[Federal Register Volume 80, Number 151 (Thursday, August 6, 2015)]
[Rules and Regulations]
[Pages 47036-47139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18973]



[[Page 47035]]

Vol. 80

Thursday,

No. 151

August 6, 2015

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 412





 Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for Federal Fiscal Year 2016; Final Rule

  Federal Register / Vol. 80, No. 151 / Thursday, August 6, 2015 / 
Rules and Regulations  

[[Page 47036]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1624-F]
RIN 0938-AS45


Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for Federal Fiscal Year 2016

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

ACTION: Final rule.

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SUMMARY: This final rule updates the prospective payment rates for 
inpatient rehabilitation facilities (IRFs) for federal fiscal year (FY) 
2016 as required by the statute. As required by section 1886(j)(5) of 
the Act, this rule includes the classification and weighting factors 
for the IRF PPS's case-mix groups and a description of the 
methodologies and data used in computing the prospective payment rates 
for FY 2016. This final rule also finalizes policy changes, including 
the adoption of an IRF-specific market basket that reflects the cost 
structures of only IRF providers, a 1-year phase-in of the revised wage 
index changes, a 3-year phase-out of the rural adjustment for certain 
IRFs, and revisions and updates to the quality reporting program (QRP).

DATES: Effective Date: These regulations are effective on October 1, 
2015.
    Applicability Dates: The updated IRF prospective payment rates are 
applicable for IRF discharges occurring on or after October 1, 2015, 
and on or before September 30, 2016 (FY 2016). The updated quality 
measures and reporting requirements under the IRF QRP are effective for 
IRF discharges occurring on or after October 1, 2016.

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 rates.
    Catherine Kraemer, (410) 786-0179, for information about the 
revised wage index.
    Bridget Dickensheets, (410) 786-8670, or Heidi Oumarou, (410) 786-
7942, for information about the IRF-specific market basket.

SUPPLEMENTARY INFORMATION: The IRF PPS Addenda along with other 
supporting documents and tables referenced in this final rule are 
available through the Internet on the CMS Web site at http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/.

Executive Summary

A. Purpose

    This final rule updates the prospective payment rates for IRFs for 
FY 2016 (that is, for discharges occurring on or after October 1, 2015, 
and on or before September 30, 2016) as required under section 
1886(j)(3)(C) of the Social Security Act (the Act). As required by 
section 1886(j)(5) of the Act, this rule includes the classification 
and weighting factors for the IRF PPS's case-mix groups and a 
description of the methodologies and data used in computing the 
prospective payment rates for FY 2016. This final rule also finalizes 
policy changes, including the adoption of an IRF-specific market basket 
that reflects the cost structures of only IRF providers, a 1-year 
phase-in of the revised wage index changes, a 3-year phase-out of the 
rural adjustment for certain IRFs, and revisions and updates to the 
quality measures and reporting requirements under the IRF QRP.

B. Summary of Major Provisions

    In this final rule, we use the methods described in the FY 2015 IRF 
PPS final rule (79 FR 45872) to propose updates to the federal 
prospective payment rates for FY 2016 using updated FY 2014 IRF claims 
and the most recent available IRF cost report data, which is FY 2013 
IRF cost report data. We are also finalizing an IRF-specific market 
basket that reflects the cost structures of only IRF providers. The 
IRF-specific market basket will be used to update the IRF PPS base 
payment rate and to determine the FY 2016 labor-related share. We are 
also phasing in the revised wage index changes, phasing out the rural 
adjustment for certain IRFs and revising and updating quality measures 
and reporting requirements under the IRF QRP.

C. Summary of Impacts

------------------------------------------------------------------------
       Provision description                      Transfers
------------------------------------------------------------------------
FY 2016 IRF PPS payment rate update  The overall economic impact of this
                                      final rule is an estimated $135
                                      million in increased payments from
                                      the Federal government to IRFs
                                      during FY 2016.
------------------------------------------------------------------------
       Provision description                        Costs
------------------------------------------------------------------------
New quality reporting program        The total costs in FY 2016 for IRFs
 requirements.                        as a result of the new quality
                                      reporting requirements are
                                      estimated to be $24,042,291.01.
------------------------------------------------------------------------

    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 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. Analysis and Responses to Public Comments
IV. Update to the Case-Mix Group (CMG) Relative Weights and Average 
Length of Stay Values for FY 2016
V. Continued Use of FY 2014 Facility-Level Adjustment Factors
VI. FY 2016 IRF PPS Payment Update
    A. Background
    B. Overview of the 2012-Based IRF Market Basket
    C. Creating an IRF-Specific Market Basket
    D. FY 2016 Market Basket Update and Productivity Adjustment
    E. Labor-Related Share for FY 2016
    F. Wage Adjustment
    G. Description of the IRF Standard Payment Conversion Factor and 
Payment Rates for FY 2016
    H. Example of the Methodology for Adjusting the Federal 
Prospective Payment Rates
VII. Update to Payments for High-Cost Outliers Under the IRF PPS
    A. Update to the Outlier Threshold Amount for FY 2016
    B. Update to the IRF Cost-to-Charge Ratio Ceiling and Urban/
Rural Averages
VIII. ICD-10-CM Implementation for IRF PPS
IX. Revisions and Updates to the IRF QRP
    A. Background and Statutory Authority

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    B. General Considerations Used for Selection of Quality, 
Resource Use, and Other Measures for the IRF QRP
    C. Policy for Retention of IRF QRP Measures Adopted for Previous 
Payment Determinations
    D. Policy for Adopting Changes to IRF QRP Measures
    E. Quality Measures Previously Finalized for and Currently Used 
in the IRF QRP
    F. Quality Measures Previously Adopted for IRF QRP for the FY 
2018 Payment Determination and Subsequent Years
    G. Additional IRF QRP Quality Measures for the FY 2018 Payment 
Determination and Subsequent Years
    H. IRF QRP Quality Measures and Measure Concepts Under 
Consideration for Future Years
    I. Form, Manner, and Timing of Quality Data Submission for the 
FY 2018 Payment Determination and Subsequent Years
    J. Timing for New IRFs To Begin Submitting Quality Data Under 
the IRF QRP for the FY 2018 Payment Determination and Subsequent 
Years
    K. IRF QRP Data Completion Thresholds for the FY 2016 Payment 
Determination and Subsequent Years
    L. Suspension of the IRF QRP Data Validation Process for the FY 
2016 Payment Determination and Subsequent Years
    M. Previously Adopted and Proposed IRF QRP Submission Exception 
and Extension Requirements for the FY 2017 Payment Determination and 
Subsequent Years
    N. Previously Adopted and Proposed IRF QRP Reconsideration and 
Appeals Procedures for the FY 2017 Payment Determination and 
Subsequent Years
    O. Public Display of Quality Measure Data for the IRF QRP
    P. Method for Applying the Reduction to the FY 2016 IRF Increase 
Factor for IRFs That Fail To Meet the Quality Reporting Requirements
X. Miscellaneous Comments
XI. Provisions of the Final Regulations
XII. Collection of Information Requirements
    A. Statutory Requirements for Solicitation of Comments
    B. Collection of Information Requirements for Updates Related to 
the IRF QRP
XIII. 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 final rule, we are listing the 
acronyms, abbreviation, and short forms used and their corresponding 
terms in alphabetical order.

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
AHE Average Hourly Earnings
AHIMA American Health Information Management Association
ASAP Assessment Submission and Processing
ASCA Administrative Simplification Compliance Act (Pub. L. 107-105, 
enacted on December 27, 2002)
BEA Bureau of Economic Analysis
BLS U.S. Bureau of Labor Statistics
CAH Critical Access Hospitals
CARE Continuity Assessment Record and Evaluation
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
CPI Consumer Price Index
DSH Disproportionate Share Hospital
DSH PP Disproportionate Share Patient Percentage
ECI Employment Cost Index
EHR Electronic Health Record
ESRD End-Stage Renal Disease
FFS Fee-for-Service
FR Federal Register
FY Federal Fiscal Year
GDP Gross Domestic Product
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)
HOMER Home Office Medicare Records
ICD-9-CM International Classification of Diseases, 9th Revision, 
Clinical Modification
ICD-10-CM International Classification of Diseases, 10th Revision, 
Clinical Modification
IGI IHS Global Insight
IMPACT Act Improving Medicare Post-Acute Care Transformation Act of 
2014 (Pub. L. 113-185, enacted on October 6, 2014)
I-O Input-Output
IPF Inpatient Psychiatric Facility
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
IRF QRP Inpatient Rehabilitation Facility Quality Reporting Program
IRVEN Inpatient Rehabilitation Validation and Entry
LIP Low-Income Percentage
LOS Length of Stay
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
MDS Minimum Data Set
MFP Multifactor Productivity
MLN Medicare Learning Network
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
NAICS North American Industry Classification System
NHSN National Healthcare Safety Network
NPP National Priorities Partnership
NPUAP National Pressure Ulcer Advisory Panel
NQF National Quality Forum
OMB Office of Management and Budget
ONC Office of the National Coordinator for Health Information 
Technology
OT Occupational Therapists
PAC Post-Acute Care
PAI Patient Assessment Instrument
PLI Professional Liability Insurance
POA Present on Admission
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
PT Physical Therapist
QIES Quality Improvement Evaluation System
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
RSRR Risk-standardized readmission rate
SDTI Suspected Deep Tissue Injuries
SIR Standardized Infection Ratio
SLP Speech-Language Pathologist
SOC Standard Occupational Classification System
SNF Skilled Nursing Facilities
SRR Standardized Risk Ratio
SSI Supplemental Security Income
TEP Technical Expert Panel

I. Background

A. Historical Overview of the IRF PPS

    Section 1886(j) of the Act provides for the implementation of a 
per-discharge 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

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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 FYs 2002 through 2015.
    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-Service-Payment/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 was 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 final 
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

[[Page 47039]]

(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 final 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 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 final 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

[[Page 47040]]

47860), in which we published the final FY 2014 IRF federal prospective 
payment rates.
    In the FY 2015 IRF PPS final rule (79 FR 45872), we updated the 
federal prospective payment rates, the CMG relative weights, and the 
outlier threshold amount. We also further 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 IRF-
PAI, 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 2015, please refer 
to the FY 2015 IRF PPS final rule (79 FR 45872) and the FY 2015 IRF PPS 
correction notice (79 FR 59121).

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 previously 
discussed, 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 
productivity adjustment for FY 2016 is discussed in section VI.D. of 
this final rule. Section 3401(d) of the Affordable Care Act requires an 
additional 0.2 percentage point adjustment to the IRF increase factor 
for FY 2016, as discussed in section VI.D. of this final 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.

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 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 MAC. 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

[[Page 47041]]

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 the FY 2016 IRF PPS proposed rule (80 FR 23332), we proposed to 
update the IRF federal prospective payment rates for FY 2016, adopt an 
IRF-specific market basket that will be used to determine the market 
basket update and labor-related share, phase in the revised wage index 
changes for all IRFs, phase out the rural adjustment for certain IRFs, 
and revise and update quality measures and reporting requirements under 
the IRF QRP.
    The proposed updates to the IRF federal prospective payment rates 
for FY 2016 were as follows:
     Update the FY 2016 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 the FY 2016 IRF PPS proposed rule (80 FR 23332, 23337 
through 23341).
     Describe the continued use of FY 2014 facility-level 
adjustment factors as discussed in section IV of the FY 2016 IRF PPS 
proposed rule (80 FR 23332 at 23341).
     Adopt the proposed IRF-specific market basket, as 
discussed in section V of the FY 2016 IRF PPS proposed rule (80 FR 
23332, 23341 through 23358).
     Update the FY 2016 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 the FY 
2016 IRF PPS proposed rule (80 FR 23332, 23355 through 23356).
     Update the FY 2016 IRF PPS payment rates by the FY 2016 
wage index and the labor-related share in a budget-neutral manner and 
discuss the proposed wage adjustment transition as discussed in section 
V of the FY 2016 IRF PPS proposed rule (80 FR 23332, 23356 through 
23357).
     Describe the calculation of the IRF standard payment 
conversion factor for FY 2016, as discussed in section V of the FY 2016 
IRF PPS proposed rule (80 FR 23332, 23364 through 23365).
     Update the outlier threshold amount for FY 2016, as 
discussed in section VI of the FY 2016 IRF PPS proposed rule (80 FR 
23332 at 23367).
     Update the cost-to-charge ratio (CCR) ceiling and urban/
rural average CCRs for FY 2016, as discussed in section VI of the FY 
2016 IRF PPS proposed rule (80 FR 23332, 23367 through 23368).
     Discuss implementation of International Classification of 
Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for the IRF 
PPS as discussed in section VII of the FY 2016 IRF PPS proposed rule 
(80 FR 23332 at 23368).
     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 VIII of the FY 2016 IRF PPS proposed rule (80 FR 23332, 
23368 through 23389).

III. Analysis and Responses to Public Comments

    We received 85 timely responses from the public, many of which 
contained multiple comments on the FY 2016 IRF PPS proposed rule (80 FR 
23332). We received comments from various trade associations, inpatient 
rehabilitation facilities, individual physicians, therapists, 
clinicians, health care industry organizations, and health care 
consulting firms. The following sections, arranged by subject area, 
include a summary of the public comments that we received, and our 
responses.

IV. Update to the Case-Mix Group (CMG) Relative Weights and Average 
Length of Stay Values for FY 2016

    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 the FY 2016 IRF PPS proposed rule (80 FR 23332, 23337 through 
23341), we proposed to update the CMG relative weights and average 
length of stay values for FY 2016. 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 2016, we proposed to use the FY 
2014 IRF claims and FY 2013 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 2014 IRF cost report data are available for 
analysis, but the majority of the FY 2014 IRF claims data are available 
for analysis.
    In the FY 2016 IRF PPS proposed rule, we proposed 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 CCR 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 final 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.

[[Page 47042]]

    Step 4. We normalize the FY 2016 CMG relative weights to the same 
average CMG relative weight from the CMG relative weights implemented 
in the FY 2015 IRF PPS final rule (79 FR 45872).
    Consistent with the methodology that we have used to update the IRF 
classification system in each instance in the past, we proposed to 
update the CMG relative weights for FY 2016 in such a way that total 
estimated aggregate payments to IRFs for FY 2016 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 
2016 CMG relative weights, we use the following steps:
    Step 1. Calculate the estimated total amount of IRF PPS payments 
for FY 2016 (with no changes to the CMG relative weights).
    Step 2. Calculate the estimated total amount of IRF PPS payments 
for FY 2016 by applying the changes to the CMG relative weights (as 
discussed in this final rule).
    Step 3. Divide the amount calculated in step 1 by the amount 
calculated in step 2 to determine the budget neutrality factor (.9981) 
that would maintain the same total estimated aggregate payments in FY 
2016 with and without the changes to the CMG relative weights.
    Step 4. Apply the budget neutrality factor (.9981) to the FY 2015 
IRF PPS standard payment amount after the application of the budget-
neutral wage adjustment factor.
    In section VI.G. of this final rule, we discuss the use of the 
existing methodology to calculate the standard payment conversion 
factor for FY 2016.
    In Table 1, ``Relative Weights and Average Length of Stay Values 
for Case-Mix Groups,'' we present the CMGs, the comorbidity tiers, the 
corresponding relative weights, and the average length of stay values 
for each CMG and tier for FY 2016. 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--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)       Tier 1    Tier 2    Tier 3     None     Tier 1    Tier 2    Tier 3     None
--------------------------------------------------------------------------------------------------------------------------------------------------------
0101......................................  Stroke M>51.05..............    0.8080    0.7077    0.6589    0.6304        10         9         9         8
0102......................................  Stroke M>44.45 and M<51.05      1.0165    0.8904    0.8290    0.7931        11        10        10        10
                                             and C>18.5.
0103......................................  Stroke M>44.45 and M<51.05      1.1428    1.0010    0.9320    0.8916        12        13        12        11
                                             and C<18.5.
0104......................................  Stroke M>38.85 and M<44.45..    1.2349    1.0817    1.0071    0.9635        13        13        12        12
0105......................................  Stroke M>34.25 and M<38.85..    1.4494    1.2696    1.1820    1.1309        14        15        14        14
0106......................................  Stroke M>30.05 and M<34.25..    1.6160    1.4155    1.3179    1.2609        16        16        15        15
0107......................................  Stroke M>26.15 and M<30.05..    1.8101    1.5855    1.4762    1.4122        18        17        17        17
0108......................................  Stroke M<26.15 and A>84.5...    2.2978    2.0126    1.8739    1.7927        23        23        21        21
0109......................................  Stroke M>22.35 and M<26.15      2.0953    1.8353    1.7088    1.6348        21        20        19        19
                                             and A<84.5.
0110......................................  Stroke M<22.35 and A<84.5...    2.7602    2.4177    2.2511    2.1536        28        27        24        24
0201......................................  Traumatic brain injury          0.8012    0.6584    0.5941    0.5613         9         9         8         8
                                             M>53.35 and C>23.5.
0202......................................  Traumatic brain injury          1.0535    0.8656    0.7812    0.7380        11        11        10         9
                                             M>44.25 and M<53.35 and
                                             C>23.5.
0203......................................  Traumatic brain injury          1.2056    0.9906    0.8940    0.8445        11        13        10        11
                                             M>44.25 and C<23.5.
0204......................................  Traumatic brain injury          1.3292    1.0922    0.9856    0.9311        13        13        12        12
                                             M>40.65 and M<44.25.
0205......................................  Traumatic brain injury          1.5900    1.3064    1.1790    1.1138        15        16        14        13
                                             M>28.75 and M<40.65.
0206......................................  Traumatic brain injury          1.8962    1.5580    1.4060    1.3282        17        18        17        16
                                             M>22.05 and M<28.75.
0207......................................  Traumatic brain injury          2.5238    2.0737    1.8714    1.7679        30        24        20        19
                                             M<22.05.
0301......................................  Non-traumatic brain injury      1.1171    0.9325    0.8551    0.7979        10        11        10        10
                                             M>41.05.
0302......................................  Non-traumatic brain injury      1.3867    1.1576    1.0615    0.9906        13        13        12        12
                                             M>35.05 and M<41.05.
0303......................................  Non-traumatic brain injury      1.6159    1.3489    1.2370    1.1543        16        15        14        14
                                             M>26.15 and M<35.05.
0304......................................  Non-traumatic brain injury      2.1493    1.7942    1.6453    1.5353        22        20        18        17
                                             M<26.15.
0401......................................  Traumatic spinal cord injury    0.9696    0.8252    0.7557    0.6985        10        10         9         9
                                             M>48.45.
0402......................................  Traumatic spinal cord injury    1.4217    1.2100    1.1081    1.0242        14        14        13        13
                                             M>30.35 and M<48.45.

[[Page 47043]]

 
0403......................................  Traumatic spinal cord injury    2.2684    1.9306    1.7679    1.6342        28        22        20        19
                                             M>16.05 and M<30.35.
0404......................................  Traumatic spinal cord injury    3.9720    3.3805    3.0957    2.8615        47        37        33        34
                                             M<16.05 and A>63.5.
0405......................................  Traumatic spinal cord injury    3.5415    3.0141    2.7602    2.5514        43        39        28        27
                                             M<16.05 and A<63.5.
0501......................................  Non-traumatic spinal cord       0.8672    0.6911    0.6417    0.5890         9         7         8         8
                                             injury M>51.35.
0502......................................  Non-traumatic spinal cord       1.1393    0.9079    0.8430    0.7738        11        11        10        10
                                             injury M>40.15 and M<51.35.
0503......................................  Non-traumatic spinal cord       1.4419    1.1491    1.0669    0.9794        14        13        13        12
                                             injury M>31.25 and M<40.15.
0504......................................  Non-traumatic spinal cord       1.6555    1.3192    1.2249    1.1244        15        16        14        13
                                             injury M>29.25 and M<31.25.
0505......................................  Non-traumatic spinal cord       1.9346    1.5417    1.4315    1.3140        19        17        16        16
                                             injury M>23.75 and M<29.25.
0506......................................  Non-traumatic spinal cord       2.7197    2.1673    2.0123    1.8472        27        24        22        21
                                             injury M<23.75.
0601......................................  Neurological M>47.75........    1.0412    0.8216    0.7667    0.6928        10        10         9         9
0602......................................  Neurological M>37.35 and        1.3339    1.0525    0.9822    0.8875        12        12        11        11
                                             M<47.75.
0603......................................  Neurological M>25.85 and        1.6581    1.3083    1.2209    1.1031        15        14        13        13
                                             M<37.35.
0604......................................  Neurological M<25.85........    2.1767    1.7175    1.6028    1.4482        20        18        17        16
0701......................................  Fracture of lower extremity     0.9659    0.8088    0.7660    0.6958        11         9         9         9
                                             M>42.15.
0702......................................  Fracture of lower extremity     1.2529    1.0491    0.9936    0.9025        13        12        12        11
                                             M>34.15 and M<42.15.
0703......................................  Fracture of lower extremity     1.5022    1.2579    1.1913    1.0821        14        14        14        13
                                             M>28.15 and M<34.15.
0704......................................  Fracture of lower extremity     1.9534    1.6357    1.5492    1.4071        18        18        17        16
                                             M<28.15.
0801......................................  Replacement of lower            0.8034    0.6328    0.5741    0.5302         8         8         7         7
                                             extremity joint M>49.55.
0802......................................  Replacement of lower            1.0561    0.8318    0.7547    0.6970        10        10         9         9
                                             extremity joint M>37.05 and
                                             M<49.55.
0803......................................  Replacement of lower            1.4245    1.1220    1.0180    0.9401        13        13        12        11
                                             extremity joint M>28.65 and
                                             M<37.05 and A>83.5.
0804......................................  Replacement of lower            1.2739    1.0033    0.9103    0.8407        12        11        11        10
                                             extremity joint M>28.65 and
                                             M<37.05 and A<83.5.
0805......................................  Replacement of lower            1.5355    1.2094    1.0973    1.0134        15        14        12        12
                                             extremity joint M>22.05 and
                                             M<28.65.
0806......................................  Replacement of lower            1.9083    1.5031    1.3637    1.2594        17        16        15        14
                                             extremity joint M<22.05.
0901......................................  Other orthopedic M>44.75....    0.9563    0.7692    0.7050    0.6426        10         9         9         8
0902......................................  Other orthopedic M>34.35 and    1.2714    1.0226    0.9372    0.8544        13        12        11        11
                                             M<44.75.
0903......................................  Other orthopedic M>24.15 and    1.5876    1.2770    1.1704    1.0669        15        14        13        13
                                             M<34.35.
0904......................................  Other orthopedic M<24.15....    2.0060    1.6135    1.4788    1.3480        19        18        16        16
1001......................................  Amputation, lower extremity     1.0684    0.9367    0.8341    0.7526        11        11        10        10
                                             M>47.65.

[[Page 47044]]

 
1002......................................  Amputation, lower extremity     1.3349    1.1704    1.0421    0.9404        13        13        12        11
                                             M>36.25 and M<47.65.
1003......................................  Amputation, lower extremity     1.9160    1.6798    1.4958    1.3497        18        19        17        16
                                             M<36.25.
1101......................................  Amputation, non-lower           1.3933    1.3933    1.1068    1.0400        14        14        12        12
                                             extremity M>36.35.
1102......................................  Amputation, non-lower           1.8119    1.8119    1.4393    1.3524        16        20        15        16
                                             extremity M<36.35.
1201......................................  Osteoarthritis M>37.65......    0.9863    0.9576    0.8720    0.8135         9        11        10        10
1202......................................  Osteoarthritis M>30.75 and      1.2107    1.1755    1.0704    0.9986        12        14        13        12
                                             M<37.65.
1203......................................  Osteoarthritis M<30.75......    1.4934    1.4500    1.3203    1.2318        14        16        15        14
1301......................................  Rheumatoid, other arthritis     1.1791    0.9716    0.9161    0.8365         9        11        10        10
                                             M>36.35.
1302......................................  Rheumatoid, other arthritis     1.4946    1.2315    1.1612    1.0603        14        14        13        13
                                             M>26.15 and M<36.35.
1303......................................  Rheumatoid, other arthritis     1.9625    1.6171    1.5248    1.3923        21        18        16        16
                                             M<26.15.
1401......................................  Cardiac M>48.85.............    0.9069    0.7453    0.6740    0.6065         9         9         8         8
1402......................................  Cardiac M>38.55 and M<48.85.    1.2018    0.9877    0.8932    0.8037        11        11        11        10
1403......................................  Cardiac M>31.15 and M<38.55.    1.4475    1.1896    1.0757    0.9680        13        13        12        12
1404......................................  Cardiac M<31.15.............    1.8371    1.5098    1.3653    1.2286        17        17        15        14
1501......................................  Pulmonary M>49.25...........    1.0526    0.8479    0.7807    0.7512        11        10         9         9
1502......................................  Pulmonary M>39.05 and           1.3349    1.0754    0.9901    0.9527        12        12        11        11
                                             M<49.25.
1503......................................  Pulmonary M>29.15 and           1.6150    1.3010    1.1978    1.1526        15        13        13        13
                                             M<39.05.
1504......................................  Pulmonary M<29.15...........    2.0063    1.6163    1.4881    1.4319        21        17        15        15
1601......................................  Pain syndrome M>37.15.......    1.1376    0.8365    0.8218    0.7556        11        10        10         9
1602......................................  Pain syndrome M>26.75 and       1.4940    1.0985    1.0792    0.9923        14        13        12        12
                                             M<37.15.
1603......................................  Pain syndrome M<26.75.......    1.9109    1.4050    1.3803    1.2692        15        15        15        15
1701......................................  Major multiple trauma           1.0705    0.9081    0.8286    0.7711        10        10        11         9
                                             without brain or spinal
                                             cord injury M>39.25.
1702......................................  Major multiple trauma           1.3897    1.1788    1.0756    1.0010        13        14        12        12
                                             without brain or spinal
                                             cord injury M>31.05 and
                                             M<39.25.
1703......................................  Major multiple trauma           1.5913    1.3498    1.2317    1.1463        19        15        14        14
                                             without brain or spinal
                                             cord injury M>25.55 and
                                             M<31.05.
1704......................................  Major multiple trauma           2.0891    1.7721    1.6169    1.5048        21        20        18        17
                                             without brain or spinal
                                             cord injury M<25.55.
1801......................................  Major multiple trauma with      1.2783    0.9685    0.8849    0.7874        14        12        11        10
                                             brain or spinal cord injury
                                             M>40.85.
1802......................................  Major multiple trauma with      1.8807    1.4248    1.3019    1.1584        18        17        15        14
                                             brain or spinal cord injury
                                             M>23.05 and M<40.85.
1803......................................  Major multiple trauma with      3.0933    2.3435    2.1413    1.9054        32        27        22        21
                                             brain or spinal cord injury
                                             M<23.05.
1901......................................  Guillain Barre M>35.95......    1.1826    1.0281    0.9998    0.8741        16        11        12        11
1902......................................  Guillain Barre M>18.05 and      2.2408    1.9481    1.8945    1.6563        26        22        21        20
                                             M<35.95.
1903......................................  Guillain Barre M<18.05......    3.7479    3.2583    3.1687    2.7703        52        32        27        32
2001......................................  Miscellaneous M>49.15.......    0.9252    0.7603    0.7013    0.6348         9         9         9         8
2002......................................  Miscellaneous M>38.75 and       1.2002    0.9863    0.9097    0.8234        11        11        10        10
                                             M<49.15.
2003......................................  Miscellaneous M>27.85 and       1.4943    1.2280    1.1327    1.0253        14        14        13        12
                                             M<38.75.
2004......................................  Miscellaneous M<27.85.......    1.9243    1.5814    1.4586    1.3203        18        18        16        15

[[Page 47045]]

 
2101......................................  Burns M>0...................    1.7151    1.7151    1.3313    1.2915        18        18        15        15
5001......................................  Short-stay cases, length of   ........  ........  ........    0.1556  ........  ........  ........         2
                                             stay is 3 days or fewer.
5101......................................  Expired, orthopedic, length   ........  ........  ........    0.7236  ........  ........  ........         8
                                             of stay is 13 days or fewer.
5102......................................  Expired, orthopedic, length   ........  ........  ........    1.6315  ........  ........  ........        17
                                             of stay is 14 days or more.
5103......................................  Expired, not orthopedic,      ........  ........  ........    0.7734  ........  ........  ........         8
                                             length of stay is 15 days
                                             or fewer.
5104......................................  Expired, not orthopedic,      ........  ........  ........    1.9277  ........  ........  ........        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 revisions for FY 2016 
would affect particular CMG relative weight values, which would affect 
the overall distribution of payments within CMGs and tiers. Note that, 
because we proposed to implement the CMG relative weight revisions in a 
budget-neutral manner (as previously described), total estimated 
aggregate payments to IRFs for FY 2016 would not be affected as a 
result of the CMG relative weight revisions. However, the revisions 
would affect the distribution of payments within CMGs and tiers.

   Table 2--Distributional Effects of the Changes to the CMG Relative
                                 Weights
              [FY 2015 values compared with FY 2016 values]
------------------------------------------------------------------------
                                             Number of     Percentage of
            Percentage change             cases affected  cases affected
------------------------------------------------------------------------
Increased by 15% or more................             170             0.0
Increased by between 5% and 15%.........           2,830             0.7
Changed by less than 5%.................         387,215            99.1
Decreased by between 5% and 15%.........             416             0.1
Decreased by 15% or more................               0             0.0
------------------------------------------------------------------------

    As Table 2 shows, 99 percent of all IRF cases are in CMGs and tiers 
that 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 2016. The largest estimated increase in the CMG 
relative weight values that affects the largest number of IRF 
discharges would be a 0.2 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 2014 claims 
data, 19,356 IRF discharges (5.0 percent of all IRF discharges) were 
classified into this CMG and tier.
    The largest decrease in a CMG relative weight value affecting the 
largest number of IRF cases would be 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 2014 IRF claims 
data, this change would have affected 9,295 cases (2.4 percent of all 
IRF cases).
    The changes in the average length of stay values for FY 2016, 
compared with the FY 2015 average length of stay values, are small and 
do not show any particular trends in IRF length of stay patterns.
    We received 1 comment on the proposed update to the CMG relative 
weights and average length of stay values for FY 2016, which is 
summarized below.
    Comment: One commenter requested that we provide more detail about 
the use of the CCR data in the CMG relative weight calculations. 
Additionally, the commenter requested that we outline the methodology 
used to calculate the average length of stay values in the FY 2016 IRF 
PPS proposed rule.
    Response: As we discussed in the FY 2015 IRF PPS final rule (79 FR 
45872 at 45882), a key variable used to calculate the CMG relative 
weights is a facility's average cost per case, which is obtained by 
averaging the estimated cost per case for every patient discharged from 
the facility in a given fiscal year. To obtain the estimated cost per 
case for a given IRF patient, we start by pulling the appropriate 
charges from the Medicare claim for that patient. Then, we calculate 
the appropriate CCRs from the Medicare cost report submitted by the 
facility. The CCRs are then multiplied by the charges from the Medicare 
claim to obtain the estimated IRF cost for the case. This variable is 
used as the dependent variable in the regression analysis to estimate 
the CMG relative weights.
    As we also discussed in the FY 2015 IRF PPS final rule (79 FR 45872 
at 45882), the methodology for calculating the average length of stay 
values is available for download from the IRF PPS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Research.html.

[[Page 47046]]

    Final Decision: After careful consideration of the public comments, 
we are finalizing our proposal to update the CMG relative weight and 
average length of stay values for FY 2016, as shown in Table 1 of this 
final rule. These updates are effective October 1, 2015.

V. Continued Use of FY 2014 Facility-Level Adjustment Factors

    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.'' Under this authority, we currently 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).
    Based on the substantive changes to the facility-level adjustment 
factors that were adopted in the FY 2014 final rule (78 FR 47860, 47868 
through 47872), in the FY 2015 final rule (79 FR 45872, 45882 through 
45883) we froze the facility-level adjustment factors at the 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). For FY 2016, we will continue to hold the adjustment 
factors at the FY 2014 levels as we continue to monitor the most 
current IRF claims data available and continue to evaluate and monitor 
the effects of the FY 2014 changes.

VI. FY 2016 IRF PPS Payment Update

A. Background

    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. Section 1886(j)(3)(C)(ii)(I) of the Act requires the 
application of a productivity adjustment, as described below. In 
addition, sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(iv) of the 
Act require the application of a 0.2 percentage point reduction to the 
market basket increase factor for FY 2016. Thus, in the FY 2016 IRF PPS 
proposed rule (80 FR 23341), we proposed to update the IRF PPS payments 
for FY 2016 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, 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.
    We have utilized various market baskets through the years in the 
IRF PPS program. When we implemented the IRF PPS in January 2002, it 
used the Excluded Hospital with Capital market basket (which was based 
on 1992 Medicare cost reports for Medicare participating IRFs, IPFs, 
LTCHs, cancer hospitals, and children's hospitals) as an ``input price 
index'' (66 FR 41427 through 41430). Although ``market basket'' 
technically describes the mix of goods and services used in providing 
health care at a given point in time, this term is also commonly used 
to denote the input price index (that is, cost category weights and 
price proxies) derived from that market basket. Accordingly, the term 
``market basket,'' as used in this document, refers to an input price 
index.
    Beginning with the FY 2006 IRF PPS final rule (70 FR 47908), we 
adopted a 2002-based RPL market basket for the IRF PPS. This market 
basket reflected the operating and capital cost structures for 
freestanding IRFs, freestanding IPFs, and LTCHs. Cancer and children's 
hospitals were excluded from the RPL market basket because their 
payments are based entirely on reasonable costs subject to rate-of-
increase limits established under the authority of section 1886(b) of 
the Act and not through a PPS. Also, the 2002 cost structures for 
cancer and children's hospitals were noticeably different than the cost 
structures of freestanding IRFs, freestanding IPFs, and LTCHs. See the 
FY 2006 IRF PPS final rule (70 FR 47908) for a complete discussion of 
the 2002-based RPL market basket.
    In the FY 2010 IRF proposed rule (74 FR 21062), we expressed an 
interest in exploring the feasibility of creating a stand-alone IRF, or 
IRF-specific, market basket that reflects the cost structures of only 
IRF providers. But, as we noted in that discussion, Medicare cost 
report data revealed differences between cost levels and cost 
structures for freestanding and hospital-based IRF facilities. As we 
were unable at that time to fully understand these differences even 
after reviewing explanatory variables such as geographic variation, 
case mix, urban/rural status, share of low income patients, teaching 
status, and outliers (short stay and high-cost), we noted that we would 
continue to research ways to reconcile the differences and solicited 
public comment for additional information that might help us to better 
understand the reasons for the observed variations (74 FR 21062). We 
summarized the public comments we received and our responses in the FY 
2010 IRF PPS final rule (74 FR 39762, 39776 through 39778). Despite 
receiving comments from the public on this issue, however, we were 
still unable to sufficiently reconcile the observed variations, and, 
therefore, were unable to establish a stand-alone IRF market basket at 
that time.
    Beginning with the FY 2012 IRF PPS, we used a rebased RPL market 
basket, which was named the 2008-based RPL market basket, reflecting 
the updated operating and capital cost structures for freestanding 
IRFs, freestanding IPFs, and LTCHs (76 FR 47849 through 47860). In 
doing so, we updated the base year from 2002 to 2008; adopted a more 
specific composite chemical price proxy; broke the professional fees 
cost category into two separate categories (Labor-related and Nonlabor-
related); and added two additional cost categories (Administrative and 
Business Support Services and Financial Services), which were 
previously included in the residual All Other cost category. The FY 
2012 IRF PPS proposed rule (76 FR 24229 through 24241) and FY 2012 IRF 
PPS final rule (76 FR 47849 through 47860) contain a complete 
discussion of the development of the 2008-based RPL market basket.
    In the meantime, as stated in the FY 2016 IRF PPS proposed rule, we 
have continued to work to address our concerns regarding the 
development of a stand-alone IRF market. For the reasons described 
below, we believe using data from hospital-based and freestanding 
providers to derive IRF-specific market basket cost weights is 
appropriate, despite differences in facility versus unit cost levels 
and cost structures. Therefore, for FY 2016, we proposed to create and 
adopt a 2012-based IRF-specific market basket, using both freestanding 
and hospital-based IRF Medicare cost report data.
    We received a total of 17 comments on our proposal to adopt an IRF-
specific market basket. Several commenters supported the proposed 
stand-alone IRF market basket; while several other commenters raised 
concerns regarding the data and methodologies used to derive the 
proposed IRF-specific market basket. In particular, several commenters 
stated that CMS was using a flawed methodology for allocating overhead 
costs to hospital-based IRF units. In support of this comment, one of 
these commenters attached an analytic report they had commissioned.

[[Page 47047]]

This report outlined how the commenters came to believe that there were 
overhead costs allocation errors, and what could be done to fix those 
errors. Other commenters, on the overhead cost allocation issue, 
suggested that CMS continue using the RPL market basket, or make 
changes to the calculation of the proposed IRF-specific market basket 
cost weights. Several of these latter commenters requested that CMS 
allow for an additional round of comments on the revised IRF-specific 
market basket.
    The commissioned report was authored by Dobson DaVanzo & 
Associates, LLC (Dobson DaVanzo).\1\ Dobson DaVanzo's analysis 
replicated the CMS methodology described in the FY 2016 proposed rule 
to determine the major cost category weights for the proposed IRF-
specific market basket using Medicare Cost Reports (form CMS-2552-10). 
As many of the commenters on the IRF-specific market basket referenced 
the Dobson DaVanzo report, the report and its conclusions regarding the 
allocation issue were clearly available to a significant segment of the 
industry.
---------------------------------------------------------------------------

    \1\ ``Analysis of CMS Proposed Inpatient Rehabilitation Facility 
Specific Market Basket'', submitted to HealthSouth Corporation by 
Dobson DaVanzo, May 22, 2015. The public reference for this comment 
letter is: CMS-2015-0053-0004, and can be retrieved from the 
following link: http://www.regulations.gov/#!documentDetail;D=CMS-
2015-0053-0004 (last accessed July 16, 2015).
---------------------------------------------------------------------------

    The Dobson DaVanzo report raised two main concerns with the 
proposed cost weight methodology proposed in the FY 2016 IRF proposed 
rule (80 FR 23341). Their first concern was in regards to the proposed 
methodology for calculating wages and salaries for hospital-based 
IRFs--they asserted that CMS erroneously omitted overhead wages and 
salaries allocated to ancillary departments. Having identified this 
issue, Dobson DaVanzo then suggested a method to fix the methodology to 
account for these omitted costs. The second concern regarded the 
proposed use of certain IRF-specific data in the calculation of 
employee benefits and contract labor costs instead of the IPPS hospital 
data that had been used in both of the RPL market baskets. We provide a 
more detailed description of these concerns in section VI.C.1.a.i. 
through section VI.C.1.a.iii of this final rule.
    Based on the public comments regarding flaws in the proposed 
methodology, and the suggested means of fixing those flaws as reflected 
in the Dobson DaVanzo report, we performed a detailed review of the 
entire proposed methodology for allocating overhead costs to hospital-
based units, as well as Dobson DaVanzo's suggested fixes for deriving 
overhead wages and salaries attributable to the ancillary cost centers 
for hospital-based IRFs. In doing so, we confirmed that the proposed 
methodology only calculated overhead wages and salaries attributable to 
the routine inpatient hospital-based IRF unit; we agree with the 
commenters that the proposed method inadvertently omitted the overhead 
wages and salaries attributable to ancillary departments. In analyzing 
Dobson DaVanzo's suggestions to fix this error, we identified two 
related data errors that had not been specifically identified by Dobson 
DaVanzo. The first data-related error was in regard to the ratio of 
overhead wages and salaries to total overhead costs for the total 
facility, and the second related to the inclusion of capital costs in 
total overhead costs that are then allocated to overhead wages and 
salaries. To address these data errors, we effected slight technical 
modifications to their suggested corrections for the proposed 
methodology. The additional data errors that we identified, and the 
technical corrections to address those errors are described in detail 
in section VI.C.1.a.i. through section VI.C.1.a.ii of this final rule.
    As amended, we believe that the final methodology fully addresses 
commenters concerns, as well as the technical errors that we discovered 
while considering commenters' proposed solutions to the inadvertent 
omission of the overhead wages and salaries attributable to ancillary 
departments. Having addressed these technical errors, we do not believe 
there is a need to seek further public comment, or a reason to further 
delay implementation of an IRF-specific market basket.
    We summarize general comments about the proposed methodology below. 
Specific technical comments are summarized and responded to in the 
relevant sections of this final rule.
    Comment: Several commenters supported the adoption of a stand-alone 
IRF market basket and considered the stand-alone market basket to be an 
improvement over the RPL market basket. While supportive, however, some 
of these commenters noted concerns with the proposed methodology for 
deriving some of the hospital-based costs. Many of these commenters 
cited the Dobson DaVanzo report, which replicated CMS's calculation of 
the proposed IRF-specific market basket and highlighted two concerns 
regarding the proposed methodologies' allocation of overhead costs to 
hospital-based IRFs. One concern was that there was an insufficient 
number of IRF Medicare cost reports to calculate reliable Employee 
Benefits and Contract Labor cost weights. The other concern, as noted 
above, was in regard to the omission of overhead wages and salaries 
attributable to ancillary cost centers for hospital-based IRFs. These 
commenters requested that CMS review the Dobson DaVanzo report findings 
and the suggested solution to the attribution of the overhead wage 
problem, and revise the proposed methodology for calculating the market 
basket accordingly. Our responses to these specific concerns raised by 
the commenters as presented in the Dobson DaVanzo report are discussed 
in greater detail in section VI.C.1.a.i through section VI.C.1.a.iii of 
this final rule.
    Additionally, one commenter stated that a stand-alone IRF market 
basket is an integral step that must be taken as we move toward the 
goal of implementing the Improving Medicare Post-Acute Care 
Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185, enacted on 
October 6, 2014). The commenter stated that a stand-alone IRF market 
basket will help to more accurately capture the costs and resources for 
inpatient rehabilitation services. The commenter also believes that the 
creation of a stand-alone IRF market basket is an integral step in any 
plan to create site-neutral payments for IRFs and SNFs as discussed by 
the Medicare Payment Advisory Commission (MedPAC), as well as the House 
Ways and Means Subcommittee on Health, and the President's Budget. 
However, the commenter noted that they remain concerned about the 
disparities in costs and resources between freestanding and hospital-
based IRFs and urged CMS to stay vigilant by monitoring and analyzing 
cost differences between these two types of IRFs after the IRF market 
basket is implemented. The commenter requested that any significant 
data derived from CMS analysis be shared with stakeholders in periodic 
reports and notices of proposed rulemaking for feedback on how the IRF 
market basket and payment system should be refined.
    Response: We appreciate the commenters' support. As always, we will 
continue to evaluate our methodology and its effects over time. If we 
identify problems that need to be addressed, we will notify the public 
of our findings and our proposed solutions through the rulemaking 
process. And, as noted above, we address the commenter's specific 
concerns regarding our proposed methodology's allocation of overhead 
costs to hospital-based IRFs and concerns about the

[[Page 47048]]

number of IRF Medicare cost reports that are available for use in the 
calculation of the Employee Benefits and Contract Labor cost weights in 
section VI.C.1.a.i through section VI.C.1.a.iii of this final rule.
    Comment: Some commenters recommended that CMS continue to use the 
RPL market basket methodology for deriving the Employee Benefits and 
Contract Labor cost weights until there are sufficient data for all 
IRFs, so as to more accurately represent the costs IRFs incur for these 
cost categories. One commenter also recommended that CMS continue to 
encourage all providers to report these data on the Medicare cost 
report. In addition, the commenters recommended that CMS develop 
educational materials related to the Medicare cost reports to help 
providers understand the importance of completing the reports, what the 
data are utilized for, and how to complete the reports.
    Response: We address the commenters' specific concerns regarding 
the calculation of the cost weights in section VI.C.1 of this final 
rule. We have encouraged and will continue to encourage all providers 
to report data completely and accurately on the Medicare cost report. 
Furthermore, the commenter may be interested in Change Request 6132, 
which was published on August 1, 2008 (https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM6132.pdf). This Change Request directed Medicare 
contractors to educate Medicare providers regarding the specific ways 
that CMS uses Medicare cost report data. In this Change Request, we 
noted that the Medicare cost reports play a central role in the 
development of the market baskets used to update PPS payments, as well 
as in the evaluation of Medicare payment adequacy. We also indicated 
that Medicare contractors were to supply information to providers 
regarding how we use the Medicare cost report data to update future PPS 
payments. We also stated that it is crucial that Medicare providers 
fill out these reports with complete and valid data. Finally, we would 
also note that complete instructions for the Hospital Medicare cost 
report (CMS Form 2552-10) are available in Chapter 40 of the Provider 
Reimbursement Manual on the CMS Web site (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html).
    Comment: One commenter supported CMS' use of an IRF-specific market 
basket, but stated that because of the cost disparity between hospital-
based and freestanding facilities, CMS should develop separate market 
basket update percentages for each of those two groups. The commenter 
stated that patients treated in hospital-based units have more complex 
medical conditions and require more resources to treat than those in 
freestanding units. The commenter stated that combining these two 
facilities for the purpose of establishing one market basket update 
could result in underpayments for Medicare patients treated in 
hospital-based facilities.
    Response: We respectfully disagree with the suggestion that we 
should provide separate market basket updates for freestanding and 
hospital-based IRFs. In particular, the base payment rate reflects 
costs for both freestanding and hospital-based facilities. Thus, we 
believe it is appropriate for the IRF market basket to also reflect the 
data for both facility types.
    Comment: Several commenters suggested that CMS should postpone 
implementation of a new IRF-specific market basket until CMS can ensure 
that the IRF-specific market basket accurately reflects costs for 
freestanding and hospital-based IRFs. Most of these commenters cited 
the two main concerns noted in the Dobson DaVanzo report regarding our 
proposed methodology's allocation of overhead costs to hospital-based 
IRFs and concerns about the number of IRF Medicare cost reports that 
are available for use in the calculation of the Employee Benefits and 
Contract Labor cost weights. The commenters stated that until these two 
concerns are addressed, and calculations are corrected by CMS, the 
implementation of the IRF-specific market basket should be postponed. 
The commenters also asked that IRFs be provided with an opportunity to 
analyze and comment on the recalculated cost weights prior to CMS' 
implementation of the IRF-specific market basket.
    Response: We respectfully disagree with the commenters' request to 
postpone implementation of the IRF market basket. The primary data 
sources for the IRF market basket cost weights are the Medicare cost 
reports for both freestanding and hospital-based IRFs. We proposed 
specific methodologies for deriving the cost weights using these 
Medicare cost reports in the proposed rule. Commenters provided 
valuable feedback on those specific methodologies and, as discussed 
above, and in greater detail below, we are making modifications to the 
methodology based on these comments in this final rule (detailed 
discussion can be found in section VI.C.1 of this final rule). In sum, 
we believe that using IRF facilities' (freestanding and hospital-based) 
cost report data to establish an IRF-specific market basket is a 
technical improvement from the current 2008-based RPL market basket, 
which is based on 2008 data for freestanding IRFs, freestanding IPFs, 
and LTCHs.
    In addition, as discussed in sections VI.C.1.a.i. through section 
VI.C.1.a.ii of this final rule, we evaluated the comments provided on 
the proposed rule, and based on these comments, we are making technical 
corrections to errors in our proposed methodology for deriving the 
Wages and Salaries and Employee Benefits cost weights. As described in 
those sections, these modifications are made either at the suggestion 
of comments, or in response to errors identified in the course of our 
considering commenters' suggested solutions to the issues that were 
raised in their public comments (specifically the Dobson DaVanzo 
report). Both sets of corrections will resolve the identified 
inaccuracies in the proposed calculation of the cost weights. And, as 
these methodological and technical changes are straightforward and in 
direct response to public comments and suggestions within the public 
comments, we do not believe a second round of rulemaking is required.
    Comment: One commenter stated that the CMS methodology for 
hospital-based IRFs assumes that the provision of, and intensity of, 
services are uniform between all payers and within each ancillary and 
overhead cost center. The commenter stated that this assumption may not 
be accurate and could therefore lead to the use of inaccurate data to 
develop the underlying cost weights. Several commenters stated that 78 
percent of IRF providers are hospital-based units and cited the Dobson 
DaVanzo report, which estimated that ``67 percent of the expenditure 
weights will be based on data for hospital-based units'' and concluded 
that ``using potentially unreliable allocated data that will account 
for more than two-thirds of the market basket information could be 
problematic and perhaps introduce error into the IRF-specific market 
basket.''
    Response: We respectfully disagree with the commenter's suggestion 
that the derivation of the IRF market basket is based on unreliable 
allocated data. Using the IRF Medicare cost report data, we proposed 
specific methodologies for deriving the cost weights in the proposed 
rule. As discussed in section VI.C.1.a.i of this final rule, based on 
comments on that specific methodology, suggested solutions to issues 
identified

[[Page 47049]]

in that methodology, and our further evaluation of those proposed 
solutions, we are making modifications to our proposed methodology to 
address the issues identified by commenters. We believe that our 
revised methodology is based on a set of reasonable assumptions and 
results in a set of cost weights that is more representative of the 
universe of IRF providers compared to the 2008-based RPL market basket 
cost weights.
    Comment: One commenter noted that the LTCH PPS, IPF PPS, and IRF 
PPS all arrived at the same 2.7 percent market basket update. The 
commenter questioned whether the extensive work performed by CMS to 
develop three specific market basket updates that generally produce the 
same result justifies the departure from the RPL methodology.
    Response: We respectfully disagree with the commenter's suggestion 
that we should not develop different market baskets due to the market 
basket updates being similar. The IRF-specific market basket cost 
weights and price proxies are intended to reflect the cost structures 
of, and price pressures faced by, IRF providers. These cost weights and 
price proxies are used to develop the market basket update and labor-
related share. While the proposed updates rounded to the same value for 
FY 2016, there may be years when they do not. Also, the proposed labor-
related share differed between IRF (80 FR 23356), IPF (80 FR 25032), 
and LTCH providers (80 FR 24474), and we believe that using a labor-
related share based on cost data for the specific type of facility is a 
technical improvement over using a labor-related share based on the RPL 
market basket, which combines the 3 types of freestanding facilities 
together.
    Final Decision: We reviewed all of the public comments regarding 
the proposed creation of an IRF-specific market basket. Where noted 
above, we have summarized and responded to each of the specific 
technical comments in the relevant methodology discussion in section 
VI.C.1 of this final rule, and as indicated in those discussions, we 
are making several changes to the proposed methodologies based on these 
comments.
    After consideration of the public comments, we are finalizing the 
creation and adoption of a 2012-based IRF market basket because we 
believe that the use of this 2012-based IRF market basket to update IRF 
PPS payments is a technical improvement over the current 2008-based RPL 
market basket, as the major cost weights are based on Medicare cost 
report data from both freestanding and hospital-based IRFs and do not 
include costs from either IPF or LTCH providers, which could have 
different cost structures than IRFs.
    In the following discussion, we provide an overview of the proposed 
IRF market basket and describe the methodologies we proposed to use to 
determine the operating and capital portions of the proposed 2012-based 
IRF market basket. For each proposed methodology, we indicate whether 
we received any public comments, and we include responses to comments, 
if applicable. We then provide the methodology we are finalizing for 
the 2012-based IRF market basket.

