly cost to all IRFs for the submission of MRSA bacteremia and 
CDI data to NHSN will be $757,598.40.

B. ICRs Regarding Individual, Group, and Co-Treatment Therapy Data on 
the IRF-PAI

    As stated in section VIII of this proposed rule, we are proposing a 
new Therapy Information Section for the IRF-PAI that will require IRF 
providers to submit data regarding the amount and mode (that is, 
Individual, Group, and Co-Treatment) of therapy that patients are 
receiving and in which therapy discipline (PT, OT, speech/language) 
beginning on October 1, 2015.
    Under Medicare's conditions of participation for hospitals that 
provide rehabilitation, physical therapy, occupational therapy, 
audiology, or speech pathology services at Sec.  482.56, the provision 
of care and the personnel qualifications must be in accordance with 
national acceptable standards of practice and must also meet the 
requirements at Sec.  409.17, according to which IRFs are required to 
furnish physical therapy, occupational therapy or speech-language 
pathology services under a plan that, among other things, 
``[p]rescribes the type, amount, frequency, and duration of the 
physical therapy, occupational therapy, or speech-language pathology 
services to be furnished to the individual.'' (Such services may also 
be furnished under plan requirements specific to the payment policy 
under which the services are rendered, if applicable.) In addition, the 
IRF coverage requirements at Sec.  412.622(a)(3)(ii), (4), require the 
IRF to document that the patient ``[g]enerally requires and can 
reasonably be expected to actively participate in, and benefit from, an 
intensive rehabilitation therapy program.'' As Medicare already 
requires extensive documentation of the type, amount, frequency and 
duration of physical therapy, occupational therapy, or speech-language 
pathology services furnished to individuals in the IRF setting, we do 
not believe that IRFs will incur any additional burden related to

[[Page 26348]]

the collection of the data for the proposed new Therapy Information 
Section. In accordance with 5 CFR 1320.3(b)(2), we believe the burden 
associated with this requirement is exempt from the PRA as it is a 
usual and customary business practice. The time, effort, and financial 
resources necessary to comply with this requirement would be incurred 
in the course of each IRF conducting its normal business activities.
    We anticipate that it will take approximately 4 minutes to retrieve 
the therapy data from the patient's medical record and transfer the 
required data to the IRF-PAI for submission. We believe this task can 
be completed by any clinician in the IRF. To calculate the burden, we 
obtained hourly wage rates for social worker assistants, licensed 
practical nurses (LPN), recreational therapists, social workers, 
dietitians and nutritionists, RN, speech language pathologists, 
audiologists, occupational therapists, and physical therapists, all of 
whom may complete the IRF-PAI, from the Bureau of Labor Statistics 
(http://www.bls.gov/ooh/healthcare/home.htm). The $26.52 rate is a 
blend of all of these categories, and reflects the fact that IRF 
providers have historically used all of these clinicians for 
preparation and coding of the IRF-PAI. However, to account for overhead 
and fringe benefits, we double the average rate, making it $53.04. On 
average, an IRF submits roughly 300 IRF-PAIs annually and when 
multiplied by 4 minutes to complete the proposed new Therapy 
Information Section, the total estimated annual hour burden per each 
IRF is 20 hours. We estimate the total cost burden to each IRF for 
reporting the proposed therapy data will be $1,060 annually. Since 
there are a total of 1,140 IRFs, we estimate the total burden cost 
across all IRFs for submitting therapy data is $1.2 million.
    We will be submitting a revision of the IRF-PAI information 
collection request currently approved under OMB control number 0938-
0842.
    If you comment on these information collection and recordkeeping 
requirements, please submit your comments electronically as specified 
in the ADDRESSES section of this proposed rule.

XIII. Response to Public Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, 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, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

XIV. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule updates the IRF prospective payment rates for FY 
2015 as required under section 1886(j)(3)(C) of the Act. It responds to 
section 1886(j)(5) of the Act, which requires the Secretary to publish 
in the Federal Register on or before the August 1 that precedes the 
start of each fiscal year, the classification and weighting factors for 
the IRF PPS's case-mix groups and a description of the methodology and 
data used in computing the prospective payment rates for that fiscal 
year.
    This proposed rule implements sections 1886(j)(3)(C) and (D) of the 
Act. Section 1886(j)(3)(C)(ii)(I) of the Act requires the Secretary to 
apply a multi-factor productivity adjustment to the market basket 
increase factor, and to apply other adjustments as defined by the Act. 
The productivity adjustment applies to FYs from 2012 forward. The other 
adjustments apply to FYs 2010 through 2019.
    This proposed rule also adopts some policy changes within the 
statutory discretion afforded to the Secretary under section 1886(j) of 
the Act. We propose to collect data on the amount and mode (that is, 
Individual, Group, and Co-Treatment) of therapy provided in the IRF 
setting according to therapy discipline, revise the list of impairment 
group codes that presumptively meet the 60 percent rule compliance 
criteria, provide for a new item on the IRF-PAI form to indicate 
whether the prior treatment and severity requirements have been met for 
arthritis cases, and revise and update quality measures and reporting 
requirements under the IRF quality reporting program. In this proposed 
rule, we also address the implementation of the International 
Classification of Diseases, 10th Revision, Clinical Modification (ICD-
10-CM) for the IRF prospective payment system (PPS), effective when 
ICD-10-CM becomes the required medical data code set for use on 
Medicare claims and IRF-PAI submissions.