B. Overview of the 2012-Based IRF Market Basket

    The 2012-based IRF market basket is a fixed-weight, Laspeyres-type 
price index. A Laspeyres price index measures the change in price, over 
time, of the same mix of goods and services purchased in the base 
period. Any changes in the quantity or mix of goods and services (that 
is, intensity) purchased over time relative to a base period are not 
measured.
    The index itself is constructed in 3 steps. First, a base period is 
selected (in this final rule, the base period is FY 2012), total base 
period costs are estimated for a set of mutually exclusive and 
exhaustive cost categories, and the proportion of total costs that each 
cost category represents is calculated. These proportions are called 
cost weights. Second, each cost category is matched to an appropriate 
price or wage variable, referred to as a price proxy. In nearly every 
instance where we have selected price proxies for the various market 
baskets, these price proxies are derived from publicly available 
statistical series that are published on a consistent schedule 
(preferably at least on a quarterly basis). In cases where a publicly 
available price series is not available (for example, a price index for 
malpractice insurance), we have collected price data from other sources 
and subsequently developed our own index to capture changes in prices 
for these types of costs. Finally, the cost weight for each cost 
category is multiplied by the established price proxy. The sum of these 
products (that is, the cost weights multiplied by their price levels) 
for all cost categories yields the composite index level of the market 
basket for the given time period. Repeating this step for other periods 
produces a series of market basket levels over time. Dividing the 
composite index level of one period by the composite index level for an 
earlier period produces a rate of growth in the input price index over 
that timeframe.
    As previously noted, the market basket is described as a fixed-
weight index because it represents the change in price over time of a 
constant mix (quantity and intensity) of goods and services needed to 
furnish IRF services. The effects on total costs resulting from changes 
in the mix of goods and services purchased subsequent to the base 
period are not measured. For example, an IRF hiring more nurses to 
accommodate the needs of patients would increase the volume of goods 
and services purchased by the IRF, but would not be factored into the 
price change measured by a fixed-weight IRF market basket. Only when 
the index is rebased would changes in the quantity and intensity be 
captured, with those changes being reflected in the cost weights. 
Therefore, we rebase the market basket periodically so that the cost 
weights reflect recent changes in the mix of goods and services that 
IRFs purchase (hospital inputs) to furnish inpatient care between base 
periods.

C. Creating an IRF-Specific Market Basket

    As explained in the FY 2016 IRF PPS proposed rule (80 FR 23341 
through 23342), we have been investigating the creation of a stand-
alone, IRF-specific, market basket that reflects the cost structures of 
only IRF providers to replace the RPL market basket. The major cost 
weights for the 2008-based RPL market basket were calculated using 
Medicare cost report data for those providers that complete a stand-
alone Medicare cost report. We define a ``major cost weight'' as one 
for which we are able to obtain data from the Medicare cost report for 
that particular cost category (for example, Wages and Salaries). 
However, the Medicare cost report data does not collect detailed input 
cost data for the more detailed cost categories for which we would like 
to capture input price pressures (for example, Chemicals). Therefore, a 
public data source is used to identify the costs associated with these 
more detailed cost categories. For the 2008-based RPL market basket, we 
used only data from stand-alone Medicare cost reports due to concerns 
regarding our ability to incorporate Medicare cost report data for 
hospital-based providers. In the FY 2015 IRF PPS final rule (79 FR 
45884 through 45886), we presented several of these concerns (as 
restated below) but explained that we would continue to research the 
possibility of creating an IRF-specific market basket to update IRF PPS 
payments.
    Since the FY 2015 IRF PPS final rule, we performed additional 
research on the Medicare cost report data available for

[[Page 47050]]

hospital-based IRFs and evaluated these concerns. We subsequently 
concluded from this research that Medicare cost report data for both 
hospital-based IRFs and freestanding IRFs could be used to calculate 
the major market basket cost weights for a stand-alone IRF market 
basket. We developed a detailed methodology to derive market basket 
cost weights that are representative of the universe of IRF providers. 
We believe the use of an IRF market basket is a technical improvement 
over the RPL market basket that is currently used to update IRF PPS 
payments. As a result, in the FY 2016 IRF PPS proposed rule, we 
proposed to adopt a 2012-based IRF market basket that reflects data for 
both freestanding and hospital-based IRFs. Below we discuss our prior 
concerns and provide reasons for why we believe it is technically 
feasible to create a stand-alone IRF market basket using Medicare cost 
report data for both hospital-based and freestanding IRFs.
    One concern discussed in the FY 2015 IRF PPS final rule (79 FR 
45884) was that the cost level differences for hospital-based IRFs 
relative to freestanding IRFs were not readily explained by the 
specific characteristics of the individual providers and/or the 
patients that they served (for example, characteristics related to case 
mix, urban/rural status, or teaching status). To address this concern, 
we used regression analysis to evaluate the effect of including 
hospital-based IRF Medicare cost report data in the calculation of cost 
distributions (which refers to how costs for certain categories relate 
to total costs for a particular provider). A more detailed description 
of these regression models can be found in the FY 2015 IRF final rule 
(79 FR 45884 through 45885). Based on this analysis, we concluded that 
the inclusion of those IRF providers with unexplained variability in 
costs would not significantly impact the cost weights and, therefore, 
should not be a major cause of concern.
    Another concern regarding the incorporation of hospital-based IRF 
data into the calculation of the market basket cost weights was 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 
for such facilities. However, Medicare 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. To use 
Medicare cost report data from these providers, we needed to determine 
the appropriate adjustments to apply to the data to ensure that the 
cost weights we use would represent only the hospital-based IRF (not 
the hospital as a whole). Over the past year, we worked to develop 
detailed methodologies to calculate the major cost weights for both 
freestanding and hospital-based IRFs. We described our proposed 
methodologies and the resulting cost weights in section V.C.1 of the 
proposed rule (80 FR 23332, 23343 through 23349), and we welcomed 
public comments on these proposals.
    We also evaluated the differences in cost weights for hospital-
based and freestanding IRFs and found the most significant differences 
occurred for wages and salaries and pharmaceutical costs. Specifically, 
the hospital-based IRF wages and salaries cost shares tend to be lower 
than those of freestanding IRFs while hospital-based IRF pharmaceutical 
cost shares tend to be higher than those of freestanding IRFs. The 
proposed methodology for deriving costs for each of these categories 
can be found in section V.C.1 of the proposed rule.
    Our research led to the conclusion that it is appropriate to 
include hospital-based IRF data in the calculation of the major cost 
weights for an IRF market basket. We proposed methodologies to estimate 
proposed cost weights for a combined sample of freestanding and 
hospital-based IRF providers, thus reflecting the cost structure of the 
universe of IRF providers. We believe this proposed methodology is a 
technical improvement over the RPL market basket that relied solely on 
freestanding IRF, freestanding IPF, and LTCH cost structures. In the 
sections below, we summarize and respond to the comments we received on 
these specific proposals.
1. Development of Cost Categories and Weights for the 2012-Based IRF 
Market Basket
a. Use of Medicare Cost Report Data
    We proposed a 2012-based IRF market basket that consisted of seven 
major cost categories derived from the FY 2012 Medicare cost reports 
(CMS Form 2552-10) for freestanding and hospital-based IRFs. These 
categories were Wages and Salaries, Employee Benefits, Contract Labor, 
Pharmaceuticals, Professional Liability Insurance (PLI), Capital, and a 
residual category. The residual category reflects all remaining costs 
that are not captured in the other six cost categories. The FY 2012 
cost reports include providers whose cost reporting period began on or 
after October 1, 2011, and prior to September 30, 2012. We selected FY 
2012 as the base year because the Medicare cost reports for that year 
were the most recent, complete set of Medicare cost report data 
available for IRFs at the time of development of the proposed IRF 
market basket.
    Since our goal was to establish cost weights that were reflective 
of case mix and practice patterns associated with the services IRFs 
provide to Medicare beneficiaries, we proposed to limit the cost 
reports used to establish the 2012-based IRF market basket to those 
from facilities that had a Medicare average length of stay (LOS) that 
was relatively similar to their facility average LOS. We believe that 
this trim eliminates statistical outliers and ensures a more accurate 
market basket that reflects the costs generally incurred during a 
Medicare-covered stay. We proposed to define the Medicare average LOS 
for freestanding IRFs based on what the IRFs reported on line 14 of 
Worksheet S-3, Part I. We proposed to define the Medicare average LOS 
for hospital-based IRFs based on what was reported on line 17 of 
Worksheet S-3, Part I. We then used the cost reports from IRFs with a 
Medicare average LOS within 15 percent (that is, 15 percent higher or 
lower) than the facility average LOS for IRFs to establish the sample 
of providers used to estimate the 2012-based IRF market basket cost 
weights. We applied this LOS edit to the data for IRFs to exclude 
providers that serve a population whose LOS would indicate that the 
patients served are not consistent with a LOS of a typical Medicare 
patient. This process resulted in the exclusion of about eight percent 
of the freestanding and hospital-based IRF Medicare cost reports. Of 
those excluded, about 18 percent were freestanding IRFs and 82 percent 
were hospital-based IRFs. This ratio is relatively consistent with the 
ratio of the universe of freestanding to hospital-based IRF providers. 
In the FY 2012 IRF PPS final rule (76 FR 47850), the same process was 
used to derive the 2008-based RPL market basket.
    We did not receive any specific comments on our proposed LOS edit 
methodology.
    Final Decision: We are finalizing the LOS edit methodology as 
proposed.
    We also proposed to use the cost reports for IRFs that were not 
excluded through this process to calculate the costs for six of the 
seven major cost categories (Wages and Salaries, Employee Benefits, 
Contract Labor, Professional Liability Insurance,

[[Page 47051]]

Pharmaceuticals, and Capital) for the market basket.
    Similar to the 2008-based RPL market basket major cost weights, the 
resulting 2012-based IRF market basket cost weights reflect Medicare 
allowable costs (routine, ancillary and capital)--costs that are 
eligible for reimbursement through the IRF PPS. We proposed to define 
Medicare allowable costs for freestanding facilities as cost centers 
(CMS Form 2552-10): 30 through 35, 50 through 76 (excluding 52 and 75), 
90 through 91 and 93. We proposed to define Medicare allowable costs 
for hospital-based facilities as cost centers (CMS Form 2552-10): 40, 
50 through 76 (excluding 52 and 75), 90 through 91 and 93.
    For freestanding IRFs, total Medicare allowable costs would be 
equal to the total costs as reported on Worksheet B, part I, column 26. 
For hospital-based IRFs, total Medicare allowable costs would be equal 
to total costs for the IRF inpatient unit after the allocation of 
overhead costs (Worksheet B, part I, column 26, line 41) and a 
proportion of total ancillary costs. We calculated the portion of 
ancillary costs attributable to the hospital-based IRF for a given 
ancillary cost center by multiplying total facility ancillary costs for 
the specific cost center (as reported on Worksheet B, Part I, column 
26) by the ratio of IRF Medicare ancillary costs for the cost center 
(as reported on Worksheet D-3, column 3 for hospital-based IRFs) to 
total Medicare ancillary costs for the cost center (equal to the sum of 
Worksheet D-3, column 3 for all relevant PPS (that is, IPPS, IRF, IPF 
and SNF)). We proposed to use these methods to derive levels of total 
costs for IRF providers.
    We did not receive any specific public comments on our proposed 
methodology for deriving total costs for freestanding and hospital-
based IRFs.
    Final Decision: We are finalizing our methodology for calculating 
total costs as proposed.
    With this work complete, we then set about deriving cost levels for 
six of the seven major cost categories.
(i) Wages and Salaries Costs
    For freestanding IRFs, we proposed to derive wages and salaries 
costs as the sum of inpatient salaries, ancillary salaries, and a 
proportion of overhead (or general service cost center) salaries as 
reported on Worksheet A, column 1. Since overhead salary costs are 
attributable to the entire IRF, we proposed to only include the 
proportion attributable to the Medicare allowable cost centers. We 
proposed to estimate the proportion of overhead salaries that are 
attributed to Medicare allowable costs centers by multiplying the ratio 
of Medicare allowable area salaries to total salaries (Worksheet A, 
column 1, line 200) times total overhead salaries. In the FY 2012 IRF 
PPS final rule (76 FR 47850), a similar methodology was used to derive 
wages and salaries costs in the 2008-based RPL market basket.
    As stated in the proposed rule, for hospital-based IRFs, we 
proposed to derive wages and salaries costs as the sum of inpatient 
unit wages and salaries (Worksheet A, column 1, line 41) and a portion 
of salary costs attributable to total facility ancillary and overhead 
cost centers as these cost centers are shared with the entire facility. 
We proposed to calculate the portion of ancillary salaries attributable 
to the hospital-based IRF for a given ancillary cost center by 
multiplying total facility ancillary salary costs for the specific cost 
center (as reported on Worksheet A, column 1) by the ratio of IRF 
Medicare ancillary costs for the cost center (as reported on Worksheet 
D-3, column 3 for hospital-based IRFs) to total Medicare ancillary 
costs for the cost center (equal to the sum of Worksheet D-3, column 3 
for all relevant PPS units [that is, IPPS, IRF, IPF and SNF]). For 
example, if hospital-based IRF Medicare physical therapy costs 
represent 30 percent of the total Medicare physical therapy costs for 
the entire facility, then 30 percent of total facility physical therapy 
salaries (as reported in Worksheet A, column 1, line 66) would be 
attributable to the hospital-based IRF. We believe it is appropriate to 
use only a portion of the ancillary costs in the market basket cost 
weight calculations since the hospital-based IRF only utilizes a 
portion of the facility's ancillary services. We believe the ratio of 
reported IRF Medicare costs to reported total Medicare costs provides a 
reasonable estimate of the ancillary services utilized, and costs 
incurred, by the hospital-based IRF.
    We also proposed to calculate the portion of overhead salary costs 
attributable to hospital-based IRFs by multiplying the total overhead 
costs attributable to the hospital-based IRF (sum of columns 4-18 on 
Worksheet B, part I, line 41) by the ratio of total facility overhead 
salaries (as reported on Worksheet A, column 1, lines 4-18) to total 
facility overhead costs (as reported on Worksheet A, column 7, lines 4-
18). This methodology assumes the proportion of total costs related to 
salaries for the overhead cost center is similar for all inpatient 
units (that is, acute inpatient or inpatient rehabilitation).
    We received nine comments on our proposed methodology for deriving 
wages and salaries costs.
    Comment: Several commenters expressed concern about the accuracy of 
our wages and salaries calculations for hospital-based IRFs. Some of 
these commenters cited the Dobson DaVanzo report, which replicated and 
analyzed our proposed methodology for calculating wages and salaries 
costs for hospital-based and freestanding IRFs. Commenters especially 
noted one of the report's two main concerns, namely our proposed 
methodology's allocation of overhead costs to hospital-based IRFs 
(regarding our having allocated overhead wages and salaries associated 
with the routine portion of the IRF unit, that is, Worksheet B, line 
41, which contains costs for only the hospital-based IRF routine 
department) and disregards the overhead wages and salaries associated 
with the ancillary departments and the number of IRF Medicare cost 
reports that are available for use in the calculation of the Employee 
Benefits and Contract Labor cost weights. Citing the report, several 
commenters expressed general concern that CMS is using a flawed 
methodology for allocating overhead costs to hospital-based IRFs. The 
commenters requested that we correct our methodology to include an 
allocation for overhead wages and salaries attributable to ancillary 
departments. The Dobson DaVanzo report provided a specific description 
of the methodology they suggested to correct for this omission. 
Specifically, for each ancillary department, they computed the sum of 
columns 4-18 on Worksheet B, part I, which was then multiplied by the 
ratio of IRF Medicare ancillary costs to total Medicare (IPPS, IRF, 
IPF, and SNF) ancillary costs for each cost center. The sum of IRF 
routine and ancillary department costs was then multiplied by the ratio 
of facility wage and salary overhead costs (as reported on Worksheet A, 
column 1, lines 4-18) to facility total overhead costs (as reported on 
Worksheet A, column 7, lines 4-18).
    Response: We appreciate commenters' detailed review of our 
methodology, and their having had concerns about our wages and salaries 
calculations. For those citing the concerns raised by the Dobson 
DaVanzo report, we concur that our proposed methodology did 
inadvertently omit the overhead wages and salaries attributable to the 
ancillary departments of hospital-based IRFs. Therefore, based on those 
commenters' request that we correct the omission as identified by the 
Dobson DaVanzo report, we are including in the calculation of wages and 
salaries costs

[[Page 47052]]

for hospital-based IRFs an estimate of overhead wages and salaries 
attributable to the ancillary departments.
    As finalized in this final rule, we will calculate the overhead 
wages and salaries attributable to each ancillary department by first 
calculating total noncapital overhead costs attributable to the 
specific ancillary department (Worksheet B, part I, columns 4-18, less 
Worksheet B, part II, columns 4-18). We will then identify the portion 
of these noncapital overhead costs for each ancillary cost center that 
is attributable to the hospital-based IRF. For each cost center, we 
then multiply total facility noncapital overhead costs by the ratio of 
IRF Medicare ancillary costs (as reported on Worksheet D-3, column 3, 
for hospital-based IRFs) to total Medicare ancillary costs (equal to 
the sum of Worksheet D-3, column 3, for all relevant PPS units [that 
is, IPPS, IRF, IPF and SNF]). Next, we identify the portion of these 
noncapital overhead costs for the hospital-based IRF attributable to 
wages and salaries by multiplying the noncapital overhead costs by an 
``overhead ratio,'' which is defined as the ratio of total facility 
overhead salaries (as reported on Worksheet A, column 1, lines 4-18) to 
total noncapital overhead costs (as reported on Worksheet A, columns 1 
& 2, lines 4-18) for all ancillary departments. This methodology is 
nearly identical to the methodology suggested in the Dobson DaVanzo 
report with two modifications to correct data errors not noted by 
Dobson DaVanzo.
    The Dobson DaVanzo report suggested that the ratio of total 
facility overhead salaries to total facility overhead costs (``overhead 
ratio'') be made equal to facility wage and salary overhead costs (as 
reported on Worksheet A, column 1, lines 4-18) divided by facility 
total noncapital overhead costs (as reported on Worksheet A, column 7, 
lines 4-18). In considering this suggestion, we reviewed the overhead 
ratios (Worksheet A, column 1 divided by Worksheet A, column 7) by cost 
center, which showed that many providers reported data for these 
columns that resulted in an overhead ratio that exceeded 100 percent. 
This is a problem, as an overhead ratio exceeding 100 percent would 
erroneously suggest that wages and salaries costs are greater than 
total costs. Given this error, the suggested overhead ratio methodology 
would result in erroneous data being included in the calculation of 
estimated overhead wages and salaries. In order to address this issue, 
we reevaluated the numerator (wage and salaries for overhead cost 
centers) of the overhead ratio, and found no data errors or other 
concerns with Worksheet A, column 1, lines 4-18 that would explain the 
observed overhead ratio issue. We then reevaluated the denominator 
(total noncapital costs for overhead cost centers). A facility's total 
noncapital overhead costs are reflected in multiple columns in the 
Medicare cost report for the overhead cost center rows (Worksheet A, 
sum of columns 1 and 2; Worksheet A, column 7). Looking at those 
options, we noted that data from Worksheet A, columns 1 and 2, lines 4-
18, was a more reliable reflection of total noncapital overhead costs 
data for purposes of calculating an overhead ratio because, unlike our 
proposed use of Worksheet A, column 7, lines 4-18, that data results in 
the lowest incidence of an erroneous overhead ratio that is greater 
than 100 percent as compared to our other data source options. Because 
this is a more reliable cost report data source for total noncapital 
overhead costs for purposes of calculating an overhead ratio, we are 
changing the proposed denominator in the calculation of the overhead 
ratio to the sum of total overhead wages and salaries and total 
noncapital nonsalary overhead costs (as reported on Worksheet A, column 
1 and 2, lines 4-18). As amended with this technical correction, no 
providers were found to have an aggregate overhead ratio in excess of 
100 percent; therefore, this revision minimizes the impacts of 
potential misreporting in the Medicare cost report data.
    Second, the Dobson DaVanzo report's suggested methodology for 
accounting for overhead wages and salaries attributable to ancillary 
departments starts by computing total overhead costs using columns 4-18 
on Worksheet B, part I, for each ancillary cost center. However, we 
found that these total overhead costs include capital costs. The 
inclusion of capital costs in overhead wages and salaries is erroneous 
in that total capital costs are accounted for in the capital cost 
weight of the market basket, and the inclusion of any capital costs in 
overhead wages and salaries would therefore double count capital costs. 
Furthermore, the designation of a portion of capital costs as wages and 
salaries would be inconsistent with the Medicare cost report 
instructions.
    The Medicare cost report instructions define capital-related costs 
as ``depreciation, leases and rentals for the use of facilities and/or 
equipment, and interest incurred in acquiring land or depreciable 
assets used for patient care, insurance on depreciable assets used for 
patient care and taxes on land or depreciable assets used for patient 
care.'' \2\ The instructions also state that providers should exclude 
the following from capital-related costs: ``costs incurred for the 
repair or maintenance of equipment or facilities, amounts included in 
rentals or lease payments for repair and/or maintenance agreements. . . 
.'' Based on this definition of capital costs as reported on the 
Medicare cost report, we concluded that capital costs do not include 
direct wages and salaries costs (of which overhead salaries is a 
component) and that it would be erroneous to allocate a portion of 
capital costs to overhead wages and salaries.
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    \2\ See the Medicare cost report instructions at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.html, Chapter, 40, Page 40-259 to 40-260.
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    Therefore, the Dobson DaVanzo report's suggested methodology would 
result in allocating a portion of total overhead costs (which includes 
capital costs) to overhead wages and salaries and, ultimately, the 
Wages and Salaries cost weight. In order to address this issue, we 
reevaluated the suggested calculation of total overhead costs in light 
of the available data and determined that capital costs were identified 
in Worksheet B, part II, columns 4-18. We further determined that 
excluding the capital costs reflected in Worksheet B, part II, columns 
4-18, from the overhead costs reflected in Worksheet B, part I, columns 
4-18, results in a calculation of total overhead costs to then allocate 
to wages and salaries that is accurate and consistent with the Medicare 
cost reporting instructions and our proposed methodologies for 
calculating overhead wages and salaries and the Wages and Salaries cost 
weight. Thus, in our final calculation as presented above we are 
modifying the suggested methodology to eliminate any erroneous 
allocation of capital costs to overhead wages and salaries. Therefore, 
the starting point of our corrected calculation is total noncapital 
overhead costs (Worksheet B, part I, columns 4-18, less Worksheet B, 
part II, columns 4-18 for the ancillary cost centers).
    Having corrected our methodology for calculating overhead wages and 
salaries attributable to the ancillary departments for hospital-based 
IRFs, and in light of general comments that we had proposed a flawed 
methodology for allocating overhead costs to the hospital-based IRF, we 
reviewed the corresponding calculations in the proposed methodology for 
the routine inpatient hospital-based IRFs. Based on that review, we 
identified the same inaccuracies, which led to the

[[Page 47053]]

incorporation of the same two modifications that we made to the Dobson 
DaVanzo suggested methodology discussed above for our routine inpatient 
hospital-based IRF calculations. These technical corrections resolve 
the observed data inaccuracies that we found in the calculation of 
overhead wages and salaries attributable to routine inpatient hospital-
based IRFs.
    Specifically, our proposed methodology was to calculate the portion 
of overhead wages and salaries costs attributable to the routine 
inpatient hospital-based IRF by multiplying the total overhead costs 
attributable to the hospital-based IRF (sum of columns 4-18 on 
Worksheet B, part I, line 41) by an ``overhead ratio'' of total 
facility overhead salaries (as reported on Worksheet A, column 1, lines 
4-18) to total facility noncapital overhead costs (as reported on 
Worksheet A, column 7, lines 4-18). As stated above, our proposed 
methodology erroneously produced overhead ratios that exceeded 100 
percent. In order to address this erroneous result, we are, for the 
same reasons described above, changing the denominator in the 
calculation of the overhead ratio to the sum of total facility overhead 
salaries and total facility noncapital nonsalary costs (as reported on 
Worksheet A, column 1 and 2, lines 4-18).
    Also, as stated above, calculating total overhead costs as the sum 
of columns 4-18 on Worksheet B, part I, as we proposed, would 
erroneously include capital costs. Capital costs, as defined by the 
Medicare cost report instructions, should not be included in the 
calculation of overhead wages and salaries for hospital-based IRFs. As 
proposed, our methodology for calculating overhead wages and salaries 
attributable to the routine inpatient hospital-based IRF erroneously 
included a portion of capital costs in the Wages and Salaries cost 
weight. To address this inaccuracy, we are, for the same reasons 
described above, revising our calculation of total overhead costs to be 
equal to total noncapital overhead costs attributable to the hospital-
based IRF (sum of columns 4-18 on Worksheet B, part I, line 41 less 
total capital costs as reported on Worksheet B, part II, columns 4-18, 
line 41).
    These modifications to the calculation of overhead wages and 
salaries attributable to the routine inpatient hospital-based IRFs are 
consistent with the methodology we are finalizing for the calculation 
of overhead wages and salaries attributable to the ancillary 
departments for hospital-based IRF as described above. We note that 
these modifications result in changes to the calculation of employee 
benefits, which we discuss below.
    Comment: Several commenters requested that CMS explain with greater 
specificity the methodology that we used to calculate the wages and 
salaries costs for the proposed 2012-based IRF market basket.
    Response: In the proposed rule, we provided a detailed description 
of how we derived the wages and salaries costs for the proposed IRF 
market basket. This discussion in the proposed rule contained 
sufficient detail such that, as noted above, Dobson DaVanzo was able to 
replicate our calculations and determine which costs we inadvertently 
omitted in our calculation. Therefore, we believe that we provided 
sufficient detail regarding our proposed methodology. Furthermore, we 
provide above a detailed description of the changes to our methodology 
that we are making in response to comments, including those citing the 
Dobson DaVanzo report.
    Final Decision: Based on public comments, we are changing the 
proposed methodology for estimating wages and salaries costs as 
described above and finalizing the methodology as changed. We discuss 
the effect of the changes to the proposed methodology on the Wages and 
Salaries cost weight in section VI.C.1.b of this final rule.
(ii) Employee Benefits Costs
    Effective with our implementation of CMS Form 2552-10, we began 
collecting employee benefits and contract labor data on Worksheet S-3, 
Part V. Previously, with CMS Form 2540-96, employee benefits and 
contract labor data were reported on Worksheet S-3, part II, which was 
applicable to only IPPS providers, and, therefore, these data were not 
available for the derivation of the RPL market basket. Due to the lack 
of such data, the Employee Benefits cost weight for the 2008-based RPL 
market basket was derived by multiplying the 2008-based RPL market 
basket Wages and Salaries cost weight by the ratio of the IPPS hospital 
market basket Employee Benefits cost weight to the IPPS hospital market 
basket Wages and Salaries cost weight. Similarly, the Contract Labor 
cost weight for the 2008-based RPL market basket was derived by 
multiplying the 2008-based RPL market basket Wages and Salaries cost 
weight by the ratio of the IPPS hospital market basket Contract Labor 
cost weight to the IPPS hospital market basket Wages and Salaries cost 
weight (see FY 2012 IRF PPS final rule (76 FR 47850 through 47851)).
    For FY 2012 Medicare cost report data, while there were providers 
that did report data on Worksheet S-3, part V, many providers did not 
complete this worksheet. However, in the proposed rule (80 FR 23344), 
we stated that we believed we had a large enough sample to enable us to 
produce a reasonable Employee Benefits cost weight.
    For freestanding IRFs, we proposed that employee benefits costs 
would be equal to the data reported on Worksheet S-3, Part V, line 2, 
column 2.
    As stated in the proposed rule, for hospital-based IRFs, we 
proposed to calculate total benefits as the sum of benefit costs 
reported on Worksheet S-3 Part V, line 4, column 2, and a portion of 
ancillary benefits and overhead benefits for the total facility. We 
proposed that ancillary benefits attributable to the hospital-based IRF 
would be calculated by multiplying ancillary salaries for the hospital-
based IRF as determined in the derivation of wages and salaries for the 
hospital-based IRF by the ratio of total facility benefits to total 
facility salaries. Similarly, we proposed that overhead benefits 
attributable to the hospital-based IRF would be calculated by 
multiplying overhead wages and salaries for the hospital-based IRF as 
determined in the derivation of wages and salaries for the hospital-
based IRF by the ratio of total facility benefits costs to total 
facility wages and salaries costs.
    Based on public comments, as stated above, we are now including a 
portion of overhead wages and salaries attributable to the ancillary 
departments in our calculation of wages and salaries for hospital-based 
IRFs. That change compelled us to make corresponding corrections to the 
calculation of employee benefits costs. Specifically, we need to 
include a portion of overhead employee benefits attributable to 
ancillary departments for hospital-based IRFs. We are estimating 
overhead employee benefits attributable to the ancillary departments 
using the same general methodology used to calculate routine inpatient 
overhead and ancillary employee benefits attributable to the hospital-
based unit. Overhead employee benefits attributable to the ancillary 
departments are calculated by multiplying overhead wages and salaries 
attributable to the ancillary departments by the ratio of total 
facility benefits to total facility salaries. Therefore, based on 
public comments and corrections to errors identified in our analysis of 
suggested solutions to concerns raised by commenters, total employee 
benefits for hospital-based IRFs are equal to the sum of benefit costs 
reported on Worksheet S-3 Part V,

[[Page 47054]]

line 4, column 2 and a portion of ancillary benefit costs and a portion 
of overhead benefit costs attributable to the routine inpatient unit 
and ancillary departments.
    The proposed methodology calculated routine overhead benefit costs 
attributable to the hospital-based IRF by multiplying overhead wages 
and salaries attributable to the routine inpatient portion of the 
hospital-based IRF by the ratio of total facility benefits to total 
facility salaries. As stated above, however, we are making two 
corrections to the calculation of the overhead wages and salaries 
attributable to the routine inpatient hospital-based IRF to correct 
data errors. These changes to the calculation of routine overhead wages 
and salaries as provided above result in changes to the routine 
overhead employee benefits attributable to the hospital-based IRF. The 
effect of methodological changes on the Employee Benefits cost weight 
is discussed in more detail in sections VI.C.1.b of this final rule.
    We received nine comments specific to our proposed methodology for 
calculating employee benefits costs.
    Comment: Several commenters noted our proposal to change the 
methodology for determining employee benefits costs from the 
methodology used to determine the employee benefits costs for the 2008-
based RPL market basket. As discussed in the proposed rule, under the 
RPL methodology, we used data from IPPS hospitals as a proxy for 
determining these costs for RPL facilities. Several commenters noted 
concern about the employee benefit cost data we relied upon, citing to 
the Dobson DaVanzo report, which found that only 96 of 217 freestanding 
IRFs (44 percent) and 268 of 819 hospitals with IRF units (33 percent) 
provided data on employee benefit costs. Commenters further noted that 
the Dobson DaVanzo report concluded that data were available for only a 
very few providers and the use of that data reduced the cost weight for 
Employee Benefits by 13 percent compared to if the cost weight were 
derived using the RPL market basket methodology. The report notes that 
this is contrary to the CMS conclusion that there was a sufficient 
volume of providers and that the use of IRF specific data instead of 
IPPS data did not make a material difference in the cost weights for 
these categories. The commenters stated that CMS should, for any future 
IRF market basket that replaces the RPL market basket, consider using 
IPPS data as a proxy for these specific data elements, as was done for 
the RPL market basket.
    Response: We believe our statement regarding the data available for 
our proposed methodology was misunderstood. In the proposed rule, we 
noted that many providers did not report Worksheet S-3, part V, data, 
but that we believed we had a sufficiently large sample to produce a 
reasonable Employee Benefits cost weight. Specifically, we found that 
when we recalculated the 2012 cost weight using the proposed IRF market 
basket methodology by reweighting the results to reflect the 
characteristics of the universe of IRF providers (freestanding and 
hospital-based), it did not have a material effect on the resulting 
cost weight.
    We understand the commenters' concern regarding our proposed 
methodology as compared to what was done for the 2008-based RPL market 
basket. However, we believe that the use of employee benefit costs 
reported by IRFs is a technical improvement from the methodology used 
for the 2008-based RPL market basket. Specifically, this methodology 
calculated the Employee Benefit cost weight by multiplying the RPL 
market basket Wages and Salaries cost weight by the IPPS employee 
benefit ratio. The IPPS employee benefit ratio was equal to the 2006-
based IPPS market basket Employee Benefit cost weight divided by the 
2006-based IPPS market basket Wages and Salaries cost weight. Using the 
rebased and revised 2010-based IPPS market basket; we calculate an 
employee benefit ratio of 28 percent compared to the 2012-based IRF 
market basket with 24 percent. Much of this 4-percentage-point 
difference is attributable to the characteristics of the IRF facilities 
as compared to the IPPS. Approximately 30 percent of total costs for 
IRFs are attributable to for-profit facilities (70 percent are 
attributable to nonprofit and government facilities) while 
approximately 10 percent of total costs for IPPS hospitals are 
attributable to for-profit facilities (90 percent are attributable to 
nonprofit and government facilities). Both the IRF and IPPS data show 
that the employee benefit ratio for for-profit facilities is lower than 
the employee benefit ratio for nonprofit/government facilities (in the 
range of 6 through 8 percentage points lower), thus IRF's higher 
proportion of for-profit facilities compared to IPPS hospitals leads to 
a lower employee benefit ratio.
    Final Decision: In conclusion, we believe the use of Worksheet S-3, 
part V data for IRFs is a technical improvement from the methodology 
used for the 2008-based RPL market basket, as we believe it better 
reflects the cost structures of IRFs. We encourage IRF providers to 
continue to report Worksheet S-3, part V, data and we will continue to 
monitor the data as the reporting improves. Therefore, having 
considered these public comments, we are finalizing our proposed 
methodology for calculating the primary Employee Benefit costs for the 
2012-based IRF market basket using the Worksheet S-3, part V data we 
proposed. As noted above, we are also finalizing the calculation of 
total employee benefits for hospital-based IRFs as equal to the sum of 
benefit costs reported on Worksheet S-3 Part V, line 4, column 2, and a 
portion of ancillary benefits and a portion of overhead benefits 
attributable to the routine inpatient unit and ancillary departments. 
This is slightly different than the proposed rule as we are now 
incorporating a portion of overhead benefits attributable to the 
ancillary departments in response to public comments. In addition, as 
mentioned above, the changes to the calculated routine overhead 
salaries for the hospital-based IRF, based on public comment, would 
also result in changes to the routine overhead employee benefits 
attributable to the hospital-based IRF.
(iii) Contract Labor Costs
    Similar to the RPL and IPPS market baskets, contract labor costs 
are primarily associated with direct patient care services. Contract 
labor costs for services such as accounting, billing, and legal are 
estimated using other government data sources. We proposed to derive 
the Contract Labor cost weight for the 2012-based IRF market basket 
using data from Worksheet S-3, part V. As previously noted, for FY 2012 
Medicare cost report data, while there were providers that did report 
data on Worksheet S-3, part V, many providers did not complete this 
worksheet. However, as we said in the proposed rule (80 FR 23344), we 
believe that we have a large enough sample to enable us to produce a 
reasonable Contract Labor cost weight.
    For freestanding IRFs, we proposed that contract labor costs would 
be based on data reported on Worksheet S-3, part V, column 1, line 2, 
and for hospital-based IRFs, contract labor costs would be based on 
line 4 of this same worksheet.
    We received 9 comments on our methodology for calculating contract 
labor costs that were similar to the comments we received regarding 
employee benefits costs.
    Comment: Several commenters noted our proposal to change the 
methodology

[[Page 47055]]

for determining the Contract Labor cost weight from the methodology 
used to derive that weight for the 2008-based RPL market basket. Under 
the RPL methodology, CMS used data from IPPS hospitals as a proxy for 
determining these costs for RPL facilities. Commenters expressed 
concern about the number of IRFs upon which those proposals were based, 
with some commenters citing to the Dobson DaVanzo report, which found 
that only 79 of 217 freestanding IRFs (36 percent) and 131 of 819 
hospitals with IRF units (16 percent) provided data on contract labor 
costs. Commenters further cited the Dobson DaVanzo report as evidence 
that there was insufficient data to produce a reasonable Contract Labor 
cost weight. The commenters also noted that the report found that, 
using the proposed IRF data as opposed to the IPPS cost weights (as was 
done for the RPL market basket) reduced the cost weight for contract 
labor by 70 percent.
    Response: We believe our statement regarding the data available for 
our proposed methodology was misunderstood. As the commenter noted, 
about 20 percent of freestanding and hospital-based IRF providers 
reported Worksheet S-3, part V, data on contract labor costs. As noted 
in the proposed rule, when we recalculated an IRF-specific Contract 
Labor cost weight using Worksheet S-3, part V, data, which we weighted 
to reflect the characteristics of the universe of IRF providers 
(freestanding and hospital-based), and compared that figure to the 
proposed IRF-specific cost weight, the reweighted cost weight produced 
a Contract Labor cost weight that was similar to the proposed cost 
weight under the IRF-specific market basket. Therefore, we concluded 
that the small sample size did not likely have a material effect on the 
Contract Labor cost weight.
    We understand the commenters' concern for the methodology change. 
Specifically, the methodology used for the RPL market basket calculated 
the Contract Labor cost weight by multiplying the RPL market basket 
Wages and Salaries cost weight by the IPPS contract labor ratio. The 
IPPS contract labor ratio was equal to the 2006-based IPPS market 
basket Contract Labor cost weight divided by the 2006-based IPPS market 
basket Wages and Salaries cost weight. Using the rebased and revised 
2010- based IPPS market basket, we calculated a contract labor ratio 
using the current RPL-based methodology of 4 percent compared to the 
contract labor ratio we calculated using the 2012-based IRF market 
basket of 2 percent. This difference appears consistent across 
different types of providers (for example, nonprofit vs. for-profit). 
As a result, we believe that the use of contract labor data directly 
reported by IRFs represents a technical improvement over the contract 
labor ratio resulting from the IPPS cost weights, as it reflects IRF's 
Medicare services and the characteristics of these providers instead of 
the contract labor employed relative to direct wages and salaries as 
experienced by IPPS hospitals.
    Final Decision: After consideration of the public comments, we are 
finalizing our methodology for deriving contract labor costs as 
proposed.
(iv) Pharmaceuticals Costs
    In the FY 2016 IRF PPS proposed rule (80 FR 23344), for 
freestanding IRFs, we proposed to calculate pharmaceuticals costs using 
non-salary costs reported on Worksheet A, column 7, less Worksheet A, 
column 1, for the pharmacy cost center (line 15) and drugs charged to 
patients cost center (line 73).
    For hospital-based IRFs, we proposed to calculate pharmaceuticals 
costs using a portion of the non-salary pharmacy costs and a portion of 
the non-salary drugs charged to patient costs reported for the total 
facility. Non-salary pharmacy costs attributable to the hospital-based 
IRF are calculated by multiplying total pharmacy costs attributable to 
the hospital-based IRF (as reported on Worksheet B, column 15, line 41) 
by the ratio of total non-salary pharmacy costs (Worksheet A, column 2, 
line 15) to total pharmacy costs (sum of Worksheet A, columns 1 and 2 
for line 15) for the total facility. Non-salary drugs charged to 
patient costs attributable to the hospital-based IRF are calculated by 
multiplying total non-salary drugs charged to patient costs (Worksheet 
B, part I, column 0, line 73, plus Worksheet B, part I, column 15, line 
73, less Worksheet A, column 1, line 73) for the total facility by the 
ratio of Medicare drugs charged to patient ancillary costs for the IRF 
unit (as reported on Worksheet D-3 for hospital-based IRFs, line 73, 
column 3) to total Medicare drugs charged to patient ancillary costs 
for the total facility (equal to the sum of Worksheet D-3, line 73, 
column 3, for all relevant PPS (that is, IPPS, IRF, IPF and SNF)).
    We did not receive any specific comments on our proposed 
methodology for calculating pharmaceuticals costs for freestanding and 
hospital-based IRFs.
    Final Decision: We are finalizing our methodology for calculating 
pharmaceuticals costs as proposed.
(v) Professional Liability Insurance Costs
    In the FY 2016 IRF PPS proposed rule (80 FR 23345), for 
freestanding IRFs, we proposed that Professional Liability Insurance 
(PLI) costs (often referred to as malpractice costs) would be equal to 
premiums, paid losses and self-insurance costs reported on Worksheet S-
2, line 118, columns 1 through 3. For hospital-based IRFs, we proposed 
to assume that the PLI weight for the total facility is similar to the 
hospital-based IRF unit since the only data reported on this worksheet 
is for the entire facility, as we currently have no means to identify 
the proportion of total PLI costs that are only attributable to the 
hospital-based IRF. Therefore, hospital-based IRF PLI costs would be 
equal to total facility PLI (as reported on Worksheet S-2, line 118, 
columns 1 through 3) divided by total facility costs (as reported on 
Worksheet A, line 200) times hospital-based IRF Medicare allowable 
total costs.
    We did not receive any specific comments on this proposed 
methodology for deriving PLI costs for freestanding and hospital-based 
IRFs.
    Final Decision: We are finalizing our methodology for calculating 
PLI costs as proposed.
(vi) Capital Costs
    In the FY 2016 IRF PPS proposed rule (80 FR 23345), for 
freestanding IRFs, we proposed that capital costs would be equal to 
Medicare allowable capital costs as reported on Worksheet B, Part II, 
column 26.
    For hospital-based IRFs, we proposed that capital costs would be 
equal to IRF inpatient capital costs (as reported on Worksheet B, part 
II, column 26, line 41) and a portion of IRF ancillary capital costs. 
We proposed to calculate the portion of ancillary capital costs 
attributable to the hospital-based IRF for a given cost center by 
multiplying total facility ancillary capital costs for the specific 
ancillary cost center (as reported on Worksheet B, Part II, column 26) 
by the ratio of IRF Medicare ancillary costs for the cost center (as 
reported on Worksheet D-3, column 3 for hospital-based IRFs) to total 
Medicare ancillary costs for the cost center (equal to the sum of 
Worksheet D-3, column 3 for all relevant PPS (that is, IPPS, IRF, IPF 
and SNF)). For example, if hospital-based IRF Medicare physical therapy 
costs represent 30 percent of the total Medicare physical therapy costs 
for the entire facility, then 30 percent of total facility physical 
therapy capital costs (as reported in Worksheet B, part II, column 26, 
line 66)

[[Page 47056]]

would be attributable to the hospital-based IRF.
    We did not receive any specific comments on our proposed 
methodology for deriving capital costs for freestanding and hospital-
based IRFs.
    Final Decision: We are finalizing our methodology for calculating 
capital costs as proposed.
b. Final Major Cost Category Computation
    After we derived costs for the 6 major cost categories for each 
provider using the Medicare cost report data as previously described, 
we proposed to address data outliers using the following steps (80 FR 
23345). First, we divide the costs for each of the six categories by 
total Medicare allowable costs calculated for the provider to obtain 
cost weights for the universe of IRF providers. We then remove those 
providers whose derived cost weights fall in the top and bottom five 
percent of provider specific derived cost weights to ensure the removal 
of outliers. After the outliers have been removed, we sum the costs for 
each category across all remaining providers. We then divide this by 
the sum of total Medicare allowable costs across all remaining 
providers to obtain a cost weight for the proposed 2012-based IRF 
market basket for the given category. Finally, we calculate the 
residual ``All Other'' cost weight that reflects all remaining costs 
that are not captured in the six cost categories listed. See Table 3 
for the resulting cost weights for these major cost categories that we 
obtain from the Medicare cost reports. In this table, we provide the 
proposed cost weights, as well as the final major cost weights, after 
implementing the methodological changes to the calculation of the wages 
and salaries and employee benefits costs as described in section 
VI.C.1.a.i through section VI.C.1.a.ii of this final rule.