B. Overall Impacts

    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 30, 1993, Regulatory Planning and 
Review), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (September 
19, 1980, Pub. L. 96-354) (RFA), section 1102(b) of the Act, section 
202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), and the 
Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct 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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for a 
major proposed rule with economically significant effects ($100 million 
or more in any 1 year). We estimate the total impact of the proposed 
policy updates described in this proposed rule by comparing the 
estimated payments in FY 2015 with those in FY 2014. This analysis 
results in an estimated $160 million increase for FY 2015 IRF PPS 
payments. As a result, this proposed rule is designated as economically 
``significant'' under section 3(f)(1) of Executive Order 12866, and 
hence a major rule under the Congressional Review Act. Also, the rule 
has been reviewed by OMB.
    The Regulatory Flexibility Act (RFA) requires agencies to analyze 
options for regulatory relief of small entities, if a rule has a 
significant impact on a substantial number of small entities. For 
purposes of the RFA, small entities include small businesses, nonprofit 
organizations, and small governmental jurisdictions. Most IRFs and most 
other providers and suppliers are small entities, either by having 
revenues of $7 million to $35.5 million or less in any 1 year depending 
on industry classification, or by being nonprofit organizations that 
are not dominant in their markets. (For details, see the Small Business 
Administration's final rule that set forth size standards for health 
care industries, at 65 FR 69432 at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf, effective March 26, 2012.) 
Because we lack data on individual hospital receipts, we cannot 
determine the number of small proprietary IRFs or the proportion of 
IRFs' revenue that is derived from Medicare payments. Therefore, we 
assume that all IRFs (an approximate total of 1,100 IRFs, of which 
approximately 60 percent are nonprofit facilities) are considered small 
entities and that Medicare payment constitutes

[[Page 26349]]

the majority of their revenues. The Department of Health and Human 
Services generally uses a revenue impact of 3 to 5 percent as a 
significance threshold under the RFA. As shown in Table 13, we estimate 
that the net revenue impact of this proposed rule on all IRFs is to 
increase estimated payments by approximately 2.2 percent. However, we 
find that certain categories of IRF providers would be expected to 
experience revenue impacts in the 3 percent range. We estimate a 3.8 
percent overall impact for four rural IRFs in the Pacific region, and a 
3 percent increase for 141 urban IRFs in the Middle Atlantic region and 
27 rural IRFs in the West North Central region. As a result, we 
anticipate this proposed rule adopts a net positive impact on a 
substantial number of small entities. Medicare Administrative 
Contractors are not considered to be small entities. Individuals and 
States are not included in the definition of a small entity.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may 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 and has fewer than 100 beds. As discussed in detail 
below, the rates and policies set forth in this proposed rule will not 
have a significant impact (not greater than 3 percent) on rural 
hospitals based on the data of the 165 rural units and 17 rural 
hospitals in our database of 1,140 IRFs for which data were available.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-04, enacted on March 22, 1995) also requires that agencies assess 
anticipated costs and benefits before issuing any rule whose mandates 
require spending in any 1 year of $100 million in 1995 dollars, updated 
annually for inflation. In 2014, that threshold level is approximately 
$141 million. This proposed rule will not impose spending costs on 
state, local, or tribal governments, in the aggregate, or by the 
private sector, of greater than $141 million.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on state and local governments, 
preempts state law, or otherwise has federalism implications. As stated 
above, this proposed rule will not have a substantial effect on state 
and local governments, preempt state law, or otherwise have a 
federalism implication.

C. Detailed Economic Analysis

1. Basis and Methodology of Estimates
    This proposed rule sets forth proposed policy changes and updates 
to the IRF PPS rates contained in the FY 2014 IRF PPS final rule (78 FR 
47860). Specifically, this proposed rule updates the CMG relative 
weights and average length of stay values, the wage index, and the 
outlier threshold for high-cost cases. This proposed rule also applies 
a MFP adjustment to the FY 2015 RPL market basket increase factor in 
accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and a 0.2 
percentage point reduction to the FY 2015 RPL market basket increase 
factor in accordance with sections 1886(j)(3)(C)(ii)(II) and (D)(iv) of 
the Act. Further, this proposed rule proposes additional changes to the 
presumptive methodology and additional therapy and quality data 
collection that are expected to result in some additional financial 
effects on IRFs. In addition, section XI of this rule discusses the 
implementation of the required 2 percentage point reduction of the 
market basket increase factor for any IRF that fails to meet the IRF 
quality reporting requirements, in accordance with section 1886(j)(7) 
of the Act.
    We estimate that the impact of the proposed changes and updates 
described in this proposed rule will be a net estimated increase of 
$160 million in payments to IRF providers. This estimate does not 
include the estimated impacts of the additional proposed changes to the 
presumptive compliance method and the additional therapy and quality 
data collection, as discussed in section 8 of this Economic Analysis. 
In addition, it does not include the implementation of the required 2 
percentage point reduction of the market basket increase factor for any 
IRF that fails to meet the IRF quality reporting requirements (as 
discussed in section 9 of this Economic Analysis). The impact analysis 
in Table 13 of this proposed rule represents the projected effects of 
the updates to IRF PPS payments for FY 2015 compared with the estimated 
IRF PPS payments in FY 2014. We determine the effects by estimating 
payments while holding all other payment variables constant. We use the 
best data available, but we do not attempt to predict behavioral 
responses to these changes, and we do not make adjustments for future 
changes in such variables as number of discharges or case-mix.
    We note that certain events may combine to limit the scope or 
accuracy of our impact analysis, because such an analysis is future-
oriented and, thus, susceptible to forecasting errors because of other 
changes in the forecasted impact time period. Some examples could be 
legislative changes made by the Congress to the Medicare program that 
would impact program funding, or changes specifically related to IRFs. 
Although some of these changes may not necessarily be specific to the 
IRF PPS, the nature of the Medicare program is such that the changes 
may interact, and the complexity of the interaction of these changes 
could make it difficult to predict accurately the full scope of the 
impact upon IRFs.
    In updating the rates for FY 2015, we are proposing standard annual 
revisions described in this proposed rule (for example, the update to 
the wage and market basket indexes used to adjust the federal rates). 
We are also implementing a productivity adjustment to the FY 2015 RPL 
market basket increase factor in accordance with section 
1886(j)(3)(C)(ii)(I) of the Act, and a 0.2 percentage point reduction 
to the FY 2015 RPL market basket increase factor in accordance with 
sections 1886(j)(3)(C)(ii)(II) and (D)(iv) of the Act. We estimate the 
total increase in payments to IRFs in FY 2015, relative to FY 2014, 
will be approximately $160 million.
    This estimate is derived from the application of the FY 2015 RPL 
market basket increase factor, as reduced by a productivity adjustment 
in accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and a 0.2 
percentage point reduction in accordance with sections 
1886(j)(3)(C)(ii)(II) and (D)(iv) of the Act, which yields an estimated 
increase in aggregate payments to IRFs of $155 million. Furthermore, 
there is an additional estimated $5 million increase in aggregate 
payments to IRFs due to the proposed update to the outlier threshold 
amount. Outlier payments are estimated to increase under this proposal 
from approximately 2.9 percent in FY 2014 to 3.0 percent in FY 2015. 
Therefore, summed together, we estimate that these updates will result 
in a net increase in estimated payments of $160 million from FY 2014 to 
FY 2015.
    The effects of the proposed updates that impact IRF PPS payment 
rates are shown in Table 13. The following proposed updates that affect 
the IRF PPS payment rates are discussed separately below:
     The effects of the proposed update to the outlier 
threshold amount, from approximately 2.9 percent to 3.0 percent of 
total estimated payments for FY 2015,

[[Page 26350]]