                      Table 3--Major Cost Categories as Derived From Medicare Cost Reports
----------------------------------------------------------------------------------------------------------------
                                                                  2012-based IRF  2012-based IRF
                      Major cost categories                          proposed          final      2008-based RPL
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Wages and Salaries..............................................            45.5            47.3            47.4
Employee Benefits \1\...........................................            10.7            11.2            12.3
Contract Labor \1\..............................................             0.8             0.8             2.6
Professional Liability Insurance (Malpractice)..................             0.9             0.9             0.8
Pharmaceuticals.................................................             5.1             5.1             6.5
Capital.........................................................             8.6             8.6             8.4
All Other.......................................................            28.4            26.1            22.0
----------------------------------------------------------------------------------------------------------------
Total may not sum to 100 due to rounding.
\1\ Due to the lack of Medicare cost report data, the Employee Benefits and Contract Labor cost weights in the
  2008-based RPL market basket were based on the IPPS market basket.


    As discussed in section VI.C.1.a.i of this final rule, we made 
revisions to our proposed methodology for calculating wages and 
salaries costs for the IRF market basket based on public comments. The 
total effect of this methodology change on the 2012-based IRF market 
basket Wages and Salaries cost weight (which reflects freestanding and 
hospital-based IRFs) is an increase of about 1.9 percentage points from 
the proposed 2012-based IRF market basket Wages and Salaries cost 
weight of 45.5 percent. This overall effect can be broken down into 
multiple parts. The first part is our change to include overhead wages 
and salaries attributable to the ancillary departments for hospital-
based IRFs, which resulted in an increase of 3.2 percentage points to 
the aggregate Wages and Salaries cost weight. This effect is partially 
offset by the second part, which is our change in methodology for 
deriving the overhead wages and salaries attributable to the routine 
department of hospital-based IRFs (resulting in a decrease of 1.3 
percentage points to the Wages and Salaries cost weight). The resulting 
final Wages and Salaries cost weight obtained directly from the 
Medicare cost reports for the 2012-based IRF market basket is now 
similar to the Wages and Salaries cost weight for the 2008-based RPL 
market basket.
    Also as discussed in section VI.C.1.a.ii of this final rule, we 
made revisions to our calculation of employee benefits costs based on 
public comments. The total effect of this methodology change on the 
2012-based IRF market basket Employee Benefits cost weight (which 
reflects freestanding and hospital-based IRFs) is an increase of about 
0.4 percentage point from the proposed 2012-based IRF market basket 
Employee Benefits cost weight of 10.7 percent. This net overall effect 
can be broken down into two components: (1) The inclusion of overhead 
employee benefits attributable to the ancillary departments (resulting 
in an increase of 0.7 percentage point to the aggregate Employee 
Benefits cost weight), and (2) changes to the routine overhead employee 
benefits attributable to the hospital-based IRF as a result of changes 
to the routine overhead salaries for the hospital-based IRF (resulting 
in a decrease of 0.2 percentage point to the Employee Benefits cost 
weight).
    As we did for the 2008-based RPL market basket, we proposed to 
allocate the Contract Labor cost weight to the Wages and Salaries and 
Employee Benefits cost weights based on their relative proportions 
under the assumption that contract labor costs are comprised of both 
wages and salaries and employee benefits. The contract labor allocation 
proportion for wages and salaries is equal to the Wages and Salaries 
cost weight as a percent of the sum of the Wages and Salaries cost 
weight and the Employee Benefits cost weight. For the proposed rule, 
this rounded percentage was 81 percent; therefore, we proposed to 
allocate 81 percent of the Contract Labor cost weight to the Wages and 
Salaries cost weight and 19 percent to the Employee Benefits cost 
weight.
    We did not receive any specific comments on our methodology for 
allocating contract labor costs to the Wages and Salaries and Employee 
Benefits cost weights.
    Final Decision: We are finalizing our methodology for allocating 
contract labor as proposed. For the final rule, after making changes to 
the Wages and Salaries and Employee Benefits cost weights, the rounded 
percentage remains 81 percent. Therefore, we are finalizing our 
methodology as proposed and allocating 81 percent of the Contract Labor 
cost weight to the Wages and Salaries cost weight and 19 percent to the 
Employee Benefits cost weight.
    Table 4 shows the Wages and Salaries and Employee Benefit cost 
weights after

[[Page 47057]]

Contract Labor cost weight allocation for the proposed 2012-based IRF 
market basket, the final 2012-based IRF market basket, and the 2008-
based RPL market basket.

         Table 4--Wages and Salaries and Employee Benefits Cost Weights After Contract Labor Allocation
----------------------------------------------------------------------------------------------------------------
                                                           2012-based IRF
                 Major cost categories                        proposed        2012-based IRF     2008-based RPL
                                                             (percent)       final  (percent)      (percent)
----------------------------------------------------------------------------------------------------------------
Wages and Salaries.....................................               46.1               47.9               49.4
Employee Benefits......................................               10.9               11.3               12.8
----------------------------------------------------------------------------------------------------------------

c. Derivation of the Detailed Operating Cost Weights
    To further divide the ``All Other'' residual cost weight estimated 
from the FY 2012 Medicare cost report data into more detailed cost 
categories, we proposed to use the 2007 Benchmark Input-Output (I-O) 
``Use Tables/Before Redefinitions/Purchaser Value'' for NAICS 622000, 
Hospitals, published by the Bureau of Economic Analysis (BEA) (80 FR 
23346). This data is publicly available at http://www.bea.gov/industry/io_annual.htm.
    The BEA Benchmark I-O data are scheduled for publication every five 
years with the most recent data available for 2007. The 2007 Benchmark 
I-O data are derived from the 2007 Economic Census and are the building 
blocks for BEA's economic accounts. Thus, they represent the most 
comprehensive and complete set of data on the economic processes or 
mechanisms by which output is produced and distributed.\3\ BEA also 
produces Annual I-O estimates; however, while based on a similar 
methodology, these estimates reflect less comprehensive and less 
detailed data sources and are subject to revision when benchmark data 
becomes available. Instead of using the less detailed Annual I-O data, 
we proposed to inflate the 2007 Benchmark I-O data forward to 2012 by 
applying the annual price changes from the respective price proxies to 
the appropriate market basket cost categories that are obtained from 
the 2007 Benchmark I-O data. We repeat this practice for each year. We 
then calculate the cost shares that each cost category represents of 
the inflated 2012 data. These resulting 2012 cost shares are applied to 
the All Other residual cost weight to obtain the detailed cost weights 
for the proposed 2012-based IRF market basket. For example, the cost 
for Food: Direct Purchases represents 6.5 percent of the sum of the 
``All Other'' 2007 Benchmark I-O Hospital Expenditures inflated to 
2012; therefore, the Food: Direct Purchases cost weight represents 6.5 
percent of the proposed 2012-based IRF market basket's ``All Other'' 
cost category (28.4 percent), yielding a ``final'' Food: Direct 
Purchases proposed cost weight of 1.8 percent in the proposed 2012-
based IRF market basket (0.065 * 28.4 percent = 1.8 percent).
---------------------------------------------------------------------------

    \3\ http://www.bea.gov/papers/pdf/IOmanual_092906.pdf.
---------------------------------------------------------------------------

    Using this methodology, we proposed to derive eighteen detailed IRF 
market basket cost category weights from the proposed 2012-based IRF 
market basket residual cost weight (28.4 percent). These categories 
are: (1) Electricity, (2) Fuel, Oil, and Gasoline (3) Water & Sewerage 
(4) Food: Direct Purchases, (5) Food: Contract Services, (6) Chemicals, 
(7) Medical Instruments, (8) Rubber & Plastics, (9) Paper and Printing 
Products, (10) Miscellaneous Products, (11) Professional Fees: Labor-
related, (12) Administrative and Facilities Support Services, (13) 
Installation, Maintenance, and Repair, (14) All Other Labor-related 
Services, (15) Professional Fees: Nonlabor-related, (16) Financial 
Services, (17) Telephone Services, and (18) All Other Nonlabor-related 
Services.
    We did not receive any specific comments on our proposed 
methodology of deriving detailed market basket cost category weights 
from the BEA Benchmark I-O data.
    Final Decision: We are finalizing our methodology for deriving the 
detailed market basket cost weights as proposed; however, since the 
methodological change to the derivation of wages and salaries costs and 
of employee benefits costs results in a Compensation cost weight that 
is slightly higher than proposed, the residual cost share weight is 
lower than proposed. Therefore, we are finalizing the residual cost 
share weight of 26.1 percent rather than the proposed residual of 28.4 
percent.
d. Derivation of the Detailed Capital Cost Weights
    As described in section V.C.1.a.vi of the proposed rule (80 FR 
23345), we proposed a Capital-Related cost weight of 8.6 percent as 
obtained from the FY 2012 Medicare cost reports for freestanding and 
hospital-based IRF providers. We proposed to then separate this total 
Capital-Related cost weight into more detailed cost categories (80 FR 
23346).
    Using FY 2012 Medicare cost reports, we are able to group capital-
Related costs into the following categories: Depreciation, Interest, 
Lease, and Other capital-Related costs. For each of these categories, 
we proposed to determine separately for hospital-based IRFs and 
freestanding IRFs what proportion of total capital-related costs the 
category represents.
    For freestanding IRFs, we proposed to derive the proportions for 
depreciation, interest, lease, and other capital-related costs using 
the data reported by the IRF on Worksheet A-7, which is similar to the 
methodology used for the 2008-based RPL market basket.
    For hospital-based IRFs, data for these four categories are not 
reported separately for the hospital-based IRF; therefore, we proposed 
to derive these proportions using data reported on Worksheet A-7 for 
the total facility. We assume the cost shares for the overall hospital 
are representative for the hospital-based IRF unit. For example, if 
depreciation costs make up 60 percent of total capital costs for the 
entire facility, we believe it is reasonable to assume that the 
hospital-based IRF would also have a 60 percent proportion because it 
is a unit contained within the total facility.
    To combine each detailed Capital cost weight for freestanding and 
hospital-based IRFs into a single Capital cost weight for the proposed 
2012-based IRF market basket, we proposed to weight together the shares 
for each of the categories (depreciation, interest, lease, and other 
capital-related costs) based on the share of total capital costs each 
provider type represents of the total capital costs for all IRFs for 
2012. Applying this methodology, results in proportions of total 
capital-related costs for depreciation, interest, lease and other 
capital-related costs that are

[[Page 47058]]

representative of the universe of IRF providers.
    We also proposed to allocate lease costs across each of the 
remaining detailed capital-related cost categories as was done in the 
2008-based RPL market basket. This would result in three primary 
capital-related cost categories in the proposed 2012-based IRF market 
basket: Depreciation, Interest, and Other capital-Related costs. Lease 
costs are unique in that they are not broken out as a separate cost 
category in the proposed 2012-based IRF market basket. Rather, we 
proposed to proportionally distribute these costs among the cost 
categories of Depreciation, Interest, and Other Capital-Related, 
reflecting the assumption that the underlying cost structure of leases 
is similar to that of capital-related costs in general. As was done 
under the 2008-based RPL market basket, we proposed to assume that 10 
percent of the lease costs as a proportion of total capital-related 
costs represents overhead and assign those costs to the Other Capital-
Related cost category accordingly. We proposed to distribute the 
remaining lease costs proportionally across the three cost categories 
(Depreciation, Interest, and Other Capital-Related) based on the 
proportion that these categories comprise of the sum of the 
Depreciation, Interest, and Other Capital-related cost categories 
(excluding lease expenses). This is the same methodology used for the 
2008-based RPL market basket. The allocation of these lease expenses 
are shown in Table 5.
    Finally, we proposed to further divide the Depreciation and 
Interest cost categories. We proposed to separate Depreciation into the 
following two categories: (1) Building and Fixed Equipment and (2) 
Movable Equipment; and proposed to separate Interest into the following 
two categories: (1) Government/Nonprofit and (2) For-profit.
    To disaggregate the Depreciation cost weight, we needed to 
determine the percent of total Depreciation costs for IRFs attributable 
to Building and Fixed Equipment, which we hereafter refer to as the 
``fixed percentage.'' For the proposed 2012-based IRF market basket, we 
proposed to use slightly different methods to obtain the fixed 
percentages for hospital-based IRFs compared to freestanding IRFs.
    For freestanding IRFs, we proposed to use depreciation data from 
Worksheet A-7 of the FY 2012 Medicare cost reports, similar to the 
methodology used for the 2008-based RPL market basket. However, for 
hospital-based IRFs, we determined that the fixed percentage for the 
entire facility may not be representative of the hospital-based IRF 
unit due to the entire facility likely employing more sophisticated 
movable assets that are not utilized by the hospital-based IRF. 
Therefore, for hospital-based IRFs, we proposed to calculate a fixed 
percentage using: (1) Building and fixture capital costs allocated to 
the hospital-based IRF unit as reported on Worksheet B, part I, line 
41, and (2) building and fixture capital costs for the top five 
ancillary cost centers utilized by hospital-based IRFs. We proposed to 
weight these two fixed percentages (inpatient and ancillary) using the 
proportion that each capital cost type represents of total capital 
costs in the proposed 2012-based IRF market basket. We proposed to then 
weight the fixed percentages for hospital-based and freestanding IRFs 
together using the proportion of total capital costs each provider type 
represents.
    To disaggregate the Interest cost weight, we needed to determine 
the percent of total interest costs for IRFs that are attributable to 
government and nonprofit facilities, which we hereafter refer to as the 
``nonprofit percentage,'' as price pressures associated with these 
types of interest costs tend to differ from those for for-profit 
facilities. For the IRF market basket, we proposed to use interest 
costs data from Worksheet A-7 of the FY 2012 Medicare cost reports for 
both freestanding and hospital-based IRFs, similar to the methodology 
used for the 2008-based RPL market basket. We proposed to determine the 
percent of total interest costs that are attributed to government and 
nonprofit IRFs separately for hospital-based and freestanding IRFs. We 
then proposed to weight the nonprofit percentages for hospital-based 
and freestanding IRFs together using the proportion of total capital 
costs that each provider type represents.
    Table 5 provides the detailed capital cost shares obtained from the 
Medicare cost reports. Ultimately, these detailed capital cost shares 
were applied to the total Capital-Related cost weight determined in 
section V.C.1.a.vi of the proposed rule to split out the total weight 
of 8.6 percent into more detailed cost categories and weights.
    We did not receive any specific comments on our proposed 
methodology for calculating the detailed capital cost weights for the 
2012-based IRF market basket.
    Final Decision: We are finalizing our methodology for deriving the 
detailed capital cost weights as proposed. Therefore, the detailed 
capital cost weights for the final 2012-based IRF market basket 
contained in Table 5 are unchanged from the proposed rule.

  Table 5--Detailed Capital Cost Weights for the 2012-Based IRF Market
                                 Basket
------------------------------------------------------------------------
                                                             Detailed
                                            Cost shares    capital cost
                                           obtained from   shares after
                                           Medicare cost   allocation of
                                           reports  (%)        lease
                                                           expenses  (%)
------------------------------------------------------------------------
Depreciation............................              61              74
    Building and Fixed Equipment........              39              48
    Movable Equipment...................              22              26
Interest................................              13              16
    Government/Nonprofit................               8              10
    For Profit..........................               5               6
Lease...................................              20             n/a
Other...................................               6              10
------------------------------------------------------------------------


[[Page 47059]]

e. 2012-Based IRF Market Basket Cost Categories and Weights
    Table 6 shows the cost categories and weights for the proposed 
2012-based IRF market basket, the final 2012-based IRF market basket, 
and the 2008-based RPL market basket.

         Table 6--Proposed and Final 2012-Based IRF Cost Weights Compared to 2008-Based RPL Cost Weights
----------------------------------------------------------------------------------------------------------------
                                                                  Proposed 2012-    Final 2012-
                          Cost category                           based IRF cost  based IRF cost  2008-based RPL
                                                                      weight          weight        cost weight
----------------------------------------------------------------------------------------------------------------
Total...........................................................           100.0           100.0           100.0
    Compensation................................................            57.0            59.2            62.3
        Wages and Salaries......................................            46.1            47.9            49.4
        Employee Benefits.......................................            10.9            11.3            12.8
    Utilities...................................................             2.3             2.1             1.6
        Electricity.............................................             1.0             1.0             1.1
        Fuel, Oil, and Gasoline.................................             1.1             1.1             0.4
        Water & Sewerage........................................             0.1             0.1             0.1
    Professional Liability Insurance............................             0.9             0.9             0.8
    All Other Products and Services.............................            31.2            29.1            27.0
        All Other Products......................................            14.0            13.3            15.6
            Pharmaceuticals.....................................             5.1             5.1             6.5
            Food: Direct Purchases..............................             1.8             1.7             3.0
            Food: Contract Services.............................             1.1             1.0             0.4
            Chemicals...........................................             0.7             0.7             1.1
            Medical Instruments.................................             2.5             2.3             1.8
            Rubber & Plastics...................................             0.6             0.6             1.1
            Paper and Printing Products.........................             1.2             1.1             1.0
            Apparel.............................................  ..............  ..............             0.2
            Machinery and Equipment.............................  ..............  ..............             0.1
            Miscellaneous Products..............................             0.9             0.8             0.3
        All Other Services......................................            17.2            15.8            11.4
            Labor-Related Services..............................             8.8             8.0             4.7
                Professional Fees: Labor-related................             3.8             3.5             2.1
                Administrative and Facilities Support Services..             0.9             0.8             0.4
                Installation, Maintenance, and Repair...........             2.1             1.9  ..............
                All Other: Labor-related Services...............             2.0             1.8             2.1
            Nonlabor-Related Services...........................             8.5             7.8             6.7
                Professional Fees: Nonlabor-related.............             3.4             3.1             4.2
                Financial services..............................             3.0             2.7             0.9
                Telephone Services..............................             0.7             0.7             0.4
                Postage.........................................  ..............  ..............             0.6
                All Other: Nonlabor-related Services............             1.4             1.3             0.6
    Capital-Related Costs.......................................             8.6             8.6             8.4
        Depreciation............................................             6.4             6.4             5.5
            Fixed Assets........................................             4.1             4.1             3.3
            Movable Equipment...................................             2.3             2.3             2.2
        Interest Costs..........................................             1.4             1.4             2.0
            Government/Nonprofit................................             0.9             0.9             0.7
            For Profit..........................................             0.5             0.5             1.3
        Other Capital-Related Costs.............................             0.8             0.8             0.9
----------------------------------------------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.

    We stated that the 2012-based IRF market basket would not include 
separate cost categories for Apparel, Machinery & Equipment, and 
Postage. Due to the small weights associated with these detailed 
categories and relatively stable price growth in the applicable price 
proxy, we proposed to include Apparel and Machinery & Equipment in the 
Miscellaneous Products cost category and Postage in the All-Other 
Nonlabor-related Services. We note that these Machinery & Equipment 
expenses are for equipment that is paid for in a given year and not 
depreciated over the asset's useful life. Depreciation expenses for 
movable equipment are reflected in the Capital-related costs of the 
2012-based IRF market basket. We also proposed to include a separate 
cost category for Installation, Maintenance, and Repair.
    We did not receive any specific comments on our proposed list of 
detailed cost categories for the 2012-based IRF market basket.
    Final Decision: We are finalizing our list of detailed cost 
categories as proposed.
2. Selection of Price Proxies
    After developing the cost weights for the 2012-based IRF market 
basket, we proposed to select the most appropriate wage and price 
proxies currently available to represent the rate of price change for 
each expenditure category (80 FR 23349). For the majority of the cost 
weights, we proposed to base the price proxies on U.S. Bureau of Labor 
Statistics (BLS) data and grouped them into one of the following BLS 
categories:
     Employment Cost Indexes. Employment Cost Indexes (ECIs) 
measure the rate of change in employment wage rates and employer costs 
for employee benefits per hour worked. These indexes are fixed-weight 
indexes and strictly measure the change

[[Page 47060]]

in wage rates and employee benefits per hour. ECIs are superior to 
Average Hourly Earnings (AHE) as price proxies for input price indexes 
because they are not affected by shifts in occupation or industry mix, 
and because they measure pure price change and are available by both 
occupational group and by industry. The industry ECIs are based on the 
North American Industry Classification System (NAICS), and the 
occupational ECIs are based on the Standard Occupational Classification 
System (SOC).
     Producer Price Indexes. Producer Price Indexes (PPIs) 
measure price changes for goods sold in other than retail markets. PPIs 
are used when the purchases of goods or services are made at the 
wholesale level.
     Consumer Price Indexes. Consumer Price Indexes (CPIs) 
measure change in the prices of final goods and services bought by 
consumers. CPIs are only used when the purchases are similar to those 
of retail consumers rather than purchases at the wholesale level, or if 
no appropriate PPIs are available.
    We evaluated the price proxies using the criteria of reliability, 
timeliness, availability, and relevance:
     Reliability. Reliability indicates that the index is based 
on valid statistical methods and has low sampling variability. Widely 
accepted statistical methods ensure that the data were collected and 
aggregated in a way that can be replicated. Low sampling variability is 
desirable because it indicates that the sample reflects the typical 
members of the population. (Sampling variability is variation that 
occurs by chance because only a sample was surveyed rather than the 
entire population.)
     Timeliness. Timeliness implies that the proxy is published 
regularly, preferably at least once a quarter. The market baskets are 
updated quarterly, and therefore, it is important for the underlying 
price proxies to be up-to-date, reflecting the most recent data 
available. We believe that using proxies that are published regularly 
(at least quarterly, whenever possible) helps to ensure that we are 
using the most recent data available to update the market basket. We 
strive to use publications that are disseminated frequently, because we 
believe that this is an optimal way to stay abreast of the most current 
data available.
     Availability. Availability means that the proxy is 
publicly available. We prefer that our proxies are publicly available 
because this will help ensure that our market basket updates are as 
transparent to the public as possible. In addition, this enables the 
public to be able to obtain the price proxy data on a regular basis.
     Relevance. Relevance means that the proxy is applicable 
and representative of the cost category weight to which it is applied. 
The CPIs, PPIs, and Employment Cost Index (ECIs) that we selected meet 
these criteria. Therefore, we believe that they continue to be the best 
measure of price changes for the cost categories to which they would be 
applied.
    Table 6 lists all price proxies that we proposed to use for the 
2012-based IRF market basket. Below is a detailed explanation of the 
price proxies that we proposed for each cost category weight, (80 FR 
23350 through 23351). We note that many of the proxies that we proposed 
for the 2012-based IRF market basket are the same as those used for the 
2008-based RPL market basket. For further discussion on the 2008-based 
RPL market basket, see the FY 2012 IRF final rule (76 FR 47852 through 
47860).
a. Price Proxies for the Operating Portion of the Proposed 2012-Based 
IRF Market Basket
1. Wages and Salaries
    We proposed to continue to use the ECI for Wages and Salaries for 
All Civilian workers in Hospitals (BLS series code #CIU1026220000000I) 
to measure the wage rate growth of this cost category. This is the same 
price proxy used in the 2008-based RPL market basket.
2. Benefits
    We proposed to continue to use the ECI for Total Benefits for All 
Civilian workers in Hospitals to measure price growth of this category. 
This ECI is calculated using the ECI for Total Compensation for All 
Civilian workers in Hospitals (BLS series code # CIU1016220000000I) and 
the relative importance of wages and salaries within total 
compensation. This is the same price proxy used in the 2008-based RPL 
market basket.
3. Electricity
    We proposed to continue to use the PPI for Commercial Electric 
Power (BLS series code #WPU0542) to measure the price growth of this 
cost category. This is the same price proxy used in the 2008-based RPL 
market basket.
4. Fuel, Oil, and Gasoline
    We proposed to change the proxy used for the Fuel, Oil, and 
Gasoline cost category. The 2008-based RPL market basket uses the PPI 
for Petroleum Refineries (BLS series code #PCU32411-32411) to proxy 
these expenses.
    For the 2012-based IRF market basket, we proposed to use a blend of 
the PPI for Petroleum Refineries and the PPI Commodity for Natural Gas 
(BLS series code #WPU0531). Our analysis of the Bureau of Economic 
Analysis' 2007 Benchmark Input-Output data (use table before 
redefinitions, purchaser's value for NAICS 622000 [Hospitals]) showed 
that Petroleum Refineries expenses accounts for approximately 70 
percent and Natural Gas accounts for approximately 30 percent of the 
Fuel, Oil, and Gasoline expenses. Therefore, we proposed a blend using 
of 70 percent of the PPI for Petroleum Refineries (BLS series code 
#PCU32411-32411) and 30 percent of the PPI Commodity for Natural Gas 
(BLS series code #WPU0531). We believe that these 2 price proxies are 
the most technically appropriate indices available to measure the price 
growth of the Fuel, Oil, and Gasoline cost category in the 2012-based 
IRF market basket.
5. Water and Sewerage
    We proposed to continue to use the CPI for Water and Sewerage 
Maintenance (BLS series code #CUUR0000SEHG01) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.
6. Professional Liability Insurance
    We proposed to continue to use the CMS Hospital Professional 
Liability Index to measure changes in PLI premiums. To generate this 
index, we collect commercial insurance premiums for a fixed level of 
coverage while holding non-price factors constant (such as a change in 
the level of coverage). This is the same proxy used in the 2008-based 
RPL market basket.
7. Pharmaceuticals
    We proposed to continue to use the PPI for Pharmaceuticals for 
Human Use, Prescription (BLS series code #WPUSI07003) to measure the 
price growth of this cost category. This is the same proxy used in the 
2008-based RPL market basket.
8. Food: Direct Purchases
    We proposed to continue to use the PPI for Processed Foods and 
Feeds (BLS series code #WPU02) to measure the price growth of this cost 
category. This is the same proxy used in the 2008-based RPL market 
basket.
9. Food: Contract Purchases
    We proposed to continue to use the CPI for Food Away From Home (BLS 
series code #CUUR0000SEFV) to measure the price growth of this cost

[[Page 47061]]

category. This is the same proxy used in the 2008-based RPL market 
basket.
10. Chemicals
    We proposed to continue to use a 4-part blended PPI composed of the 
PPI for Industrial Gas Manufacturing (BLS series code 
PCU325120325120P), the PPI for Other Basic Inorganic Chemical 
Manufacturing (BLS series code #PCU32518-32518), the PPI for Other 
Basic Organic Chemical Manufacturing (BLS series code #PCU32519-32519), 
and the PPI for Soap and Cleaning Compound Manufacturing (BLS series 
code #PCU32561-32561). We proposed updating the blend weights using 
2007 Benchmark I-O data, which compared to 2002 Benchmark I-O data is 
weighted more toward organic chemical products and weighted less toward 
inorganic chemical products.
    Table 7 shows the weights for each of the four PPIs used to create 
the blended PPI. These are the same four proxies used in the 2008-based 
RPL market basket; however, the blended PPI weights in the 2008-based 
RPL market baskets were based on 2002 Benchmark I-O data.

                                      Table 7--Blended Chemical PPI Weights
----------------------------------------------------------------------------------------------------------------
                                                                  2012-based IRF    2008-based
                              Name                                  weights  (%)   RPL  weights        NAICS
----------------------------------------------------------------------------------------------------------------
PPI for Industrial Gas Manufacturing............................              32              35          325120
PPI for Other Basic Inorganic Chemical Manufacturing............              17              25          325180
PPI for Other Basic Organic Chemical Manufacturing..............              45              30          325190
PPI for Soap and Cleaning Compound Manufacturing................               6              10          325610
----------------------------------------------------------------------------------------------------------------

11. Medical Instruments
    We proposed to use a blend for the Medical Instruments cost 
category. The 2007 Benchmark Input-Output data shows an approximate 50/
50 split between Surgical and Medical Instruments and Medical and 
Surgical Appliances and Supplies for this cost category. Therefore, we 
proposed a blend composed of 50 percent of the commodity-based PPI for 
Surgical and Medical Instruments (BLS code #WPU1562) and 50 percent of 
the commodity-based PPI for Medical and Surgical Appliances and 
Supplies (BLS code #WPU1563). The 2008-based RPL market basket uses the 
single, higher level PPI for Medical, Surgical, and Personal Aid 
Devices (BLS series code #WPU156).
12. Rubber and Plastics
    We proposed to continue to use the PPI for Rubber and Plastic 
Products (BLS series code #WPU07) to measure price growth of this cost 
category. This is the same proxy used in the 2008-based RPL market 
basket.
13. Paper and Printing Products
    We proposed to continue to use the PPI for Converted Paper and 
Paperboard Products (BLS series code #WPU0915) to measure the price 
growth of this cost category. This is the same proxy used in the 2008-
based RPL market basket.
14. Miscellaneous Products
    We proposed to continue to use the PPI for Finished Goods Less Food 
and Energy (BLS series code #WPUSOP3500) to measure the price growth of 
this cost category. This is the same proxy used in the 2008-based RPL 
market basket.
15. Professional Fees: Labor-Related
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
#CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2008-based RPL market basket.
16. Administrative and Facilities Support Services
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Office and Administrative Support (BLS 
series code #CIU2010000220000I) to measure the price growth of this 
category. This is the same proxy used in the 2008-based RPL market 
basket.
17. Installation, Maintenance, and Repair
    We proposed to use the ECI for Total Compensation for Civilian 
workers in Installation, Maintenance, and Repair (BLS series code 
#CIU1010000430000I) to measure the price growth of this new cost 
category. Previously these costs were included in the All Other: Labor-
related Services category and were proxied by the ECI for Total 
Compensation for Private Industry workers in Service Occupations (BLS 
series code #CIU2010000300000I). We believe that this index better 
reflects the price changes of labor associated with maintenance-related 
services and its incorporation represents a technical improvement to 
the market basket.
18. All Other: Labor-Related Services
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Service Occupations (BLS series code 
#CIU2010000300000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2008-based RPL market basket.
19. Professional Fees: Nonlabor-Related
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Professional and Related (BLS series code 
#CIU2010000120000I) to measure the price growth of this category. This 
is the same proxy used in the 2008-based RPL market basket.
20. Financial Services
    We proposed to continue to use the ECI for Total Compensation for 
Private Industry workers in Financial Activities (BLS series code 
#CIU201520A000000I) to measure the price growth of this cost category. 
This is the same proxy used in the 2008-based RPL market basket.
21. Telephone Services
    We proposed to continue to use the CPI for Telephone Services (BLS 
series code #CUUR0000SEED) to measure the price growth of this cost 
category. This is the same proxy used in the 2008-based RPL market 
basket.
22. All Other: Nonlabor-Related Services
    We proposed to continue to use the CPI for All Items Less Food and 
Energy (BLS series code #CUUR0000SA0L1E) to measure the price growth of 
this cost category. This is the same proxy used in the 2008-based RPL 
market basket.
    We did not receive any specific comments on our proposed selection 
of price proxies. Final Decision: We are finalizing our selection of 
price proxies as proposed.

[[Page 47062]]

b. Price Proxies for the Capital Portion of the 2012-Based IRF Market 
Basket
1. Capital Price Proxies Prior to Vintage Weighting
    We proposed to apply the same price proxies to the detailed 
capital-related cost categories as were applied in the 2008-based RPL 
market basket, which are described and provided in Table 7. We also 
proposed to continue to vintage weight the capital price proxies for 
Depreciation and Interest to capture the long-term consumption of 
capital. This vintage weighting method is similar to the method used 
for the 2008-based RPL market basket and is described in section 
V.C.2.b.2 of the proposed rule.
    We proposed to proxy the Depreciation: Building and Fixed Equipment 
cost category by BEA's Chained Price Index for Nonresidential 
Construction for Hospitals and Special Care Facilities (BEA Table 
5.4.4. Price Indexes for Private Fixed Investment in Structures by 
Type), the Depreciation: Movable Equipment cost category by the PPI for 
Machinery and Equipment (BLS series code #WPU11), the Nonprofit 
Interest cost category by the average yield on domestic municipal bonds 
(Bond Buyer 20-bond index), the For-profit Interest cost category by 
the average yield on Moody's Aaa bonds (Federal Reserve), and the Other 
Capital-Related cost category by the CPI-U for Rent of Primary 
Residence (BLS series code #CUUS0000SEHA). We believe these are the 
most appropriate proxies for IRF capital-related costs that meet our 
selection criteria of relevance, timeliness, availability, and 
reliability.
    We did not receive any public comments on the capital-related price 
proxies we proposed.
    Final Decision: We are finalizing our list of capital-related price 
proxies as proposed.
2. Vintage Weights for Price Proxies
    Because capital is acquired and paid for over time, capital-related 
expenses in any given year are determined by both past and present 
purchases of physical and financial capital. The vintage-weighted 
capital-related portion of the 2012-based IRF market basket is intended 
to capture the long-term consumption of capital, using vintage weights 
for depreciation (physical capital) and interest (financial capital). 
These vintage weights reflect the proportion of capital-related 
purchases attributable to each year of the expected life of building 
and fixed equipment, movable equipment, and interest. We proposed to 
use vintage weights to compute vintage-weighted price changes 
associated with depreciation and interest expenses.
    Capital-related costs are inherently complicated and are determined 
by complex capital-related purchasing decisions, over time, based on 
such factors as interest rates and debt financing. In addition, capital 
is depreciated over time instead of being consumed in the same period 
it is purchased. By accounting for the vintage nature of capital, we 
are able to provide an accurate and stable annual measure of price 
changes. Annual non-vintage price changes for capital are unstable due 
to the volatility of interest rate changes and, therefore, do not 
reflect the actual annual price changes for IRF capital-related costs. 
The capital-related component of the 2012-based IRF market basket 
reflects the underlying stability of the capital-related acquisition 
process.
    To calculate the vintage weights for depreciation and interest 
expenses, we first needed a time series of capital-related purchases 
for building and fixed equipment and movable equipment. We found no 
single source that provides an appropriate time series of capital-
related purchases by hospitals for all of the above components of 
capital purchases. The early Medicare cost reports did not have 
sufficient capital-related data to meet this need. Data we obtained 
from the American Hospital Association (AHA) did not include annual 
capital-related purchases. However, we were able to obtain data on 
total expenses back to 1963 from the AHA. Consequently, we proposed to 
use data from the AHA Panel Survey and the AHA Annual Survey to obtain 
a time series of total expenses for hospitals. We then proposed to use 
data from the AHA Panel Survey supplemented with the ratio of 
depreciation to total hospital expenses obtained from the Medicare cost 
reports to derive a trend of annual depreciation expenses for 1963 
through 2012. We proposed to separate these depreciation expenses into 
annual amounts of building and fixed equipment depreciation and movable 
equipment depreciation as determined earlier. From these annual 
depreciation amounts, we derived annual end-of-year book values for 
building and fixed equipment and movable equipment using the expected 
life for each type of asset category. While data is not available that 
is specific to IRFs, we believe this information for all hospitals 
serves as a reasonable alternative for the pattern of depreciation for 
IRFs.
    To continue to calculate the vintage weights for depreciation and 
interest expenses, we also needed to account for the expected lives for 
Building and Fixed Equipment, Movable Equipment, and Interest for the 
2012-based IRF market basket. We proposed to calculate the expected 
lives using Medicare cost report data from freestanding and hospital-
based IRFs. The expected life of any asset can be determined by 
dividing the value of the asset (excluding fully depreciated assets) by 
its current year depreciation amount. This calculation yields the 
estimated expected life of an asset if the rates of depreciation were 
to continue at current year levels, assuming straight-line 
depreciation. We proposed to determine the expected life of building 
and fixed equipment separately for hospital-based IRFs and freestanding 
IRFs, and then weight these expected lives using the percent of total 
capital costs each provider type represents. We proposed to apply a 
similar method for movable equipment. Using these proposed methods, we 
determined the average expected life of building and fixed equipment to 
be equal to 23 years, and the average expected life of movable 
equipment to be equal to 11 years. For the expected life of interest, 
we believe vintage weights for interest should represent the average 
expected life of building and fixed equipment because, based on 
previous research described in the FY 1997 IPPS final rule (61 FR 
46198), the expected life of hospital debt instruments and the expected 
life of buildings and fixed equipment are similar. We note that for the 
2008-based RPL market basket, we used FY 2008 Medicare cost reports for 
IPPS hospitals to determine the expected life of building and fixed 
equipment and movable equipment (76 FR 51763). The 2008-based RPL 
market basket was based on an expected average life of building and 
fixed equipment of 26 years and an expected average life of movable 
equipment of 11 years, which were both calculated using data for IPPS 
hospitals.
    Multiplying these expected lives by the annual depreciation amounts 
results in annual year-end asset costs for building and fixed equipment 
and movable equipment. We then calculated a time series, beginning in 
1964, of annual capital purchases by subtracting the previous year's 
asset costs from the current year's asset costs.
    For the building and fixed equipment and movable equipment vintage 
weights, we proposed to use the real annual capital-related purchase 
amounts for each asset type to capture the actual amount of the 
physical acquisition, net of the effect of price inflation. These real 
annual capital-related purchase amounts are produced by deflating the 
nominal annual

[[Page 47063]]

purchase amount by the associated price proxy as provided earlier in 
this final rule. For the interest vintage weights, we proposed to use 
the total nominal annual capital-related purchase amounts to capture 
the value of the debt instrument (including, but not limited to, 
mortgages and bonds). Using these capital-related purchase time series 
specific to each asset type, we proposed to calculate the vintage 
weights for building and fixed equipment, for movable equipment, and 
for interest.
    The vintage weights for each asset type are deemed to represent the 
average purchase pattern of the asset over its expected life (in the 
case of building and fixed equipment and interest, 23 years, and in the 
case of movable equipment, 11 years). For each asset type, we used the 
time series of annual capital-related purchase amounts available from 
2012 back to 1964. These data allow us to derive twenty-seven 23-year 
periods of capital-related purchases for building and fixed equipment 
and interest, and thirty-nine 11-year periods of capital-related 
purchases for movable equipment. For each 23-year period for building 
and fixed equipment and interest, or 11-year period for movable 
equipment, we calculate annual vintage weights by dividing the capital-
related purchase amount in any given year by the total amount of 
purchases over the entire 23-year or 11-year period. This calculation 
is done for each year in the 23-year or 11-year period and for each of 
the periods for which we have data. We then calculate the average 
vintage weight for a given year of the expected life by taking the 
average of these vintage weights across the multiple periods of data.
    We did not receive any specific comments on the proposed 
methodology for calculating the vintage weights for the 2012-based IRF 
market basket.
    Final Decision: We are finalizing the vintage weights as proposed.
    The vintage weights for the capital-related portion of the 2008-
based RPL market basket and the 2012-based IRF market basket are 
presented in Table 8.

                Table 8--2008-Based RPL Market Basket And 2012-Based IRF Market Basket Vintage Weights for Capital-Related Price Proxies
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Building and fixed equipment          Movable equipment                   Interest
                                                         -----------------------------------------------------------------------------------------------
                          Year                             2012-based 23   2008-based 26   2012-based 11   2008-based 11   2012-based 23   2008-based 26
                                                               years           years           years           years           years           years
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................           0.029           0.021           0.069           0.071           0.017           0.010
2.......................................................           0.031           0.023           0.073           0.075           0.019           0.012
3.......................................................           0.034           0.025           0.077           0.080           0.022           0.014
4.......................................................           0.036           0.027           0.083           0.083           0.024           0.016
5.......................................................           0.037           0.028           0.087           0.085           0.026           0.018
6.......................................................           0.039           0.030           0.091           0.089           0.028           0.020
7.......................................................           0.040           0.031           0.096           0.092           0.030           0.021
8.......................................................           0.041           0.033           0.100           0.098           0.032           0.024
9.......................................................           0.042           0.035           0.103           0.103           0.035           0.026
10......................................................           0.044           0.037           0.107           0.109           0.038           0.029
11......................................................           0.045           0.039           0.114           0.116           0.040           0.033
12......................................................           0.045           0.041  ..............  ..............           0.042           0.035
13......................................................           0.045           0.042  ..............  ..............           0.044           0.038
14......................................................           0.046           0.043  ..............  ..............           0.046           0.041
15......................................................           0.046           0.044  ..............  ..............           0.048           0.043
16......................................................           0.048           0.045  ..............  ..............           0.053           0.046
17......................................................           0.049           0.046  ..............  ..............           0.057           0.049
18......................................................           0.050           0.047  ..............  ..............           0.060           0.052
19......................................................           0.051           0.047  ..............  ..............           0.063           0.053
20......................................................           0.051           0.045  ..............  ..............           0.066           0.053
21......................................................           0.051           0.045  ..............  ..............           0.067           0.055
22......................................................           0.050           0.045  ..............  ..............           0.069           0.056
23......................................................           0.052           0.046  ..............  ..............           0.073           0.060
24......................................................  ..............           0.046  ..............  ..............  ..............           0.063
25......................................................  ..............           0.045  ..............  ..............  ..............           0.064
26......................................................  ..............           0.046  ..............  ..............  ..............           0.068
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................           1.000           1.000           1.000           1.000           1.000           1.000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Numbers may not add to total due to rounding.

    The process of creating vintage-weighted price proxies requires 
applying the vintage weights to the price proxy index where the last 
applied vintage weight in Table 8 is applied to the most recent data 
point. We have provided on the CMS Web site an example of how the 
vintage weighting price proxies are calculated, using example vintage 
weights and example price indices. The example can be found at the 
following link: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html in the zip file titled ``Weight Calculations 
as described in the IPPS FY 2010 Proposed Rule.''
c. Summary of Price Proxies of the 2012-Based IRF Market Basket
    As stated above, we did not receive any public comments on our 
proposed list of operating or capital price proxies.
    Final Decision: We are finalizing the list of operating and capital 
price proxies as proposed.
    Table 9 shows both the operating and capital price proxies for the 
2012-based IRF market basket.

[[Page 47064]]



       Table 9--Price Proxies for the 2012-Based IRF Market Basket
------------------------------------------------------------------------
                                                                Weight
         Cost description                Price proxies         (percent)
------------------------------------------------------------------------
Total--IRF12.....................  .........................       100.0
    Compensation.................  .........................        59.2
        Wages and Salaries.......  ECI for Wages and                47.9
                                    Salaries for All
                                    Civilian workers in
                                    Hospitals.
        Employee Benefits........  ECI for Total Benefits           11.3
                                    for All Civilian workers
                                    in Hospitals.
    Utilities....................  .........................         2.1
        Electricity..............  PPI for Commercial                1.0
                                    Electric Power.
        Fuel, Oil, and Gasoline..  Blend of the PPI for              1.1
                                    Petroleum Refineries and
                                    PPI for Natural Gas.
        Water & Sewage...........  CPI-U for Water and               0.1
                                    Sewerage Maintenance.
    Professional Liability         .........................         0.9
     Insurance.
        Malpractice..............  CMS Hospital Professional         0.9
                                    Liability Insurance
                                    Premium Index.
    All Other Products and         .........................        29.1
     Services.
    All Other Products...........  .........................        13.3
        Pharmaceuticals..........  PPI for Pharmaceuticals           5.1
                                    for human use,
                                    prescription.
        Food: Direct Purchases...  PPI for Processed Foods           1.7
                                    and Feeds.
        Food: Contract Services..  CPI-U for Food Away From          1.0
                                    Home.
        Chemicals................  Blend of Chemical PPIs...         0.7
        Medical Instruments......  Blend of the PPI for              2.3
                                    Surgical and medical
                                    instruments and PPI for
                                    Medical and surgical
                                    appliances and supplies.
        Rubber & Plastics........  PPI for Rubber and                0.6
                                    Plastic Products.
        Paper and Printing         PPI for Converted Paper           1.1
         Products.                  and Paperboard Products.
        Miscellaneous Products...  PPI for Finished Goods            0.8
                                    Less Food and Energy.
    All Other Services...........  .........................        15.8
    Labor-Related Services.......  .........................         8.0
        Professional Fees: Labor-  ECI for Total                     3.5
         related.                   compensation for Private
                                    industry workers in
                                    Professional and related.
        Administrative and         ECI for Total                     0.8
         Facilities Support         compensation for Private
         Services.                  industry workers in
                                    Office and
                                    administrative support.
        Installation, Maintenance  ECI for Total                     1.9
         & Repair.                  compensation for
                                    Civilian workers in
                                    Installation,
                                    maintenance, and repair.
        All Other: Labor-related   ECI for Total                     1.8
         Services.                  compensation for Private
                                    industry workers in
                                    Service occupations.
    Nonlabor-Related Services....  .........................         7.8
        Professional Fees:         ECI for Total                     3.1
         Nonlabor-related.          compensation for Private
                                    industry workers in
                                    Professional and related.
        Financial services.......  ECI for Total                     2.7
                                    compensation for Private
                                    industry workers in
                                    Financial activities.
        Telephone Services.......  CPI-U for Telephone               0.7
                                    Services.
    All Other: Nonlabor-related    CPI-U for All Items Less          1.3
     Services.                      Food and Energy.
    Capital-Related Costs........  .........................         8.6
    Depreciation.................  .........................         6.4
        Fixed Assets.............  BEA chained price index           4.1
                                    for nonresidential
                                    construction for
                                    hospitals and special
                                    care facilities--vintage
                                    weighted (23 years).
        Movable Equipment........  PPI for machinery and             2.3
                                    equipment--vintage
                                    weighted (11 years).
    Interest Costs...............  .........................         1.4
        Government/Nonprofit.....  Average yield on domestic         0.9
                                    municipal bonds (Bond
                                    Buyer 20 bonds)--vintage
                                    weighted (23 years).
        For Profit...............  Average yield on Moody's          0.5
                                    Aaa bonds--vintage
                                    weighted (23 years).
    Other Capital-Related Costs..  CPI-U for Rent of primary         0.8
                                    residence.
------------------------------------------------------------------------
Note: Detail may not add to total due to rounding.

D. FY 2016 Market Basket Update and Productivity Adjustment

1. FY 2016 Market Basket Update
    For FY 2016, we proposed to use the 2012-based IRF market basket 
increase factor described in section VI.C. of the proposed rule to 
update the IRF PPS base payment rate (80 FR 23355). Consistent with 
historical practice, we proposed to estimate the market basket update 
for the IRF PPS based on IHS Global Insight's forecast using the most 
recent available data. IHS Global Insight (IGI), Inc. is a nationally 
recognized economic and financial forecasting firm with which CMS 
contracts to forecast the components of the market baskets and 
multifactor productivity (MFP).
    Based on IGI's first quarter 2015 forecast with historical data 
through the fourth quarter of 2014, the projected proposed 2012-based 
IRF market basket increase factor for FY 2016 would be 2.7 percent. 
Therefore, consistent with our historical practice of estimating market 
basket increases based on the best available data, we proposed a market 
basket increase factor of 2.7 percent for FY 2016. We also proposed 
that if more recent data are subsequently available (for example, a 
more recent estimate of the market basket) we would use such data, to 
determine the FY 2016 update in the final rule.
    We received 5 comments on the proposed market basket increase 
factor for FY 2016.
    Comment: A few commenters stated that although the proposed payment 
increase does not keep up with inflation, they supported and 
appreciated the proposed increase in baseline payments and suggested 
that CMS finalize this policy in the final rule. A few commenters 
stated that they generally concurred with the methodology CMS used to 
arrive at the net market basket update. One commenter stated that the 
market basket update does not account for the mandatory sequestration, 
and they encouraged CMS to consider the fact that the proposed rule 
does not account for the two-percent sequestration reduction to all 
lines of Medicare.
    Response: We believe that the market basket update adequately 
accounts for

[[Page 47065]]

price inflation pressures faced by IRF providers. The productivity 
adjustment to the market basket update is mandated by the Affordable 
Care Act, and sequestration cuts are mandated by the Federal Budget. 
Both the productivity adjustments and sequestration cuts are outside 
the scope of regulatory policymaking or the market basket payment 
update.
    Comment: One commenter noted that, for FY 2016, the Medicare 
Payment Advisory Commission (MedPAC) recommends that a 0-percent update 
be applied to IRF PPS payment rates. However, this commenter also 
acknowledged that a 0-percent update is not currently authorized under 
statute.
    Response: As discussed, and in accordance with sections 
1886(j)(3)(C) and 1886(j)(3)(D) of the Act, the Secretary is updating 
IRF PPS payment rates for FY 2016 by an adjusted market basket increase 
factor of 1.7 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 2016.
    Final Decision: For this final rule, we are estimating the market 
basket update for the IRF PPS using the most recent available data. 
Based on IGI's second quarter 2015 forecast with historical data 
through the first quarter of 2015, the projected 2012-based IRF market 
basket increase factor for FY 2016 is 2.4 percent. Therefore, 
consistent with our historical practice of estimating market basket 
increases based on the best available data, we are finalizing a market 
basket increase factor of 2.4 percent for FY 2016.
    For comparison, the 2008-based RPL market basket is also projected 
to be 2.4 percent in FY 2016; this estimate is based on IGI's second 
quarter 2015 forecast (with historical data through the first quarter 
of 2015). Table 10 compares the 2012-based IRF market basket and the 
2008-based RPL market basket percent changes.