consistent with section 1886(j)(4) of the Act.
     The effects of the proposed annual market basket update 
(using the RPL market basket) to IRF PPS payment rates, as required by 
section 1886(j)(3)(A)(i) and sections 1886(j)(3)(C) and (D) of the Act, 
including a productivity adjustment in accordance with section 
1886(j)(3)(C)(i)(I) of the Act, and a 0.2 percentage point reduction in 
accordance with sections 1886(j)(3)(C) and (D) of the Act.
     The effects of applying the proposed budget-neutral labor-
related share and wage index adjustment, as required under section 
1886(j)(6) of the Act.
     The effects of the proposed budget-neutral changes to the 
CMG relative weights and average length of stay values, under the 
authority of section 1886(j)(2)(C)(i) of the Act.
     The total change in estimated payments based on the 
proposed FY 2015 payment changes relative to the estimated FY 2014 
payments.
2. Description of Table 13
    Table 13 categorizes IRFs by geographic location, including urban 
or rural location, and location for CMS's 9 census divisions (as 
defined on the cost report) of the country. In addition, the table 
divides IRFs into those that are separate rehabilitation hospitals 
(otherwise called freestanding hospitals in this section), those that 
are rehabilitation units of a hospital (otherwise called hospital units 
in this section), rural or urban facilities, ownership (otherwise 
called for-profit, non-profit, and government), by teaching status, and 
by disproportionate share patient percentage (DSH PP). The top row of 
Table 13 shows the overall impact on the 1,140 IRFs included in the 
analysis.
    The next 12 rows of Table 13 contain IRFs categorized according to 
their geographic location, designation as either a freestanding 
hospital or a unit of a hospital, and by type of ownership; all urban, 
which is further divided into urban units of a hospital, urban 
freestanding hospitals, and by type of ownership; and all rural, which 
is further divided into rural units of a hospital, rural freestanding 
hospitals, and by type of ownership. There are 958 IRFs located in 
urban areas included in our analysis. Among these, there are 731 IRF 
units of hospitals located in urban areas and 227 freestanding IRF 
hospitals located in urban areas. There are 182 IRFs located in rural 
areas included in our analysis. Among these, there are 165 IRF units of 
hospitals located in rural areas and 17 freestanding IRF hospitals 
located in rural areas. There are 401 for-profit IRFs. Among these, 
there are 337 IRFs in urban areas and 64 IRFs in rural areas. There are 
670 non-profit IRFs. Among these, there are 564 urban IRFs and 106 
rural IRFs. There are 69 government-owned IRFs. Among these, there are 
57 urban IRFs and 12 rural IRFs.
    The remaining four parts of Table 13 show IRFs grouped by their 
geographic location within a region, by teaching status, and by DSH PP. 
First, IRFs located in urban areas are categorized for their location 
within a particular one of the nine Census geographic regions. Second, 
IRFs located in rural areas are categorized for their location within a 
particular one of the nine Census geographic regions. In some cases, 
especially for rural IRFs located in the New England, Mountain, and 
Pacific regions, the number of IRFs represented is small. IRFs are then 
grouped by teaching status, including non-teaching IRFs, IRFs with an 
intern and resident to average daily census (ADC) ratio less than 10 
percent, IRFs with an intern and resident to ADC ratio greater than or 
equal to 10 percent and less than or equal to 19 percent, and IRFs with 
an intern and resident to ADC ratio greater than 19 percent. Finally, 
IRFs are grouped by DSH PP, including IRFs with zero DSH PP, IRFs with 
a DSH PP less than 5 percent, IRFs with a DSH PP between 5 and less 
than 10 percent, IRFs with a DSH PP between 10 and 20 percent, and IRFs 
with a DSH PP greater than 20 percent.
    The estimated impacts of each policy described in this proposed 
rule to the facility categories listed above are shown in the columns 
of Table 13. The description of each column is as follows:
     Column (1) shows the facility classification categories 
described above.
     Column (2) shows the number of IRFs in each category in 
our FY 2013 analysis file.
     Column (3) shows the number of cases in each category in 
our FY 2013 analysis file.
     Column (4) shows the estimated effect of the proposed 
adjustment to the outlier threshold amount.
     Column (5) shows the estimated effect of the proposed 
update to the IRF PPS payment rates, which includes a productivity 
adjustment in accordance with section 1886(j)(3)(C)(ii)(I) of the Act, 
and a 0.2 percentage point reduction in accordance with sections 
1886(j)(3)(C)(ii)(II) and (D)(iv) of the Act.
     Column (6) shows the estimated effect of the proposed 
update to the IRF labor-related share and wage index, in a budget-
neutral manner.
     Column (7) shows the estimated effect of the proposed 
update to the CMG relative weights and average length of stay values, 
in a budget-neutral manner.
     Column (8) compares our estimates of the payments per 
discharge, incorporating all of the proposed policies reflected in this 
proposed rule for FY 2015 to our estimates of payments per discharge in 
FY 2014.
    The average estimated increase for all IRFs is approximately 2.2 
percent. This estimated net increase includes the effects of the 
proposed RPL market basket increase factor for FY 2015 of 2.7 percent, 
reduced by a productivity adjustment of 0.4 percentage point in 
accordance with section 1886(j)(3)(C)(ii)(I) of the Act, and further 
reduced by 0.2 percentage point in accordance with sections 
1886(j)(3)(C)(ii)(II) and (D)(iv) of the Act. It also includes the 
approximate 0.1 percent overall estimated increase in estimated IRF 
outlier payments from the proposed update to the outlier threshold 
amount. Since we are making the proposed updates to the IRF wage index 
and the CMG relative weights in a budget-neutral manner, they will not 
be expected to affect total estimated IRF payments in the aggregate. 
However, as described in more detail in each section, they will be 
expected to affect the estimated distribution of payments among 
providers.

[[Page 26351]]



                                                Table 13--IRF Impact Table for FY 2015 (Columns 4-9 in %)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Adjusted
                                                                                                         market      FY 2015
                                                                Number of    Number of                   basket     CBSA wage                   Total
                   Facility classification                         IRFs        cases       Outlier      increase    index  and      CMG        percent
                                                                                                       factor for  labor-share                  change
                                                                                                      FY 2015 \1\
(1)                                                                    (2)          (3)          (4)          (5)          (6)          (7)          (9)
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½------------------------------------------------------------------------------------------
Total........................................................        1,140      387,651          0.1          2.1          0.0          0.0          2.2
Urban unit...................................................          731      178,428          0.2          2.1          0.1          0.0          2.3
Rural unit...................................................          165       26,350          0.2          2.1         -0.1          0.1          2.3
Urban hospital...............................................          227      177,235          0.0          2.1          0.0          0.0          2.0
Rural hospital...............................................           17        5,638          0.0          2.1         -0.2          0.0          2.0
Urban For-Profit.............................................          337      165,022          0.1          2.1         -0.2          0.0          2.0
Rural For-Profit.............................................           64       12,457          0.1          2.1         -0.2          0.1          2.1
Urban Non-Profit.............................................          564      175,036          0.1          2.1          0.2          0.0          2.4
Rural Non-Profit.............................................          106       17,626          0.2          2.1          0.0          0.1          2.4
Urban Government.............................................           57       15,605          0.1          2.1         -0.1          0.0          2.2
Rural Government.............................................           12        1,905          0.2          2.1         -0.6          0.1          1.9
Urban........................................................          958      355,663          0.1          2.1          0.0          0.0          2.2
Rural........................................................          182       31,988          0.1          2.1         -0.1          0.1          2.3
Urban by region:
    Urban New England........................................           30       16,895          0.1          2.1          0.4         -0.1          2.5
    Urban Middle Atlantic....................................          141       58,236          0.1          2.1          0.8          0.0          3.0
    Urban South Atlantic.....................................          138       64,527          0.1          2.1         -0.1         -0.1          2.0
    Urban East North Central.................................          180       53,150          0.1          2.1         -0.2          0.0          2.0
    Urban East South Central.................................           50       24,427          0.1          2.1         -0.5         -0.1          1.6
    Urban West North Central.................................           73       18,609          0.1          2.1         -0.4          0.0          1.8
    Urban West South Central.................................          173       70,843          0.1          2.1         -0.3          0.1          2.0
    Urban Mountain...........................................           72       23,013          0.1          2.1         -0.7          0.0          1.5
    Urban Pacific............................................          101       25,963          0.2          2.1          0.6          0.0          2.9
Rural by region:
    Rural New England........................................            5        1,263          0.1          2.1          0.0         -0.1          2.1
    Rural Middle Atlantic....................................           15        2,550          0.1          2.1          0.5          0.2          2.9
    Rural South Atlantic.....................................           24        6,009          0.1          2.1         -0.1          0.1          2.2
    Rural East North Central.................................           31        5,224          0.1          2.1         -0.2          0.1          2.1
    Rural East South Central.................................           21        3,493          0.1          2.1         -0.2          0.1          2.2
    Rural West North Central.................................           27        3,451          0.2          2.1          0.5          0.1          3.0
    Rural West South Central.................................           48        8,949          0.1          2.1         -0.4          0.2          1.9
    Rural Mountain...........................................            7          667          0.3          2.1         -0.1          0.0          2.4
    Rural Pacific............................................            4          382          0.4          2.1          1.2          0.0          3.8
Teaching Status:
    Non-teaching.............................................        1,030      341,633          0.1          2.1          0.0          0.0          2.2
    Resident to ADC less than 10%............................           58       30,509          0.1          2.1          0.3         -0.1          2.4
    Resident to ADC 10%-19%..................................           40       14,166          0.2          2.1         -0.1         -0.1          2.1
    Resident to ADC greater than 19%.........................           12        1,343          0.1          2.1          0.1          0.0          2.2
Disproportionate Share Patient Percentage (DSH PP):
    DSH PP = 0%..............................................           42        7,793          0.2          2.1          0.1          0.1          2.5
    DSH PP less than 5%......................................          178       61,772          0.1          2.1          0.1          0.1          2.4
    DSH PP 5%-10%............................................          337      134,924          0.1          2.1         -0.2          0.0          2.1
    DSH PP 10%-20%...........................................          359      123,942          0.1          2.1          0.1          0.0          2.3
    DSH PP greater than 20%..................................          224       59,220          0.1          2.1         -0.1         -0.1          2.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This column reflects the impact of the RPL market basket increase factor for FY 2015 (2.7 percent), reduced by a 0.4 percentage point reduction for
  the productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) of the Act, and reduced by 0.2 percentage points in accordance with paragraphs
  1886(j)(3)(C) and (D) of the Act.