 Table 10--2012-Based IRF Market Basket and 2008-Based RPL Market Basket
                Percent Changes, FY 2010 Through FY 2018
------------------------------------------------------------------------
                                       2012-Based IRF    2008-Based RPL
                                        market basket     market basket
          Fiscal year  (FY)             index percent     index percent
                                           change            change
------------------------------------------------------------------------
Historical data:
    FY 2010.........................               2.1               2.2
    FY 2011.........................               2.3               2.5
    FY 2012.........................               1.8               2.2
    FY 2013.........................               2.0               2.1
    FY 2014.........................               1.8               1.8
    Average 2010-2014...............               2.0               2.2
Forecast:
    FY 2015.........................               1.6               2.0
    FY 2016.........................               2.4               2.4
    FY 2017.........................               2.9               2.9
    FY 2018.........................               3.1               3.1
    Average 2015-2018...............               2.5               2.6
------------------------------------------------------------------------
Note: These market basket percent changes do not include any further
  adjustments as may be statutorily required.
Source: IHS Global Insight, Inc. 2nd quarter 2015 forecast.

    The final FY 2016 market basket increase factor based on the 2012-
based IRF market basket is 0.3 percentage point lower than the proposed 
FY 2016 market basket increase factor. The difference between the 
proposed and final rule updates is primarily attributable to a downward 
revision in the IHS Global Insight forecasted growth in wages and 
salaries for hospital workers. The revised methodology for the Wages 
and Salaries and Employee Benefits cost weights results in a market 
basket update that is 0.1 percentage point higher than if no changes to 
the methodology had been finalized.
2. Productivity Adjustment
    According to section 1886(j)(3)(C)(i) of the Act, the Secretary 
shall establish an increase factor based on an appropriate percentage 
increase in a market basket of goods and services. As described in 
section V.C and V.D.1. of the proposed rule (80 FR 23342 through 
23355), we proposed to estimate the IRF PPS increase factor for FY 2016 
based on the proposed 2012-based IRF market basket. Section 
1886(j)(3)(C)(ii) of the Act then requires that, after establishing the 
increase factor for a FY, the Secretary shall reduce such increase 
factor for FY 2012 and each subsequent FY, by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act. 
Section 1886(b)(3)(B)(xi)(II) of the Act sets forth the definition of 
this productivity adjustment. The statute defines the productivity 
adjustment to be equal to the 10-year moving average of changes in 
annual economy-wide private nonfarm business MFP (as projected by the 
Secretary for the 10-year period ending with the applicable FY, year, 
cost reporting period, or other annual period) (the ``MFP 
adjustment''). The BLS publishes the official measure of private 
nonfarm business MFP. Please see http://www.bls.gov/mfp for the BLS 
historical published MFP data.
    MFP is derived by subtracting the contribution of labor and capital 
input growth from output growth. The projections of the components of 
MFP are currently produced by IGI, a nationally recognized economic 
forecasting firm with which CMS contracts to forecast the components of 
the market basket and MFP. As described in the FY 2012 IRF PPS final 
rule (76 FR 47836, 47858 through 47859), to generate a forecast of MFP, 
IGI replicated the MFP measure calculated by the BLS using a series of 
proxy variables derived from IGI's U.S. macroeconomic models. In the FY 
2012 IRF PPS final rule, we identified each of the major MFP component 
series employed by the BLS to measure MFP as well as provided the 
corresponding concepts determined to be the best available proxies for 
the BLS series. Beginning with the FY 2016 rulemaking cycle, the MFP 
adjustment is calculated using a revised series developed by IGI to 
proxy the aggregate capital inputs. Specifically, IGI has replaced the 
Real Effective Capital Stock used for Full Employment GDP with a 
forecast of BLS aggregate capital inputs recently

[[Page 47066]]

developed by IGI using a regression model. This series provides a 
better fit to the BLS capital inputs, as measured by the differences 
between the actual BLS capital input growth rates and the estimated 
model growth rates over the historical time period. Therefore, we are 
using IGI's most recent forecast of the BLS capital inputs series in 
the MFP calculations beginning with the FY 2016 rulemaking cycle. A 
complete description of the MFP projection methodology is available on 
CMS Web site at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. Although we discuss the IGI changes to the 
MFP proxy series in this final rule, in the future, when IGI makes 
changes to the MFP methodology, we will announce them on our Web site 
rather than in the annual rulemaking.
    Using IGI's first quarter 2015 forecast, the MFP adjustment for FY 
2016 (the 10-year moving average of MFP for the period ending FY 2016) 
was projected to be 0.6 percent. Thus, in accordance with section 
1886(j)(3)(C) of the Act, we proposed to base the FY 2016 market basket 
update, which is used to determine the applicable percentage increase 
for the IRF payments, on the most recent estimate of the proposed 2012-
based IRF market basket (estimated to be 2.7 percent in the proposed 
rule based on IGI's first quarter 2015 forecast). We proposed to then 
reduce this percentage increase by the current estimate of the MFP 
adjustment for FY 2016 of 0.6 percentage point (the 10-year moving 
average of MFP for the period ending FY 2016 based on IGI's first 
quarter 2015 forecast). Following application of the MFP, we 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 estimate of the FY 2016 IRF update for the proposed 
rule was 1.9 percent (2.7 percent market basket update, less 0.6 
percentage point MFP adjustment, less 0.2 percentage point legislative 
adjustment). Furthermore, we noted in the proposed rule that if more 
recent data were to be subsequently available (for example, a more 
recent estimate of the market basket and MFP adjustment), we would use 
such data to determine the FY 2016 market basket update and MFP 
adjustment in the final rule.
    We did not receive any specific comments on our methodology for 
calculating the productivity adjustment for FY 2016. We did receive 2 
comments on the application of the productivity adjustment to the 
market basket increase factor.
    Comment: One commenter stated that while they understand that CMS 
is bound by the required Affordable Care Act offsets, it is unlikely 
that productivity improvements will be generated by rehabilitation 
hospital providers at a pace matching the productivity of the economy 
at large on an ongoing, consistent basis as currently contemplated by 
the Affordable Care Act. A few commenters stated that services provided 
in rehabilitation hospitals are very labor-intensive through the 
provision of hands-on care by physical therapists, occupational 
therapists, speech therapists, and rehabilitation nursing staff. These 
commenters further stated that the proposed rule would implement 
significant new costs related to the IRF Quality Reporting Program and 
that the implementation of ICD-10-CM will increase billing and coding 
times. The commenters stated that as health care reform continues to 
take shape in the coming years, many changes discussed here, and new 
ones yet to be implemented, will adversely impact productivity levels 
in IRFs. Further, the commenters stated that while there are 
technologies utilized in providing therapy to patients, many of the 
treatment plans do not lend themselves to continual productivity 
improvements. The commenters claimed that it will be especially 
challenging for efficient providers, over time, to achieve continued 
efficiencies at a rate that will be required by ongoing application of 
productivity adjustments. As a result, the commenters respectfully 
requested that CMS carefully monitor the impact that these productivity 
adjustments will have on IRFs. One of the commenters also requested 
that CMS provide feedback to Congress as appropriate.
    Another commenter suggested that CMS remain cognizant of the 
intensive labor time and costs required by state and/or federal 
regulations to which IRFs are bound, and which may be barriers to IRFs 
achieving further gains in productivity efficiencies. The commenter 
stated that CMS should consider the unique needs of IRFs' 
rehabilitation patients and their interdisciplinary teams of highly 
skilled health care professionals when considering the productivity 
adjustment factor that it will apply to IRFs. In addition, the 
commenter stated that CMS should be mindful of the additional labor 
costs that IRFs will incur as a result of having more items that must 
be reported on the newest version of the IRF-PAI.
    Response: Section 1886(j)(3)(C)(ii)(I) of the Act requires the 
application of a productivity adjustment that must be applied to the 
IRF PPS market basket update. We will continue to monitor the impact of 
the payment updates, including the effects of the productivity 
adjustment, on IRF provider margins as well as beneficiary access to 
care.
    Final Decision: We are finalizing the methodology for determining 
the productivity adjustment as proposed. Using IGI's second quarter 
2015 forecast, the MFP adjustment for FY 2016 (the 10-year moving 
average of MFP for the period ending FY 2016) is projected to be 0.5 
percent. Thus, in accordance with section 1886(j)(3)(C) of the Act, we 
base the FY 2016 market basket update, which is used to determine the 
applicable percentage increase for the IRF payments, on the most recent 
estimate of the 2012-based IRF market basket (currently estimated to be 
2.4 percent based on IGI's second quarter 2015 forecast). We then 
reduce this percentage increase by the current estimate of the MFP 
adjustment for FY 2016 of 0.5 percentage point (the 10-year moving 
average of MFP for the period ending FY 2016 based on IGI's second 
quarter 2015 forecast). Following application of the MFP, we 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 estimate of the FY 2016 IRF update for this final 
rule is 1.7 percent (2.4 percent market basket update, less 0.5 
percentage-point MFP adjustment, less 0.2 percentage-point statutory 
other adjustment).
    For FY 2016, the Medicare Payment Advisory Commission (MedPAC) 
recommends that a 0-percent update be applied to IRF PPS payment rates. 
As discussed, and in accordance with sections 1886(j)(3)(C) and 
1886(j)(3)(D) of the Act, the Secretary is updating IRF PPS payment 
rates for FY 2015 by an adjusted market basket increase factor of 1.7 
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 2016.

E. Labor-Related Share for FY 2016

    Section 1886(j)(6) of the Act specifies that the Secretary is to 
adjust the proportion (as estimated by the Secretary from time to time) 
of rehabilitation facilities' costs which are attributable to wages and 
wage-related costs, of the prospective payment rates computed under 
section 1886(j)(3) for area differences in wage levels by a factor 
(established by the Secretary)

[[Page 47067]]

reflecting the relative hospital wage level in the geographic area of 
the rehabilitation facility compared to the national average wage level 
for such facilities. The labor-related share is determined by 
identifying the national average proportion of total costs that are 
related to, influenced by, or vary with the local labor market. We 
continue to classify a cost category as labor-related if the costs are 
labor-intensive and vary with the local labor market. As stated in the 
FY 2015 IRF PPS final rule (79 FR 45886), the labor-related share for 
FY 2015 was defined as the sum of the FY 2015 relative importance of 
Wages and Salaries, Employee Benefits, Professional Fees: Labor- 
Related Services, Administrative and Business Support Services, All 
Other: Labor-related Services, and a portion of the Capital Costs from 
the 2008-based RPL market basket.
    Based on our definition of the labor-related share and the cost 
categories in the proposed 2012-based IRF market basket, we proposed to 
include in the labor-related share for FY 2016 the sum of the FY 2016 
relative importance of Wages and Salaries, Employee Benefits, 
Professional Fees: Labor- Related, Administrative and Facilities 
Support Services, Installation, Maintenance, and Repair, All Other: 
Labor-related Services, and a portion of the Capital-Related cost 
weight from the proposed 2012-based IRF market basket (80 FR 23356). As 
noted in Section VI.C.2.a of this final rule, for the 2012-based IRF 
market basket, we have created a separate cost category for 
Installation, Maintenance, and Repair services. These expenses were 
previously included in the ``All Other'' Labor-related Services cost 
category in the 2008-based RPL market basket, along with other 
services, including, but not limited to, janitorial, waste management, 
security, and dry cleaning/laundry services. Because these services 
tend to be labor-intensive and are mostly performed at the facility 
(and, therefore, unlikely to be purchased in the national market), we 
continue to believe that they meet our definition of labor-related 
services.
    Similar to the 2008-based RPL market basket, the 2012-based IRF 
market basket includes 2 cost categories for nonmedical Professional 
fees (including, but not limited to, expenses for legal, accounting, 
and engineering services). These are Professional Fees: Labor-related 
and Professional Fees: Nonlabor-related. For the 2012-based IRF market 
basket, we proposed to estimate the labor-related percentage of non-
medical professional fees (and assign these expenses to the 
Professional Fees: Labor-related services cost category) based on the 
same method that was used to determine the labor-related percentage of 
professional fees in the 2008-based RPL market basket.
    To summarize, the professional services survey found that hospitals 
purchase the following proportion of these four services outside of 
their local labor market:
     34 percent of accounting and auditing services.
     30 percent of engineering services.
     33 percent of legal services.
     42 percent of management consulting services.
    We proposed to apply each of these percentages to the respective 
Benchmark I-O cost category underlying the professional fees cost 
category to determine the Professional Fees: Nonlabor-related costs. 
The Professional Fees: Labor-related costs were determined to be the 
difference between the total costs for each Benchmark I-O category and 
the Professional Fees: Nonlabor-related costs. This is the same 
methodology that we used to separate the 2008-based RPL market basket 
professional fees category into Professional Fees: Labor-related and 
Professional Fees: Nonlabor-related cost categories. For more detail 
regarding this methodology, see the FY 2012 IRF final rule (76 FR 
47861).
    In addition to the professional services listed, we also classified 
expenses under NAICS 55, Management of Companies and Enterprises, into 
the Professional Fees cost category as was done in the 2008-based RPL 
market basket. The NAICS 55 data are mostly comprised of corporate, 
subsidiary, and regional managing offices, or otherwise referred to as 
home offices. Since many facilities are not located in the same 
geographic area as their home office, we analyzed data from a variety 
of sources to determine what proportion of these costs should be 
appropriately included in the labor-related share. For the 2012-based 
IRF market basket, we proposed to derive the home office percentages 
using data for both freestanding IRF providers and hospital-based IRF 
providers. In the 2008-based RPL market basket, we used the home office 
percentages based on the data reported by freestanding IRFs, IPFs, and 
LTCHs.
    Using data primarily from the Medicare cost reports and the Home 
Office Medicare Records (HOMER) database that provides the address 
(including city and state) for home offices, we were able to determine 
that 38 percent of the total number of freestanding and hospital-based 
IRFs that had home offices had those home offices located in their 
respective local labor markets--defined as being in the same 
Metropolitan Statistical Area (MSA).
    The Medicare cost report requires hospitals to report their home 
office provider numbers. Using the HOMER database to determine the home 
office location for each home office provider number, we compared the 
location of the provider with the location of the hospital's home 
office. We then placed providers into one of the following 2 groups:
     Group 1--Provider and home office are located in different 
MSAs.
     Group 2--Provider and home office are located in the same 
MSA.
    We found that 62 percent of the providers with home offices were 
classified into Group 1 (that is, different MSAs) and, thus, these 
providers were determined to not be located in the same local labor 
market as their home office. We found that 38 percent of all providers 
with home offices were classified into Group 2 (that is, the same MSA). 
Given these results, we proposed to classify 38 percent of the 
Professional Fees costs into the Professional Fees: Labor-related cost 
category and the remaining 62 percent into the Professional Fees: 
Nonlabor-related Services cost category. This methodology for 
apportioning the Professional Fee expenses between Labor-related and 
Nonlabor-related categories was similar to the method used in the 2008-
based RPL market basket. For more details regarding this methodology, 
see the FY 2012 IRF final rule (76 FR 47860 through 47863).
    Using this proposed method and the IHS Global Insight, Inc. first 
quarter 2015 forecast for the proposed 2012-based IRF market basket, 
the proposed IRF labor-related share for FY 2016 is the sum of the FY 
2016 relative importance of each labor-related cost category. The 
relative importance reflects the different rates of price change for 
these cost categories between the base year (FY 2012) and FY 2016.
    The sum of the relative importance for FY 2016 operating costs 
(Wages and Salaries, Employee Benefits, Professional Fees: Labor-
related, Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-related Services) 
using the proposed 2012-based IRF market basket is 65.7 percent, as 
shown in Table 11. We proposed to specify the labor-related share to 
one decimal place, which is consistent with the IPPS labor-related 
share (79 FR 49990) (currently the labor-related share from the RPL 
market

[[Page 47068]]

basket is specified to three decimal places).
    We proposed that the portion of Capital that is influenced by the 
local labor market is estimated to be 46 percent, which is the same 
percentage applied to the 2008-based RPL market basket. Since the 
relative importance for Capital-Related Costs is 8.4 percent of the 
proposed 2012-based IRF market basket in FY 2016, we proposed to take 
46 percent of 8.4 percent to determine the proposed labor-related share 
of Capital for FY 2016. The result would be 3.9 percent, which we 
proposed to add to 65.7 percent for the operating cost amount to 
determine the total proposed labor-related share for FY 2016. Thus, the 
labor-related share that we proposed to use for IRF PPS in FY 2016 
would be 69.6 percent. This proposed labor-related share is determined 
using the same methodology as employed in calculating all previous IRF 
labor-related shares (see 76 FR 47862). By comparison, the FY 2015 
labor-related share under the 2008-based RPL market basket was 69.294 
percent. Therefore, the proposed change from the RPL market basket to 
the IRF market basket had only a minimal impact on the labor-related 
share for IRF providers.
    We did not receive any specific comments on our proposed 
methodology for calculating the FY 2016 labor-related share using the 
2012-based IRF market basket.
    Final Decision: We are finalizing our methodology for determining 
the labor-related share as proposed.
    As discussed in sections VI.C.1.a.i and VI.C1.a.ii of this final 
rule, we are revising the Wages and Salaries and Employee Benefits cost 
weights based on public comments we received. Using the proposed method 
and the IHS Global Insight, Inc. second quarter 2015 forecast for the 
2012-based IRF market basket, the final IRF labor-related share for FY 
2016 is the sum of the FY 2016 relative importance of each labor-
related cost category. Table 11 compares the proposed FY 2016 labor-
related share using the proposed 2012-based IRF market basket relative 
importance, the final FY 2016 labor-related share using the finalized 
2012-based IRF market basket relative importance, and the FY 2015 
labor-related share using the 2008-based RPL market basket.
    The sum of the relative importance for FY 2016 operating costs 
(Wages and Salaries, Employee Benefits, Professional Fees: Labor-
related, Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-related Services) 
using the final 2012-based IRF market basket is 67.1 percent, as shown 
in Table 11.
    Since the relative importance for Capital-Related Costs is 8.4 
percent of the 2012-based IRF market basket in FY 2016, we take 46 
percent of 8.4 percent to determine the labor-related share of Capital 
for FY 2016. The result is 3.9 percent, which we add to the 67.1 
percent operating cost amount to determine the total labor-related 
share for FY 2016. Thus, the labor-related share for IRF PPS in FY 2016 
is 71.0 percent. By comparison, the FY 2015 labor-related share under 
the 2008-based RPL market basket was 69.294 percent. Therefore, the 
change from the RPL market basket to the IRF market basket results in 
an increase of approximately 1.7 percentage points to the labor-related 
share for IRF providers.

                                        Table 11--IRF Labor-Related Share
----------------------------------------------------------------------------------------------------------------
                                                                 FY 2016
                                                             proposed labor-    FY 2016 final     FY 2015 final
                                                              related share     labor-related     labor-related
                                                                   \1\            share \2\         share \3\
----------------------------------------------------------------------------------------------------------------
Wages and Salaries........................................              46.0              47.6            48.271
Employee Benefits.........................................              11.0              11.4            12.936
Professional Fees: Labor-related..........................               3.8               3.5             2.058
Administrative and Facilities Support Services............               0.9               0.8             0.415
Installation, Maintenance, and Repair.....................               2.1               2.0  ................
All Other: Labor-related Services.........................               1.9               1.8             2.061
                                                           -----------------------------------------------------
    Subtotal..............................................              65.7              67.1            65.741
Labor-related portion of capital (46%)....................               3.9               3.9             3.553
                                                           -----------------------------------------------------
        Total Labor-Related Share.........................              69.6              71.0            69.294
----------------------------------------------------------------------------------------------------------------
\1\ Based on the proposed 2012-based IRF Market Basket, IHS Global Insight, Inc. 1st quarter 2015 forecast.
\2\ Based on the final 2012-based IRF Market Basket, IHS Global Insight, Inc. 2nd quarter 2015 forecast.
\3\ Federal Register 79 FR 45886.

F. Wage Adjustment

1. Background
    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 2016, we proposed to maintain the policies and methodologies 
described in the FY 2012 IRF PPS final rule (76 FR 47836, 47863 through 
47865) related to the labor market area definitions and the wage index 
methodology for areas with wage data (80 FR 23358). Thus, we proposed 
to use the CBSA labor market area definitions and the FY 2015 pre-
reclassification and pre-floor hospital wage index data. In accordance 
with section 1886(d)(3)(E) of the Act, the FY 2015 pre-reclassification 
and pre-floor hospital wage index is based on data submitted for 
hospital cost reporting periods beginning on or after October 1, 2010, 
and before October 1, 2011 (that is, FY 2011 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 proposed to continue to use the same methodology

[[Page 47069]]

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 
2016 IRF PPS wage index. We did not receive any comments on these 
proposals. Therefore, we are finalizing our proposal to use the CBSA 
labor market area definitions and the FY 2015 pre-reclassification and 
pre-floor hospital wage index data for areas with wage data. We are 
also finalizing our proposal 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.
2. Update
    The wage index used for the IRF PPS is calculated using the pre-
reclassification and pre-floor acute care hospital wage index data and 
is assigned to the IRF on the basis of the labor market area in which 
the IRF is geographically located. IRF labor market areas are 
delineated based on the Core-Based Statistical Areas (CBSAs) 
established by the Office of Management and Budget (OMB). The current 
CBSA labor market definitions used in FY 2015 are based on OMB 
standards published on December 27, 2000 (65 FR 82228).
    As stated in the FY 2016 IRF PPS proposed rule (80 FR 23331), we 
proposed to include the 2010 Census-based CBSA changes in the IRF PPS 
wage index for FY 2016. On February 28, 2013, OMB issued OMB Bulletin 
No. 13-01, which established revised delineations for Metropolitan 
Statistical Areas, Micropolitan Statistical Areas, and Combined 
Statistical Areas, and provided guidance on the use of the delineations 
of these statistical areas. A copy of this bulletin is available online 
at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. The OMB bulletin provides the delineations of all 
Metropolitan Statistical Areas, Metropolitan Divisions, Micropolitan 
Statistical Areas, Combined Statistical Areas, and New England City and 
Town Areas in the United States and Puerto Rico based on the standards 
published on June 28, 2010, in the Federal Register (75 FR 37246 
through 37252) and Census Bureau data.
    While the revisions OMB published on February 28, 2013 are not as 
sweeping as the changes made when we adopted the CBSA geographic 
designations in the FY 2006 IRF PPS final rule, the February 28, 2013 
OMB bulletin does contain a number of significant changes. For example, 
there are new CBSAs, urban counties that become rural, rural counties 
that become urban, and existing CBSAs that are being split apart. 
However, because the bulletin was not issued until February 28, 2013, 
with supporting data not available until later, and because the changes 
made by the bulletin and their ramifications needed to be extensively 
reviewed and verified, these changes were not incorporated into the 
hospital wage index until FY 2015. In the FY 2015 IRF PPS final rule 
(79 FR 45886), we stated that we intended to consider changes to the 
wage index based on the most current OMB delineations in FY 2016. As 
discussed below, we are implementing the new OMB delineations as 
described in the February 28, 2013 OMB Bulletin No. 13-01, for the IRF 
PPS wage index beginning in FY 2016.
3. Implementation of New Labor Market Delineations
    As discussed in the FY 2015 IRF PPS proposed rule (79 FR 26308) and 
final rule (79 FR 45871), we delayed implementing the new OMB 
statistical area delineations to allow for sufficient time to assess 
the new changes. We believe it is important for the IRF PPS to use the 
latest OMB delineations available to maintain a more accurate and up-
to-date payment system that reflects the reality of population shifts 
and labor market conditions. While CMS and other stakeholders have 
explored potential alternatives to the current CBSA-based labor market 
system (we refer readers to the CMS Web site at www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html), no consensus has been achieved regarding how best to 
implement a replacement system. As discussed in the FY 2005 IPPS final 
rule (69 FR 49027), while we recognize that MSAs are not designed 
specifically to define labor market areas, we believe they do represent 
a useful proxy for this purpose. We further believe that using the most 
current OMB delineations would increase the integrity of the IRF PPS 
wage index by creating a more accurate representation of geographic 
variation in wage levels. We have reviewed our findings and impacts 
relating to the new OMB delineations, and have concluded that there is 
no compelling reason to further delay implementation. Because we 
believe that we have broad authority under section 1886(j)(6) of the 
Act to determine the labor market areas used for the IRF PPS wage 
index, and because we also believe that the most current OMB 
delineations accurately reflect the local economies and wage levels of 
the areas in which hospitals are currently located, we proposed to 
implement the new OMB delineations as described in the February 28, 
2013 OMB Bulletin No. 13-01, for the IRF PPS wage index effective 
beginning in FY 2016 (80 FR 23358 through 23359). As discussed below, 
we proposed to implement a 1-year transition with a blended wage index 
for all providers and a 3 year phase-out of the rural adjustment for a 
subset of providers in FY 2016 to assist providers in adapting to the 
new OMB delineations. This proposed transition is discussed in more 
detail below.
    We received 1 comment on the proposed policy to adopt the new OMB 
delineations which is summarized below.
    Comment: One commenter expressed support of the proposal to adopt 
the new OMB delineations effective for FY 2016.
    Response: We appreciate the support for our proposal to adopt the 
new OMB delineations. For a discussion of our policies to moderate the 
impact of our adoption of the new OMB delineations under the IRF PPS, 
we refer readers to section VI.F.4. of this final rule.
    Final Decision: After consideration of the public comments we 
received, we are finalizing the implementation of the new OMB 
delineations as described in the February 28, 2013 OMB Bulletin No. 13-
01, effective beginning with the FY 2016 IRF PPS wage index.
a. Micropolitan Statistical Areas
    OMB defines a ``Micropolitan Statistical Area'' as a CBSA 
associated with at least one urban cluster that has a population of at 
least 10,000, but less than 50,000 (75 FR 37252). We refer to these as 
Micropolitan Areas. After extensive impact analysis, consistent with 
the treatment of these areas under the IPPS as discussed in the FY 2005 
IPPS final rule (69 FR 49029 through 49032), we determined the best 
course of action would be to treat Micropolitan Areas as ``rural'' and 
include them in the calculation of each state's IRF PPS rural wage 
index. Thus, the IRF PPS statewide rural wage index is determined using 
IPPS hospital data from hospitals located in non-MSA areas, and the 
statewide rural wage index is assigned to IRFs located in those areas. 
Because Micropolitan Areas tend to encompass smaller population centers 
and contain fewer hospitals than MSAs, we determined that if 
Micropolitan Areas were to be treated as separate labor market areas, 
the IRF PPS wage index would have included

[[Page 47070]]

significantly more single-provider labor market areas. As we explained 
in the FY 2006 IRF PPS final rule (70 FR 47920 through 47921), 
recognizing Micropolitan Areas as independent labor markets would 
generally increase the potential for dramatic shifts in year-to-year 
wage index values because a single hospital (or group of hospitals) 
could have a disproportionate effect on the wage index of an area. 
Dramatic shifts in an area's wage index from year to year are 
problematic and create instability in the payment levels from year to 
year, which could make fiscal planning for IRFs difficult if we adopted 
this approach. For these reasons, we adopted a policy to include 
Micropolitan Areas in the state's rural wage area for purposes of the 
IRF PPS wage index, and have continued this policy through the present.
    Based upon the new 2010 Decennial Census data, a number of urban 
counties have switched status and have joined or became Micropolitan 
Areas, and some counties that once were part of a Micropolitan Area, 
have become urban. Overall, there are fewer Micropolitan Areas (541) 
under the new OMB delineations based on the 2010 Census than existed 
under the latest data from the 2000 Census (581). We believe that the 
best course of action would be to continue the policy established in 
the FY 2006 IRF PPS final rule (70 FR 47880) and include Micropolitan 
Areas in each state's rural wage index. These areas continue to be 
defined as having relatively small urban cores (populations of 10,000 
to 49,999). We do not believe it would be appropriate to calculate a 
separate wage index for areas that typically may include only a few 
hospitals for the reasons discussed in the FY 2006 IRF PPS final rule 
(70 FR 47880), and as previously discussed. Therefore, in conjunction 
with our implementation of the new OMB labor market delineations 
beginning in FY 2016 and consistent with the treatment of Micropolitan 
Areas under the IPPS, we proposed to continue to treat Micropolitan 
Areas as ``rural'' and to include Micropolitan Areas in the calculation 
of the state's rural wage index (80 FR 23359). We did not receive any 
comments addressing this proposal. Therefore, we are finalizing our 
proposal to continue to treat Micropolitan Areas as ``rural'' and to 
include Micropolitan Areas in the calculation of the state's rural wage 
index.
b. Urban Counties Becoming Rural
    As previously discussed, we proposed to implement the new OMB 
statistical area delineations (based upon the 2010 decennial Census 
data) beginning in FY 2016 for the IRF PPS wage index (80 FR 23359 
through 23360). Our analysis shows that a total of 37 counties (and 
county equivalents) that are currently considered part of an urban CBSA 
would be considered located in a rural area, for IRF PPS payment 
beginning in FY 2016 with the new OMB delineations. Table 12 lists the 
37 urban counties that will be rural with the implementation of the new 
OMB delineations.

   Table 12--Counties That Will Transition From Urban to Rural Status
------------------------------------------------------------------------
                                                     Previous urban area
            County               State    Previous      (constituent
                                            CBSA          counties)
------------------------------------------------------------------------
Greene County................  IN            14020  Bloomington, IN.
Anson County.................  NC            16740  Charlotte-Gastonia-
                                                     Rock Hill, NC-SC.
Franklin County..............  IN            17140  Cincinnati-
                                                     Middletown, OH-KY-
                                                     IN.
Stewart County...............  TN            17300  Clarksville, TN-KY.
Howard County................  MO            17860  Columbia, MO.
Delta County.................  TX            19124  Dallas-Fort Worth-
                                                     Arlington, TX.
Pittsylvania County..........  VA            19260  Danville, VA.
Danville City................  VA            19260  Danville, VA.
Preble County................  OH            19380  Dayton, OH.
Gibson County................  IN            21780  Evansville, IN-KY.
Webster County...............  KY            21780  Evansville, IN-KY.
Franklin County..............  AR            22900  Fort Smith, AR-OK.
Ionia County.................  MI            24340  Grand Rapids-
                                                     Wyoming, MI.
Newaygo County...............  MI            24340  Grand Rapids-
                                                     Wyoming, MI.
Greene County................  NC            24780  Greenville, NC.
Stone County.................  MS            25060  Gulfport-Biloxi, MS.
Morgan County................  WV            25180  Hagerstown-
                                                     Martinsburg, MD-WV.
San Jacinto County...........  TX            26420  Houston-Sugar Land-
                                                     Baytown, TX.
Franklin County..............  KS            28140  Kansas City, MO-KS.
Tipton County................  IN            29020  Kokomo, IN.
Nelson County................  KY            31140  Louisville/Jefferson
                                                     County, KY-IN.
Geary County.................  KS            31740  Manhattan, KS.
Washington County............  OH            37620  Parkersburg-Marietta-
                                                     Vienna, WV-OH.
Pleasants County.............  WV            37620  Parkersburg-Marietta-
                                                     Vienna, WV-OH.
George County................  MS            37700  Pascagoula, MS.
Power County.................  ID            38540  Pocatello, ID.
Cumberland County............  VA            40060  Richmond, VA.
King and Queen County........  VA            40060  Richmond, VA.
Louisa County................  VA            40060  Richmond, VA.
Washington County............  MO            41180  St. Louis, MO-IL.
Summit County................  UT            41620  Salt Lake City, UT.
Erie County..................  OH            41780  Sandusky, OH.
Franklin County..............  MA            44140  Springfield, MA.
Ottawa County................  OH            45780  Toledo, OH.
Greene County................  AL            46220  Tuscaloosa, AL.
Calhoun County...............  TX            47020  Victoria, TX.
Surry County.................  VA            47260  Virginia Beach-
                                                     Norfolk-Newport
                                                     News, VA-NC.
------------------------------------------------------------------------


[[Page 47071]]

    We proposed that the wage data for all hospitals located in the 
counties listed in Table 12 now be considered rural when their 
respective state's rural wage index value is calculated. This rural 
wage index value will be used under the IRF PPS. We did not receive any 
comments addressing this proposal. Therefore, we are finalizing our 
proposed reassignment of these counties from urban status to rural 
status for purposes of the wage index based on the new OMB 
delineations.
c. Rural Counties Becoming Urban
    With the implementation of the new OMB delineations, (based upon 
the 2010 decennial Census data), a total of 105 counties (and county 
equivalents) that are currently located in rural areas will now be 
located in urban areas. Table 13 below lists the 105 rural counties.

   Table 13--Counties That Will Transition From Rural to Urban Status
------------------------------------------------------------------------
                                                         Urban area
            County               State    New CBSA      (constituent
                                                          counties)
------------------------------------------------------------------------
Utuado Municipio.............  PR            10380  Aguadilla-Isabela,
                                                     PR.
Linn County..................  OR            10540  Albany, OR.
Oldham County................  TX            11100  Amarillo, TX.
Morgan County................  GA            12060  Atlanta-Sandy
                                                     Springs-Roswell,
                                                     GA.
Lincoln County...............  GA            12260  Augusta-Richmond
                                                     County, GA-SC.
Newton County................  TX            13140  Beaumont-Port
                                                     Arthur, TX.
Fayette County...............  WV            13220  Beckley, WV.
Raleigh County...............  WV            13220  Beckley, WV.
Golden Valley County.........  MT            13740  Billings, MT.
Oliver County................  ND            13900  Bismarck, ND.
Sioux County.................  ND            13900  Bismarck, ND.
Floyd County.................  VI            13980  Blacksburg-
                                                     Christiansburg-
                                                     Radford, VA.
De Witt County...............  IL            14010  Bloomington, IL.
Columbia County..............  PA            14100  Bloomsburg-Berwick,
                                                     PA.
Montour County...............  PA            14100  Bloomsburg-Berwick,
                                                     PA.
Allen County.................  KY            14540  Bowling Green, KY.
Butler County................  KY            14540  Bowling Green, KY.
St. Mary's County............  MD            15680  California-Lexington
                                                     Park, MD.
Jackson County...............  IL            16060  Carbondale-Marion,
                                                     IL.
Williamson County............  IL            16060  Carbondale-Marion,
                                                     IL.
Franklin County..............  PA            16540  Chambersburg-
                                                     Waynesboro, PA.
Iredell County...............  NC            16740  Charlotte-Concord-
                                                     Gastonia, NC-SC.
Lincoln County...............  NC            16740  Charlotte-Concord-
                                                     Gastonia, NC-SC.
Rowan County.................  NC            16740  Charlotte-Concord-
                                                     Gastonia, NC-SC.
Chester County...............  SC            16740  Charlotte-Concord-
                                                     Gastonia, NC-SC.
Lancaster County.............  SC            16740  Charlotte-Concord-
                                                     Gastonia, NC-SC.
Buckingham County............  VA            16820  Charlottesville, VA.
Union County.................  IN            17140  Cincinnati, OH-KY-
                                                     IN.
Hocking County...............  OH            18140  Columbus, OH.
Perry County.................  OH            18140  Columbus, OH.
Walton County................  FL            18880  Crestview-Fort
                                                     Walton Beach-
                                                     Destin, FL.
Hood County..................  TX            23104  Dallas-Fort Worth-
                                                     Arlington, TX.
Somervell County.............  TX            23104  Dallas-Fort Worth-
                                                     Arlington, TX.
Baldwin County...............  AL            19300  Daphne-Fairhope-
                                                     Foley, AL.
Monroe County................  PA            20700  East Stroudsburg,
                                                     PA.
Hudspeth County..............  TX            21340  El Paso, TX.
Adams County.................  PA            23900  Gettysburg, PA.
Hall County..................  NE            24260  Grand Island, NE.
Hamilton County..............  NE            24260  Grand Island, NE.
Howard County................  NE            24260  Grand Island, NE.
Merrick County...............  NE            24260  Grand Island, NE.
Montcalm County..............  MI            24340  Grand Rapids-
                                                     Wyoming, MI.
Josephine County.............  OR            24420  Grants Pass, OR.
Tangipahoa Parish............  LA            25220  Hammond, LA.
Beaufort County..............  SC            25940  Hilton Head Island-
                                                     Bluffton-Beaufort,
                                                     SC.
Jasper County................  SC            25940  Hilton Head Island-
                                                     Bluffton-Beaufort,
                                                     SC.
Citrus County................  FL            26140  Homosassa Springs,
                                                     FL.
Butte County.................  ID            26820  Idaho Falls, ID.
Yazoo County.................  MS            27140  Jackson, MS.
Crockett County..............  TN            27180  Jackson, TN.
Kalawao County...............  HI            27980  Kahului-Wailuku-
                                                     Lahaina, HI.
Maui County..................  HI            27980  Kahului-Wailuku-
                                                     Lahaina, HI.
Campbell County..............  TN            28940  Knoxville, TN.
Morgan County................  TN            28940  Knoxville, TN.
Roane County.................  TN            28940  Knoxville, TN.
Acadia Parish................  LA            29180  Lafayette, LA.
Iberia Parish................  LA            29180  Lafayette, LA.
Vermilion Parish.............  LA            29180  Lafayette, LA.
Cotton County................  OK            30020  Lawton, OK.
Scott County.................  IN            31140  Louisville/Jefferson
                                                     County, KY-IN.
Lynn County..................  TX            31180  Lubbock, TX.

[[Page 47072]]

 
Green County.................  WI            31540  Madison, WI.
Benton County................  MS            32820  Memphis, TN-MS-AR.
Midland County...............  MI            33220  Midland, MI.
Martin County................  TX            33260  Midland, TX.
Le Sueur County..............  MN            33460  Minneapolis-St. Paul-
                                                     Bloomington, MN-WI.
Mille Lacs County............  MN            33460  Minneapolis-St. Paul-
                                                     Bloomington, MN-WI.
Sibley County................  MN            33460  Minneapolis-St. Paul-
                                                     Bloomington, MN-WI.
Maury County.................  TN            34980  Nashville-Davidson--
                                                     Murfreesboro--Frank
                                                     lin, TN.
Craven County................  NC            35100  New Bern, NC.
Jones County.................  NC            35100  New Bern, NC.
Pamlico County...............  NC            35100  New Bern, NC.
St. James Parish.............  LA            35380  New Orleans-
                                                     Metairie, LA.
Box Elder County.............  UT            36260  Ogden-Clearfield,
                                                     UT.
Gulf County..................  FL            37460  Panama City, FL.
Custer County................  SD            39660  Rapid City, SD.
Fillmore County..............  MN            40340  Rochester, MN.
Yates County.................  NY            40380  Rochester, NY.
Sussex County................  DE            41540  Salisbury, MD-DE.
Worcester County.............  MA            41540  Salisbury, MD-DE.
Highlands County.............  FL            42700  Sebring, FL.
Webster Parish...............  LA            43340  Shreveport-Bossier
                                                     City, LA.
Cochise County...............  AZ            43420  Sierra Vista-
                                                     Douglas, AZ.
Plymouth County..............  IA            43580  Sioux City, IA-NE-
                                                     SD.
Union County.................  SC            43900  Spartanburg, SC.
Pend Oreille County..........  WA            44060  Spokane-Spokane
                                                     Valley, WA.
Stevens County...............  WA            44060  Spokane-Spokane
                                                     Valley, WA.
Augusta County...............  VA            44420  Staunton-Waynesboro,
                                                     VA.
Staunton City................  VA            44420  Staunton-Waynesboro,
                                                     VA.
Waynesboro City..............  VA            44420  Staunton-Waynesboro,
                                                     VA.
Little River County..........  AR            45500  Texarkana, TX-AR.
Sumter County................  FL            45540  The Villages, FL.
Pickens County...............  AL            46220  Tuscaloosa, AL.
Gates County.................  NC            47260  Virginia Beach-
                                                     Norfolk-Newport
                                                     News, VA-NC.
Falls County.................  TX            47380  Waco, TX.
Columbia County..............  WA            47460  Walla Walla, WA.
Walla Walla County...........  WA            47460  Walla Walla, WA.
Peach County.................  GA            47580  Warner Robins, GA.
Pulaski County...............  GA            47580  Warner Robins, GA.
Culpeper County..............  VA            47894  Washington-Arlington-
                                                     Alexandria, DC-VA-
                                                     MD-WV.
Rappahannock County..........  VA            47894  Washington-Arlington-
                                                     Alexandria, DC-VA-
                                                     MD-WV.
Jefferson County.............  NY            48060  Watertown-Fort Drum,
                                                     NY.
Kingman County...............  KS            48620  Wichita, KS.
Davidson County..............  NC            49180  Winston-Salem, NC.
Windham County...............  CT            49340  Worcester, MA-CT.
------------------------------------------------------------------------

    We proposed that when calculating the area wage index, the wage 
data for hospitals located in these counties would be included in their 
new respective urban CBSAs (80 FR 23360 through 23362). This urban wage 
index value will be used under the IRF PPS. We did not receive any 
comments on this proposal. Therefore, we are finalizing our proposed 
reassignment of these counties from rural status to urban status for 
purposes of the wage index based on the new OMB delineations.
d. Urban Counties Moving to a Different Urban CBSA
    As we stated in the FY 2016 IRF PPS proposed rule (80 FR 23362 
through 23363), in addition to rural counties becoming urban and urban 
counties becoming rural, several urban counties will shift from one 
urban CBSA to another urban CBSA under the new OMB delineations. In 
other cases, applying the new OMB delineations will involve a change 
only in CBSA name or number, while the CBSA continues to encompass the 
same constituent counties. For example, CBSA 29140 (Lafayette, IN), 
will experience both a change to its number and its name, and would 
become CBSA 29200 (Lafayette-West Lafayette, IN), while all of its 
three constituent counties will remain the same. We are not discussing 
these changes in this section because they are inconsequential changes 
to the IRF PPS wage index. However, in other cases, adoption of the new 
OMB delineations shifts counties between existing and new CBSAs, 
changing the constituent makeup of the CBSAs.
    In one type of change, an entire CBSA will be subsumed by another 
CBSA. For example, CBSA 37380 (Palm Coast, FL) currently is a single 
county (Flagler, FL) CBSA. Flagler County will be a part of CBSA 19660 
(Deltona-Daytona Beach-Ormond Beach, FL) under the new OMB 
delineations.
    In another type of change, some CBSAs have counties that will split 
off to become part of, or to form, entirely new labor market areas. For 
example, CBSA 37964 (Philadelphia Metropolitan Division of MSA 37980) 
currently is comprised of five Pennsylvania counties (Bucks, Chester, 
Delaware, Montgomery, and Philadelphia). Under the new OMB 
delineations, Montgomery, Bucks, and Chester counties will split off 
and form the new CBSA 33874 (Montgomery County-Bucks County-Chester 
County,

[[Page 47073]]

PA Metropolitan Division of MSA 37980), while Delaware and Philadelphia 
counties will remain in CBSA 37964.
    Finally, in some cases, a CBSA will lose counties to another 
existing CBSA. For example, Lincoln County and Putnam County, WV, will 
move from CBSA 16620 (Charleston, WV) to CBSA 26580 (Huntington-
Ashland, WV-KY-OH). CBSA 16620 will still exist in the new labor market 
delineations with fewer constituent counties. Table 14 lists the urban 
counties that will move from one urban CBSA to another urban CBSA under 
the new OMB delineations.

         Table 14--Counties That Will Change to a Different CBSA
------------------------------------------------------------------------
    Prior CBSA        New CBSA            County              State
------------------------------------------------------------------------
11300............           26900  Madison County......  IN
11340............           24860  Anderson County.....  SC
14060............           14010  McLean County.......  IL
37764............           15764  Essex County........  MA
16620............           26580  Lincoln County......  WV
16620............           26580  Putnam County.......  WV
16974............           20994  DeKalb County.......  IL
16974............           20994  Kane County.........  IL
21940............           41980  Ceiba Municipio.....  PR
21940............           41980  Fajardo Municipio...  PR
21940............           41980  Luquillo Municipio..  PR
26100............           24340  Ottawa County.......  MI
31140............           21060  Meade County........  KY
34100............           28940  Grainger County.....  TN
35644............           35614  Bergen County.......  NJ
35644............           35614  Hudson County.......  NJ
20764............           35614  Middlesex County....  NJ
20764............           35614  Monmouth County.....  NJ
20764............           35614  Ocean County........  NJ
35644............           35614  Passaic County......  NJ
20764............           35084  Somerset County.....  NJ
35644............           35614  Bronx County........  NY
35644............           35614  Kings County........  NY
35644............           35614  New York County.....  NY
35644............           20524  Putnam County.......  NY
35644............           35614  Queens County.......  NY
35644............           35614  Richmond County.....  NY
35644............           35614  Rockland County.....  NY
35644............           35614  Westchester County..  NY
37380............           19660  Flagler County......  FL
37700............           25060  Jackson County......  MS
37964............           33874  Bucks County........  PA
37964............           33874  Chester County......  PA
37964............           33874  Montgomery County...  PA
39100............           20524  Dutchess County.....  NY
39100............           35614  Orange County.......  NY
41884............           42034  Marin County........  CA
41980............           11640  Arecibo Municipio...  PR
41980............           11640  Camuy Municipio.....  PR
41980............           11640  Hatillo Municipio...  PR
41980............           11640  Quebradillas          PR
                                    Municipio.
48900............           34820  Brunswick County....  NC
49500............           38660  Gu[aacute]nica        PR
                                    Municipio.
49500............           38660  Guayanilla Municipio  PR
49500............           38660  Pe[ntilde]uelas       PR
                                    Municipio.
49500............           38660  Yauco Municipio.....  PR
------------------------------------------------------------------------

    If providers located in these counties move from one CBSA to 
another under the new OMB delineations, there may be impacts, both 
negative and positive, upon their specific wage index values. As 
discussed below, we proposed to implement a transition wage index to 
adjust for these possible impacts. We did not receive any comments on 
the proposed reassignment of the counties listed in Table 14. 
Therefore, we are finalizing our proposed reassignment of these 
counties from one urban area to another urban area for purposes of the 
wage index based on the new OMB delineations.
4. Transition Period
    In the FY 2016 IRF PPS proposed rule (80 FR 23363) we stated that, 
overall, we believe implementing the new OMB delineations will result 
in wage index values being more representative of the actual costs of 
labor in a given area. Further, we recognize that some providers will 
have a higher wage index due to our proposed implementation of the new 
labor market area delineations. However, we also recognize that more 
providers will experience decreases in wage index values as a result of 
the implementation of the new labor market area delineations. We 
explained that in prior years, we have provided for transition periods 
when adopting changes that have significant payment implications, 
particularly large negative impacts. As discussed in the FY 2006 IRF 
PPS final rule (70 FR 47921 through 47926), we evaluated several 
options to ease the transition to the new CBSA system.