3. Impact of the Proposed Update to the Outlier Threshold Amount
    The estimated effects of the proposed update to the outlier 
threshold adjustment are presented in column 4 of Table 13. In the FY 
2014 IRF PPS final rule (78 FR 47860), we used FY 2012 IRF claims data 
(the best, most complete data available at that time) to set the 
outlier threshold amount for FY 2014 so that estimated outlier payments 
would equal 3 percent of total estimated payments for FY 2014.
    For this proposed rule, we are updating our analysis using FY 2013 
IRF claims data and, based on this updated analysis, we estimate that 
IRF outlier payments as a percentage of total estimated IRF payments 
are 2.9 percent in FY 2014. Thus, we propose to adjust the outlier 
threshold amount in this proposed rule to set total estimated outlier 
payments equal to 3 percent of total estimated payments in FY 2015. The 
estimated change in total IRF payments for FY 2015, therefore, includes 
an approximate 0.1 percent increase in payments because the estimated 
outlier portion of total payments is estimated to increase from 
approximately 2.9 percent to 3 percent.
    The impact of this proposed outlier adjustment update (as shown in 
column 4 of Table 13) is to increase estimated overall payments to IRFs 
by about 0.1 percent. We estimate the largest increase in payments from 
the update to the outlier threshold amount to be 0.4 percent for rural 
IRFs in the Pacific region. We do not estimate that any group of IRFs 
would experience a

[[Page 26352]]

decrease in payments from this proposed update.
4. Impact of the Proposed Market Basket Update to the IRF PPS Payment 
Rates
    The estimated effects of the proposed market basket update to the 
IRF PPS payment rates are presented in column 5 of Table 13. In the 
aggregate the proposed update would result in a net 2.1 percent 
increase in overall estimated payments to IRFs. This net increase 
reflects the estimated RPL market basket increase factor for FY 2014 of 
2.7 percent, reduced by the 0.2 percentage point in accordance with 
sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the Act, and 
further reduced by a 0.4 percentage point productivity adjustment as 
required by section 1886(j)(3)(C)(ii)(I) of the Act.
5. Impact of the Proposed CBSA Wage Index and Labor-Related Share
    In column 6 of Table 13, we present the effects of the proposed 
budget-neutral update of the wage index and labor-related share. The 
proposed changes to the wage index and the labor-related share are 
discussed together because the wage index is applied to the labor-
related share portion of payments, so the proposed changes in the two 
have a combined effect on payments to providers. As discussed in 
section V.D. of this proposed rule, we propose to increase the labor-
related share from 69.494 percent in FY 2014 to 69.538 percent in FY 
2015.
    In the aggregate, since these proposed updates to the wage index 
and the labor-related share are applied in a budget-neutral manner as 
required under section 1886(j)(6) of the Act, we do not estimate that 
these proposed updates would affect overall estimated payments to IRFs. 
However, we estimate that these proposed updates would have small 
distributional effects. For example, we estimate the largest increase 
in payments from the proposed update to the CBSA wage index and labor-
related share of 1.2 percent for rural IRFs in the Pacific region. We 
estimate the largest decrease in payments from the update to the CBSA 
wage index and labor-related share to be a 0.7 percent decrease for 
urban IRFs in the Moumethodntain region.
6. Impact of the Proposed Update to the CMG Relative Weights and 
Average Length of Stay Values.
    In column 7 of Table 13, we present the effects of the proposed 
budget-neutral update of the CMG relative weights and average length of 
stay values. In the aggregate, we do not estimate that these updates 
will affect overall estimated payments of IRFs. However, we do expect 
these updates to have small distributional effects. The largest 
estimated increase in payments is a 0.2 percent increase in rural 
Middle Atlantic and rural West South Central IRFs. Urban areas in New 
England, South Atlantic, and East South Central and rural New England 
are estimated to experiences a 0.1 percent decrease in payments due to 
the CMG relative weights change.