[[Page 47074]]

    In implementing the new CBSA delineations for FY 2016, we continue 
to have similar concerns as those expressed in the FY 2006 IRF PPS 
final rule. While we believe that implementing the latest OMB labor 
market area delineations will create a more accurate wage index system, 
we recognize that IRFs may experience decreases in their wage index as 
a result of the labor market area changes. Our analysis for the FY 2016 
IRF PPS final rule indicates that a majority of IRFs either expect no 
change in the wage index or an increase in the wage index based on the 
new CBSA delineations. However, we found that 188 facilities will 
experience a decline in their wage index with 29 facilities 
experiencing a decline of 5 percent or more based on the CBSA changes. 
Therefore, we believe it is appropriate to consider, as we did in FY 
2006, whether or not a transition period should be used to implement 
these proposed changes to the wage index.
    In light of the comments received during the FY 2006 rulemaking 
cycle on our proposal in the FY 2006 IRF PPS proposed rule (70 FR 30238 
through 30240) to adopt the new CBSA definitions without a transition 
period, we believe that a transition period is appropriate. Therefore, 
in the FY 2016 proposed rule, we proposed using a similar transition 
methodology to that used in FY 2006. Specifically, for the FY 2016 IRF 
PPS, we proposed implementing a budget-neutral 1-year transition 
policy. Under the proposed policy, all IRF providers would receive a 1-
year blended wage index using 50 percent of their FY 2016 wage index 
based on the proposed new OMB delineations and 50 percent of their FY 
2016 wage index based on the OMB delineations used in FY 2015. We would 
apply this 1-year blended wage index in FY 2016 for all geographic 
areas to assist providers in adapting to these proposed changes. We 
believe a 1-year, 50/50 blend would mitigate the short-term instability 
and negative payment impacts due to the implementation of the new OMB 
delineations. This transition policy would be for a 1-year period, 
going into effect October 1, 2015, and continuing through September 30, 
2016.
    For FY 2006, it was determined that the transition to the current 
wage index system would have significant negative impacts upon IRFs 
that were originally considered rural, but would be considered urban 
under the new definitions. To alleviate the potentially decreased 
payments associated with switching from rural status to urban status in 
calculating the IRF area wage index for FY 2006, we implemented a 3-
year budget-neutral phase-out of the rural adjustment for FY 2005 rural 
IRFs that became urban IRFs in FY 2006 and that experienced a loss in 
payment because of this redesignation. The 3-year transition period was 
afforded to these facilities because, as a group, they experienced a 
significant reduction in payments due to the labor market revisions and 
the loss of the rural adjustment. This adjustment was in addition to a 
1-year blended wage index (comprised of a 50/50 blend of the FY 2006 
MSA-based wage index and the FY 2006 CBSA-based wage index) for all 
IRFs.
    Our analysis for the FY 2016 final rule indicates that 22 IRFs will 
experience a change in either rural or urban designations. Of these, 19 
facilities designated as rural in FY 2015 will be designated as urban 
in FY 2016. While 16 of these rural IRFs that will be designated as 
urban under the new CBSA delineations will experience an increase in 
their wage index, these IRFs will lose the 14.9 percent rural 
adjustment. In many cases, this loss exceeds the urban CBSA based 
increase in the wage index. Consistent with the transition policy 
adopted in FY 2006 (70 FR 47923 through 47927), we considered the 
appropriateness of applying a 3-year phase-out of the rural adjustment 
for IRFs located in rural counties that would become urban under the 
new OMB delineations, given the potentially significant payment impacts 
for these facilities. We continue to believe, as discussed in the FY 
2006 IRF final rule (70 FR 47880), that the phase-out of the rural 
adjustment transition period for these facilities specifically is 
appropriate because, as a group, we expect these IRFs would experience 
a steeper and more abrupt reduction in their payments compared to other 
IRFs.
    Therefore, in addition to the 1-year transition policy noted, we 
proposed using a budget-neutral 3-year phase-out of the rural 
adjustment for existing FY 2015 rural IRFs that will become urban in FY 
2016 and that experience a loss in payments due to changes from the new 
CBSA delineations. Accordingly, the incremental steps needed to reduce 
the impact of the loss of the FY 2015 rural adjustment of 14.9 percent 
would be phased out over FYs 2016, 2017 and 2018. This policy would 
allow rural IRFs which would be classified as urban in FY 2016 to 
receive two-thirds of the 2015 rural adjustment for FY 2016, as well as 
the blended wage index. For FY 2017, these IRFs would receive the full 
FY 2017 wage index and one-third of the FY 2015 rural adjustment. For 
FY 2018, these IRFs would receive the full FY 2018 wage index without a 
rural adjustment. We believe a 3-year budget-neutral phase-out of the 
rural adjustment for IRFs that transition from rural to urban status 
under the new CBSA delineations would best accomplish the goals of 
mitigating the loss of the rural adjustment for existing FY 2015 rural 
IRFs. The purpose of the gradual phase-out of the rural adjustment for 
these facilities is to alleviate the significant payment implications 
for existing rural IRFs that may need time to adjust to the loss of 
their FY 2015 rural payment adjustment or that experience a reduction 
in payments solely because of this redesignation. As stated, this 
policy is specifically for rural IRFs that become urban in FY 2016 and 
that experience a loss in payments due to changes from the new CBSA 
delineations. Thus we did not propose implementing a transition policy 
for urban facilities that become rural in FY 2016 because these IRFs 
would receive the full rural adjustment of 14.9 percent beginning 
October 1, 2015 in addition to the 1-year blended wage index using 50 
percent of their FY 2016 wage index based on the proposed new OMB 
delineations and 50 percent of their FY 2016 wage index based on the 
OMB delineations used in FY 2105.
    We received 4 comments on the proposed implementation of a 1-year 
transition with a blended wage index for all providers and a 3-year 
phase-out of the rural adjustment for a subset of providers in FY 2016 
to assist those providers in adjusting to the new OMB delineations, 
which are summarized below.
    Comment: Commenters were generally supportive of CMS' efforts to 
implement a 1-year blended wage index to mitigate potential negative 
impacts from the transition to the new OMB delineations. Two commenters 
requested that CMS expand the 1-year budget neutral 50/50 blended wage 
index for a longer period of time. One commenter requested that CMS 
implement the new CBSA delineations over a three year transition period 
(rather than our proposed one year transition).
    Response: We appreciate the support for our proposal to adopt the 
new CBSA delineations with a transition period. We explored multiple 
alternatives to the proposed 1-year 50/50 blended wage index. While we 
acknowledge that some providers will see negative impacts based upon 
the adoption of the new OMB delineations, we also point out that some 
providers will experience increases in their wage index values due

[[Page 47075]]

to the new OMB delineations. We believe that a transition period longer 
than 1 year would reduce the accuracy of the overall labor market area 
wage index system. The wage index is a relative measure of the value of 
labor in prescribed labor market areas; therefore, we believe it is 
important to implement the new delineations with as minimal a 
transition as is reasonable. We do not believe it is appropriate to 
expand or extend the 1-year 50/50 blended transition wage index further 
than what was proposed, because doing so would only further delay what 
we believe are the more refined and accurate labor market areas, based 
on the recent 2010 Census.
    Comment: Commenters were generally supportive of CMS' efforts to 
implement a 3-year phase-out of the rural adjustment for FY 2015 rural 
IRFs that are transitioning to urban status in FY 2016 due to the new 
OMB delineations. Four commenters requested that CMS extend the 3-year 
phase-out of the rural adjustment for rural IRFs transitioning to urban 
CBSAs. The commenters were supportive of implementing the phase-out of 
the rural adjustment gradually over a period of years but suggested we 
extend the transition timeframe to a 4-year period. One commenter 
suggested we implement a 5-year phase-out or allow the affected 
facilities to apply for reclassification back to rural status for a 
period of 3 years.
    Response: We appreciate the commenters' support for a phase-out of 
the rural adjustment for FY 2015 rural IRFs that will be considered 
urban in FY 2016. The intent of the 3-year phase-out of the rural 
adjustment is to mitigate potential negative payment effects on rural 
facilities that will be redesignated as urban facilitates, effective FY 
2016. As described in more detail in the FY 2006 IRF PPS final rule (70 
FR 47880), our analysis determined a 3-year budget neutral transition 
policy would best accomplish the goals of mitigating the loss of the 
rural adjustment for existing rural IRFs that will become urban under 
the new CBSA designations. For a complete discussion of this policy, we 
refer readers to the FY 2006 IRF PPS final rule (70 FR 47880, 47921 
through 47925). Based on similar concerns to those we expressed during 
the FY 2006 rulemaking cycle to the proposed adoption of the new CBSA 
definitions, we considered different multi-year transition policies to 
provide a sufficient buffer for rural IRFs that may experience a 
reduction in payments due to being designated as urban. However, fewer 
IRFs (19) will be impacted by the transition from rural to urban status 
than were affected in FY 2006 (34). Additionally, the FY 2016 rural 
adjustment of 14.9 percent is less than the FY 2006 rural adjustment of 
21.3 percent; therefore, we believe that a 3-year budget-neutral phase-
out of the rural adjustment would appropriately mitigate the adverse 
payment impacts for these IRFs while also ensuring that payment rates 
for these facilities are set accurately and appropriately.
    Final Decision: After consideration of the public comments we 
received, we are finalizing our proposals for transitioning to the wage 
index associated with the new OMB delineations without modification. We 
are finalizing our proposal to provide a 1-year blended wage index for 
all IRF facilities and a 3-year phase-out of the rural adjustment for 
IRFs that were deemed rural in FY 2015 but are considered urban under 
the new delineations. All IRF providers will receive a 1-year blended 
wage index using 50 percent of their FY 2016 wage index based on the 
proposed new OMB delineations and 50 percent of their FY 2016 wage 
index based on the OMB delineations used in FY 2015. We will apply this 
1-year blended wage index in FY 2016 for all geographic areas to assist 
providers in adapting to these proposed changes. FY 2015 rural IRFs 
which will be classified as urban in FY 2016 will receive two-thirds of 
the FY 2015 rural adjustment in FY 2016, as well as the blended wage 
index. For FY 2017, these IRFs will receive the full FY 2017 wage index 
and one-third of the FY 2015 rural adjustment. For FY 2018, these IRFs 
will receive the full FY 2018 wage index without a rural adjustment.
    The wage index applicable to FY 2016 is set forth in Table A 
available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html. Table A 
provides a crosswalk between the FY 2015 wage index for a provider 
using the current OMB delineations in effect in FY 2015 and the FY 2016 
wage index using the revised OMB delineations, as well as the 
transition wage index values for FY 2016.
    To calculate the wage-adjusted facility payment for the payment 
rates set forth in this final rule, we multiply the unadjusted federal 
payment rate for IRFs by the FY 2016 labor-related share based on the 
2012-based IRF market basket (71.0 percent) to determine the labor-
related portion of the standard payment amount. A full discussion of 
the calculation of the labor-related share can be found in section VI.E 
of this final rule. We then multiply the labor-related portion by the 
applicable IRF wage index from the tables in the addendum to this final 
rule. The table is available through the Internet on the CMS Web site 
at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Data-Files.html. The change from the proposed FY 
2016 labor-related share of 69.6 percent to the final FY 2016 labor-
related share of 71.0 percent results in a final FY 2016 budget-neutral 
wage adjustment factor of 1.0033 instead of the proposed FY 2016 
budget-neutral wage adjustment factor of 1.0027.
    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 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 FY 2016 IRF standard payment conversion factor 
reflects the update to the wage indexes (based on the FY 2011 hospital 
cost report data) and the labor-related share in a budget-neutral 
manner:
    Step 1. Determine the total amount of the estimated FY 2015 IRF PPS 
rates, using the FY 2015 standard payment conversion factor and the 
labor-related share and the wage indexes from FY 2015 (as published in 
the FY 2015 IRF PPS final rule (79 FR 45871)).
    Step 2. Calculate the total amount of estimated IRF PPS payments 
using the FY 2016 standard payment conversion factor and the FY 2016 
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 2016 budget-
neutral wage adjustment factor of 1.0033.
    Step 4. Apply the FY 2016 budget-neutral wage adjustment factor 
from step 3 to the FY 2015 IRF PPS standard payment conversion factor 
after the application of the adjusted market basket update to determine 
the FY 2016 standard payment conversion factor.
    We discuss the calculation of the standard payment conversion 
factor for FY 2016 in section VI.G of this final rule.
    We received 4 comments on the proposed IRF wage adjustment for FY 
2016, which are summarized below.
    Comment: One commenter, while supportive of CMS' proposed IRF wage 
adjustment, effective for FY 2016, recommended that CMS institute a 
smoothing variable to lessen year-to-year volatility in the wage index 
experienced by some facilities. Three commenters requested that CMS 
align

[[Page 47076]]

the timeframe for the IRF wage index with other post-acute and acute 
care settings. One commenter also recommended that we consider wage 
index policies under the current IPPS because IRFs compete in a similar 
labor pool as acute care hospitals. Four commenters requested that CMS 
grant IRFs the ability to request reclassification of their applicable 
CBSAs.
    Response: Consistent with our previous responses to these comments 
(most recently published in our FY 2015 IRF PPS final rule (79 FR 
45887)), we note that the IRF PPS does not account for geographic 
reclassification under sections 1886(d)(8) and (d)(10) of the Act. 
Furthermore, as we do not have an IRF-specific wage index, we are 
unable to determine at this time the degree, if any, to which a 
geographic reclassification adjustment under the IRF PPS would be 
appropriate. The rationale for our current wage index policies is fully 
described in the FY 2006 IRF PPS final rule (70 FR 47880, 47926 through 
47928).
    Additionally, while some commenters recommended that we adopt IPPS 
reclassification, we note the MedPAC's June 2007 report to the 
Congress, titled ``Report to Congress: Promoting Greater Efficiency in 
Medicare'' (available at http://www.medpac.gov/documents/Jun07_EntireReport.pdf), recommends that Congress ``repeal the existing 
hospital wage index statute, including reclassification and exceptions, 
and give the Secretary authority to establish new wage index systems.'' 
We continue to believe it would not be prudent at this time to adopt 
the IPPS wage index policies, such as reclassification, and will, 
therefore, continue to use the CBSA labor market area definitions and 
the pre-reclassification and pre-floor hospital wage index data based 
on 2011 cost report data in this final rule.
    With regard to issues mentioned about ensuring that the wage index 
minimizes fluctuations, matches the costs of labor in the market, and 
provides for a single wage index policy, section 3137(b) of the 
Affordable Care Act required us to submit a report to the Congress by 
December 31, 2011 that includes a plan to reform the hospital wage 
index system. The report that we submitted is available online at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Reform.html. However, we will continue to 
monitor the IPPS wage index to identify any policy changes that may be 
appropriate for IRFs. This is consistent with our previous responses to 
these recurring comments.
    Final Decision: After careful consideration of the comments, we are 
finalizing use of the FY 2015 pre-floor, pre-reclassified hospital wage 
index data to derive the applicable IRF PPS wage index for FY 2016.

G. Description of the IRF Standard Payment Conversion Factor and 
Payment Rates for FY 2016

    To calculate the standard payment conversion factor for FY 2016, as 
illustrated in Table 15, we begin by applying the adjusted market 
basket increase factor for FY 2016 that was adjusted in accordance with 
sections 1886(j)(3)(C) and (D) of the Act, to the standard payment 
conversion factor for FY 2015 ($15,198). Applying the 1.7 percent 
adjusted market basket increase for FY 2016 to the standard payment 
conversion factor for FY 2015 of $15,198 yields a standard payment 
amount of $15,456. Then, we apply the budget neutrality factor for the 
FY 2016 wage index and labor-related share of 1.0033, which results in 
a standard payment amount of $15,507. We next apply the budget 
neutrality factors for the revised CMG relative weights of 0.9981, 
which results in the standard payment conversion factor of $15,478 for 
FY 2016.

    Table 15--Calculations To Determine the FY 2016 Standard Payment
                            Conversion Factor
------------------------------------------------------------------------
             Explanation for adjustment                    Calculations
------------------------------------------------------------------------
Standard Payment Conversion Factor for FY 2015.....  ...         $15,198
Market Basket Increase Factor for FY 2016 (2.4        x            1.017
 percent), reduced by 0.5 percentage point for the
 productivity adjustment as required by section
 1886(j)(3)(C)(ii)(I) of the Act, and reduced by
 0.2 percentage point in accordance with paragraphs
 1886(j)(3)(C) and (D) of the Act..................
Budget Neutrality Factor for the Wage Index and       x           1.0033
 Labor-Related Share...............................
Budget Neutrality Factor for the Revisions to the     x           0.9981
 CMG Relative Weights..............................
FY 2016 Standard Payment Conversion Factor.........   =          $15,478
------------------------------------------------------------------------

    We received 1 comment on the proposed FY 2016 standard payment 
conversion factor, which is summarized below.
    Comment: One commenter expressed support for the proposed budget 
neutrality factors used to adjust the FY 2016 standard payment 
conversion factor.
    Response: We appreciate the commenter's support.
    Final Decision: After consideration of the public comments, we are 
finalizing the IRF standard payment conversion factor of $15,478 for FY 
2016.
    After the application of the CMG relative weights described in 
section IV of this final rule to the FY 2016 standard payment 
conversion factor ($15,478), the resulting unadjusted IRF prospective 
payment rates for FY 2016 are shown in Table 16.

                                         Table 16--FY 2016 Payment Rates
----------------------------------------------------------------------------------------------------------------
                                            Payment rate      Payment rate      Payment rate     Payment rate no
                   CMG                         tier 1            tier 2            tier 3          comorbidity
----------------------------------------------------------------------------------------------------------------
0101....................................       $ 12,506.22       $ 10,953.78       $ 10,198.45        $ 9,757.33
0102....................................         15,733.39         13,781.61         12,831.26         12,275.60
0103....................................         17,688.26         15,493.48         14,425.50         13,800.18
0104....................................         19,113.78         16,742.55         15,587.89         14,913.05
0105....................................         22,433.81         19,650.87         18,295.00         17,504.07
0106....................................         25,012.45         21,909.11         20,398.46         19,516.21
0107....................................         28,016.73         24,540.37         22,848.62         21,858.03
0108....................................         35,565.35         31,151.02         29,004.22         27,747.41

[[Page 47077]]

 
0109....................................         32,431.05         28,406.77         26,448.81         25,303.43
0110....................................         42,722.38         37,421.16         34,842.53         33,333.42
0201....................................         12,400.97         10,190.72          9,195.48          8,687.80
0202....................................         16,306.07         13,397.76         12,091.41         11,422.76
0203....................................         18,660.28         15,332.51         13,837.33         13,071.17
0204....................................         20,573.36         16,905.07         15,255.12         14,411.57
0205....................................         24,610.02         20,220.46         18,248.56         17,239.40
0206....................................         29,349.38         24,114.72         21,762.07         20,557.88
0207....................................         39,063.38         32,096.73         28,965.53         27,363.56
0301....................................         17,290.47         14,433.24         13,235.24         12,349.90
0302....................................         21,463.34         17,917.33         16,429.90         15,332.51
0303....................................         25,010.90         20,878.27         19,146.29         17,866.26
0304....................................         33,266.87         27,770.63         25,465.95         23,763.37
0401....................................         15,007.47         12,772.45         11,696.72         10,811.38
0402....................................         22,005.07         18,728.38         17,151.17         15,852.57
0403....................................         35,110.30         29,881.83         27,363.56         25,294.15
0404....................................         61,478.62         52,323.38         47,915.24         44,290.30
0405....................................         54,815.34         46,652.24         42,722.38         39,490.57
0501....................................         13,422.52         10,696.85          9,932.23          9,116.54
0502....................................         17,634.09         14,052.48         13,047.95         11,976.88
0503....................................         22,317.73         17,785.77         16,513.48         15,159.15
0504....................................         25,623.83         20,418.58         18,959.00         17,403.46
0505....................................         29,943.74         23,862.43         22,156.76         20,338.09
0506....................................         42,095.52         33,545.47         31,146.38         28,590.96
0601....................................         16,115.69         12,716.72         11,866.98         10,723.16
0602....................................         20,646.10         16,290.60         15,202.49         13,736.73
0603....................................         25,664.07         20,249.87         18,897.09         17,073.78
0604....................................         33,690.96         26,583.47         24,808.14         22,415.24
0701....................................         14,950.20         12,518.61         11,856.15         10,769.59
0702....................................         19,392.39         16,237.97         15,378.94         13,968.90
0703....................................         23,251.05         19,469.78         18,438.94         16,748.74
0704....................................         30,234.73         25,317.36         23,978.52         21,779.09
0801....................................         12,435.03          9,794.48          8,885.92          8,206.44
0802....................................         16,346.32         12,874.60         11,681.25         10,788.17
0803....................................         22,048.41         17,366.32         15,756.60         14,550.87
0804....................................         19,717.42         15,529.08         14,089.62         13,012.35
0805....................................         23,766.47         18,719.09         16,984.01         15,685.41
0806....................................         29,536.67         23,264.98         21,107.35         19,492.99
0901....................................         14,801.61         11,905.68         10,911.99          9,946.16
0902....................................         19,678.73         15,827.80         14,505.98         13,224.40
0903....................................         24,572.87         19,765.41         18,115.45         16,513.48
0904....................................         31,048.87         24,973.75         22,888.87         20,864.34
1001....................................         16,536.70         14,498.24         12,910.20         11,648.74
1002....................................         20,661.58         18,115.45         16,129.62         14,555.51
1003....................................         29,655.85         25,999.94         23,151.99         20,890.66
1101....................................         21,565.50         21,565.50         17,131.05         16,097.12
1102....................................         28,044.59         28,044.59         22,277.49         20,932.45
1201....................................         15,265.95         14,821.73         13,496.82         12,591.35
1202....................................         18,739.21         18,194.39         16,567.65         15,456.33
1203....................................         23,114.85         22,443.10         20,435.60         19,065.80
1301....................................         18,250.11         15,038.42         14,179.40         12,947.35
1302....................................         23,133.42         19,061.16         17,973.05         16,411.32
1303....................................         30,375.58         25,029.47         23,600.85         21,550.02
1401....................................         14,037.00         11,535.75         10,432.17          9,387.41
1402....................................         18,601.46         15,287.62         13,824.95         12,439.67
1403....................................         22,404.41         18,412.63         16,649.68         14,982.70
1404....................................         28,434.63         23,368.68         21,132.11         19,016.27
1501....................................         16,292.14         13,123.80         12,083.67         11,627.07
1502....................................         20,661.58         16,645.04         15,324.77         14,745.89
1503....................................         24,996.97         20,136.88         18,539.55         17,839.94
1504....................................         31,053.51         25,017.09         23,032.81         22,162.95
1601....................................         17,607.77         12,947.35         12,719.82         11,695.18
1602....................................         23,124.13         17,002.58         16,703.86         15,358.82
1603....................................         29,576.91         21,746.59         21,364.28         19,644.68
1701....................................         16,569.20         14,055.57         12,825.07         11,935.09
1702....................................         21,509.78         18,245.47         16,648.14         15,493.48
1703....................................         24,630.14         20,892.20         19,064.25         17,742.43
1704....................................         32,335.09         27,428.56         25,026.38         23,291.29
1801....................................         19,785.53         14,990.44         13,696.48         12,187.38
1802....................................         29,109.47         22,053.05         20,150.81         17,929.72
1803....................................         47,878.10         36,272.69         33,143.04         29,491.78

[[Page 47078]]

 
1901....................................         18,304.28         15,912.93         15,474.90         13,529.32
1902....................................         34,683.10         30,152.69         29,323.07         25,636.21
1903....................................         58,010.00         50,431.97         49,045.14         42,878.70
2001....................................         14,320.25         11,767.92         10,854.72          9,825.43
2002....................................         18,576.70         15,265.95         14,080.34         12,744.59
2003....................................         23,128.78         19,006.98         17,531.93         15,869.59
2004....................................         29,784.32         24,476.91         22,576.21         20,435.60
2101....................................         26,546.32         26,546.32         20,605.86         19,989.84
5001....................................  ................  ................  ................          2,408.38
5101....................................  ................  ................  ................         11,199.88
5102....................................  ................  ................  ................         25,252.36
5103....................................  ................  ................  ................         11,970.69
5104....................................  ................  ................  ................         29,836.94
----------------------------------------------------------------------------------------------------------------

H. Example of the Methodology for Adjusting the Federal Prospective 
Payment Rates

    Table 17 illustrates the methodology for adjusting the federal 
prospective payments (as described in sections VI.A. through VI.F. of 
this final rule). The following examples are based on two hypothetical 
Medicare beneficiaries, both classified into CMG 0110 (without 
comorbidities). The unadjusted federal prospective payment rate for CMG 
0110 (without comorbidities) appears in Table 16.
    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 0.8416, 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 0.8599, 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 16. Then, we multiply the labor-related share for FY 2016 (71.0 
percent) described in section VI.E. of this final rule by the 
unadjusted federal prospective payment rate. To determine the non-labor 
portion of the federal prospective payment rate, we subtract the labor 
portion of the federal payment from the unadjusted federal prospective 
payment.
    To compute the wage-adjusted federal prospective payment, we 
multiply the labor portion of the federal payment by the appropriate 
transition wage index, which may be found in Table A. The table is 
available on 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 wage-adjusted 
federal payment by adding the wage-adjusted labor amount to the non-
labor portion.
    Adjusting the 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 17 illustrates the components of the 
adjusted payment calculation.

                   Table 17--Example of Computing the IRF FY 2016 Federal Prospective Payment
----------------------------------------------------------------------------------------------------------------
                                                                                                Urban Facility B
            Steps                                                       Rural Facility A         (Harrison Co.,
                                                                       (Spencer Co., IN)              IN)
----------------------------------------------------------------------------------------------------------------
1............................  Unadjusted Federal Prospective     ...        $ 33,333.42  ...        $ 33,333.42
                                Payment.
2............................  Labor Share......................   x                0.71   x                0.71
3............................  Labor Portion of Federal Payment.   =          $23,666.73   =          $23,666.73
4............................  CBSA-Based Wage Index (shown in     x              0.8416   x              0.8599
                                the Addendum, Tables 1 and 2).
5............................  Wage-Adjusted Amount.............   =          $19,917.92   =          $20,351.02
6............................  Non-Labor Amount.................   +           $9,666.69   +           $9,666.69
7............................  Wage-Adjusted Federal Payment....   =          $29,584.61   =          $30,017.71
8............................  Rural Adjustment.................   x               1.149   x               1.000
9............................  Wage- and Rural-Adjusted Federal    =          $33,992.72   =          $30,017.71
                                Payment.
10...........................  LIP Adjustment...................   x              1.0156   x              1.0454
11...........................  FY 2016 Wage-, Rural- and LIP-      =          $34,523.01   =          $31,380.51
                                Adjusted Federal Prospective
                                Payment Rate.
12...........................  FY 2016 Wage- and Rural-Adjusted   ...         $33,992.72  ...         $30,017.71
                                Federal Prospective Payment.
13...........................  Teaching Status Adjustment.......   x                   0   x              0.0784
14...........................  Teaching Status Adjustment Amount   =                0.00   =            2,353.39
15...........................  FY 2016 Wage-, Rural-, and LIP-     +          $34,523.01   +          $31,380.51
                                Adjusted Federal Prospective
                                Payment Rate.
16...........................  Total FY 2016 Adjusted Federal      =          $34,523.01   =          $33,733.90
                                Prospective Payment.
----------------------------------------------------------------------------------------------------------------


[[Page 47079]]

    Thus, the adjusted payment for Facility A would be $34,523.01, and 
the adjusted payment for Facility B would be $33,733.90.

VII. Update to Payments for High-Cost Outliers Under the IRF PPS

A. Update to the Outlier Threshold Amount for FY 2016

    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 2006 through 2015 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, 79 FR 45872, 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.
    In the FY 2016 IRF PPS proposed rule (80 FR 23332 at 23367), to 
update the IRF outlier threshold amount for FY 2016, we proposed to use 
FY 2014 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 2015. Based on an analysis of the preliminary data used for the 
proposed rule, we estimated that IRF outlier payments as a percentage 
of total estimated payments would be approximately 3.2 percent in FY 
2015. Therefore, we proposed to update the outlier threshold amount 
from $8,848 for FY 2015 to $9,698 for FY 2016, as described in the FY 
2016 IRF PPS proposed rule (80 FR 23332 at 23367), to maintain 
estimated outlier payments at approximately 3 percent of total 
estimated aggregate IRF payments for FY 2016.
    We note that, as we typically do, we updated our data between the 
FY 2016 IRF PPS proposed and final rules to ensure that we use the most 
recent available data in calculating IRF PPS payments. Based on our 
analysis using this updated data, we now estimate that IRF outlier 
payments as a percentage of total estimated payments are approximately 
2.9 percent in FY 2015.
    We received 4 comments on the proposed update to the FY 2016 
outlier threshold amount to maintain estimated outlier payments at 
approximately 3 percent of total estimated IRF payments, which are 
summarized below.
    Comment: Several commenters expressed support for the proposed 
update to the outlier threshold amount to maintain estimated outlier 
payments for FY 2016 at 3 percent of total IRF PPS payments. However, 
some commenters expressed concern about the proposed increase in the 
outlier threshold and the potential financial impact this could have on 
IRFs with many high-cost outlier cases. One commenter suggested that 
CMS implement a two-year transition policy for changes to the FY 2016 
outlier threshold to mitigate any financial impact on IRFs. Several 
commenters also expressed concerns about the distribution of outlier 
payments and questioned whether the IRF outlier policy is reimbursing 
IRFs appropriately for high-cost cases. One commenter suggested that we 
ensure that Medicare pays out the full 3 percent to IRFs in FY 2016.
    Response: We will continue to monitor our IRF outlier policies to 
ensure that they continue to compensate IRFs appropriately for treating 
unusually high-cost patients and, thereby, promote access to care for 
patients who are likely to require unusually high-cost care. We note 
that when we updated the IRF claims data between the proposed and final 
rules, as we do each year, our analysis of the most recent available 
data indicates that an outlier threshold decrease (from $8,848 in FY 
2015 to $8,658 in FY 2016) is necessary to ensure that estimated 
outlier payments in FY 2016 equal 3 percent of total estimated IRF PPS 
payments. Thus, we do not estimate any negative financial impact of 
this update on IRFs with many high-cost outlier cases. Nevertheless, 
the annual updates to the outlier threshold amount are not substantial, 
and we do not believe the financial impact on individual IRFs would be 
large enough to warrant an extended transition period for the changes. 
We will continue to monitor trends in IRF outlier payments to ensure 
that they are working as intended to compensate IRFs for treating 
exceptionally high-cost IRF patients, and that the IRF outlier policy 
continues to result in IRF outlier payments that equal approximately 3 
percent of total IRF PPS payments annually.
    Final Decision: Having carefully considered the public comments 
received and also taking into account the most recent available data, 
we are finalizing the outlier threshold amount of $8,658 to maintain 
estimated outlier payments at approximately 3 percent of total 
estimated aggregate IRF payments for FY 2016. This update is effective 
October 1, 2015.

B. 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 proposed to apply a 
ceiling to IRFs' CCRs. Using the methodology described in that final 
rule, we proposed to update the national urban and rural CCRs for IRFs, 
as well as the national CCR ceiling for FY 2016, 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 2016, as discussed below.
     Other IRFs for which accurate data to calculate an overall 
CCR are not available.
    Specifically, for FY 2016, we proposed to estimate a national 
average CCR of 0.562 for rural IRFs, which we calculated by taking an 
average of the

[[Page 47080]]

CCRs for all rural IRFs using their most recently submitted cost report 
data. Similarly, we proposed to estimate a national average CCR of 
0.435 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 final rule, we have used the most recent available cost report 
data (FY 2013). This includes all IRFs whose cost reporting periods 
begin on or after October 1, 2012, and before October 1, 2013. If, for 
any IRF, the FY 2013 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 2012) 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 proposed to set the national 
CCR ceiling at 3 standard deviations above the mean CCR. Using this 
method, the national CCR ceiling would be 1.36 for FY 2016. This means 
that, if an individual IRF's CCR exceeds this proposed ceiling of 1.36 
for FY 2016, we would replace the IRF's CCR with the appropriate 
national average CCR (either rural or urban, depending on the 
geographic location of the IRF). We calculated the national CCR ceiling 
by:
    Step 1. Taking the national average CCR (weighted by each IRF's 
total costs, as previously discussed) 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 did not receive any comments on the proposed update to the IRF 
CCR ceiling and the urban/rural averages for FY 2016.
    Final Decision: As we did not receive any comments on the proposed 
updates to the IRF CCR ceiling and the urban/rural averages for FY 
2016, we are finalizing the national average urban CCR at 0.435, the 
national average rural CCR at 0.562, and the national CCR ceiling at 
1.36 for FY 2016. These updates are effective October 1, 2015.

VIII. ICD-10-CM Implementation for IRF PPS

    In the FY 2015 IRF PPS final rule (79 FR 45872), we finalized 
conversions from the International Classification of Diseases, 9th 
Revision, Clinical Modification (ICD-9-CM) to the ICD-10-CM for the IRF 
PPS, which will be effective when ICD-10-CM becomes the required 
medical data code set for use on Medicare claims and IRF-PAI 
submissions. We remind providers of IRF services that the 
implementation date for ICD-10-CM is October 1, 2015. The ICD-10-CM 
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.

IX. Revisions and Updates to the IRF QRP

A. Background and Statutory Authority

    Section 3004(b) of the Affordable Care Act amended section 
1886(j)(7) of the Act, requiring the Secretary to establish the IRF 
QRP. This program applies to freestanding IRFs, as well as IRF units 
affiliated with either acute care facilities or critical access 
hospitals (CAHs). Beginning with the FY 2014 payment determination and 
subsequent years, the Secretary is required to reduce any annual update 
to the standard federal rate for discharges occurring during such 
fiscal year by 2 percentage points for any IRF that does not comply 
with the requirements established by the Secretary.
    The Act requires that for the FY 2014 payment determination and 
subsequent years, each IRF submit data on quality measures specified by 
the Secretary in a form and manner, and at a time, specified by the 
Secretary. The Secretary is required to specify quality measures that 
are endorsed by the entity that holds the contract with the Secretary 
under section 1890(a) of the Act. This entity is currently the NQF. 
Information regarding the NQF is available at http://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx. 
The Act authorizes an exception under which the Secretary may specify 
non-endorsed quality measures for specified areas or medical topics 
determined appropriate by the Secretary for which a feasible or 
practical measure has not been endorsed by the NQF, as long as due 
consideration is given to NQF-endorsed measures or measures adopted by 
a consensus organization identified by the Secretary.
    Additionally, section 2(a) of the Improving Medicare Post-Acute 
Care Transformation Act of 2014 (IMPACT Act) (Pub. L. 113-185, enacted 
on Oct. 6, 2014), amended title XVIII of the Act by adding section 
1899B of the Act, titled Standardized Post-Acute Care (PAC) Assessment 
Data for Quality, Payment and Discharge Planning. Section 1899B(c)(1) 
of the Act requires that the Secretary specify not later than the 
applicable specified application date, as defined in section 
1899B(a)(2)(E) of the Act, quality measures on which IRF providers are 
required to submit standardized patient assessment data described in 
section 1899B(b)(1) of the Act and other necessary data specified by 
the Secretary. Section 1899B(c)(2)(A) requires, to the extent possible, 
the submission of such quality measure data through the use of a PAC 
assessment instrument and the modification of such instrument as 
necessary to enable such use; for IRFs, this requirement refers to the 
IRF-PAI. In addition, section 1899B(d)(1) of the Act requires that the 
Secretary specify not later than the applicable specified application 
date, resource use and other measures on which IRF providers are 
required to submit any necessary data specified by the Secretary, which 
may include standardized assessment data in addition to claims data. 
Furthermore, section 2(c)(2) of the IMPACT Act amended section 
1886(j)(7) of the Act by adding section 1886(j)(7)(F)(i), which 
requires IRF providers to submit to the Secretary data on the quality, 
resource use, and other measures required under sections 1899B(c)(1) 
and (d)(1) of the Act. Additionally, section 1886(j)(7)(F)(ii) requires 
that, beginning in FY 2019 and for each subsequent year, providers 
submit standardized patient assessment data required under section 
1899B(b)(1) of the Act. Under section 1886(j)(7)(F)(iii) of the Act, 
the required data must be submitted in the form and manner, and at the 
time, specified by the Secretary.
    Section 1899B(c)(1) and (d)(1) of the Act direct CMS to specify 
measures that relate to at least 5 stated quality domains and 3 stated 
resource use and other measure domains. The quality measures specified 
under section 1899B(c)(1) of the Act must address at least the 
following domains:
     Functional status, cognitive function, and changes in 
function and cognitive function;

[[Page 47081]]

     Skin integrity and changes in skin integrity;
     Medication reconciliation;
     Incidence of major falls; and
     Accurately communicating the existence of and providing 
for the transfer of health information and care preferences of an 
individual to the individual, family caregiver of the individual, and 
providers of services furnishing items and services to the individual 
when the individual transitions (1) from a hospital or CAH to another 
applicable setting, including a PAC provider or the home of the 
individual, or (2) from a PAC provider to another applicable setting, 
including a different PAC provider, hospital, CAH, or the home of the 
individual.
    The resource use and other measures specified under section 
1899B(d)(1) of the Act must address at least the following domains:
     Resource use measures, including total estimated Medicare 
spending per beneficiary;
     Discharge to community; and
     Measures to reflect all-condition risk-adjusted 
potentially preventable hospital readmissions rates.
    Sections 1899B(c) and (d) of the Act indicate that data satisfying 
the eight measure domains in the IMPACT Act is the minimum data 
reporting requirement. Therefore, we may specify additional measures 
and additional domains.
    Section 1899B(e)(2)(A) of the Act requires that each measure 
specified by the Secretary under that section be endorsed by the entity 
that holds the contract with the Secretary under section 1890(a) of the 
Act. This entity is currently the NQF. Information regarding the NQF is 
available at http://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx. However, under section 1899B(e)(2)(B) of 
the Act, the Secretary may specify a measure that has not been so 
endorsed in the case of a specified area of medical topic determined 
appropriate by the Secretary for which a feasible or practical measure 
has not been 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 1899B(e)(3) of the Act mandates the use of the pre-
rulemaking process of section 1890A with respect to the measures 
specified under sections 1899B(c) and (d) and provides that the 
Secretary may use expedited procedures, such as ad-hoc reviews, as 
necessary in the case of a measure required for data submissions during 
the 1-year period before the applicable specified application date. In 
addition, section 1899B(e)(3)(B)(ii) of the Act gives the Secretary the 
option to waive the pre-rulemaking process for a measure if the pre-
rulemaking process (including through the use of expedited procedures) 
would result in the inability of the Secretary to satisfy any deadline 
specified in section 1899B of the Act with respect to the measure.
    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, and section 1899B(g) of the Act requires 
public reporting of the performance of individual providers on the 
quality, resource use, and other measures beginning not later than 2 
years after the applicable specified application date. The Secretary 
must ensure, including through a process consistent with the provisions 
of section 1886(b)(3)(B)(viii)(VII) of the Act, that each IRF is given 
the opportunity to review the data and information that is to be made 
public and to submit corrections prior to the publication or posting of 
this data. Public reporting of data and information under section 
1899B(g)(1) of the Act must be consistent with the provisions of 
section 1886(j)(7)(E) of the Act. In addition, section 1899B(f)(1) of 
the Act, as added by the IMPACT Act, requires the Secretary to make 
confidential feedback reports available to post-acute providers on 
their performance on the measures required under section 1899B(c)(1) 
and (d)(1) of the Act, beginning 1 year after the applicable specified 
application date.
    For more information on the statutory history of the IRF QRP, 
please refer to the FY 2015 IRF PPS final rule (79 FR 45908). More 
information on the IMPACT Act is available at https://www.govtrack.us/congress/bills/113/hr4994.
    As previously stated, the IMPACT Act adds new section 1899B of the 
Act that imposes new data reporting requirements for certain post-acute 
care (PAC) providers, including IRFs. Sections 1899B(c)(1) and 
1899B(d)(1) of the Act collectively require that the Secretary specify 
quality measures and resource use and other measures with respect to 
certain domains not later than the specified application date that 
applies to each measure domain and PAC provider setting. Section 
1899B(a)(2)(E) of the Act delineates the specified application dates 
for each measure domain and PAC provider. The IMPACT Act also amends 
various sections of the Act, including section 1886(j)(7), to require 
the Secretary to reduce the otherwise applicable PPS payment to a PAC 
provider that does not report the new data in a form and manner, and at 
a time, specified by the Secretary. For IRFs, amended section 
1886(j)(7)(A)(i) of the Act would require the Secretary to reduce the 
payment update for any IRF that does not satisfactorily submit the new 
required data.
    Under the current IRF QRP, the general timeline and sequencing of 
measure implementation occurs as follows: Specification of measures; 
proposal and finalization of measures through rulemaking; IRF 
submission of data on the adopted measures; analysis and processing of 
the submitted data; notification to IRFs regarding their quality 
reporting compliance with respect to a particular FY; consideration of 
any reconsideration requests; and imposition of a payment reduction in 
a particular FY for failure to satisfactorily submit data with respect 
to that FY. Any payment reductions that are taken with respect to a FY 
begin approximately one year after the end of the data submission 
period for that fiscal year and approximately 2 years after we first 
adopt the measure.
    To the extent that the IMPACT Act could be interpreted to shorten 
this timeline so as to require us to reduce an IRF's PPS payment for 
failure to satisfactorily submit data on a measure specified under 
section 1899B(c)(1) or (d)(1) of the Act beginning with the same FY as 
the specified application date for that measure, such a timeline would 
not be feasible. The current timeline previously discussed reflects 
operational and other practical constraints, including the time needed 
to specify and adopt valid and reliable measures, collect the data, and 
determine whether an IRF has complied with our quality reporting 
requirements. It also takes into consideration our desire to give IRFs 
enough notice of new data reporting obligations so that they are 
prepared to timely start reporting the data. Therefore, we intend to 
follow the same timing and sequence of events for measures specified 
under section 1899B(c)(1) and (d)(1) of the Act that we currently 
follow for other measures specified under the IRF QRP. We intend to 
specify each of these measures no later than the specified application 
dates set forth in section 1899B(a)(2)(E) of the Act and propose to 
adopt them consistent with the requirements in the Act and 
Administrative Procedure Act.

[[Page 47082]]

To the extent that we finalize a proposal to adopt a measure for the 
IRF QRP that satisfies an IMPACT Act measure domain, we intend to 
require IRFs to report data on the measure for the fiscal year that 
begins 2 years after the specified application date for that measure. 
Likewise, we intend to require IRFs to begin reporting any other data 
specifically required under the IMPACT Act for the FY that begins 2 
years after we adopt requirements that would govern the submission of 
that data.
    Comment: Several commenters requested the development of a 
comprehensive overall plan for implementation across all settings 
covered by the IMPACT Act. Commenters stated that a comprehensive 
implementation plan would give PAC providers an opportunity to plan for 
the potential impacts to their operations, and enable all stakeholders 
to understand CMS's approach in implementing the IMPACT Act across care 
settings. Commenters requested that CMS describe an overall strategy 
for identifying cross-cutting measures, timelines for data collection 
and timelines for reporting. One commenter requested that CMS plans be 
communicated as soon as possible and that CMS develop setting-specific 
communications to facilitate understanding of the IMPACT Act 
requirements.
    Response: We appreciate the request for a comprehensive plan to 
allow PAC providers to plan for implementation of the IMPACT Act, as 
well as the need for stakeholder input, the development of reliable, 
accurate measures, clarity on the level of standardization of items and 
measures, and avoidance of unnecessary burden on PAC providers. Our 
intent has been to comply with these principles in the implementation 
and rollout of QRPs in the various care settings, and we will continue 
to adhere to these principles as the agency moves forward with 
implementing IMPACT Act requirements.
    In addition, in implementing the IMPACT Act requirements, we will 
follow the strategy for identifying cross-cutting measures, timelines 
for data collection and timelines for reporting as outlined in the 
IMPACT Act. As described above, the IMPACT Act requires us to specify 
measures that relate to at least five stated quality domains and three 
stated resource use and other measure domains. The IMPACT Act also 
outlines timelines for data collection and timelines for reporting. We 
intend to adopt measures that comply with the IMPACT Act in a manner 
that is consistent with the sequence we follow in other quality 
reporting programs. We agree that outreach and education are 
invaluable, and we intend to continue to provide easy reference 
information to the public, such as a high-level walk-through of 
information.
    In addition to the Special Open Door Forum (SODF), we hosted on the 
topic of the IMPACT Act, we have created a post-acute care quality 
initiatives Web site, which pertains primarily to the IMPACT Act 
required quality measures/assessment instrument domains, and allows 
access to a mail box for IMPACT Act provider related questions. We note 
that the slides used for the SODF are accessible on the IMPACT Act/
Post-Acute Care Quality Initiatives Web site http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html, and that they provide high-level background and 
information, including timelines as they pertain to the assessment 
domains required under the IMPACT Act. Further, we are in the midst of 
developing plans for providing additional and ongoing education and 
outreach (to include timelines) in the near future, as suggested by 
commenters. For further information and future postings of such 
documents and information, please continue to check the Post-Acute Care 
Quality Initiatives Web site (listed above), as well as the IRF Quality 
Reporting Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html?redirect=/IRF-Quality-Reporting/.
    We also refer the public to the following Web site for updates: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html.
    Comment: Several commenters asked for more opportunities for 
stakeholder input into various aspects of the measure development 
process. The commenters requested opportunities to provide input early 
and throughout the measure development process. One commenter requested 
stakeholder input on and reaction to an IMPACT Act implementation plan. 
Two commenters requested that CMS hold meetings with PAC providers on a 
frequent and regular basis to provide feedback on implementation and 
resolve any perceived inconsistencies in the FY 2016 IRF PPS proposed 
rule. One commenter specifically noted an appreciation for the 
listening sessions held by CMS thus far, yet requested opportunities 
for more extensive collaboration. Finally, one commenter suggested that 
CMS prioritize patient and their families as important stakeholders in 
the development and implementation of quality of care measures, 
particularly with regard to measures assessing the transfer of health 
information and patient care preferences.
    Response: We plan to implement the IMPACT Act in a manner that is 
transparent and includes input from and collaboration with the PAC 
provider community. It is of the utmost importance to us to continue to 
engage stakeholders, including patients and their families, throughout 
the measure development process through participation in technical 
expert panels (TEPs), listening sessions, and public comments. We have 
provided multiple opportunities for stakeholder input, which include 
the following activities to date: Our measure development contractor(s) 
convened a TEP that included stakeholder experts on February 3, 2015; 
we convened listening sessions on February 10 and March 24, 2015; we 
heard stakeholder input during the February 9th 2015 ad hoc MAP meeting 
convened for the sole purpose of reviewing measures we had developed to 
comply with the IMPACT Act. Additionally, we implemented a public mail 
box for the submission of comments in January 2015, 
[email protected], which is listed on our post-acute 
care quality initiatives Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html, 
and we held a Special Open Door Forum to seek input on the measures on 
February 25, 2015. The slides from the Special Open Door Forum are 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html.
    Comment: One commenter noted that it would be important for CMS to 
include in the FY 2016 IRF PPS final rule the aspects of IMPACT Act 
implementation relating to the timeline and sequencing of 
standardization of patient assessment data. One commenter suggested 
that CMS move quickly to reduce the burden of reporting duplicative 
data and to allow for better cross-setting comparisons, as well as the 
evolution of better quality measures.
    Response: We believe that the commenter is requesting information

[[Page 47083]]

pertaining to specific milestones related to our efforts to meet the 
statutory timelines which are specified within the IMPACT Act. We 
intend to use the rulemaking process to establish and communicate 
timelines for implementation. In addition, we will continue to provide 
ongoing education and outreach to stakeholders through Special Open 
Door Forums and periodic training sessions. We will also provide 
information about the measures at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html.
    Also, we have made additional details regarding standardization of 
patient assessment data and the cross-setting measure specifications 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information.html. We plan to continue to update this 
information as additional measures are specified.
    Comment: Several commenters supported the use of NQF-endorsed 
measures, while one commenter expressed concern that two of the 
measures proposed for FY 2018 lacked NQF endorsement. A few commenters 
requested that CMS only use measures that have been endorsed by NQF. 
Some commenters suggested that CMS use only NQF-endorsed measures that 
were specified for the exact setting in which they would be used and 
that were fully supported by the Measures Application Partnership 
(MAP).
    Response: We will continue to propose and adopt measures that have 
been appropriately tested and, when possible, that have been endorsed 
by the NQF. However, when this is not feasible, and where, as here, due 
consideration has been given to measures that are endorsed or adopted 
by a consensus organization, the exception authority given to the 
Secretary in sections 1899B(e)(2)(B) and 1886(j)(7)(D)(ii) of the Act 
permit the Secretary to adopt a measure for the IRF QRP that is not 
NQF-endorsed. Additionally, when selecting cross-setting measures and 
assessment items, we take into consideration the variations in patient 
populations treated in different PAC settings. Finally, we appreciate 
the comment regarding using only measures that are fully supported by 
the MAP. We recognize and support the importance of this multi-
stakeholder partnership that provides invaluable feedback to the 
federal government on the selection of performance measures and 
consider the MAP's recommendations regarding all quality measures under 
consideration for use in the IRF QRP.
    Comment: Several commenters identified the need to have as much 
standardization of measures and data collection across PAC settings as 
possible, while recognizing that some variations among settings may be 
necessary. Some commenters cautioned that complete standardization 
among PAC settings may not be possible and suggested that CMS consider 
standardization around topics or domains but allow different settings 
to use assessment instruments that are most appropriate for the patient 
populations assessed.
    Response: We agree that standardization is important, but would 
like to clarify that while the IMPACT Act requires that certain data be 
standardized in order to allow for interoperability and the exchange 
and use of such data among and by PAC providers, there will be 
instances in which providers in some PAC settings may need somewhat 
different items that are unique to their patient population. We will, 
however, ensure that a core set of standardized items is collected 
across each PAC setting.
    Comment: Several commenters requested that CMS consider minimizing 
the burden for PAC providers when available and avoid duplication in 
data collection efforts.
    Response: We appreciate the importance of avoiding undue burden and 
will continue to evaluate and consider any burden the IRF QRP places on 
IRFs.

B. General Considerations Used for Selection of Quality, Resource Use, 
and Other Measures for the IRF QRP

    We refer readers to the FY 2015 IRF PPS final rule (79 FR 45911) 
for a detailed discussion of the considerations we use for the 
selection of IRF QRP quality measures. In this final rule, we apply the 
same considerations to the selection of quality, resource use, and 
other measures required under section 1899B of the Act for the IRF QRP, 
in addition to the considerations discussed below.
    The quality measures we are adopting address the measure domains 
that the Secretary is required to specify under sections 1899B(c)(1) 
and (d)(1) of the Act. The totality of the measures considered to meet 
the requirements of the IMPACT Act will evolve, and additional measures 
will be proposed over time as they become available.
    To meet the first specified application date applicable to IRFs 
under section 1899B(a)(2)(E) of the Act, which is October 1, 2016, we 
have focused on measures that:
     Correspond to a measure domain in sections 1899B(c)(1) or 
(d)(1) of the Act and are setting-agnostic: For example, falls with 
major injury and the incidence of pressure ulcers;
     Are currently adopted for 1 or more of our PAC quality 
reporting programs, are already either NQF-endorsed and in use or 
finalized for use, or already previewed by the Measure Applications 
Partnership (MAP) with support;
     Minimize added burden on IRFs;
     Minimize or avoid, to the extent feasible, revisions to 
the existing items in assessment tools currently in use (for example, 
the IRF-PAI); and
     Where possible, the avoidance of duplication of existing 
assessment items.
    In our selection and specification of measures, we employ a 
transparent process in which we seek input from stakeholders and 
national experts and engage in a process that allows for pre-rulemaking 
input on each measure, as required by section 1890A of the Act. This 
process is based on a private-public partnership, and it occurs via the 
MAP. The MAP is composed of multi-stakeholder groups convened by the 
NQF, our current contractor under section 1890 of the Act, to provide 
input on the selection of quality and efficiency measures described in 
section 1890(b)(7)(B) of the Act. The NQF must convene these 
stakeholders and provide us with the stakeholders' input on the 
selection of such measures. We, in turn, must take this input into 
consideration in selecting such measures. In addition, the Secretary 
must make available to the public by December 1 of each year a list of 
such measures that the Secretary is considering under Title XVIII of 
the Act.
    As discussed in section IX.A. of this final rule, section 
1899B(e)(3) of the Act provides that the pre-rulemaking process 
required by section 1890A of the Act applies to the measures required 
under section 1899B of the Act, subject to certain exceptions for 
expedited procedures or, alternatively, waiver of section 1890A.
    We initiated an ad hoc MAP process for the review of the quality 
measures under consideration for proposal, in preparation for adoption 
of those quality measures into the IRF QRP that are required by the 
IMPACT Act, and that must be implemented by October 1, 2016. The List 
of Measures under Consideration (MUC List) under the IMPACT Act was 
made public on February 5, 2015. Under the IMPACT Act, these measures 
must be standardized so they can be applied across PAC settings and 
must

[[Page 47084]]

correspond to measure domains specified in sections 1899B(c)(1) and 
(d)(1) of the Act. The MAP reviewed the IMPACT Act-related quality 
measures adopted in this final rule for the IRF QRP, in light of their 
intended cross-setting uses. We refer to sections IX.F. and IX.G. of 
this final rule for more information on the MAP's recommendations. The 
MAP's final report, MAP Off-Cycle Deliberations 2015: Measures under 
Consideration to Implement Provisions of the IMPACT Act: Final Report 
is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    As discussed in section IX.A. of this final rule, section 1899B(j) 
of the Act requires that we allow for stakeholder input, such as 
through town halls, open door forums, and mailbox submissions, before 
the initial rulemaking process to implement section 1899B of the Act. 
To meet this requirement, we provided the following opportunities for 
stakeholder input: Our measure development contractor(s) convened a TEP 
that included stakeholder experts and patient representatives on 
February 3, 2015; we provided 2 separate listening sessions on February 
10 and March 24, 2015; we sought public input during the February 9th 
2015 ad hoc MAP process provided for the sole purpose of reviewing the 
measures adopted in response to the IMPACT Act. Additionally, we 
implemented a public mail box for the submission of comments in January 
2015, [email protected], which is listed on our post-
acute care quality initiatives Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html, 
and held a National Stakeholder Special Open Door Forum to seek input 
on the measures on February 25, 2015. The slides from the SODF are 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html.
    For measures that do not have NQF endorsement, or which are not 
fully supported by the MAP for the IRF QRP, we are adopting these 
measures for the IRF QRP for the purposes of satisfying the measure 
domains required under the IMPACT Act that most closely align with the 
national priorities identified in the National Quality Strategy (http://www.ahrq.gov/workingforquality/) and for which the MAP supports the 
measure concept. Further discussion as to the importance and high-
priority status of these measures in the IRF setting is included under 
each quality measure proposal in this final rule. In addition, for 
measures not endorsed by the NQF, we have sought, to the extent 
practicable, to adopt measures that have been endorsed or adopted by a 
national consensus organization, recommended by multi-stakeholder 
organizations, and/or developed with the input of providers, 
purchasers/payers, and other stakeholders.

C. Policy for Retention of IRF QRP Measures Adopted for Previous 
Payment Determinations

    In the CY 2013 Hospital Outpatient Prospective Payment System/
Ambulatory Surgical Center (OPPS/ASC) Payment Systems and Quality 
Reporting Programs final rule (77 FR 68500 through 68507), we adopted 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. For the purpose of streamlining the rulemaking 
process, when we initially adopt a measure for the IRF QRP for a 
payment determination, this measure will also be adopted for all 
subsequent years or until we propose to remove, suspend, or replace the 
measure. For further information on how measures are considered for 
removal, suspension, or replacement, please refer to the CY 2013 OPPS/
ASC final rule (77 FR 68500 through 68507).
    We did not propose any changes to this policy for retaining IRF QRP 
measures adopted for previous payment determinations.

D. Policy for Adopting Changes to IRF QRP Measures

    In the CY 2013 OPPS/ASC final rule (77 FR 68500 through 68507), we 
adopted a subregulatory process to incorporate NQF updates to IRF 
quality measure specifications that do not substantively change the 
nature of the measure. Substantive changes will be proposed and 
finalized through rulemaking. Regarding what constitutes a substantive 
versus a nonsubstantive change, we expect to make this determination on 
a measure-by-measure basis. Examples of such nonsubstantive changes 
might include updated diagnosis or procedure codes; medication updates 
for categories of medications, broadening of age ranges, and changes to 
exclusions for a measure. The subregulatory process for nonsubstantive 
changes will include revision of the IRF PAI Manual and posting of 
updates at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    Examples of changes that we might consider to be substantive would 
be those in which the changes are so significant that the measure is no 
longer the same measure, or when a standard of performance assessed by 
a measure becomes more stringent, such as changes in acceptable timing 
of medication, procedure/process, test administration, or expansion of 
the measure to a new setting.
    We did not propose any changes to this policy for adopting changes 
to IRF QRP measures. However, we received a public comment, which is 
discussed below.
    Comment: One commenter recommended that CMS more clearly define the 
sub-regulatory process criteria for determining what constitutes a non-
substantive change, and stated that they appreciated the need for a 
sub-regulatory process in order for CMS to have some flexibility in 
updating measures that need non-substantive changes. This commenter 
also recommended that CMS consider any changes to numerator definitions 
for measures and not just denominator changes (for example, exclusions) 
as substantive.
    Response: We will take these recommendations into account as we 
further examine what constitutes a substantive versus a non-substantive 
change. We will propose any changes to our policy for adopting changes 
to IRF QRP measures in future rulemaking.

E. Quality Measures Previously Finalized for and Currently Used in the 
IRF QRP

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 (NQF #0138); and (2) an application of Percent of Residents or 
Patients 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.

[[Page 47085]]

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 the following measures:
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 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)). Data submission for 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). 
Additional information about this measure can be found at http://www.qualityforum.org/QPS/0138. IRFs 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.
3. Measures Finalized in the FY 2014 IRF/PPS Final Rule
    For the FY 2016 adjustments to the IRF PPS annual increase factor, 
we finalized the adoption of one additional 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 finalized the adoption of 3 
additional 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 Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short-Stay) (NQF #0678). In the FY 
2014 IRF PPS final rule (78 FR 47912 through 47916), we also adopted a 
revised version of the IRF-PAI (Version 1.2), which providers began 
using as of October 1, 2014, for the FY 2017 adjustments to the IRF PPS 
annual increase factor and subsequent year annual increase factors.
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 Vaccination Coverage among 
Healthcare Personnel (NQF #0431) quality measure that is collected by 
the CDC via the NHSN. 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 submit 
their data for this measure to the NHSN (http://www.cdc.gov/nhsn/). 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 and at 
http://www.qualityforum.org/QPS/0431. 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. We finalized that the final deadline for data 
submission associated with this quality measure is May 15th of each 
year.
b. All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge 
From Inpatient Rehabilitation Facilities (NQF #2502)
    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 IRFs. 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.
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.
    We added the data elements needed for this measure to the ``Quality 
Indicator'' section of the IRF-PAI Version 1.2, which became 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 and at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    For purposes of this quality measure, the influenza vaccination 
season is October 1 (or when the vaccine becomes available) through 
March 31 each year. We also finalized that for the FY 2017 adjustments 
to the IRF PPS annual increase factor, data collection covers the 
period from October 1, 2014 (or when the vaccine becomes available) 
through March 31, 2015.
    The measure specifications for this measure can be found on the NQF 
and CMS Web sites at http://www.qualityforum.org/QPS/0680 and at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
d. Percent of Residents or Patients With Pressure Ulcers That Are New 
or Worsened (Short-Stay) (NQF #0678)
    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 
IRF-PAI Version 1.2, for quality reporting affecting the FY 2017 
adjustments to the IRF PPS annual increase factor and subsequent year 
annual increase factors. The measure specifications for this measure 
can be found on the NQF and CMS Web sites

[[Page 47086]]

at http://www.qualityforum.org/QPS/0678 and at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
4. Measures Finalized in the FY 2015 IRF-PPS Final Rule
    In the FY 2015 IRF-PPS final rule, we adopted 2 additional quality 
measures:
a. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 
Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) 
Bacteremia Outcome Measure (NQF #1716)
    In the FY 2015 IRF PPS final rule (79 FR 45911 through 45913), we 
adopted the NHSN Facility-Wide Inpatient Hospital-Onset MRSA Bacteremia 
Outcome Measure (NQF #1716), a measure of hospital-onset unique blood 
source MRSA laboratory-identified events among all patients in the 
inpatient rehabilitation facility. This measure was developed by the 
CDC and is NQF-endorsed. We finalized that data submission would start 
on January 1, 2015, and that adjustments to the IRF PPS annual increase 
factor would begin with FY 2017. Data are submitted via the CDC's NHSN. 
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 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.
b. National Healthcare Safety Network (NHSN) Facility-Wide Inpatient 
Hospital-Onset Clostridium Difficile Infection (CDI) Outcome Measure 
(NQF #1717)
    In the FY 2015 IRF PPS final rule (79 FR 45913 through 45914), we 
adopted the NHSN Facility-Wide Inpatient Hospital-Onset CDI Outcome 
Measure (NQF #1717), a measure of hospital-onset CDI laboratory-
identified events among all inpatients in the facility. This measure 
was developed by the CDC and is NQF-endorsed. We finalized that data 
would be submitted starting January 1, 2015, and that adjustments to 
the IRF PPS annual increase factor would begin with FY 2017. Providers 
will use the CDC/NHSN data collection and submission framework for 
reporting of the NHSN Facility-Wide Inpatient Hospital-Onset CDI 
Outcome Measure (NQF #1717). 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 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.

 Table 18--Quality Measures Previously Finalized for and Currently Used
                  in the IRF Quality Reporting Program
------------------------------------------------------------------------
                                                         Data submission
        NQF measure ID           Quality measure title      mechanism
------------------------------------------------------------------------
NQF #0138.....................  National Health Safety  CDC NHSN.
                                 Network (NHSN)
                                 Catheter-Associated
                                 Urinary Tract
                                 Infection (CAUTI)
                                 Outcome Measure.
NQF #0431.....................  Influenza Vaccination   CDC NHSN.
                                 Coverage among
                                 Healthcare Personnel.
NQF #0680.....................  Percent of Residents    IRF-PAI.
                                 or Patients Who Were
                                 Assessed and
                                 Appropriately Given
                                 the Seasonal
                                 Influenza Vaccine
                                 (Short-Stay).
NQF #0678.....................  Percent of Residents    IRF-PAI.
                                 or Patients with
                                 Pressure Ulcers That
                                 Are New or Worsened
                                 (Short-Stay).
NQF #2502.....................  All-Cause Unplanned     Claims-based.
                                 Readmission Measure
                                 for 30 Days Post-
                                 Discharge from
                                 Inpatient
                                 Rehabilitation
                                 Facilities*.
NQF #1716.....................  National Healthcare     CDC NHSN.
                                 Safety Network (NHSN)
                                 Facility-Wide
                                 Inpatient Hospital-
                                 Onset Methicillin-
                                 Resistant
                                 Staphylococcus aureus
                                 (MRSA) Bacteremia
                                 Outcome Measure.
NQF #1717.....................  National Healthcare     CDC NHSN.
                                 Safety Network (NHSN)
                                 Facility-Wide
                                 Inpatient Hospital-
                                 Onset Clostridium
                                 difficile Infection
                                 (CDI) Outcome Measure.
------------------------------------------------------------------------
* Claims-based measure; no additional data submission required by IRFs.

5. Continuation of Previously Adopted IRF QRP Quality Measures for the 
FY 2018 Payment Determination and Subsequent Years
    For the FY 2018 adjustments to the IRF PPS annual increase factor, 
we are retaining the previously discussed measures: (1) NHSN CAUTI 
Outcome Measure (NQF #0138); (2) Percent of Residents or Patients Who 
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine 
(Short-Stay) (NQF #0680); (3) Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678); (4) 
All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge from 
IRFs (NQF #2502); (5) Influenza Vaccination Coverage among Healthcare 
Personnel (NQF #0431); (6) NHSN Facility-Wide Inpatient Hospital-Onset 
MRSA Bacteremia Outcome Measure (NQF #1716), (7) and NHSN Facility-Wide 
Inpatient Hospital-Onset CDI Outcome Measure (NQF #1717) quality 
measures.
    We received several comments on Quality Measures Previously 
Finalized for and Currently Used in the IRF QRP, which are summarized 
below.
    Comment: MedPAC commented in support of outcome measures, such as 
avoiding preventable readmissions and hospital-acquired infections in 
the Quality Reporting Programs.
    Response: We appreciate MedPAC for their support of outcome 
measures such as hospital readmissions and episodes of healthcare-
acquired infections. We believe that outcomes-based measures are 
important in ascertaining quality and intend to continue to implement 
outcomes-based measures throughout

[[Page 47087]]

the life of the IRF QRP. For example, we proposed IRF functional 
outcomes as part of this rulemaking cycle and we intend to propose 
outcomes-based measures to satisfy the IMPACT Act domains, such as 
Discharge to Community and Potentially Preventable Hospital 
Readmissions.
    Comment: Two commenters did not support the measure Percentage of 
Residents or Patients Who Were Assessed and Appropriately Given the 
Seasonal Influenza Vaccine (Short-Stay) (NQF #0680), stating that it is 
not an outcome measure, not related to the specific rehabilitative care 
provided to the patient, and that the majority of patients admitted to 
the IRFs have already been vaccinated. One commenter did not support 
the NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant 
Staphylococcus Aureus Bacteremia Outcome Measure (NQF #1716) or the 
NHSN Facility-Wide Inpatient Hospital-Onset Clostridium Difficile 
Infection Outcome Measure (NQF #1717), stating that they are not 
related to the specific rehabilitative care provided to the patient.
    Response: We thank the commenters for their comments. While the 
main focus of IRFs is improving the functional status of the patient, 
it is not the sole focus. We maintain that prevention and tracking of 
infectious disease is the responsibility of every care setting, 
regardless of where they fall within the continuum of care. For a 
broader discussion on the importance of each of the above listed 
measures, we refer you to the FY 2015 IRF PPS Final Rule (79 FR 45872).
    Comment: One commenter had concerns about measures that are 
collected via the CDC's NHSN system, noting that more data is collected 
through NHSN than is required for the quality measure, and that those 
reporting processes are not subject to rulemaking and may add 
additional reporting burdens.
    Response: When we propose to adopt a quality measure that is 
collected and submitted to CMS via the CDC's NHSN, we make certain that 
the proposed rule provides a detailed description of the measure, and 
we address and respond to public comments on the reporting burden 
related to the measure. In addition, we make certain that the measure 
specifications and protocols for the measure are posted on the CDC's 
NHSN Web site, the CMS Web site, and the NQF Web site, as applicable, 
and available for public scrutiny and comment, including details 
related to the procedures for using NHSN for data submission and 
information on definitions, numerator data, denominator data, data 
analysis, and measure specifications for the proposed measure. Because 
of this, we believe that the substantive aspects of the reporting 
processes are subject to rulemaking.
    Comment: Two commenters supported the current healthcare-associated 
infection (HAI) measures, reported through the CDC's NHSN.
    Response: We thank the commenters for their support; we have 
considered all public comments submitted on the healthcare-associated 
infection measures previously finalized. The measures, as listed above, 
will continue to be part of the IRF QRP unless we propose to remove 
them through future rulemaking.

F. Quality Measures Previously Adopted for IRF QRP for the FY 2018 
Payment Determination and Subsequent Years

    For the FY 2018 payment determination and subsequent years, we 
proposed to adopt 2 quality measures to reflect NQF endorsement or to 
meet the requirements of the IMPACT Act: (1) All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge from IRFs (NQF #2502); 
and (2) an application of Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (NQF #0678). These quality 
measures are as follows:
1. Quality Measure To Reflect NQF Endorsement: All-Cause Unplanned 
Readmission Measure for 30 Days Post Discharge From IRFs (NQF #2502)
    The All-Cause Unplanned Readmission Measure for 30 Days Post 
Discharge from IRFs (NQF #2502) measure was adopted for use in the IRF 
QRP in the FY 2014 IRF PPS final rule (78 FR 47906 through 47910). We 
proposed to adopt this measure for the FY 2018 payment determination 
and subsequent years to reflect that it is NQF-endorsed for use in the 
IRF setting as of December 2014. For current specifications of this 
measure, please visit http://www.qualityforum.org/QPS/2502.
    As adopted through the FY 2014 IRF PPS final rule, All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502) is a Medicare Fee-For-Service (FFS) claims-based measure. IRFs 
would not be required to report any additional data to us because we 
would calculate this measure based on claims data that are already 
reported to the Medicare program for payment purposes. We believe there 
would be no additional data collection burden on providers resulting 
from our implementation of All-Cause Unplanned Readmission Measure for 
30 Days Post Discharge from IRFs (NQF #2502) as part of the IRF QRP. In 
the FY 2014 IRF PPS final rule, we stated that we would provide initial 
feedback to providers, prior to public reporting of this measure, based 
on Medicare FFS claims data from CY 2013 and CY 2014.
    The description of this measure provided in the FY 2014 IRF PPS 
final rule (78 FR 47906 through 47910) noted this measure was the ratio 
of the number of risk-adjusted predicted unplanned readmissions for 
each individual IRF to the average number of risk-adjusted predicted 
unplanned readmissions for the same patients treated at the average 
IRF. This ratio is referred to as the standardized risk ratio (SRR). 
However, the measure specifications compute the risk-standardized 
readmission rate (RSRR) for this measure. The RSRR is the SRR 
multiplied by the overall national raw readmission rate for all IRF 
stays. The outcome is expressed as a percentage rate rather than a 
ratio.
    This measure, which harmonizes with the Hospital-Wide All-Cause 
Readmission Measure (NQF #1789) currently in use in the Hospital 
Inpatient Quality Reporting (HIQR) Program, continues to use the CMS 
Planned Readmission Algorithm as the main component for identifying 
planned readmissions. This algorithm was refined in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50211 through 50216). The All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502) measure for the IRF QRP will utilize the most recently updated 
version of the algorithm. A complete description of the CMS Planned 
Readmission Algorithm, which includes lists of planned diagnoses and 
procedures, can be found on CMS Web site (http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html). The additional post-
acute care planned readmission procedures specified for All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502) remain the same as when first adopted through FY 2014 IRF PPS 
final rule. Documentation on the additional post-acute care planned 
readmissions for this measure is available at http://www.qualityforum.org/QPS/2502. http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73619.
    We sought public comments on our proposal to adopt the NQF-endorsed 
version of All-Cause Unplanned Readmission Measure for 30 Days Post 
Discharge from IRFs (NQF #2502) for

[[Page 47088]]

the IRF QRP for the FY 2018 payment determination and subsequent years. 
The responses to public comments on this measure are discussed in this 
section of the final rule.
    Comment: Several commenters supported the adoption of this measure. 
One commenter noted that many hospital readmissions are preventable and 
that readmissions are costly and associated with increased morbidity 
and mortality. Another commenter supported the measure proposal, noting 
that NQF endorsement by a consensus-building entity is an important 
prerequisite designed to ensure the measure has been appropriately 
reviewed by stakeholders.
    Response: We agree that readmissions are preventable and associated 
with increased morbidity, mortality, and costs. We also appreciate the 
commenters' support on the measure's NQF endorsement.
    Comment: Several commenters expressed concern over this measure's 
use of claims data which are not accessible to IRFs in real time for 
quality improvement. Commenters noted concerns over their ability to 
track patients' post-IRF discharge to know whether patients were 
readmitted and the reason for the readmission. These commenters noted 
that a facility's readmission rate alone does not provide them with the 
specific patient information they would need for quality improvement 
and suggested that CMS share data with IRFs. Specifically, commenters 
indicated that they would need information on whether a patient was 
readmitted, as well as information on demographics and diagnosis. One 
commenter who also noted that the claims data are outdated and not 
reflective of IRFs' more recent quality improvement efforts suggested 
that CMS work with the industry to develop a standardized mechanism to 
track patients after IRF discharge in ``real time.''
    Response: We appreciate the commenters' concern pertaining to 
quality improvement and the readmissions of patients following an IRF 
discharge. We support the intent to seek information that will drive 
improved quality; however, we are currently unable to provide 
information pertaining to a patient's readmission episode. As part of 
their quality improvement and care coordination efforts, IRFs are 
encouraged to monitor hospital readmissions and follow up with patients 
post-discharge. Although this measure will not provide specific 
information at the patient level on a real-time basis, we believe that 
IRFs will be able to monitor their overall hospital readmission rates, 
assess their performance, and improve quality.
    Comment: Several commenters expressed concern over the lack of risk 
adjustment for sociodemographic status factors among IRF patients, such 
as community factors including access to primary care, medications, and 
appropriate food. One commenter recommended using proxy data on these 
factors such as Census-derived data on income and the proportion of 
facilities' patients that are dually eligible for Medicare and 
Medicaid.
    Response: While we appreciate these comments and the importance of 
the role that sociodemographic status plays in the care of patients, we 
continue to have concerns about holding providers to different 
standards for the outcomes of their patients of low sociodemographic 
status because we do not want to mask potential disparities or minimize 
incentives to improve the outcomes of disadvantaged populations. We 
routinely monitor the impact of sociodemographic status on facilities' 
results on our measures.
    NQF is currently undertaking a 2-year trial period in which new 
measures and measures undergoing maintenance reviews will be assessed 
to determine if risk-adjusting for sociodemographic factors is 
appropriate for each measure. For 2 years, NQF will conduct a trial of 
a temporary policy change that will allow inclusion of sociodemographic 
factors in the risk-adjustment approach for some performance measures. 
At the conclusion of the trial, NQF will determine whether to make this 
policy change permanent. Measure developers must submit information 
such as analyses and interpretations as well as performance scores with 
and without sociodemographic factors in the risk adjustment model.
    Furthermore, the HHS Office of the Assistant Secretary for Planning 
and Evaluation (ASPE) is conducting research to examine the impact of 
socioeconomic status on quality measures, resource use, and other 
measures under the Medicare program as directed by the IMPACT Act in 
section (2)(d)(1). We will closely examine the findings of these 
reports and related Secretarial recommendations and consider how they 
apply to our quality programs at such time as they are available.
    Comment: One commenter expressed concern that the measure does not 
adequately adjust for differences in functional status.
    Response: To clarify, this measure does adjust for differences in 
functional status by including risk adjusters based on the IRF PPS case 
mix groups, which incorporate patients' motor function, and in some 
cases cognitive function, at admission.
    Comment: One commenter noted that there is inconsistency in 
reporting periods with the pressure ulcer and CAUTI measures; 
specifically, the reporting periods for the pressure ulcer and CAUTI 
measures is calendar year 2015 whereas the readmission measure is based 
on calendar years 2013-2014.
    Response: With regard to the inconsistency of reporting periods 
with other proposed IRF QRP measures, we appreciate this feedback. To 
clarify, the All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from IRFs (NQF #2502) was previously adopted in the FY 2014 
IRF PPS final rule (78 FR 47906 through 47910) as part of the IRF QRP 
and was proposed in the FY 2016 IRF PPS proposed rule (80 FR 23373) to 
reflect NQF endorsement. The dates associated with this measure were 
based on data analysis and have not changed. The readmissions measure 
is a claims-based measure, and we therefore must rely on the submission 
of claims to CMS, and the time it takes to ensure all associated claims 
have been submitted to CMS. The other IRF QRP required measures are 
simply based on the calendar year, with quarterly submission deadlines. 
There is not a way to align the two types of measures, as claims for 
the same timeframe take an additional 6 to 9 months to mature.
    Comment: Two commenters noted that this measure does not harmonize 
with hospital readmission measures used in other settings, such as the 
SNF measure (NQF #2510) and the LTCH measure (NQF #2512). Specifically, 
one commenter noted that the SNF measure is based on 12 months of data 
and the IRF measure is based on 24 months of data.
    Response: We appreciate this comment regarding alignment of the PAC 
readmission measures. Though this measure is not identical to the 
hospital readmission measures being proposed for SNFs and LTCHs, it was 
developed to harmonize with those measures. As noted in the SNF PPS 
proposed rule (80 FR 22044 at 22059 through 22061), the SNF readmission 
measure (NQF #2510) is based on 12 months of data as this ensures an 
accurate sample size for calculating the RSRR. However, 24 months of 
data were needed in order to ensure sufficient sample sizes to reliably 
calculate this measure for IRFs due to the substantially lower number 
of IRF stays in comparison with SNF stays.
    Comment: One commenter expressed concern that PAC facilities should 
not be penalized for readmissions that are

[[Page 47089]]

unrelated to the patient's initial reason for admission.
    Response: In the FY 2016 IRF PPS proposed rule (80 FR 23373), we 
proposed a measure of all-cause unplanned readmissions for the IRF QRP. 
The issue of all-cause readmissions as opposed to a more focused set of 
readmission types has been raised in other contexts such as the 
Hospital-Wide Readmission Inpatient Quality Reporting (HWR IQR) measure 
finalized in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51476). As we 
explained in the FY 2014 IRF PPS final rule (78 FR 47906 through 
47910), discussions with technical experts have led us to prefer using 
an all-cause measure rather than a condition-specific readmissions 
measure. A measure of avoidable or related readmissions is possible 
when the population being measured is narrowly defined and certain 
complications are being targeted. For broader measures, a narrow set of 
readmission types is not practical. In addition, readmissions may be 
clinically related even if they are not diagnostically related. A 
patient may have comorbid conditions that are unrelated to the reason 
for rehabilitation. If not properly dealt with in discharge planning, a 
readmission for such a condition may become more likely. One of the 
primary purposes of a readmission measure is to encourage improved 
transitions at discharge, a choice among discharge destinations and 
care coordination. A readmission can occur that is less related to the 
primary condition being treated in the IRF than to the coordination of 
care post-discharge. That said, we have chosen to reduce the all-cause 
readmission set by excluding readmissions that are normally for planned 
or expected diagnosis and procedures. We augmented the research for the 
Hospital IQR set of planned readmissions for the IRF setting with 
recommendations and input from a TEP in the field of post-acute care 
(including IRFs). In the case where the readmission is due to a random 
event, such as a car accident, we expect these events to be randomly 
distributed across IRFs.
    Comment: One commenter did not support a potentially preventable 
hospital readmission rate because this would be based on data not 
accessible to all IRFs and that there are factors outside the control 
of an IRF that result in readmission that could not be predicted during 
the IRF stay.
    Response: We appreciate this feedback; however, we would like to 
clarify that the All-Cause Unplanned Readmission Measure for 30 Days 
Post-Discharge from IRFs (NQF #2502) was not proposed to meet the 
requirements of the IMPACT Act and is not a measure of potentially 
preventable hospital readmissions. This measure was adopted for use in 
the IRF QRP in the FY 2014 IRF PPS final rule (78 FR 47906 through 
47910), and was proposed in the FY 2016 IRF PPS final rule (80 FR 
23373) to reflect NQF endorsement for the IRF setting.
    Final Decision: Having carefully considered the comments we 
received on the NQF-endorsed version of All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge from IRFs (NQF #2502), we are 
finalizing the adoption of this measure for use in the IRF QRP for the 
FY 2018 payment determination and subsequent years.
2. Quality Measure Addressing the Domain of Skin Integrity and Changes 
in Skin Integrity: Percent of Residents or Patients With Pressure 
Ulcers That Are New or Worsened (Short-Stay) (NQF #0678)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required under the 
applicable reporting provisions to submit standardized patient 
assessment data and other necessary data specified by the Secretary to 
5 quality domains, one of which is skin integrity and changes in skin 
integrity. The specified application date by which the Secretary must 
specify quality measures to address this domain for IRFs, SNFs, and 
LTCHs is October 1, 2016, and for HHAs is January 1, 2017. To satisfy 
these requirements, we proposed to adopt the measure Percent of 
Residents or Patients with Pressure Ulcers that are New or Worsened 
(Short-Stay) (NQF #0678) that we have already adopted for the IRF QRP 
as a cross-setting quality measure that satisfies the domain of skin 
integrity and changes in skin integrity (80 FR 23373 through 23375). 
The reporting of data for this measure would affect the payment 
determination for FY 2018 and subsequent years. For the IRF setting, 
the measure assesses the percent of patients with stage 2 through stage 
4 pressure ulcers that are new or worsened since admission.
    As described in the FY 2012 IRF PPS final rule (76 FR 47876 through 
47878), pressure ulcers are high-cost adverse events and are an 
important measure of quality. For information on the history and 
rationale for the relevance, importance, and applicability of this 
measure in the IRF QRP, we refer readers to the FY 2012 IRF PPS final 
rule and the FY 2014 IRF PPS final rule (78 FR 47911 through 47912). 
Details regarding the specifications for this measure are available on 
the NQF Web site at http://www.qualityforum.org/QPS/0678.
    The IMPACT Act requires the implementation of quality measures and 
resource use and other measures that are standardized in order to 
enable interoperability across PAC settings, as well as the reporting 
of standardized patient assessment data and other necessary data 
specified by the Secretary. This requirement is in line with the NQF 
Steering Committee report, which stated: ``to understand the impact of 
pressure ulcers across providers, quality measures addressing 
prevention, incidence, and prevalence of pressure ulcers must be 
harmonized and aligned.'' \4\ The Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678) 
measure is NQF-endorsed for the IRF setting and has been successfully 
implemented using a harmonized set of data elements in three PAC 
settings (IRF, LTCH and SNF). As discussed in section IX.E. of this 
final rule, an application of this measure was adopted for the IRF QRP 
in the FY 2012 IRF PPS final rule (76 FR 47876 through 47878) for the 
FY 2014 payment determination and subsequent years, and the current 
NQF-endorsed version of the measure was finalized in the FY 2014 IRF 
PPS final rule (78 FR 47911 through 47912) for the FY 2017 payment 
determination and subsequent years. The measure has been in use in the 
IRF QRP since October 1, 2012, and currently, IRFs are submitting data 
for this measure using the IRF-PAI.
---------------------------------------------------------------------------

    \4\ National Quality Forum. National voluntary consensus 
standards for developing a framework for measuring quality for 
prevention and management of pressure ulcers. April 2008. Available 
from http://www.qualityforum.org/Projects/Pressure_Ulcers.aspx.>
---------------------------------------------------------------------------

    The Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short-Stay) (NQF #0678) measure was adopted for use in 
the LTCH QRP in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51748 
through 51756) for the FY 2014 payment determination and subsequent 
years, and has been successfully submitted by LTCHs using the LTCH 
Continuity Assessment Record and Evaluation (CARE) Data Set since 
October 2012. It has also been implemented in CMS' Nursing Home Quality 
Initiative, using the MDS 3.0 since 2011, and is currently reported on 
CMS' Nursing Home Compare at http://www.medicare.gov/nursinghomecompare/search.html.
    A TEP convened by our measure development contractor in February 
2015 provided input on the measure specifications and the feasibility 
and

[[Page 47090]]

clinical appropriateness of implementing the measure as a cross-setting 
quality measure under the IMPACT Act of 2014, for use across PAC 
settings, including the IRF setting. The TEP supported the 
implementation of this measure across PAC providers and also supported 
our efforts to standardize this measure for cross-provider development. 
Additionally, the MAP, convened by the NQF, met on February 9, 2015 and 
provided input to CMS. The MAP supported the use of Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short-Stay) (NQF #0678) in the IRF QRP as a cross-setting quality 
measure to be specified in accordance with the IMPACT Act of 2014. MAP 
noted that this measure addresses one of its previously identified PAC/
LTC core concepts as well as an IMPACT Act domain. More information 
about the MAP's recommendations for this measure is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    We proposed that that data collection for Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) 
(NQF #0678) would continue to occur through the quality indicator 
section of the IRF-PAI submitted through the Quality Improvement 
Evaluation System (QIES) Assessment Submission and Processing (ASAP) 
system. IRFs have been submitting data on the Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) 
measure (NQF #0678) through the quality indicator section of the IRF-
PAI since October 2012. For more information on IRF reporting using the 
QIES ASAP system refer to http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html and http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    In an effort to further harmonize the data elements across PAC 
providers, we proposed an update to the IRF-PAI items used to calculate 
the Percent of Residents or Patients with Pressure Ulcers That Are New 
or Worsened (Short-Stay) measure (NQF #0678) to align with the items 
included in the LTCH CARE Data Set and the MDS 3.0. The proposed 
modified IRF-PAI items used to identify new or worsened pressure ulcers 
consist of: M0800A: Worsening in Pressure Ulcer Status Since Admission, 
Stage 2; M0800B: Worsening in Pressure Ulcer Status Since Admission, 
Stage 3; and M0800C: Worsening in Pressure Ulcer Status Since 
Admission, Stage 4. We did not propose a change to the IRF-PAI items 
used to risk adjust this quality measure. These items consist of: 
FIM[supreg] Item 39I (Transfers: Bed, Chair, and Wheelchair), 
FIM[supreg] Item 32 (Bowel Frequency of Accidents), I0900A (Peripheral 
Vascular Disease (PVD)), I0900B (Peripheral Arterial Disease (PAD)), 
I2900A (Diabetes Mellitus), 25A (Height), and 26A (Weight). More 
information about the IRF-PAI items is available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html. For more information about the changes to the IRF-PAI, see 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    The specifications and data elements for the Percent of Residents 
or Patients with Pressure Ulcers that are New or Worsened (Short-Stay) 
(NQF #0678), are available in the IRF-PAI training manual at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html, as well as athttp://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We sought public comment on our proposal to specify and adopt the 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short-Stay) (NQF #0678) measure for the IRF QRP for the FY 
2018 payment determination and subsequent years to fulfill the 
requirements in the IMPACT Act. The responses to public comments on 
this measure are discussed below.
    Comment: Several comments supported our proposal to implement 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short-Stay) (NQF #0678) to fulfill the requirements of the 
IMPACT Act. The commenters stated that this measure is NQF-endorsed and 
has been supported by the MAP for use in the IRF QRP. One commenter 
highlighted that this measure has also been adopted for use in quality 
reporting programs in other PAC settings, specifically pointing to the 
use of this measure in the LTCH QRP and the Nursing Home Quality 
Initiative.
    Response: We agree that this measure fulfills the requirements of 
the IMPACT Act to implement quality measures that are standardized to 
enable interoperability across PAC settings. As the commenters stated, 
this measure is NQF-endorsed, is supported by the MAP for use in the 
IRF QRP, and has been endorsed for quality reporting programs in the 
nursing home, LTCH and IRF settings.
    Comment: One commenter supported CMS's proposal to adopt the 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short-Stay) (NQF #0678) measure in the IRF QRP. However, the 
commenter noted that the measure only focuses on Stage 2 through Stage 
4 pressure ulcers and recommended that IRFs monitor all stages of 
pressure ulcers.
    Response: We agree with the commenter that it is important for all 
healthcare providers to monitor all stages of pressure ulcers and 
implement clinically appropriate practices to maintain skin integrity 
to prevent and manage all changes to skin integrity. However, our 
review of the relevant literature and feedback from our TEP and 
clinical advisors suggest that providers have difficulty objectively 
identifying and measuring Stage 1 pressure ulcers. Therefore, Stage 1 
pressure ulcers have been excluded from the measure. Although we do not 
include Stage 1 pressure ulcers in the measure calculation, the 
proposed IRF-PAI version 1.4 tracks Stage 1 pressure ulcers at the time 
of admission and discharge for preventative purposes and to assist 
providers in care planning. The National Pressure Ulcer Advisory Panel 
(NPUAP) classifies unstageable or unclassified pressure ulcers as an 
additional category or stage of pressure ulcer in the United States. As 
currently specified, unstageable pressure ulcers are also excluded from 
the proposed quality measure Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678). 
However, we invited comment on our proposal for future measure 
development to include unstageable pressure ulcers, including suspected 
deep tissue ulcers, in the numerator of the quality measure. We 
appreciate the commenter's feedback and support of including 
unstageable pressure ulcers in the numerator of this proposed quality 
measure as new or worsened pressure ulcers. We would like to note that 
the proposed IRF-PAI version 1.4 includes reporting of unstageable 
pressure ulcers at the time of admission and discharge.
    Comment: Commenters expressed concerns about the measure not being 
standardized across PAC settings, for example, specifically noting 
differences in the payers that are required to report patient/resident 
data for this measure resulting in differences in the denominators for 
each setting. The commenter suggested measures include all patients, 
regardless of payer.