7. Effects of the Proposed Changes to the Presumptive Compliance Method 
for Compliance Review Periods Beginning on or After October 1, 2014
    As discussed in section VII. of this proposed rule, we are 
proposing some additional changes to the presumptive compliance method 
for compliance review periods beginning on or after October 1, 2014. We 
do not estimate that the proposed removal of the ``amputation status'' 
codes will have any significant financial effects on IRFs, as our data 
analysis indicates that IRFs are almost never using these codes. 
Similarly, we do not estimate that the proposed exclusion of the non-
specific Etiologic Diagnosis codes from the IGCs will have any 
significant financial effects on IRFs, as we estimate that IRFs will be 
able to switch to using the more specific codes that are available for 
the Etiologic Diagnoses instead.
    We do, however, believe that there could be a financial effect on 
IRFs from the proposed removal of the Unilateral Upper Extremity 
Amputations and Arthritis IGCs from the presumptive compliance method, 
as the removal of these IGCs from presumptively counting toward meeting 
the 60 percent rule compliance threshold could result in more IRFs 
failing to meet the requirements solely on the basis of the presumptive 
compliance method and being required to be evaluated using the medical 
review method. We estimate that these effects would be concentrated in 
approximately 10 percent of IRFs that admit a high number of patients 
with Unilateral Upper Extremity Amputation and Arthritis conditions, 
and that the effects would vary substantially among IRFs. As discussed 
in section IX. of this proposed rule, we are proposing an additional 
IRF-PAI item for arthritis cases, the purpose of which is to mitigate 
some of the financial effects for these IRFs while still allowing 
Medicare to ensure that the regulatory requirements are being met.
8. Effects of New Proposed Therapy Information Section
    Because the type, amount, frequency, and duration of therapy 
provided in IRFs is documented in detail in the IRF medical records as 
part of the requirements for meeting Medicare's conditions of 
participation and IRF coverage requirements, we estimate that the 
additional costs incurred by IRFs for FY 2016 for the new proposed 
Therapy Information Section of the IRF-PAI would be based on the 4 
additional minutes per IRF-PAI form to transfer the information from 
the IRF medical record to the IRF-PAI form. We estimate that this would 
result in an additional cost of $1.2 million to all IRFs for FY 2016.
9. Effects of Updates to the IRF QRP
    As discussed in section XI.A. of this proposed rule and in 
accordance with section 1886(j)(7) of the Act, we will implement a 2 
percentage point reduction in the FY 2015 increase factor for IRFs that 
have failed to report the required quality reporting data to us during 
the most recent IRF quality reporting period. In section XI.A of this 
proposed rule, we discuss how the 2 percentage point reduction will be 
applied. Only a few IRFs received the 2 percentage point reduction in 
the FY 2014 increase factor for failure to report the required quality 
reporting data last year, and we would anticipate that even fewer IRFs 
will receive the reduction for FY 2015 as they are now more familiar 
with the IRF QRP reporting requirements.
    In sections XI.K and XI.L of this proposed rule, we discuss our 
proposal to adopt a new data completion threshold as well as a new data 
accuracy validation policy. While we cannot estimate the increase in 
the number of IRFs that will not meet our proposed requirements at this 
time, we believe that these proposal, if finalized, may increase the 
number of IRFs that receive a 2 percent point reduction to their FY 
annual increase factor for FY 2016 and beyond. Thus, we estimate that 
this policy will increase impact on overall IRF payments, by increasing 
the rate of non-compliance by an estimated 5 percent, for FY 2016 and 
beyond, decreasing the number of IRF providers that will receive their 
full annual increase factor for FY 2016 and beyond.
    In this FY 2015 IRF PPS rule, we proposed to adopt two new quality 
measures (MRSA and CDI), as well as a new data accuracy validation 
policy. Together, we estimate that these proposals will increase the 
cost to all IRF providers by $852,238 annually for