[[Page 47091]]

    Response: We appreciate the comments pertaining to the differences 
in the pressure ulcer quality measure denominators by payer type across 
the IRF, SNF and LTCH settings. Additionally, we appreciate the 
commenters' suggested expansion of the population used to calculate all 
measures to include payer sources beyond Medicare Part A and agree that 
quality measures that include all persons treated in a facility are 
better able to capture the health outcomes of that facility's patients 
or residents, and that quality reporting on all patients or residents 
is a worthy goal. Although we had not proposed all payer data 
collection through this current rulemaking, we will take this 
recommendation into consideration for future rulemaking.
    Comment: Several commenters were concerned that the pressure ulcer 
measure is not standardized across PAC settings. The commenters stated 
that although the measure appears to meet the goals and the intent of 
the IMPACT Act, it does not use a single data assessment tool.
    One commenter specifically mentioned the frequency of assessments, 
highlighting the fact that the LTCH and IRF versions of the measure are 
calculated using assessments at two points in time (admission and 
discharge), while the SNF version uses assessments at more than two 
points in time. The commenter expressed concern that the higher 
frequency of assessments for the MDS could potentially result in higher 
rates of pressure ulcer counts for SNFs. Another commenter expressed 
particular concerns regarding differences in the look-back periods for 
the items used on the IRF, SNF and LTCH assessments (MDS = 7 day 
assessment period, IRF = 3 day assessment period, LTCH = 3 day 
assessment period) and suggested that this would result in different 
rates of detection of new or worsened ulcers. Commenters encouraged CMS 
to address all of these discrepancies, and suggested that we should 
switch to using only an admission and discharge assessment in the SNF 
version of the measure.
    Response: While the IMPACT Act requires the modification of PAC 
assessment instruments to revise or replace certain existing patient 
assessment data with standardized patient assessment data as soon as 
practicable, it does not require a single data collection tool. We 
intend to modify the existing PAC assessment instruments as soon as 
practicable to ensure the collection of standardized data. While we 
agree that it is possible that within the PAC assessment instruments 
certain sections could incorporate a standardized assessment data 
collection tool, for example, the Brief Interview for Mental Status 
(BIMS), we have not yet concluded whether this kind of modification of 
the PAC assessment instruments is necessary.
    As to the concern that the pressure ulcer measure calculation is 
based on more frequent assessments in the SNF setting than in the LTCH 
and IRF settings, we wish to clarify that the result of the measure 
calculation for all three PAC providers is the same. For all three PAC 
(SNF, LTCH, and IRF) providers, the measure calculation ultimately 
shows the difference between the number of pressure ulcers present on 
admission and the number of new or worsened pressure ulcers present on 
discharge. While the SNF measure calculation arrives at that number 
differently than does the measure calculation in the IRF and LTCH 
settings, ultimately all three settings report the same result--as 
noted, the difference between the number of pressure ulcers present on 
admission and the new or worsened pressure ulcers at discharge. To 
explain, in IRFs and LTCHs, pressure ulcer assessment data is obtained 
only at 2 points in time--on admission and on discharge. Therefore, the 
calculation of the measure includes all new or worsened pressure ulcers 
since admission. In contrast, in SNFs pressure ulcer assessment data is 
obtained on admission, at intervals during the stay (referred to as 
``interim assessments''), and at discharge. Each interim assessment and 
the discharge assessment only look back to whether there were new or 
worsened pressure ulcers since the last interim assessment. The sum of 
the number of new or worsened pressure ulcers identified at each 
interim assessment and at the time of discharge yields the total number 
of new or worsened pressure ulcers that occurred during the SNF stay 
and that were present on discharge. In other words, the collection of 
pressure ulcer data in LTCHs and IRFs is cumulative, whereas in SNFs, 
data collection is sequential. In all cases the calculation for SNFS, 
IRFs and LTCHs reaches the same result--the total number of new or 
worsened pressured ulcers between admission and discharge. With respect 
to the commenter's concern that the use of interim assessment periods 
on the MDS will result in a higher frequency of pressure ulcers for SNF 
residents, we clarify that pressure ulcers found during interim 
assessments that heal before discharge are not included in the measure 
calculation.
    In regards to the commenter's concern about different look-back 
periods, we acknowledge that although the LTCH CARE Data Set and IRF-
PAI allow up to the third day starting on the day of admission as the 
assessment period and the MDS allows for an assessment period of 
admission up to day 7, we note that the training manuals for SNFs, 
LTCHs and IRFs provide specific and equivalent-coding instructions 
related to the items used to calculate this measure (found in Section 
M--skin conditions for all three assessments). These instructions 
ensure that the assessment of skin integrity occurs at the initiation 
of patients' or residents' PAC stays regardless of setting. All three 
manuals direct providers to complete the skin assessment for pressure 
ulcers present on admission as close to admission as possible, ensuring 
a harmonized approach to the timing of the initial skin assessment. 
Regardless of differences in the allowed assessment periods, providers 
across PAC settings should adhere to best clinical practices, 
established standards of care, and the instructions in their respective 
training manuals, to ensure that skin integrity information is 
collected as close to admission as possible. Although the manual 
instructions are harmonized to ensure assessment at the beginning of 
the stay, based on the commenter's feedback, we will take into 
consideration the incorporation of uniform assessment periods for this 
section of the assessments.
    Comment: Several commenters stated that collection of data for the 
proposed quality measure, Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678), is 
burdensome for IRFs. Commenters expressed that the transitions needed 
to meet the proposed changes to the IRF-PAI items used to calculate 
this measure will be financially burdensome for IRFs and will require a 
significant investment of time and updates to electronic medical 
records (EMRs). Commenters noted that even small changes to the data 
set can result in significant changes in the logic and flow of the data 
collection and require re-training of staff to complete the new items. 
The commenters also pointed out that the possible future addition of 
unstageable pressure ulcers in the numerator of the measure represents 
an additional potential change and additional added burden for IRFs.
    Response: We recognize the commenter's concern pertaining to

[[Page 47092]]

burden due to data set revisions, data collection, or training of staff 
due to the revisions in the proposed quality measure, Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short-Stay) (NQF #0678). We recognize the importance of education and 
will continue to disseminate information on assessment or quality 
measure revisions by means of training sessions, training manuals, 
webinars, open door forums, and help desk support. It should be noted 
that standard clinical practice requires providers to conduct thorough 
skin assessments, comprehensively document and track skin integrity, 
including pressure ulcers, and to adhere to pressure ulcer prevention 
and management guidelines. Thus, the documentation of pressure ulcer 
status as required by the IRF-PAI aligns with standard clinical 
practice, which we expect all PAC providers to adhere to. Although we 
recognize that the items have changed, pressure ulcer data has been 
collected in IRFs since October 2012, and the new items measure the 
same concepts as the pressure ulcer items in the current version of the 
IRF-PAI. In addition, in an effort to minimize burden of these items, 
we continue to include a gateway question and have a skip pattern. If 
the answer is [0-No] to IRF-PAI version 1.4 item number M0210: Unhealed 
Pressure Ulcer(s)--Does this patient have one or more unhealed pressure 
ulcer(s) at Stage 1 or higher?, the IRF staff will be able to skip 
several items in section M, including the M0300 and M0800 items. The 
skip pattern means that for many patients, IRF staff will not be 
required to complete the M0300 and M0800 items.
    While we applaud the use of EMRs, we do not require that providers 
use EMRs to populate assessment data. It should be noted that with each 
assessment release, we provide free software to our providers that 
allows for the completion and submission of any required assessment 
data. Free downloads of the Inpatient Rehabilitation Validation and 
Entry (IRVEN) software product are available on the CMS Web site at 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Software.html. Whether to take further steps than 
required to submit the assessment data--for example, the use of a 
vendor to design software that extracts data from a provider's EMR to 
populate the CMS quality assessment--is a business decision that is 
made solely by the provider. We only require that assessment data be 
submitted via the QIES ASAP system in a specific compatible format. To 
submit the required assessment data, providers can choose to use our 
free software, or the data submission specifications we provide that 
allow providers and their vendors to develop their own software, while 
ensuring compatibility with the QIES ASAP system.
    Implementing quality measures and data collection tools that are 
consistent with standard clinical practice, support positive outcomes, 
and are standardized across PAC settings are key objectives in our 
quality initiatives. It should be noted that the changes to the IRF-PAI 
were proposed in an effort to further standardize the data elements 
across PAC providers. Feedback relating to provider burden will be 
taken into account as we consider future updates to the quality 
measure, the Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (Short-Stay) (NQF #0678), including the 
consideration to add unstageable pressure ulcers, which includes 
suspected deep tissue injuries (sDTIs), in the numerator. In an effort 
to minimize provider burden, we will make every effort to utilize items 
that will already be in the IRF-PAI for this possible future change.
    Comment: Several commenters questioned whether the pressure ulcer 
measure is representative of the quality of care provided by IRFs. Some 
commenters shared that based on analysis of IRF-PAI data in the Uniform 
Data System for Medical Rehabilitation database, less than 1 percent of 
Medicare IRF cases are identified with a new or worsened pressure ulcer 
at discharge and questioned if improvement below 1 percent would be a 
meaningful indication of quality to consumers. One commenter suggested 
that pressure ulcer history would be a more appropriate measure of 
outcomes, compared to the proposed measure, because history is not 
taken at a single point in time.
    Response: We believe that pressure ulcer development and the 
worsening of pressure ulcers is an issue that is highly relevant to the 
IRF setting, as well as all post-acute care settings. Pressure ulcers 
are high-cost adverse events across the spectrum of health care 
settings from acute hospitals to home health. Specifically, patients in 
an IRF setting may have medically complex conditions and severe 
functional limitations and are, therefore, at high risk for the 
development, or worsening, of pressure ulcers. Pressure ulcers are 
serious medical conditions and an important measure of quality. 
Pressure ulcers can lead to severe, life-threatening infections, which 
substantially increase the total cost of care. Even if the proportion 
of patients in IRFs with new or worsening pressure ulcers is small, any 
such cases are particularly troubling. The National Quality Strategy 
identifies patient safety one of six priorities for quality measurement 
and assessment.\5\ In addition, section 1899B(c)(1)(B) of the Act 
directs CMS to specify measures that relate to skin integrity and 
changes in skin integrity, and section 1899B(g) of the Act requires 
public reporting of PAC provider performance on these measures. 
Therefore, we proposed the quality measure, Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) 
(NQF #0678). The proposed quality measure, Percent of Residents or 
Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) 
(NQF #0678), considers pressure ulcers that developed or worsened 
during the entire stay, holding PAC facilities accountable for the 
entirety of pressure ulcer care provided rather than looking at a 
snapshot or prevalence measure (that is, a measure of the proportion of 
a population who have, or had, a specific characteristic in a given 
time period) of pressure ulcers on a given date or time. We are open to 
stakeholder feedback on measure development and encourage all 
stakeholders to submit comments via email at 
[email protected].
---------------------------------------------------------------------------

    \5\ US Department of Health and Health Services. National 
Strategy for Quality Improvement in Health Care 2014 Annual Progress 
Report to Congress. September 2014. Accessed July 2015. http://www.ahrq.gov/workingforquality/reports/annual-reports/nqs2014annlrpt.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters supported the intent of the measure, 
but had concerns regarding the risk adjustment of this measure. One 
commenter recommended the inclusion of pressure ulcer history, rather 
than the presence of severe pressure ulcers at admission, as a risk 
factor for pressure ulcer outcomes. Another commenter was concerned 
that the measure is limited to only high risk patients or residents, 
and that the denominator size is decreased by excluding individuals who 
are low risk. The commenter indicated that pressure ulcers do develop 
in low risk individuals and that this exclusion will impact each PAC 
setting differently because the prevalence of low risk individuals 
varies across settings. The commenter recommended that CMS use a 
logistic regression model for risk adjustment to allow for an increase 
in the measure sample size by including all admissions,

[[Page 47093]]

take into consideration low-volume providers, and capture the 
development of pressure ulcers in low-risk individuals. The commenter 
stated that a patient's or resident's risk is not dichotomous (for 
example, high-risk vs. low-risk) and recommended that CMS grade risk 
using an ordinal scale related to an increasing number and severity of 
risk factors. The commenter also expressed that the populations and 
types of risk for pressure ulcers varies significantly across PAC 
settings, and that using a logistic regression model would be a more 
robust way to include a wide range of risk factors to better reflect 
the population across PAC settings. The commenter noted that the cross-
setting pressure ulcer TEP also recommended that CMS consider modifying 
the risk adjustment model and discussed excluding or risk adjusting for 
hospice patients and those at the end of life.
    Response: We appreciate the commenters' recommendations regarding 
risk adjustment for this measure.
    In regards to the recommendation that we risk adjust using a 
logistic regression model and incorporate low risk patients into the 
measure, we believe that this comment may have been submitted on the 
wrong quality measure. The comments apply to the quality measure 
Percent of High Risk Residents with Pressure Ulcers (Long Stay) (NQF 
#0679), which is not the measure that we proposed for the IRF QRP. The 
proposed measure is Percent of Residents or Patients with Pressure 
Ulcers that are New or Worsened (NQF #0678). This measure is currently 
risk adjusted using a logistic regression that includes low-risk 
patients or residents. In the model, patients or residents are 
categorized as either high- or low-risk for four risk factors: 
Functional limitation; bowel incontinence; diabetes or peripheral 
vascular disease/peripheral arterial disease; and low body mass index 
(BMI). The measure is not risk adjusted for severe pressure ulcers at 
admission. An expected score is calculated for each patient or resident 
using that patient or resident's risk level on the four risk factors 
described above. The patient/resident-level expected scores are then 
averaged to calculate the facility-level expected score, which is 
compared to the facility-level observed score to calculate the adjusted 
score for each facility. Additional detail regarding risk adjustment 
for this measure is available in the measure specifications, available 
at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html. We have determined that risk adjustment is 
appropriate for this measure and we have carefully developed and 
implemented the risk adjustment model previously described. When 
developing the risk adjustment model for this measure, we reviewed the 
relevant medical and scientific literature, conducted analyses to test 
additional risk factors, convened technical expert panels to seek 
stakeholder input, and obtained clinical guidance from subject matter 
experts and other stakeholders to identify additional risk factors. We 
will continue to analyze this measure as more data is collected and 
will consider changing the risk adjustment model, expanding the risk 
stratifications, and testing the inclusion of other risk factors as 
additional risk adjustors for future iterations of the measure. We will 
also take into consideration the TEP discussion and this commenter's 
feedback regarding the exclusion or risk adjustment for hospice 
patients and those at the end of life. As we transition to standardized 
data collection across PAC settings to meet the mandate of the IMPACT 
Act, we intend to continue our ongoing measure development and 
refinement activities to inform the ongoing evaluation of risk 
adjustment models and methodology. This continued refinement of the 
risk adjustment models will ensure that the measure remains valid and 
reliable to inform quality improvement within and across each PAC 
setting, and to fulfill the public reporting goals of quality reporting 
programs, including the IRF QRP. We remain committed to conducting 
ongoing testing and measure development activities in an effort to 
improve the risk adjustment of quality measures implemented through the 
quality reporting programs.
    Comment: A few commenters expressed concern regarding the 
reliability and validity of this measure across different PAC settings. 
The commenters were concerned that the reliability and validity testing 
for this measure was only conducted in the SNF setting.
    Response: We appreciate the commenters' concern that the SNF, LTCH 
and IRF populations are not identical and that some differences may 
exist in the reliability and validity of the measure across settings. 
However, the NQF has expanded its endorsement of this measure to 
include the IRF and LTCH settings, and has agreed that the similarities 
between the facilities and the potential overlap in patients, along 
with nonclinical factors that affect where a patient is treated, 
suggest that research regarding SNF/nursing home residents and the use 
of the MDS assessment is applicable to the use of the IRF-PAI in IRFs 
and LTCH CARE Data Set in LTCHs.
    All NQF-endorsed measures must meet strict reliability and validity 
criteria at regular intervals, in order to maintain NQF endorsement. 
Our measure development contractor is currently conducting measure and 
item level testing for this measure across PAC settings in preparation 
for NQF Endorsement Maintenance Review. Initial findings reviewed in 
2014 suggest that the measure is both valid and reliable in the SNF, 
LTCH, and IRF settings. Details regarding this testing will be made 
available to stakeholders once testing is complete, as part of the NQF 
maintenance and review process. We agree that it is important to 
conduct ongoing evaluations of the measure across PAC settings, and we 
remain committed to conducting ongoing measure testing to inform future 
measure development. It should be noted that we are working towards the 
development of a more fully standardized data set for this measure. As 
such, we continue to conduct measure development and testing to explore 
differences to determine the best way to standardize quality 
measurement, while ensuring measure reliability and validity and 
appropriately accounting for unique differences in populations across 
different PAC settings.
    Comment: A few commenters expressed concerns that although the MAP 
supports cross-setting use of this measure, it is only NQF-endorsed for 
the SNF setting and suggested that CMS delay implementing the cross-
setting measure until it is NQF-endorsed across all PAC settings. One 
commenter also pointed out that the specifications available on the NQF 
Web site are dated October 2013.
    Response: Although the proposed measure was originally developed 
for the SNF/nursing home resident population, it has been re-specified 
for the LTCH and IRF settings and received NQF endorsement for 
expansion to the LTCH and IRF settings by the NQF Consensus Standards 
Approval Committee (CSAC) on July 11, 2012 \6\ and was subsequently 
ratified by the NQF Board of Directors for expansion to the LTCH and 
IRF settings on August 1, 2012.\7\ As reflected on the NQF Web

[[Page 47094]]

site, the endorsed settings for this measure include Post-Acute/Long 
Term Care Facility: Inpatient Rehabilitation Facility, Post Acute/Long 
Term Care Facility: Long Term Acute Care Hospital, Post Acute/Long Term 
Care Facility: Nursing Home/Skilled Nursing Facility.\8\ NQF 
endorsement of this measure indicates that NQF supports the use of this 
measure in the LTCH and IRF settings, as well as in the SNF setting. In 
addition, this measure was fully supported by the MAP for cross-setting 
use at its meeting on February 9, 2015. With regard to the measure 
specifications posted on the NQF Web site, the most up-to-date version 
of the measure specifications were posted for stakeholder review at the 
time of the proposed rule on the CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Downloads/Inpatient-Rehabilitation-Facility-Quality-Reporting-Program-Specifications-for-the-Quality-Measures-Proposed-Through-the-Fiscal-Year-2016-Notice-of-Proposed-Rulemaking-report.pdf. 
The specifications currently posted on the NQF Web site are 
computationally equivalent and have the same measure components as 
those posted on the CMS Web site at the time of the proposed rule. 
However, we provided more detail in the specifications posted with the 
proposed rule, in an effort to more clearly explain aspects of the 
measure that were not as clear in the NQF specifications. Additionally, 
we clarified language to make phrasing more parallel across settings, 
and updated item numbers and labels to match the 2016 data sets (MDS 
3.0, LTCH CARE Data Sets, and IRF-PAI). We are working closely with NQF 
to make updates and ensure that the most current language and clearest 
version of the specifications are available on the NQF Web site.
---------------------------------------------------------------------------

    \7\ National Quality Forum. NQF Removes Time-Limited Endorsement 
for 13 Measures; Measures Now Have Endorsed Status. August 1, 2012. 
Available; http://www.qualityforum.org/News_And_Resources/Press_Releases/2012/NQF_Removes_Time-Limited_Endorsement_for_13_Measures;_Measures_Now_Have_Endorsed_Statu
s.aspx.
    \8\ National Quality Forum. Percent of Residents or Patients 
with Pressure Ulcers that are New or Worsened (Short-Stay). 
Available: http://www.qualityforum.org/QPS/0678.
---------------------------------------------------------------------------

    Comment: Multiple commenters expressed concern or requested 
clarification regarding changes to Section M of the IRF-PAI. Commenters 
were concerned that changes in pressure ulcer documentation, 
definitions, and guidance in the IRF-PAI and relevant training 
materials, may lead to increased confusion for clinicians, ultimately 
resulting in decreased data consistency and validity. These changes 
also make it difficult to compare data over time, or to use historic 
data for benchmarking purposes. Commenters noted the importance of 
providing clear guidance in manuals and training materials. One 
commenter did not object to the proposed changes, but requested that 
CMS clarify any minor changes to the IRF-PAI items and instructions 
through the final rule and sub-regulatory mechanisms (for example, the 
IRF-PPAI Training Manual) and noted that there are several 
modifications that need clarification.
    One commenter was concerned that the NPUAP staging system should 
not be used as the sole determinant of wound severity status and 
pointed out that there are many important pieces of information to 
consider, including wound size, worst tissue type and if a wound is 
open to the environment. The commenter also encouraged CMS to consider 
tools beyond the IRF-PAI to determine wound status and encouraged CMS 
to implement new tools for wound image documentation. They highlighted 
the fact that there is new technology available that would make it 
easier for CMS to standardize across facilities to ensure quality, 
transparency and accuracy in pressure ulcer prevention and care. The 
commenter also recommended several changes to the IRF-PAI, aimed at 
ensuring that all pressure ulcers are tracked from the beginning to the 
end of the stay.
    Response: We are committed to providing information and support 
that will allow providers to accurately interpret and complete quality 
reporting items. To increase provider understanding, we intend to 
provide comprehensive training, as we do each time the assessment items 
change for the IRF-PAI. In addition, we understand the importance of 
education and will continue to disseminate information on assessment or 
quality measure revisions through training sessions, training manuals, 
webinars, open door forums, and help desk support. It should be noted 
that the changes to the IRF-PAI were proposed in an effort to further 
standardize the data elements across PAC providers. Additionally, the 
new items measure the same concepts as the pressure ulcer items in the 
current version of the IRF-PAI and the quality measure has not changed. 
We believe that the standard CMS training activities, along with 
increased public outreach, will increase the accuracy of coding of the 
assessments, which will increase the reliability of the data submitted 
to us. As noted, the new IRF-PAI items measure the same concepts as the 
pressure ulcer items in the current version of the IRF-PAI, and the 
quality measure specifications, measure calculations, and scoring have 
not changed. This consistency will facilitate accurate and reliable 
data collection and reporting over time.
    The measure utilizes NPUAP staging, an important indicator of the 
severity of pressure ulcers, to identify new or worsened pressure 
ulcers. However, the purpose of the measure is not to capture all 
details regarding pressure ulcer severity, prevention, management, or 
documentation. We encourage all providers to engage in best practices 
to manage and track pressure ulcers within each facility, and we 
applaud the use of advanced technologies to facilitate improved quality 
and accuracy in pressure ulcer management and documentation. We will 
take all recommendations into consideration when updating future 
quality measures and the IRF-PAI assessment instrument. We appreciate 
stakeholder feedback on measure development and encourage everyone to 
submit comments to our comment email: [email protected].
    Final Decision: Having carefully considered the comments we 
received on the measure, Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short-Stay) (NQF #0678), we are 
finalizing the adoption of this measure for use in the IRF QRP as 
proposed.
    As part of our ongoing measure development efforts, we are 
considering a future update to the numerator of the quality measure, 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short-Stay) (NQF #0678). This update would hold providers 
accountable for the development of unstageable pressure ulcers, 
including suspected deep tissue injuries (sDTIs). Under this possible 
future change, the numerator of the quality measure would be updated to 
include unstageable pressure ulcers, including sDTIs, that are new or 
developed in the facility, as well as Stage 1 or 2 pressure ulcers that 
become unstageable due to slough or eschar (indicating progression to a 
Stage 3 or 4 pressure ulcer) after admission. In the FY 2016 IRF PPS 
proposed rule, we did not propose the implementation of this change 
(that is, including unstageable pressure ulcers, including sDTIs, in 
the numerator) in the IRF QRP, but sought public comment on this 
potential area of measure development.
    Our measure development contractor convened a cross-setting 
pressure ulcer TEP that strongly recommended that we hold providers 
accountable for the development of new unstageable pressure ulcers by 
including these pressure ulcers in the numerator of the quality 
measure. Although the TEP acknowledged that unstageable pressure

[[Page 47095]]

ulcers, including sDTIs, cannot and should not be assigned a numeric 
stage, panel members recommended that these be included in the 
numerator of the quality measure, Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678), as a 
new pressure ulcer if it developed in the facility. The TEP also 
recommended that a Stage 1 or 2 pressure ulcer that becomes unstageable 
due to slough or eschar should be considered worsened, because the 
presence of slough or eschar indicates a full thickness (equivalent to 
Stage 3 or 4) wound.9 10 These recommendations were 
supported by technical and clinical advisors and the NPUAP.\11\ 
Furthermore, exploratory data analysis conducted by our measure 
development contractor suggests that the addition of unstageable 
pressure ulcers, including sDTIs, would increase the observed incidence 
of new or worsened pressure ulcers at the facility level and may 
improve the ability of the quality measure to discriminate between 
poor- and high-performing facilities.
---------------------------------------------------------------------------

    \9\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf.
    \10\ Schwartz, M., Ignaczak, M.K., Swinson Evans, T.M., Thaker, 
S., and Smith, L.: The Development of a Cross-Setting Pressure Ulcer 
Quality Measure: Summary Report on November 15, 2013, Technical 
Expert Panel Follow-Up Webinar. Centers for Medicare & Medicaid 
Services, January 2014. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Pressure-Ulcer-Quality-Measure-Summary-Report-on-November-15-2013-Technical-Expert-Pa.pdf.
    \11\ Schwartz, M., Nguyen, K.H., Swinson Evans, T.M., Ignaczak, 
M.K., Thaker, S., and Bernard, S.L.: Development of a Cross-Setting 
Quality Measure for Pressure Ulcers: OY2 Information Gathering, 
Final Report. Centers for Medicare & Medicaid Services, November 
2013. Available: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/Development-of-a-Cross-Setting-Quality-Measure-for-Pressure-Ulcers-Information-Gathering-Final-Report.pdf.
---------------------------------------------------------------------------

    We sought public comment to inform our future measure development 
efforts to include unstageable pressure ulcers, including sDTIs, in the 
numerator of the quality measure, Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678). The 
responses to public comments on future development of the measure, 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short-Stay) (NQF #0678), are discussed below in this section 
of the final rule.
    Comment: Several commenters were supportive of our proposal to 
include unstageable pressure ulcers (we understand their comments to be 
referring to unstageable pressure ulcers due to slough or eschar and 
due to non-removable dressing/device) in the numerator of the quality 
measure as an area for future measure development, but expressed 
reservations about the possible future inclusion of suspected deep 
tissue injuries (sDTIs) in the numerator of the quality measure, 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short-Stay) (NQF #0678). One commenter cited literature 
suggesting that sDTIs can take between 72 hours and seven days to 
become visible, indicating that there is no reliable and consistent way 
to determine whether an sDTI at admission is facility-acquired or not. 
Another commenter indicated that providers should not be penalized for 
sDTIs because much is still unknown about sDTIs, including if there is 
an actual deep tissue injury. Additionally, many sDTIs heal without 
opening. One commenter requested more information regarding the way 
this change would be incorporated into the measure specification, the 
impact the change would have on the reliability and validity of the 
measure, and how the change may impact the risk adjustment methodology. 
Finally, the commenter encouraged CMS to submit any proposed changes 
through NQF review and specify all details in future rulemaking.
    Response: We thank the commenters for their support of the proposal 
to include unstageable pressure ulcers and for providing input 
regarding this proposed area for measure development. We also 
appreciate the recommendations regarding the approach to future 
implementation. At this time we are only soliciting feedback on this 
concept for possible measure development and will continue to conduct 
analyses and solicit input before making any final decisions. We intend 
to continue monitoring the literature, conduct reliability and validity 
testing, seek input from subject matter experts and stakeholders, and 
participate in ongoing refinement activities to inform this measure 
before proposing to adopt any changes. Should we move forward with the 
addition of unstageable pressure ulcers, including sDTIs, to the 
measure numerator, we will provide more details regarding the 
specifications for this change prior to implementation. We intend to 
submit any changes for NQF review and will seek public comment on 
future measure concepts or revisions.
    With regard to the commenters' concerns regarding sDTIs, we believe 
that it is important to do a thorough admission assessment on each 
patient who is admitted to an IRF, including a thorough skin assessment 
documenting the presence of any pressure ulcers of any kind, including 
sDTIs. When considering the addition of sDTIs to the measure numerator, 
we convened cross-setting TEPs in June and November 2013, and obtained 
input from clinicians, experts, and other stakeholders. While we agree 
that ongoing research and exploration of the clinical evidence is 
needed, sDTIs are a serious medical condition. Given their potential 
impact on mortality, morbidity, and quality of life, it may be 
detrimental to the quality of care to exclude sDTIs from future quality 
measures. Currently, we are only considering including sDTIs in the 
measure numerator, and will continue to conduct analyses, monitor the 
literature and clinical evidence, and solicit input before making any 
final decisions. We thank the commenters and will take all comments 
into account as we consider potential measure development and 
revisions.
    Comment: One commenter does not support the addition of unstageable 
pressure ulcers in the numerator of the quality measure, Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short-Stay) (NQF #0678). Although the commenter supports the 
collection of new or worsened pressure ulcer data in the IRF-PAI, they 
stated that some sDTIs and unstageable pressure ulcers due to non-
removable dressing or devices may not be identifiable on admission, and 
expressed concern that these may then be incorrectly assigned as ``new 
or worsened.'' As CMS considers this future possible update, the 
commenter emphasizes the importance of ensuring that any clinical or 
coding guidance provided is reflective of the most recent evidence-
based processes for recording pressure ulcers and sDTIs as detection 
methodology is updated continuously to reflect current medical 
evidence.
    Response: We thank the commenter for their input regarding this 
proposed area for future measure development, their support of the 
inclusion of these items in the IRF-PAI, and their recommendations 
regarding implementation. As noted, at this time we are only soliciting 
feedback on this concept for possible measure development. Should we 
move forward with the addition of unstageable pressure ulcers, 
including sDTIs, to the

[[Page 47096]]

measure numerator, we will submit any changes for NQF review and seek 
public comment on future measure concepts or revisions.
    We thank the commenters and will take all comments into account as 
we consider potential measure development and revisions.

G. Additional IRF QRP Quality Measures for the FY 2018 Payment 
Determination and Subsequent Years

    We proposed to adopt 6 additional quality measures beginning with 
the FY 2018 payment determination. These new quality measures are: (1) 
An Application of Percent of Residents Experiencing One or More Falls 
with Major Injury (Long-Stay) (NQF #0674); (2) an Application of 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
on July 23, 2015); (3) IRF Functional Outcome Measure: Change in Self-
Care Score for Medical Rehabilitation Patients (NQF #2633; under 
review); (4) IRF Functional Outcome Measure: Change in Mobility Score 
for Medical Rehabilitation Patients (NQF #2634; under review); (5) IRF 
Functional Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635; endorsed on July 23, 2015); and (6) 
IRF Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; endorsed on July 23, 2015).
1. Quality Measure Addressing the Domain of the Incidence of Major 
Falls: An Application of Percent of Residents Experiencing One or More 
Falls With Major Injury (Long-Stay) (NQF #0674)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required, under the 
applicable reporting provisions, to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
with respect to five quality domains, one of which is the incidence of 
major falls. The specified application date by which the Secretary must 
specify quality measures to address this domain for IRFs, SNFs, and 
LTCHs is October 1, 2016, and for HHAs is January 1, 2019. To satisfy 
these requirements, we proposed to adopt an Application of Percent of 
Residents Experiencing One of More Falls with Major Injury (Long-Stay) 
(NQF #0674) in the IRF QRP as a cross-setting quality measure that 
addresses the IMPACT Act domain of incidence of major falls. Data 
collection would start on October 1, 2016. The reporting of data for 
this measure would affect the payment determination for FY 2018 and 
subsequent years. As described in more detail in section IX.I.2. of 
this final rule, the first data collection period is 3 months (October 
1, 2016 to December 31, 2016), and the subsequent data collection 
periods are 12 months in length and follow the calendar year (that is, 
January 1 to December 31). For the IRF setting, this measure would 
report the percentage of patients who experienced 1 or more falls with 
major injury during the IRF stay. This measure was developed by us and 
is NQF-endorsed for long-stay residents of nursing facilities.
    Research indicates that fall-related injuries are the most common 
cause of accidental death in people aged 65 and older, responsible for 
approximately 41 percent of accidental deaths annually.\12\ Rates 
increase to 70 percent of accidental deaths among individuals aged 75 
and older.\13\ In addition to death, falls can lead to fracture, soft 
tissue or head injury, fear of falling, anxiety, and depression.\14\ It 
is estimated that 10 percent to 25 percent of nursing facility resident 
falls result in fractures and/or hospitalization.\15\ For IRFs, a study 
of 5,062 patients found that 367 patients (7.25 percent) had 438 falls. 
Among these 438 falls, 129 (29.5 percent of the falls) resulted in an 
injury, of which 25 (5.7 percent of all falls and 19 percent of all 
falls with injury) were serious.\16\ A separate study of 754 stroke 
patients in an IRF reported 117 patients (15.5 percent) experienced 159 
falls. Among these 159 falls, 13 (8 percent of falls) resulted in a 
minor injury, and 3 (2 percent of falls) resulted in a serious 
injury.\17\
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    \12\ Currie LM. Fall and injury prevention. Annu Rev Nurs Res. 
2006;24:39-74.
    \13\ Fuller GF. Falls in the elderly. Am Fam Physician. Apr 1 
2000;61(7):2159-2168, 2173-2154.
    \14\ Love K, Allen J. Falls: why they matter and what you can 
do. Geriatr Nurs, 2011; 32(3): 206-208
    \15\ Vu MQ, Weintraub N, Rubenstein LZ. Falls in the nursing 
home: are they preventable? J Am Med Dir Assoc. 2004 Nov-Dec; 
5(6):401-6. Review.
    \16\ Frisina PG, Guellnitz R, Alverzo J. A time series analysis 
of falls and injury in the inpatient rehabilitation setting. Rehab 
Nurs. 2010; 35(4):141-146.
    \17\ Rabadi MH, Rabadi FM, Peterson M. An analysis of falls 
occurring in patients with stroke on an acute rehabilitation unit. 
Rehab Nurs. 2008; 33(3):104-109.
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    Falls also represent a significant cost burden to the entire health 
care system, with injurious falls accounting for 6 percent of medical 
expenses among those age 65 and older.\18\ In their 2006 work, Sorensen 
et al., estimate the costs associated with falls of varying severity 
among nursing home residents. Their work suggests that acute-care costs 
range from $979 for a typical case with a simple fracture to $14,716 
for a typical case with multiple injuries.\19\ A similar study of 
hospitalizations of nursing home residents due to serious fall-related 
injuries (intracranial bleed, hip fracture, other fracture) found an 
average cost of $23,723.\20\
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    \18\ Tinetti ME, Williams CS. The effect of falls and fall 
injuries on functioning in community-dwelling older persons. J 
Gerontol A Biol Sci Med Sci. 1998 Mar;53(2):M112-9.
    \19\ Sorensen SV, de Lissovoy G, Kunaprayoon D, Resnick B, 
Rupnow MF, Studenski S. A taxonomy and economic consequence of 
nursing home falls. Drugs Aging. 2006;23(3):251-62.
    \20\ Quigley PA, Campbell RR, Bulat T, Olney RL, Buerhaus P, 
Needleman J. Incidence and cost of serious fall-related injuries in 
nursing homes. Clin Nurs Res. Feb 2012;21(1):10-23.
---------------------------------------------------------------------------

    According to Morse,\21\ 78 percent of falls are anticipated 
physiological falls. Anticipated physiological falls are falls among 
individuals who scored high on a risk assessment scale, meaning their 
risk could have been identified in advance of the fall. To date, 
studies have identified a number of risk factors for 
falls.22 23 24 25 26 27 28 29 30 The identification of such 
risk factors suggests the potential for health care facilities to 
reduce and prevent the incidence of falls with injuries for their 
patients. In light of the evidence previously discussed, we proposed to 
adopt the quality measure, an Application of Percent of Residents

[[Page 47097]]

Experiencing One or More Falls with Major Injury (Long-Stay) (NQF 
#0674), for the IRF QRP, with data collection starting on October 1, 
2016 and affecting the payment determination for FY 2018 and subsequent 
years.
---------------------------------------------------------------------------

    \21\ Morse, J. M. (2002) Enhancing the safety of hospitalization 
by reducing patient falls. Am J Infect Control 2002; 30(6): 376-80.
    \22\ Rothschild JM, Bates DW, Leape LL. Preventable medical 
injuries in older patients. Arch Intern Med. 2000 Oct 9; 
160(18):2717-28.
    \23\ Morris JN, Moore T, Jones R, et al. Validation of long-term 
and post-acute care quality indicators. CMS Contract No: 500-95-
0062/T.O. #4. Cambridge, MA: Abt Associates, Inc., June 2003.
    \24\ Avidan AY, Fries BE, James ML, Szafara KL, Wright GT, 
Chervin RD. Insomnia and hypnotic use, recorded in the minimum data 
set, as predictors of falls and hip fractures in Michigan nursing 
homes. J Am Geriatr Soc. 2005 Jun; 53(6):955-62.
    \25\ Fonad E, Wahlin TB, Winblad B, Emami A, Sandmark H. Falls 
and fall risk among nursing home residents. J Clin Nurs. 2008 Jan; 
17(1):126- 34.
    \26\ Currie LM. Fall and injury prevention. Annu Rev Nurs Res. 
2006;24:39-74.
    \27\ Ellis AA, Trent RB. Do the risks and consequences of 
hospitalized fall injuries among older adults in California vary by 
type of fall? J Gerontol A Biol Sci Med Sci. Nov 2001;56(11):M686-
692.
    \28\ Chen XL, Liu YH, Chan DK, Shen Q, Van Nguyen H. Chin Med J 
(Engl). Characteristics associated with falls among the elderly 
within aged care wards in a tertiary hospital: a retrospective. 2010 
Jul;123(13):1668-72.
    \29\ Frisina PG, Guellnitz R, Alverzo J. A time series analysis 
of falls and injury in the inpatient rehabilitation setting. Rehabil 
Nurs. 2010 JulAug;35(4):141-6, 166.
    \30\ Lee JE, Stokic DS. Risk factors for falls during inpatient 
rehabilitant Am J Phys Med Rehabil. 2008 May;87(5):341-50; quiz 351, 
422.
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    The IMPACT Act requires the specification of quality measures and 
resource use and other measures that are standardized and interoperable 
across PAC settings, as well as the reporting of standardized patient 
assessment data and other necessary data specified by the Secretary. 
The Percent of Residents Experiencing One or More Falls with Major 
Injury (Long-Stay) (NQF #0674) quality measure is NQF-endorsed for 
long-stay residents in nursing homes and has been successfully 
implemented in nursing facilities for long-stay residents. The NQF-
endorsed measure has been in use as part of CMS' Nursing Home Quality 
Initiative since 2011. In addition, the measure is currently reported 
on CMS' Nursing Home Compare Web site at http://www.medicare.gov/nursinghomecompare/search.html. Further, the measure was adopted for 
use in the LTCH QRP in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50874 through 50877). In the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50290), we revised the data collection period for this measure with 
data collection to begin starting April 1, 2016.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed cross-setting quality measures focused on 
falls with a major injury. We are unaware of any other cross-setting 
quality measures for falls with major injury that have been endorsed or 
adopted by another consensus organization. Therefore, we proposed the 
quality measure, an Application of Percent of Residents Experiencing 
One or More Falls with Major Injury (Long-Stay) (NQF #0674), under the 
Secretary's authority to select non-NQF-endorsed measures.
    A TEP convened by our measure development contractor provided input 
on the measure specifications, including the feasibility and clinical 
appropriateness of implementing the measure across PAC settings, which 
include the IRF setting. The TEP supported the implementation of this 
measure across PAC settings, including the IRF setting, and also 
supported our efforts to standardize this measure for cross-setting 
development. Additionally, the NQF-convened MAP met on February 9, 2015 
and provided input to us on this measure. The MAP conditionally 
supported the use of the quality measure, an Application of Percent of 
Residents Experiencing One or More Falls with Major Injury (Long-Stay) 
(NQF #0674), in the IRF QRP as a cross-setting quality measure. More 
information about the MAP's recommendations for this measure is 
available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    More information on the quality measure, Percent of Residents 
Experiencing One or More Falls with Major Injury (Long-Stay) (NQF 
#0674), is located at the NQF Web site at http://www.qualityforum.org/QPS/0674. Details regarding the changes made to modify the quality 
measure, Percent of Residents Experiencing One or More Falls with Major 
Injury (Long-Stay) (NQF #0674), and updated specifications are located 
at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html. We proposed that data for this quality 
measure would be collected using the IRF-PAI with submission through 
the QIES ASAP system. More information on IRF reporting using the QIES 
ASAP system is located at the Web site http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html and 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html.
    Data collected through a revised IRF-PAI would be used to calculate 
this quality measure. Consistent with the IRF-PAI reporting 
requirements, the Application of Percent of Residents Experiencing One 
or More Falls with Major Injury (Long-Stay) (NQF #0674), will apply to 
all Medicare patients discharged from IRFs. Data items in the revised 
IRF-PAI would include: J1800: Any Falls Since Admission, and J1900: 
Number of Falls Since Admission.
    The calculation of the proposed quality measure would be based on 
item J1900C: Number of Falls with Major Injury since Admission. The 
specifications and data elements for the quality measure, the 
Application of Percent of Residents Experiencing One or More Falls with 
Major Injury (Long-Stay) (NQF #0674), are available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html. For more information on the proposed data 
collection and submission timeline for the proposed quality measure, 
please see section IX.I.2 of this final rule.
    We sought public comment on our proposal to adopt the quality 
measure, an Application of Percent of Residents Experiencing One or 
More Falls with Major Injury (Long-Stay) (NQF #0674), with data 
collection beginning on October 1, 2016, for the IRF QRP for FY 2018 
payment determination and subsequent years to fulfill the requirements 
in the IMPACT Act. The responses to public comments on this measure are 
discussed below in this section of the final rule.
    Comment: One commenter supported measuring falls in IRFs, but 
believed that all falls should be documented, not just those with major 
injury.
    Response: We appreciate the commenter's position that all falls 
should be measured. The proposed quality measure, an Application of the 
Percent of Residents Experiencing One or More Falls with Major Injury 
(Long-Stay) (NQF #0674), assesses falls with major injuries, satisfying 
the domain delineated in the IMPACT Act, Incidence of Major Falls. We 
believe this domain mandates a quality measure related to major falls. 
However, the data elements included in the IRF-PAI version 1.4 do 
enable IRFs to track all falls, regardless of injury. As part of best 
clinical practice, we agree that IRFs should track falls for multiple 
purposes, such as those that satisfy regulatory requirements, quality 
improvement, risk assessment, and clinical decisions support.
    Comment: Several commenters supported the proposed quality measure, 
an Application of the Percent of Residents Experiencing One or More 
Falls with Major Injury (Long-Stay) (NQF #0674), but believed that the 
measure should be risk-adjusted. One commenter noted that quality of 
care is not the only determinant of risk of falls; a variety of other 
clinical factors that are not within the control of the provider may 
increase the risk for falls. Commenters asserted that risk adjustment 
creates a ``level playing field'' that allows for fair comparisons. 
Some commenters recommended risk adjustment as a strategy for 
minimizing disincentives to IRFs to accept cognitively impaired 
patients. Several commenters suggested risk adjustment for populations 
that are at a higher risk for falls, such as IRF patients with nervous 
system disorders (for example, stroke and spinal cord injury or brain 
injury), low FIM[supreg] scores, and patients with amputations. 
Commenters pointed out that the TEP convened in February 2015 
recommended risk adjustment for cognitive impairment, which several 
commenters also supported. One commenter asked whether the TEP was

[[Page 47098]]

presented the current specification of the cross-setting falls measure. 
One commenter provided support for risk adjustment by pointing out that 
the references cited in the rule indicate that risk for falls varies by 
patient characteristics. That commenter asserted that the PAC-PRD 
research indicated that the risk of falls with injury differs across 
post-acute settings. Several commenters also noted that the measure 
should be risk adjusted, claiming that risk adjustment is required by 
the IMPACT Act and that the MAP suggested that the measure should be 
risk adjusted.
    Response: To clarify, the proposed quality measure pertains to 
falls with a major injury, satisfying the IMPACT Act domain, Incidence 
of Major Falls. Thus, falls with no injury, such as those that may be 
considered near-falls, are not included in the measure. The application 
of risk adjustment for this measure as required by the IMPACT Act is 
``as determined appropriate by the Secretary,'' as stated in section 
1899B(c)(3)(B) of the Act.
    While we acknowledge that patient characteristics that elevate risk 
for falls with major injury vary across the IRF population, a short-
stay and long-stay Nursing Home TEP, convened in 2009 by our 
measurement development contractor, concluded that risk adjustment for 
this quality measure concept was inappropriate because it is each 
facility's responsibility to take steps to reduce the rate of injurious 
falls, especially since such events are considered to be ``never 
events'' (see http://psnet.ahrq.gov/primer.aspx?primerID=3 for further 
details on the origins and use of the term ``never event'').
    We note that the PAC-PRD did not assess falls with major injury, as 
falls with major injury was not an item that was tested. However, as 
the commenter pointed out, the prevalence of a history of falls prior 
to the PAC admission did vary across post-acute settings (as assessed 
by item B7 from the PAC-PRD CARE tool: ``History of Falls. Has the 
patient had two or more falls in the past year or any fall with injury 
in the past year?''). Nonetheless, as part of best clinical practice, 
IRFs should assess patients for falls risk and take steps to prevent 
future falls and falls with major injury. In the most recent TEP (2015) 
that discussed falls as a cross-setting measure aligned with the IMPACT 
Act, the numerator, denominator, and exclusion definitions provided are 
virtually identical to the specifications we proposed to adopt for this 
measure and did not include risk adjustment. Although 2 out of 11 TEP 
members supported risk adjustment of the falls measure for cognitive 
impairment, that was not the majority position. More information about 
the specifications and the convening of the TEP is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/SUMMARY-OF-FEEDBACK-FROM-THE-TECHNICAL-EXPERT-PANEL-TEP-REGARDING-CROSS-SETTING-MEASURES-ALIGNED-WITH-THE-IMPACT-ACT-OF-2014-Report.pdf.
    Factors that increase the risk of falling, such as cognitive 
impairment, should be included by facilities in their risk assessment 
to support proper care planning. Although it is possible that risk 
adjusting for cognitive impairment would reduce disincentives for 
caring for such patients in IRFs, it could also have the unintended 
consequence of leading to insufficient risk prevention efforts by the 
provider.
    We do not pay hospitals for the higher costs associated with 
treating patients for hospital-acquired conditions, including falls 
resulting in intracranial injuries, fractures and dislocations, and 
these payment reductions are not risk adjusted. More specifically, for 
Medicare FFS patients discharged from a hospital on or after October 1, 
2008, under the Deficit Reduction Act: Hospital-Acquired Conditions-
Present on Admission Indicator Program (please see http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html 
and http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/wPOAFactSheet.pdf), hospitals do not 
receive additional payment for treating injuries (fracture, 
dislocation, intracranial injury, crushing injury, burns, or other 
injuries) resulting from falls and trauma when these injuries were 
deemed to be a hospital-acquired condition (that is, when the injuries 
resulting from falls were not present on admission and were acquired 
during the hospital stay). The MAP feedback regarding risk adjustment 
for this quality measure applied to the home health setting, not 
IRFs.\31\ We note that a more recent Cochrane review by Cameron et 
al.,\32\ which included 9 randomized controlled trials of 
multifactorial interventions in care facilities, found mixed evidence 
but did note that within care facilities, multifactorial interventions 
have the potential to reduce rates of falls and risk of falls. 
Specifically, two studies showed a statistically significant reduction 
in the rate of falls, 2 found statistically significant reductions in 
the risk of falling, 1 showed a statistically significant increase in 
the rate of falls, and the remainder did not find a significant result.
---------------------------------------------------------------------------

    \31\ Measure Applications Partnership. MAP Off-Cycle 
Deliberations 2015: Measures Under Consideration to Implement 
Provisions of the IMPACT Act. March 2015. Available at: http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Off-Cycle_Deliberations_2015_-_Final_Report.aspx.
    \32\ Cameron ID, Gillespie LD, Robertson MC, Murray GR, Hill KD, 
Cumming RG, Kerse N. Interventions for preventing falls in older 
people in care facilities and hospitals. Cochrane Database of 
Systematic Reviews 2012, Issue 12. Art. No.: CD005465. DOI: 10.1002/
14651858.CD005465.pub3.
---------------------------------------------------------------------------

    Comment: Several commenters supported the measure in concept, but 
suggested changes to the specifications, including mentioning 
``patients'' (as opposed to residents), clarifying the list of major 
injuries covered under the measure, and providing the full 
specifications of the numerator, denominator, and exclusions. One 
commenter suggested that the measure be specified across settings, 
using the same assessment tool at admission and discharge, and the same 
numerator and denominator definitions, noting that there are 
differences between settings in terms of the payers. One commenter 
asserted that the item used in the IRF specification asks about the 
occurrence of two or more falls in the past year and whether a patient 
had major surgery, and that the exclusions listed in the specification 
were different in different settings, when they are the same.
    Response: The occurrence of 2 or more falls in the past year, and 
major surgery prior to admission, are not risk adjustors for this 
proposed quality measure. However, the occurrence of two or more falls 
in the past year, and major surgery prior to admission, are risk 
adjusters for the function outcomes measures, IRF Functional Outcome 
Measure: Change in Mobility Score for Medical Rehabilitation Patients 
(NQF #2634; under review) and IRF Functional Outcome Measure: Discharge 
Mobility Score for Medical Rehabilitation Patients (NQF #2635; endorsed 
on July 23, 2015), which were also proposed in the FY 2016 IRF PPS 
Proposed Rule (80 FR 23368). For the proposed quality measure, an 
Application of the Percent of Residents Experiencing One or More Falls 
with Major Injury (Long-Stay) (NQF #0674), the single exclusion 
criterion (patients/residents with missing data) is standardized across 
the IRF, LTCH, and SNF settings.