[[Page 26353]]

the cost to each IRF provider by $747.57 annually. This is average 
increase of approximately 4.43 percent to all IRF providers over the FY 
2014 burden. While we also propose to adopt a data completion threshold 
policy, this policy, if finalized, will have no associated cost burden 
beyond that discussed in the first paragraph of this section (XIV.C.9).
    We intend to closely monitor the effects of this new quality 
reporting program on IRF providers and help perpetuate successful 
reporting outcomes through ongoing stakeholder education, national 
trainings, CMS Open Door Forums, and general and technical help desks.

D. Alternatives Considered

    As stated in section XIV.B. of this proposed rule, we estimate that 
the proposed changes discussed in the rule would result in a 
significant economic impact on IRFs. The overall impact on all IRFs is 
an estimated increase in FY 2015 payments of $160 million (2.2 
percent), relative to FY 2014. The following is a discussion of the 
alternatives considered for the IRF PPS updates contained in this 
proposed rule.
    Section 1886(j)(3)(C) of the Act requires the Secretary to update 
the IRF PPS payment rates by an increase factor that reflects changes 
over time in the prices of an appropriate mix of goods and services 
included in the covered IRF services. Thus, we did not consider 
alternatives to updating payments using the estimated RPL market basket 
increase factor for FY 2015. However, as noted previously in this 
proposed rule, section 1886(j)(3)(C)(ii)(I) of the Act requires the 
Secretary to apply a productivity adjustment to the market basket 
increase factor for FY 2015, and sections 1886(j)(3)(C)(ii)(II) and 
1886(j)(3)(D)(iv) of the Act require the Secretary to apply a 0.2 
percentage point reduction to the market basket increase factor for FY 
2015. Thus, in accordance with section 1886(j)(3)(C) of the Act, we 
proposed to update IRF federal prospective payments in this proposed 
rule by 2.1 percent (which equals the 2.7 percent estimated RPL market 
basket increase factor for FY 2015 reduced by 0.2 percentage points, 
and further reduced by a 0.4 percentage point productivity adjustment 
as required by section 1886(j)(3)(C)(ii)(I) of the Act).
    We considered maintaining the existing CMG relative weights and 
average length of stay values for FY 2015. However, in light of 
recently available data and our desire to ensure that the CMG relative 
weights and average length of stay values are as reflective as possible 
of recent changes in IRF utilization and case mix, we believe that it 
is appropriate to propose to update the CMG relative weights and 
average length of stay values at this time to ensure that IRF PPS 
payments continue to reflect as accurately as possible the current 
costs of care in IRFs.
    We considered updating facility-level adjustment factors for FY 
2015. However, as discussed in more detail in section IV.B. of this 
proposed rule, we believe that freezing the facility-level adjustments 
at FY 2014 levels for FY 2015 and all subsequent years (unless and 
until the data indicate that they need to be further updated) will 
allow us an opportunity to monitor the effects of the substantial 
changes to the adjustment factors for FY 2014, and will allow IRFs time 
to adjust to last year's changes.
    We considered maintaining the existing outlier threshold amount for 
FY 2015. However, analysis of updated FY 2013 data indicates that 
estimated outlier payments would be lower than 3 percent of total 
estimated payments for FY 2015, by approximately 0.1 percent, unless we 
updated the outlier threshold amount. Consequently, we propose 
adjusting the outlier threshold amount in this proposed rule to reflect 
a 0.1 percent increase thereby setting the total outlier payments equal 
to 3 percent, instead of 2.9 percent, of aggregate estimated payments 
in FY 2015.
    We considered not proposing further changes to the presumptive 
compliance method in this proposed rule. However, to be consistent with 
the changes to the presumptive compliance method that we implemented in 
the FY 2014 IRF PPS final rule, and to correct some inadvertent 
omissions in last year's final rule, we believe it is important to 
propose further changes in this proposed rule.
    We considered not proposing the new Therapy Information Section on 
the IRF-PAI. However, we believe that it is vitally important for 
Medicare to better understand the ways in which therapy services are 
currently being provided in IRFs and, most importantly, what we are 
paying for with the Medicare spending on IRF services. We encourage 
comments on this proposed approach.

E. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in Table 14, we have prepared an accounting statement showing 
the classification of the expenditures associated with the provisions 
of this proposed rule. Table 14 provides our best estimate of the 
increase in Medicare payments under the IRF PPS as a result of the 
proposed updates presented in this proposed rule based on the data for 
1,140 IRFs in our database. In addition, Table 14 presents the costs 
associated with the proposed new IRF quality reporting program and 
therapy reporting requirements for FY 2015.

Table 14--Accounting Statement: Classification of Estimated Expenditures
------------------------------------------------------------------------
 
------------------------------------------------------------------------
  Change in Estimated Transfers from FY 2014 IRF PPS to FY 2015 IRF PPS
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $160 million.
From Whom to Whom?.....................  Federal Government to IRF
                                          Medicare Providers.
------------------------------------------------------------------------
         FY 2015 Cost to Updating the Quality Reporting Program:
------------------------------------------------------------------------
                Category                              Costs
------------------------------------------------------------------------
Cost for IRFs to Submit Data for the     $852,238.
 Quality Reporting Program.
------------------------------------------------------------------------
                FY 2016 Cost for Therapy Data Collection
------------------------------------------------------------------------
                Category                              Costs
------------------------------------------------------------------------
  Cost for IRFs to Submit Therapy Data   $1.2 million.
------------------------------------------------------------------------


[[Page 26354]]

F. Conclusion

    Overall, the estimated payments per discharge for IRFs in FY 2015 
are projected to increase by 2.2 percent, compared with the estimated 
payments in FY 2014, as reflected in column 9 of Table 13. IRF payments 
per discharge are estimated to increase by 2.2 percent in urban areas 
and by 2.3 percent in rural areas, compared with estimated FY 2014 
payments. Payments per discharge to rehabilitation units are estimated 
to increase 2.3 percent in urban and rural areas. Payments per 
discharge to freestanding rehabilitation hospitals are estimated to 
increase 2.0 percent in urban and rural areas.
    Overall, IRFs are estimated to experience a net increase in 
payments as a result of the proposed policies in proposed rule. The 
largest payment increase is estimated to be a 3.8 percent increase for 
rural IRFs located in the Pacific region.

    Authority:  Catalog of Federal Domestic Assistance Program No. 
93.773, Medicare--Hospital Insurance; and Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program.

    Dated: April 16, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 17, 2014.
Kathleen Sebelius,
Secretary.
[FR Doc. 2014-10321 Filed 5-1-14; 4:15 pm]
BILLING CODE 4120-01-P