[[Page 47099]]

    The term ``resident'' is in the title of the measure because the 
proposed quality measure, an Application of the Percent of Residents 
Experiencing One or More Falls with Major Injury (Long-Stay) (NQF# 
0674), is an application of the existing NQF-endorsed quality measure, 
Percent of Residents Experiencing One or More Falls with Major Injury 
(Long-Stay) (NQF #0674), which is a long-stay nursing home quality 
measure that uses the term ``resident.'' However, as the measure is 
harmonized across settings, we are using both patient and resident in 
the descriptions of the measure specifications.
    The complete list of major injuries in the quality measure is: bone 
fractures, joint dislocations, closed head injuries with altered 
consciousness, or subdural hematoma.
    Although the measure is calculated using only J1900C (number of 
falls with major injury), the measure was developed using all three 
categories (no injury, minor injury, and major injury) to ensure that 
major injuries are accurately assessed. During item development, 
testing revealed that to obtain accurate data, different types of falls 
had to be assessed separately. Thus, the measure was designed this way 
because psychometric item development testing showed it was imperative 
to stratify the types of falls. To omit the other two categories of 
falls would be inconsistent with how the measure was designed and could 
disable the ability to calculate the data in a way that the information 
has been evaluated to be usable.
    Comment: Commenters expressed concerns about the measure not being 
standardized across PAC settings, for example, specifically noting 
differences in the payers that are required to report patient/resident 
data for this measure resulting in differences in the denominators for 
each setting. Several commenters suggested that CMS standardize 
numerator and denominator definitions across settings.
    Response: The general issue raised by commenter with respect to 
standardization of the cross setting measures has been addressed under 
the comments and responses to the finalization of the measure Percent 
of Patients or Residents with Pressure Ulcers that are New or Worsened 
(NQF #0678) above.
    Comment: Several commenters expressed concern that the measures do 
not comply with the IMPACT Act requirements for standardization and 
discussed the frequency of assessments as one area where there is lack 
of standardization. Commenters recommended that measures be 
``consistently stated (same wording, same timeframe, and same item set) 
and measured across all PAC settings to meet the requirements of the 
IMPACT Act.''
    Response: The quality measure, an Application of Percent of 
Residents Experiencing One or More Falls with Major Injury (Long-Stay) 
(NQF #0674), and the data collection items used to calculate this 
measure are harmonized across settings and assessment instruments, 
(that is, use of only admission and discharge assessments in IRFs and 
LTCHs versus admission/re-entry, interim, and discharge assessments in 
SNFs). As to the concern that the falls with major injury measure 
calculation is based on more frequent assessments in the SNF setting 
than in the LTCH and IRF settings, we wish to clarify that result of 
the measure calculation for all three PAC providers is the same. For 
all three PAC (SNF, LTCH, and IRF) providers, the measure calculation 
ultimately shows the total number of falls during the stay. While the 
SNF measure calculation arrives at that number differently than does 
the measure calculation in the IRF and LTCH settings, ultimately all 
three settings report the same result--as noted, the total number of 
falls during the stay. To explain, in IRFs and LTCHs, falls data is 
obtained only at discharge and looks back to admission. Therefore, the 
calculation of the measure includes all falls since admission. In 
contrast, in SNFs, falls data is obtained on admission, at intervals 
during the stay (referred to as ``interim assessments''), and at 
discharge. Each interim assessment and the discharge assessment only 
look back to whether there were falls since the last interim 
assessment. The sum of the number of falls identified at each interim 
assessment and at the time of discharge yields the total number of 
falls that occurred during the stay. In other words, the collection of 
falls data in LTCHs and IRFs is cumulative, whereas in SNFs, data 
collection is sequential. In all cases the calculation for SNFs, IRFs 
and LTCHs reaches the same result--the total number of falls between 
admission and discharge.
    We made additional details regarding the measure specifications for 
the quality measure, an Application of Percent of Residents 
Experiencing One or More Falls with Major Injury (Long-Stay) (NQF 
#0674) available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    Comment: One commenter that suggested CMS should use one standard 
assessment tool that asks questions in a consistent manner across all 
PAC settings in order to meet the requirements of the IMPACT Act.
    Response: We intend to modify the existing PAC assessment 
instruments as soon as practicable to ensure the collection of 
standardized data. While we agree that it is possible that within the 
PAC assessment instruments certain sections could incorporate a 
standardized assessment data collection tool, for example, the Brief 
Interview for Mental Status (BIMS), we have not yet concluded whether 
this kind of modification of the PAC assessment instruments is 
necessary.
    Comment: Several commenters supported this measure in concept, but 
stated their position that the measure should be validated and endorsed 
by NQF prior to implementing the measure in the IRF setting. Several 
commenters expressed concerns about the measure not having been 
adequately tested in the IRF population.
    Response: We appreciate the commenters' position that the cross-
setting falls measure should be tested in the short-stay IRF population 
prior to adoption. We also appreciate the commenters' concerns 
pertaining to the reliability and validity of the proposed measure, an 
Application of the Percent of Residents Experiencing One or More Falls 
with Major Injury (Long-Stay) (NQF #0674) across PAC settings. We note 
that the TEP convened by the measurement development contractor in 2011 
supported measuring falls with major injury in IRFs, and agreed that 
falls with major injury is a ``never event.'' The TEP also concurred 
that facilities need to take responsibility to not only prevent falls, 
but to ensure that if they do occur, protections are in place so that 
the fall does not result in injury.
    With regard to the adequacy of the measure's testing for use in the 
short-stay nursing home population, the item-level testing during the 
development of the MDS 3.0 showed near-perfect inter-rater reliability 
for the MDS item (J1900C) used to identify falls with major injury. The 
NQF measure evaluation criteria do not require measure-level 
reliability if item reliability is high. However, we believe that, 
given the overlap in the IRF and SNF populations and item-level testing 
results, the application of this measure for IRF patients will be 
reliable. That said, we intend to continue to test the measure once 
data collection begins and as part of ongoing maintenance of the 
measure. We appreciate the commenters' recommendations

[[Page 47100]]

regarding NQF endorsement in the IRF setting and recognize that it is 
an important step in the measure development process. However, falls 
with major injury is an important patient safety concern in IRFs, and 
given the lack of availability of NQF-endorsed measures for the IRF 
setting or measures endorsed by any other consensus organizations, we 
proposed to adopt this measure under the exception authority given to 
the Secretary.
    Comment: One commenter noted that there are many risk factors for 
falls, including different diagnoses (such as cognitive impairment), 
and that rehabilitation hospitals tend to have a higher incidence of 
falls than acute-care settings. The commenter requested that CMS only 
review fall rates in IRFs in comparison to other IRFs.
    Response: We thank the commenter for their comment, and appreciate 
the commenter's position that fall rates in IRFs should only be 
compared to rates in other IRFs. The intent of the IRF quality 
reporting program is, in part, to support such comparisons--so that 
providers receive important feedback on how they are performing 
relative to similar providers. In addition, the IMPACT Act requires the 
Secretary to standardize the domain, Incidence of Major Falls, across 
PAC settings. Therefore, fall rates data must be collected in order to 
allow for comparison across PAC settings. Also, NQF strongly suggests a 
coordinated strategy among PAC settings that includes prevention of 
falls. Reporting falls with major injury across PAC settings will 
inform providers, policymakers, and researchers in the post-acute care 
field on collaborating to improve rates of falls. As we continue to 
develop and test constructs pertaining to falls, we will consider these 
factors.
    Comment: Several commenters suggested that IRFs should not be 
required to collect data on all falls. Some noted that it seemed to be 
inappropriate because the measure is focused on falls with major 
injury. Others stated that it seemed inappropriate because patients in 
IRFs are encouraged to exert themselves to meet their functional goals, 
which inevitably leads to unintended falls. Moreover, IRFs may need to 
teach patients how to fall. Commenters noted that because of the 
rehabilitation needs of their patients, some providers may have a 
higher proportion of ``assisted'' falls.
    Response: We agree that the rehabilitation process requires that 
patients be allowed to be as mobile and independent as possible, and 
some patients may need to learn how to fall safely. However, this 
measure is focused on falls with major injury. In proposing this 
measure to satisfy the IMPACT Act domain, Incidence of Major Falls, we 
are encouraging IRFs to balance the need to foster patient mobility and 
independence with the need to avoid major injuries (bone fractures, 
joint dislocations, closed head injuries with altered consciousness, 
and subdural hematoma), which are considered ``never events.''
    Collecting data on all falls can be useful in informing providers 
about falls in general, as a considerable proportion of falls are 
preventable. Persons who have a history of falls, regardless of injury 
status, have a greater likelihood of falling again; thus, gathering 
data on all falls is a way to collect important and relevant data on 
risk factors. As part of best clinical practice, IRFs should track 
falls for multiple purposes, such as those that satisfy regulatory 
requirements, quality improvement, risk assessment, and clinical 
decisions support, including those that are assisted/non-assisted and 
preventable/non-preventable. For the purposes of this quality measure, 
the assessment instrument includes an item about whether any fall took 
place (J1800) as a gateway item. If there were any falls, the assessor 
then completes the next set of items (J1900) indicating the number of 
falls by injury status. As discussed previously, facilities must report 
the data associated with all these items to avoid issues with missing 
data and as a way to ensure accurate data collection, but only the data 
on falls with major injury are used in calculating the quality measure.
    Comment: One commenter pointed out that the proposed rule included 
a statement that could be misinterpreted as stating that 19 percent of 
falls in IRFs are serious.
    Response: In the FY 2016 IRF PPS proposed rule (80 FR 23375), the 
original sentences read as follows: ``For IRFs, a study of 5,062 
patients found 367 patients (7.25 percent) had 438 falls. Among these 
438 falls, 129 (29.5 percent of the falls) resulted in an injury, of 
which 25 (19 percent of falls) were serious.'' To clarify, the second 
sentence in question should have read: ``Among these 438 falls, 129 
(29.5 percent of the falls) resulted in an injury, of which 25 (5.7 
percent of all falls and 19 percent of all falls with injury) were 
serious.'' The commenter correctly pointed out that 25 seriously 
injurious falls out of 438 total falls equals a 5.7 percent incidence 
of seriously injurious falls in the cited study of 5,062 IRF 
patients.\33\
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    \33\ Frisina PG, Guellnitz R, Alverzo J. A time series analysis 
of falls and injury in the inpatient rehabilitation setting. Rehab 
Nurs. 2010; 35(4):141-146.
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    Final Decision: Having carefully considered the comments we 
received on the application of the quality measure, the Percent of 
Residents Experiencing One or More Falls with Major Injury (Long-Stay) 
(NQF #0674), we are finalizing the adoption of this measure for use in 
the IRF QRP as proposed.
2. Quality Measure Addressing the Domain of Functional Status, 
Cognitive Function, and Changes in Function and Cognitive Function: 
Application of Percent of Long-Term Care Hospital Patients With an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; Endorsed on July 23, 2015)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required under the 
applicable reporting provisions to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
with respect to 5 quality domains, one of which is functional status, 
cognitive function, and changes in function and cognitive function. To 
satisfy these requirements, we proposed to specify and adopt an 
application of the quality measure, Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan that 
Addresses Function (NQF #2631; endorsed on July 23, 2015), in the IRF 
QRP as a cross-setting quality measure that addresses the domain of 
functional status, cognitive function, and changes in function and 
cognitive function. The reporting of data for this measure would affect 
the payment determination for FY 2018 and subsequent years. This 
quality measure reports the percent of patients with both an admission 
and a discharge functional assessment and a goal that addresses 
function.
    The National Committee on Vital and Health Statistics, Subcommittee 
on Health,\34\ noted: ``[i]information on functional status is becoming 
increasingly essential for fostering healthy people and a healthy 
population. Achieving optimal health and well-being for Americans 
requires an understanding across the life span of the effects of 
people's health conditions on their ability to do basic activities and

[[Page 47101]]

participate in life situations, that is, their functional status.'' 
This statement is supported by research showing that patient 
functioning is associated with important patient outcomes such as 
discharge destination and length of stay in inpatient settings,\35\ as 
well as the risk of nursing home placement and hospitalization of older 
adults living in the community.\36\ Functioning is important to 
patients and their family members.37 38 39
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    \34\ Subcommittee on Health National Committee on Vital and 
Health Statistics, ``Classifying and Reporting Functional Status'' 
(2001).
    \35\ Reistetter TA, Graham JE, Granger CV, Deutsch A, 
Ottenbacher KJ. Utility of Functional Status for Classifying 
Community Versus Institutional Discharges after Inpatient 
Rehabilitation for Stroke. Archives of Physical Medicine and 
Rehabilitation, 2010; 91:345-350.
    \36\ Miller EA, Weissert WG. Predicting Elderly People's Risk 
for Nursing Home Placement, Hospitalization, Functional Impairment, 
and Mortality: A Synthesis. Medical Care Research and Review, 57; 
3:259-297.
    \37\ Kurz, A. E., Saint-Louis, N., Burke, J. P., & Stineman, M. 
G. (2008). Exploring the personal reality of disability and 
recovery: a tool for empowering the rehabilitation process. Qual 
Health Res, 18(1), 90-105.
    \38\ Kramer, A. M. (1997). Rehabilitation care and outcomes from 
the patient's perspective. Med Care, 35(6 Suppl), JS48-57.
    \39\ Stineman, M. G., Rist, P. M., Kurichi, J. E., & Maislin, G. 
(2009). Disability meanings according to patients and clinicians: 
imagined recovery choice pathways. Quality of Life Research, 18(3), 
389-398.
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    The majority of patients and residents who receive PAC services, 
such as care provided by SNFs, HHAs, IRFs and LTCHs, have functional 
limitations, and many of these patients are at risk for further decline 
in function due to limited mobility and ambulation.\40\ The patient 
populations treated by SNFs, HHAs, IRFs and LTCHs vary in terms of 
their functional abilities at the time of the PAC admission and their 
goals of care. For IRF patients and many SNF residents, treatment goals 
may include fostering the patient's ability to manage his or her daily 
activities so that the patient can complete self-care and/or mobility 
activities as independently as possible, and if feasible, return to a 
safe, active, and productive life in a community-based setting. For HHA 
patients, achieving independence within the home environment and 
promoting community mobility may be the goal of care. For other HHA 
patients, the goal of care may be to slow the rate of functional 
decline to allow the person to remain at home and avoid 
institutionalization.\41\ Lastly, in addition to having complex medical 
care needs for an extended period of time, LTCH patients often have 
limitations in functioning because of the nature of their conditions, 
as well as deconditioning due to prolonged bed rest and treatment 
requirements (for example, ventilator use). The clinical practice 
guideline Assessment of Physical Function \42\ recommends that 
clinicians should document functional status at baseline and over time 
to validate capacity, decline, or progress. Therefore, assessment of 
functional status at admission and discharge and establishing a 
functional goal for discharge as part of the care plan (that is, 
treatment plan) is an important aspect of patient and resident care in 
all of these PAC providers.
---------------------------------------------------------------------------

    \40\ Kortebein P, Ferrando A, Lombebeida J, Wolfe R, Evans WJ. 
Effect of 10 days of bed rest on skeletal muscle in health adults. 
JAMA; 297(16):1772-4.
    \41\ Ellenbecker CH, Samia L, Cushman MJ, Alster K. Patient 
safety and quality in home health care. Patient Safety and Quality: 
An Evidence-Based Handbook for Nurses. Vol 1.
    \42\ Kresevic DM. Assessment of physical function. In: Boltz M, 
Capezuti E, Fulmer T, Zwicker D, editor(s). Evidence-based geriatric 
nursing protocols for best practice. 4th ed. New York (NY): Springer 
Publishing Company; 2012. p. 89-103. Retrieved from http://www.guideline.gov/content.aspx?id=43918
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    Given the variation in patient and resident populations across the 
PAC providers, the functional activities that are typically assessed by 
clinicians for each type of PAC provider may vary. For example, the 
activity of rolling left and right in bed is an example of a functional 
activity that may be most relevant for low-functioning patients or 
residents who are chronically critically ill. However, certain 
functional activities, such as eating, oral hygiene, lying to sitting 
on the side of the bed, toilet transfers, and walking or wheelchair 
mobility, are important activities for patients and residents in each 
PAC provider.
    Although functional assessment data are currently collected in 
SNFs, HHAs, IRFs and LTCHs, this data collection has employed different 
assessment instruments, scales, and item definitions. The data 
collected cover similar topics, but are not standardized across PAC 
settings. Further, the different sets of functional assessment items 
are coupled with different rating scales, making communication about 
patient functioning challenging when patients transition from one type 
of provider to another. Collection of standardized functional 
assessment data across SNFs, HHAs, IRFs and LTCHs, using common data 
items, would establish a common language for patient functioning, which 
may facilitate communication and care coordination as patients 
transition from one type of provider to another. The collection of 
standardized functional status data may also help improve patient or 
resident functioning during an episode of care by ensuring that basic 
daily activities are assessed at the start and end of each episode of 
care with the aim of determining whether at least one functional goal 
is established.
    The functional assessment items included in the proposed functional 
status quality measure were originally developed and tested as part of 
the Post-Acute Care Payment Reform Demonstration (PAC-PRD) version of 
the CARE Item Set, which was designed to standardize assessment of 
patients' status across acute and post-acute providers, including SNFs, 
HHAs, IRFs and LTCHs. The functional status items on the CARE Item Set 
are daily activities that clinicians typically assess at the time of 
admission and/or discharge to determine a patient's or resident's 
needs, evaluate patient or resident progress, and prepare a patient or 
resident and the patient's/resident's family for a transition to home 
or to another provider.
    The development of the CARE Item Set and a description and 
rationale for each item is described in a report entitled ``The 
Development and Testing of the Continuity Assessment Record and 
Evaluation (CARE) Item Set: Final Report on the Development of the CARE 
Item Set: Volume 1 of 3.'' \43\ Reliability and validity testing were 
conducted as part of CMS' Post-Acute Care Payment Reform Demonstration, 
and we concluded that the functional status items have acceptable 
reliability and validity. A description of the testing methodology and 
results are available in several reports, including the report entitled 
``The Development and Testing of the Continuity Assessment Record and 
Evaluation (CARE) Item Set: Final Report on Reliability Testing: Volume 
2 of 3'' \44\ and the report entitled ``The Development and Testing of 
the Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on Care Item Set and Current Assessment Comparisons: Volume 3 of 
3.'' \45\ The reports are available on CMS' Post-Acute Care Quality 
Initiatives Web page at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
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    \43\ Barbara Gage et al., ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI International, 
2012).
    \44\ Ibid.
    \45\ Ibid.
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    The cross-setting function quality measure we proposed to adopt for 
the FY 2018 payment determination and subsequent years is a process 
measure that is an application of the quality measure, Percent of LTCH 
Patients with an Admission and Discharge Functional

[[Page 47102]]

Assessment and a Care Plan that Addresses Function (NQF #2631; endorsed 
on July 23, 2015). This quality measure was developed by the CMS. It 
reports the percent of patients with both an admission and a discharge 
functional assessment and a treatment goal that addresses function. The 
treatment goal provides documentation that a care plan with a goal has 
been established for the patient.
    This process measure requires the collection of admission and 
discharge functional status data using standardized clinical assessment 
items, or data elements that assess specific functional activities, 
that is, self-care and mobility activities. The self-care and mobility 
function activities are coded using a 6-level rating scale that 
indicates the patient's level of independence with the activity; higher 
scores indicate more independence. For this quality measure, 
documentation of a goal for one of the function items reflects that the 
patient's care plan addresses function. The function goal is recorded 
at admission for at least one of the standardized self-care or mobility 
function items using the 6-level rating scale.
    To the extent that a patient has an incomplete stay (for example, 
for the purpose of being admitted to an acute care facility), 
collection of discharge functional status data might not be feasible. 
Therefore, for patients with incomplete stays, admission functional 
status data and at least one treatment goal would be required, and 
discharge functional status data would not be required to be reported.
    A TEP convened by our measure development contractor provided input 
on the technical specifications of this quality measure, including the 
feasibility of implementing the measure across PAC settings, which 
included the IRF setting. The TEP supported the implementation of this 
measure across PAC providers and also supported our efforts to 
standardize this measure for cross-setting use. Additionally, the MAP 
met on February 9, 2015 and provided input to us on the quality 
measure. The MAP conditionally supported the specification of an 
application of the quality measure, Percent of LTCH Patients With an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; endorsed on July 23, 2015) for use in 
the IRF QRP as a cross-setting measure. The MAP conditionally supported 
this measure pending NQF-endorsement and resolution of concerns about 
the use of two different functional status scales for quality reporting 
and payment purposes. The MAP reiterated its support for adding 
measures addressing function, noting the group's special interest in 
this PAC/LTC core concept. More information about the MAPs 
recommendations for this measure is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    This quality measure was developed by CMS. The specifications are 
available for review at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed cross-setting quality measures focused on 
assessment of function for PAC patients. We are also unaware of any 
other cross-setting quality measures for functional assessment that 
have been endorsed or adopted by another consensus organization. 
Therefore, we proposed to specify and adopt this functional assessment 
measure for use in the IRF QRP for the FY 2018 payment determination 
and subsequent years under the Secretary's authority to select non-NQF-
endorsed measures. As described in more detail in section IX.I.2, of 
this final rule, the first data collection period is 3 months (October 
1, 2016 to December 31, 2016), and the subsequent data collection 
periods are 12 months in length and follow the calendar year (that is, 
January 1 to December 31).
    We proposed that data for this proposed quality measure be 
collected using the IRF-PAI, with submission through the QIES ASAP 
system. For more information on IRF QRP reporting through the QIES ASAP 
system, we refer readers to http://cms.gov/Medicare/Quality-Initiatives-PatientAssessment-Instruments/IRF-QualityReporting/index.html and http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    The measure calculation algorithm are: (1) For each IRF stay, the 
records of Medicare patients discharged during the 12-month target time 
period are identified and counted; this count is the denominator; (2) 
the records of Medicare patients with complete stays are identified, 
and the number of these patient stays with complete admission 
functional assessment data and at least one self-care or mobility 
activity goal and complete discharge functional assessment data is 
counted; (3) the records of Medicare patients with incomplete stays are 
identified, and the number of these patient records with complete 
admission functional status data and at least one self-care or mobility 
goal is counted; (4) the counts from step 2 (complete IRF stays) and 
step 3 (incomplete IRF stays) are summed; the sum is the numerator 
count; and (5) the numerator count is divided by the denominator count 
and multiplied by 100 to calculate this quality measure. (Please note 
that part of step 5, the conversion to a percent value, was 
accidentally omitted from the FY 2016 IRF PPS proposed rule).
    For purposes of assessment data collection, we proposed to add a 
new section into the IRF-PAI. The new proposed section will include new 
functional status data items that will be used to calculate the quality 
measure, the Application of the Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan that 
Addresses Function (NQF #2631; endorsed on July 23, 2015), should this 
proposed measure be adopted. The items to be added to the IRF-PAI, 
which assess specific self-care and mobility activities, would be based 
on functional items included in the PAC-PRD version of the CARE Item 
Set.
    The specifications and data elements for the quality measure are 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    The proposed function items to be included within the IRF-PAI do 
not duplicate existing items currently used for data collection within 
the IRF-PAI. While many of the items to be included have labels that 
are similar to existing items on the IRF-PAI, there are several key 
differences between the two assessment item sets that may result in 
variation in the patient assessment results. Key differences include: 
(1) The data collection and associated data collection instructions; 
(2) the rating scales used to score a patient's level of independence; 
and (3) the item definitions. A description of these differences is 
provided with the measure specifications on CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    This measure is calculated using data from two points in time, at 
admission and discharge (see Section IX.I: Form, Manner, and Timing of 
Quality Data Submission of this final rule). The items would assess 
specific self-care and mobility activities, and would be based on 
functional items included in the PAC-PRD version of the CARE Item Set.

[[Page 47103]]

The items have been developed and tested for reliability and validity 
in SNFs, HHAs, IRFs, and LTCHs. More information pertaining to item 
testing is available on our Post-Acute Care Quality Initiatives Web 
page at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
    For more information on the data collection and submission timeline 
for the adopted quality measure, refer to section IX.I.2 of this final 
rule. Additional information regarding the items to be added to the 
IRF-PAI may be found on CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    Lastly, in alignment with the requirements of the IMPACT Act to 
develop quality measures and standardize data for comparative purposes, 
we believe that evaluating outcomes across the post-acute settings 
using standardized data is an important priority. Therefore, in 
addition to proposing a process-based measure for the domain in the 
IMPACT Act of ``[f]unctional status, cognitive function, and changes in 
function and cognitive function,'' which is included in this year's 
final rule, we also intend to develop outcomes-based quality measures, 
including functional status and other quality outcome measures to 
further satisfy this domain. These measures will be proposed in future 
rulemaking to assess functional change for each care setting as well as 
across care settings.
    We sought public comments on our proposal to adopt the application 
of the quality measure, Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan that Addresses Function 
(NQF #2631; endorsed on July 23, 2015) for the IRF QRP, with data 
collection starting on October 1, 2016, for the FY 2018 payment 
determination and subsequent years. The responses to public comments on 
this measure are discussed below in this section of the final rule. We 
note that we received many comments about the standardized (that is 
CARE) items that pertain to several of the 5 proposed function quality 
measures. Many of these comments are provided in this final rule as 
part of review of comments about this quality measure, an Application 
of Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan that Addresses Function (NQF #2631; endorsed 
on July 23, 2015).
    Comment: MedPAC did not support the adoption of the function 
process measure in the IRF QRP and urged CMS to adopt outcomes measures 
focused on changes in patient physical and cognitive functioning while 
under a provider's care.
    Response: We appreciate MedPAC's preference for moving toward the 
use of functional outcome measures to assess the patient's physical and 
cognitive functioning under a provider's care, and we believe that 
using this process measure at this time will give us the data we need 
to develop a more robust outcome-based quality measure on this topic in 
the future. The proposed function quality measure, the Application of 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan that Addresses Function (NQF #2631; endorsed 
on July 23, 2015), has attributes to enable outcomes-based evaluation 
by the provider. Such attributes include the assessment of functional 
status at two points in time, admission and discharge, enabling the 
provider to identify, in real time, changes, improvement or decline, as 
well as maintenance. Additionally, the proposed quality measure 
requires that the provider indicate at least one functional goal 
associated with a functional activity, and the provider can calculate 
the percent of patients who meet goals. Such real time use enables 
providers to engage in person-centered goal setting and the ability to 
use the data for quality improvement efforts. With regard to burden, we 
would like to note that this process measure primarily uses the same 
data elements as the functional outcome measures that were also 
proposed for the IRF QRP. IRF providers only need respond to each data 
item once on admission and discharge in order to inform multiple 
measures. The reporting of at least one functional assessment goal and 
the wheelchair mobility items are the only data required for this 
measure that are unique to this measure.
    Comment: Several commenters expressed their support for cross-
setting quality measure data because they facilitate their goal of 
providing high-quality care and conforming to best practices, and 
conveyed their request that CMS ensure the implementation of cross 
setting measures using standardized data and common definitions. Some 
of these commenters questioned whether the proposed function items were 
standardized and interoperable. One commenter noted that the four 
functional outcome measures were not proposed for SNFs or LTCHs, nor 
was there a time frame discussed for including them in the future.
    Response: We agree with the importance of cross-setting 
standardization and we agree that assessment items and quality measure 
should promote best practices. The quality measure, an Application of 
Percent of LTCH Patients With an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
on July 23, 2015), which is being proposed as a cross-setting measure 
for SNFs, IRFs and LTCHs is an application of a measure that was NQF-
endorsed on July 23, 2015 (http://www.qualityforum.org/QPS/2631). The 
specifications for this cross-setting measure are available on the IRF 
QRP Web page at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html. The IMPACT Act requires 
interoperability through the use of such standardized data. There will 
be instances in which some provider types may need more or less 
standardized items than other provider types--but where required by the 
IMPACT Act we will work to ensure that such core items are 
standardized. For example, we proposed functional outcome measures for 
IRFs and are currently developing functional outcome measures, 
including self-care and mobility quality measures for use in the SNF 
setting. These outcome function quality measures are intentionally 
being designed to use the same standardized functional assessment items 
that are included in the proposed function process measure, which will 
result in a limited additional reporting burden. To clarify which 
function items are included in each function measure for each QRP, we 
added a table to the document entitled, Inpatient Rehabilitation 
Facility Quality Reporting Program: Specifications of Quality Measures 
Adopted in the FY 2016 Final Rule, which clearly identifies which 
functional assessment items are used in the cross-setting process 
measure, as well as the setting-specific IRF outcome measures. The 
document is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    Comment: One commenter supported the concept of measuring function 
and monitoring the percentage of patients with completed functional 
assessments.

[[Page 47104]]

This commenter was pleased that the quality measure, an Application of 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631, endorsed 
on July 23, 2015), was proposed for multiple PAC settings in accordance 
with the IMPACT Act. This commenter noted that the proposed quality 
measure is an application of the LTCH measure under review at NQF, and 
that fewer functional assessment items are in the proposed measure when 
compared to the LTCH process quality measure, the Percent of LTCH 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function. For example, the commenter noted 
that the Confusion Assessment Method (CAM(copyright)) items and the 
Bladder Continence items are not included in the proposed application 
of the quality measure. Several commenters questioned why the CARE 
function items on the proposed IRF-PAI, MDS 3.0 and LTCH CARE Data Set 
are not the same set of items and believed the measure, an Application 
of The Percent of LTCH Patients With an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on July 23, 2015), should be the same set of items.
    Response: The proposed function process measure, specified as a 
cross-setting quality measure, is an application of the measure, 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; endorsed 
July 23, 2015). The application includes only selected function items 
from the measure, and thus is not exactly the same. The application of 
the measure is standardized across multiple settings. We believe that 
standardization of assessment items across the spectrum of post-acute 
care is an important goal. In the cross-setting process quality 
measure, there is a common core subset of function items that will 
allow tracking of patients' functional status across settings. We 
recognize that there are some differences in patients' clinical 
characteristics, including medical acuity, across the LTCH, SNF and IRF 
settings, and that certain functional items may be more relevant for 
certain patients. Decisions regarding item selection for each quality 
measure were based on our review of the literature, input from a TEP 
convened by our measure contractor, our experiences and review of data 
in each setting from the PAC-PRD, and public comments.
    As to the comments regarding the PAC assessment instruments, a core 
set of mobility and self-care items are proposed for IRFs, SNFs, and 
LTCHs, and are nested in the proposed Section GG of the IRF-PAI. 
Additional function items are included on the IRF-PAI and LTCH CARE 
Data Set due to the proposal or adoption of various other outcome-based 
quality measures in those specific settings. Therefore, we believe that 
the core set of items in the proposed Section GG are standardized to 
one another by item and through the use of the standardized 6-level 
rating scale. We will work to harmonize the assessment instructions 
that better guide the coding of the assessment(s) as we believe that 
this will lead to accurate and reliable data, allowing us to compare 
the data within each setting. To clarify which function items are 
included in each function measure for each QRP, we added a table to the 
document entitled, Inpatient Rehabilitation Facility Quality Reporting 
Program: Specifications of Quality Measures Adopted in the FY 2016 
Final Rule, which clearly identifies which functional assessment items 
are used in the cross-setting process measure, as well as the setting-
specific IRF outcome quality measures. The document is available at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    Comment: One commenter noted that the reason for standardized 
assessment items ``would establish a common language for patient and 
resident functioning, which may facilitate communication and care 
coordination as patients and residents transition from one type of 
provider to another,'' and asked CMS to provide data on the number of 
percent of patients/residents that transition from one type of provider 
to another. The commenter further requested information about why the 
current measures fail to provide clinicians with the information 
needed.
    Response: Several studies have documented patient/resident 
transition patterns following discharge from the hospital and 
continuing for 30, 60, or 90 days.46 47 48 While the exact 
proportions discharging to each type of care vary slightly across the 
years, the proportion of acute hospital admissions being discharged to 
PAC has grown from 35 percent in 2006 to 43 percent in more recent 
years (MedPAC, 2014). Among those discharged to PAC, the majority are 
discharged to SNFs or HHAs, and a much smaller proportion is discharged 
to IRFs and LTCHs. Further, many individuals in PAC settings continue 
to transition to subsequent sites of care. Common discharge patterns 
from the IRF, for example, include over 75 percent of cases continuing 
into HHA or outpatient therapy services. SNF cases are commonly 
discharged home with either outpatient therapy or home health services. 
A 2009 report outlining these issues http://aspe.hhs.gov/health/reports/09/pacihs/report.pdf includes a summary of the most common PAC 
transition patterns for Medicare FFS Beneficiaries in 2006.\49\ This 
report shows that over 20 percent of all hospital admissions in 2008 
were discharged to a SNF, IRF, or LTCH. Among those 3 settings, over 
two-thirds of each were discharged from a SNF to another PAC setting or 
readmitted directly to the acute hospital. Specifically, 66 percent of 
all SNF FFS admissions, 91 percent of IRF post-acute admissions, and 73 
percent of LTCH post-acute admissions continued on to additional post-
care. These materials document the various patterns of care for 
Medicare beneficiaries using PAC. The episode trajectories underscore 
the importance of using standardized language to measure patient/
resident complexity across all settings.
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    \46\ Gage, B., Morley, M., Ingber, M., & Smith, L. (2011). Post-
Acute Care Episodes Expanded Analytic File: RTI International. 
Prepared for the Assistant Secretary for Planning and Evaluation. 
Retrieved from http://aspe.hhs.gov/health/reports/09/pacihs/report.pdf.
    \47\ Gage, B., Morley, M., Constantine, R., Spain, P., Allpress, 
J., Garrity, M., & Ingber, M. (2008). Examining Relationships in an 
Integrated Hospital System: RTI International. Prepared for the 
Assistant Secretary for Planning and Evaluation. Retrieved from 
http://aspe.hhs.gov/health/reports/08/examine/report.html.
    \48\ Gage, B., Pilkauskas, N., Dalton, K., Constantine, R., 
Leung, M., Hoover, S., & Green, J. (2007). Long-Term Care Hospital 
(LTCH) Payment System Monitoring and Evaluation Phase II Report RTI 
International. Prepared for the Centers for Medicare & Medicaid 
Services. Retrieved from http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/downloads/rti_ltchpps_final_rpt.pdf.
    \49\ Gage, B., Morley, M., Spain, P., & Ingber, M. (2009) 
Examining Post Acute Care Relationships in an Integrated Hospital 
System. Prepared for the Assistant Secretary for Planning and 
Evaluation. Retrieved from http://aspe.hhs.gov/health/reports/09/pacihs/report.pdf.
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    Comment: One commenter noted that the proposed function measure 
includes reporting of a function goal as a way to document that 
patients have a care plan that addresses function, and that this 
reporting of function goals was not part of the original PAC-PRD. This 
commenter further noted that reporting of only one goal was not ideal, 
because many patients have goals for multiple functional limitations 
and the number

[[Page 47105]]

of standardized functional assessment items is limited compared to the 
full set of function items tested as part of the PAC-PRD. Finally, this 
commenter indicated that goals of care may be to improve function, or 
may be focused on maintenance of a patient's function.
    Response: The proposed function process measure requires a minimum 
of 1 goal per patient stay; however, clinicians can report goals for 
every self-care and mobility item included in the proposed Section GG 
of the IRF-PAI. The IMPACT Act specifically mentions goals of care as 
an important aspect of the use of standardized assessment data, quality 
measures, and resource use to inform discharge planning and incorporate 
patient preference. We agree that for many PAC patients, the goal of 
therapy is to improve function and we also recognize that, for example, 
for a PAC patient with a progressive neurologic condition, delaying 
decline may be the goal. We believe that individual, person-centered 
goals exist in relation to individual preferences and needs. We will 
provide instructions about reporting of goals in a training manual and 
in training sessions to clarify that goals set at admission may be 
focused on improvement of function or maintenance of function.
    Comment: Several commenters suggested that CMS, in lieu of 
collecting the proposed five functional measures, conduct a study of a 
nationally-representative sample of IRFs to collect data on both the 
FIM[supreg] and CARE Tool items. Some commenters suggest that the CARE 
data could be used to develop a FIM[supreg]/CARE crosswalk, and a new 
case mix classification system. Other commenters discouraged CMS from 
developing a FIM[supreg]/CARE crosswalk.
    Response: We recognize the potential contribution of developing a 
crosswalk to transform the FIM[supreg] data to CARE data and will take 
this recommendation under advisement.
    Comment: One commenter suggested that CMS conduct additional 
testing of the CARE function items with specific patient 
subpopulations. This commenter also suggested research studies that 
compare CARE items with other instruments across diverse PAC 
populations. They suggested this data be used to improve the CARE items 
or replace them with other items to address any potential floor or 
ceiling effects. This commenter also suggested studies that compare 
models of care for subpopulations so as to elicit best practices 
related to complex conditions.
    Response: We agree that adoption of the proposed function quality 
measures would offer many opportunities to examine best practices for 
caring for IRF patients. Examining the data for any floor and ceiling 
effects in special populations is also a very worthy research idea. 
With regard to examining the CARE data against other functional 
assessment instrument data, as part of the PAC-PRD analyses, we 
compared data from the existing items (that is MDS, OASIS and the 
FIM[supreg] instrument) with data from the analogous CARE items. More 
specifically, we ran cross tabulations of FIM[supreg] scores and CARE 
scores for the patients in the PAC-PRD to compare scores. A full 
description of the analyses and the results are provided in the report, 
The Development and Testing of the Continuity Assessment Record and 
Evaluation (CARE) Item Set: Final Report on the Development of the CARE 
Item Set and Current Assessment Comparisons Volume 3 of 3, and the 
report is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
    Comment: Two commenters suggested further reliability and validity 
testing of the function items. Some commenters noted concerns that the 
CARE item inter-rater reliability does not exhibit satisfactory inter-
rater reliability among clinicians in IRFs, and suggested CMS utilize 
existing items until further modifications can be made to the CARE 
functional scale. Another commenter was concerned that no external 
reliability or validity testing of the CARE tool items had been done to 
assess its applicability across sites and provider types, outside of 
the inter-rater reliability assessed for the PAC-PRD.
    Response: The reliability testing results mentioned by these 
commenters was only one of several reliability analyses conducted on 
these items as part of the PAC-PRD, which can be found at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/The-Development-and-Testing-of-the-Continuity-Assessment-Record-and-Evaluation-CARE-Item-Set-Final-Reporton-Reliability-Testing-Volume-2-of-3.pdf. That particular result was a reflection of the small sample 
size available for analysis. In addition to the inter-rater reliability 
study mentioned by these commenters, we examined inter-rater 
reliability of the CARE items using videotaped case studies, which 
included 550 assessments from 28 facilities, of which 237 assessments 
were from 8 IRFs. We also conducted analyses of the internal 
consistency of the function data. The results of these analyses 
indicate moderate to substantial agreement, which suggests sufficient 
reliability for the CARE items. In addition to the PAC-PRD analyses, as 
part of the NQF application process, we conducted additional analyses 
focused on the 6 submitted IRF and LTCH function quality measures, 
including item-level, scale-level and facility-level analyses testing 
the reliability and validity of the CARE function data. A description 
of the analyses and the results are available on the NQF Web site's 
Person- and Family-Centered Care project at http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867. Therefore, 
given the overall findings of the reliability analyses, we believe that 
the proposed function measure is sufficiently reliable for the IRF QRP.
    We understand the importance of education in assisting providers to 
collect accurate data and we worked in the past with public outreach 
including training sessions, training manuals, webinars, open door 
forums and help desk support. Further, we note that as part of the IRF 
QRP, we intend to evaluate the national-level data for this quality 
measure submitted by IRFs to CMS. These data will inform ongoing 
measure development and maintenance efforts, including further analysis 
of reliability and validity of the data elements and the quality 
measure. Finally, we agree that ongoing reliability and validity 
testing is critical for all items used to calculate quality measures. 
For external reliability and validity, we encourage stakeholders to 
design and conduct reliability testing. We are aware that 1 external 
entity conducted CARE function data reliability testing on the SNF 
population and reported the testing procedures and results in NQF 
measure documents which can be found on the NQF's Person- and Family-
Centered Care project at http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867.
    Comment: Several commenters were concerned that the measure, an 
Application of the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
(NQF #2631; endorsed on July 23, 2015) was not NQF-endorsed.
    Response: We agree that the NQF endorsement process is an important 
part of measure development. We have proposed an application of the 
quality measure, Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses 
Function. This quality measure was ratified by the NQF Board of 
Directors on July 22, 2015, and has

[[Page 47106]]

been endorsed by NQF effective July 23, 2015.
    Comment: One commenter noted that IRFs are already required to 
develop a care plan and this commenter did not support requiring 
additional documentation of the care plan as part of the measure, an 
Application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on July 23, 2015).
    Response: To clarify, the proposed function measure requires 
reporting of a minimum of one self-care or mobility goal. We are 
ensuring that a minimum of one goal is represented in the plan of care, 
which is a best practice.
    Comment: Several commenters were concerned that the measure, an 
Application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631, endorsed on July 23, 2015), does not guarantee that the 
patient's plan of care will be reflective of the functional assessment 
or contain goals associated with the assessment. Several commenters 
expressed concerns regarding the lack of benchmarks for goal-setting 
for the CARE function items. One commenter expressed concerns regarding 
the requirement to document a functional goal in the quality measure in 
the absence of data to guide goal-setting. One commenter noted that 
this process measure does not have a process to ensure a patient's plan 
of care includes a functional goal; this commenter noted a preference 
for outcome measures.
    Response: We appreciate the commenter's concern about establishing 
function goals for IRF patients. The proposed quality measure requires 
a minimum of 1 self-care or mobility goal per patient stay. The 
documentation of a functional goal requires a valid numeric score 
indicating the patient's expected level of independence at discharge. 
With regard to benchmarks and having data to guide goal-setting, 
licensed clinicians can establish a patient's discharge goal(s) based 
on the admission assessment, discussions with the patient and family, 
by using their professional judgment and the professionals' standard of 
practice. For example, a patient may require the assistance of 2 
helpers to get from a sitting to standing position on admission (Level 
1 for Sit to Stand) and the goal is for the patient to progress to 
requiring supervision for the same activity by discharge (level 4 for 
Sit to Stand). National benchmarks could be developed over time based 
on national data.
    Comment: One commenter was concerned that no data was provided 
clearly linking improved outcomes to this process measure.
    Response: We believe that there is evidence that conducting 
functional assessments is a best practice for improving functional 
outcomes. The NQF requirement for endorsing process measures is that 
the process should be evidence-based, such as processes that are 
recommended in clinical practice guidelines. As part of the NQF 
process, we submitted several such clinical practice 
guidelines 50 51 52 to support this measure, and referenced 
another cross-cutting clinical practice guideline in the proposed rule. 
The clinical practice guideline Assessment of Physical Function \53\ 
recommends that clinicians should document functional status at 
baseline and over time to validate capacity, decline, or progress. 
Therefore, assessment of functional status at admission and discharge 
and establishing a functional goal for discharge as part of the care 
plan (that is, treatment plan) is an important aspect of patient/
resident care for all PAC providers.
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    \50\ Kresevic DM. Assessment of physical function. In: Boltz M, 
Capezuti E, Fulmer T, Zwicker D, editor(s). Evidence-based geriatric 
nursing protocols for best practice. 4th ed. New York (NY): Springer 
Publishing Company; 2012. p. 89-103. Retrieved from http://www.guideline.gov/content.aspx?id=43918.
    \51\ Centre for Clinical Practice at NICE (UK). (2009). 
Rehabilitation after critical illness (NICE Clinical Guidelines No. 
83). Retrieved from http://www.nice.org.uk/guidance/CG83.
    \52\ Balas MC, Casey CM, Happ MB. Comprehensive assessment and 
management of the critically ill. In: Boltz M, Capezuti E, Fulmer T, 
Zwicker D, editor(s). Evidence-based geriatric nursing protocols for 
best practice. 4th ed. New York (NY): Springer Publishing Company; 
2012. p. 600-27. Retrieved from http://www.guideline.gov/content.aspx?id=43919.
    \53\ Kresevic DM. Assessment of physical function. In: Boltz M, 
Capezuti E, Fulmer T, Zwicker D, editors(s). Evidence-based 
geriatric nursing protocols for best practice. 4th ed. New York 
(NY): Springer Publishing Company; 2012. p. 89-103. Retrieved from 
http//www.guideline.gov/content.aspx?id=43918.
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    Comment: Several commenters expressed concern that the proposed 
function process measure, an Application of the Percent of LTCH 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan that Addresses Function (NQF #2631; endorsed on July 23, 
2015), does not meet the requirements of the IMPACT Act because 
measures must be outcome based. One commenter asserted that the 
proposed measure did not satisfy the specified IMPACT Act domain, as 
the measure is not able to report on changes in function, and another 
commenter claimed that the measure does not satisfy the reporting of 
data on functional status. Finally, a comment stated that the measure 
does not have an appropriate numerator, denominator, or exclusions, 
lacks NQF endorsement, fails to be based on a common standardized 
assessment tool, is not risk adjusted, and lacks evidence that 
associates the measure with improved outcomes. One commenter claims 
that because the specifications for the proposed measure are 
inconsistent with the measure specifications posted by NQF for the 
measure that is under endorsement review, we failed to meet the 
requirements under the IMPACT Act to provide measure specifications to 
the public, and further asserts that one cannot determine the 
specifications that are associated with the proposed measure, which is 
an application of the NQF version of the measure.
    Response: We believe that the proposed function measure meets the 
requirements of the IMPACT Act. Although we have specified this measure 
as a process measure, the measure itself has attributes that enable 
outcomes-based evaluation by the provider. Such attributes include the 
assessment of functional status at two points in time, admission and 
discharge, enabling the provider to identify, in real time, changes, 
improvement or decline, as well as maintenance. Additionally, the 
proposed quality measure requires that the provider indicate at least 
one functional goal associated with a functional activity, and 
providers can calculate the percent of patients who meet and exceed 
goals. Such real time use enables providers to engage in person-
centered goal setting and the ability to use the data for quality 
improvement efforts. Therefore, we disagree with the observation that 
the proposed process quality measure does not satisfy the domain 
requirements specified in the IMPACT Act associated with functional 
status and functional change.
    We also intend to use the data we collect on this measure to better 
inform our development of a better outcome-based cross-setting function 
measure. To the extent that commenters are concerned that the proposed 
function measure is not outcome-based because it is not risk adjusted, 
the TEP that reviewed this measure considered, but did not recommend, 
that the measure be risk-adjusted because completion of a functional 
assessment is not affected by the medical and functional complexity of 
the resident/patient. Rather, clinicians are able to report that an

[[Page 47107]]

activity was not attempted due to the resident's or patient's medical 
condition or a safety concern (including patient or clinician safety), 
and clinicians take this complexity into account when setting goals.
    We disagree with the commenter that we failed to meet the 
requirements under the IMPACT Act to provide measure specifications to 
the public. The specifications were identified in the FY 2016 IRF PPS 
proposed rule (80 FR 23332) as being posted at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html. Also, we would like to clarify that the proposed 
function process quality measure is an application of the measure 
posted on the NQF Web site, which is the Percent of LTCH Patients with 
an Admission and Discharge Functional Assessment and a Care Plan that 
Addresses Function (NQF #2631; endorsed July 23, 2015). The measure, 
NQF #2631, which was developed for LTCHs was proposed and finalized in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50291 through 50298) for 
adoption in the LTCH QRP. An application of this measure, the cross-
setting measure, was proposed in the FY 2016 IRF PPS proposed rule (80 
FR 23376 through 23379), and similarly it was proposed in the FY 2016 
IPPS/LTCH PPS proposed rule (80 FR 24602 through 24605) and the FY 2016 
SNF QRP proposed rule (80 FR 22073through 22075). This cross-setting 
version, an application of the LTCH QRP quality measure, was proposed 
based on guidance from multiple TEPs convened by our measure 
contractor, RTI International.
    Finally, we have addressed the comment regarding modifying the 
various PAC setting patient assessment instruments to use a single 
standardized assessment tool in response to similar comments above.
    Comment: Several commenters noted the significance of adequate 
training, stressing the importance of appropriate coding of the new 
items used to calculate the proposed measures, and one commenter 
specifically asked for clarification on which health care professional 
would be responsible for performing the assessment, while another asked 
that the IRF-PAI Training Manual be provided with the necessary coding 
and assessment instructions for the provider's reference in a timely 
manner. One commenter suggested transparency with regard to how CMS 
will implement the new quality measures and stated that training for 
all providers, including instructions for the revised IRF-PAI Training 
Manual, would be needed. The commenter suggested open door forums and 
training webinars for providers. One commenter recommended that 
training be available at least 5 months prior to implementation, as 
both national and local training would be needed.
    Response: We agree with the importance of thorough and 
comprehensive training, and we intend to provide such training in the 
near future for all updates to the IRF-PAI and assessment requirements. 
In addition to the manual and training sessions, we will provide 
training materials through the CMS webinars, open door forums, and help 
desk support. We welcome ongoing input from stakeholders on key 
implementation and training considerations, which can be submitted via 
email: [email protected].
    Comment: Several commenters noted that the items included in the 
IRF-PAI differ from those tested during the PAC-PRD and represented a 
limited set of items from the original CARE Tool. One of these 
commenter suggested that the contributions of occupational therapy may 
not be measureable with the limited set of items. Another commenter 
suggested that the assessment time frame used in the PAC-PRD is 
different than the assessment time frame for the proposed items and 
noted that the definition of level 1 was modified to include the 
assistance of 2 or more helpers.
    Response: The PAC-PRD tested a range of items, some of which were 
duplicative, to identify the best performing items in each domain. 
Select items were removed from the item set where testing results and 
clinician feedback suggested the need for fewer items to be included in 
a particular measure or scale. We also received feedback on the items 
proposed for inclusion on the process quality measure from a cross-
setting TEP convened by our measure development contractor, RTI 
International during this year's pre-rulemaking process. The proposed 
measure was based on these analyses and input. Other changes from the 
original PAC-PRD items included incorporating instructional detail from 
the manual and training materials directly into the data collection 
form and updating skip patterns to minimize burden. We agree that the 
contribution of occupational therapy, as well as other clinical 
disciplines, should be reflected in all item and measure development. 
During the PAC-PRD, clinicians from many different disciplines 
collected CARE data, including occupational therapists (OTs). In 
addition, the items were developed with the input from those 
individuals who would be performing the assessments, including OTs.
    With regard to the assessment time frame for the CARE function 
items, we instructed clinicians during the PAC-PRD to use a 2-day time 
frame if the patients were admitted before 12 p.m. (noon) or 3 calendar 
days if the patients were admitted after 12 p.m. (noon). Our exit 
interviews revealed that most patients were admitted to the IRF after 
12 p.m. and that clinicians used 3 calendar days. Therefore, we 
proposed to use the assessment time frame that most clinicians used 
during the PAC-PRD. With regard to the definition of level 1 to include 
the assistance of 2 or more helpers, this instruction was provided in 
the CARE Training Manual, but was not on the CARE Tool assessment form. 
User feedback included a suggestion to add this phrase onto the data 
set itself so that clinicians were aware of this scoring example.
    Comment: Several commenters were concerned about the potential for 
confusion between the FIM[supreg] and the CARE rating scales.
    Response: During the PAC-PRD, our training included a discussion of 
CARE functional items and scales, as well as differences between the 
FIM[supreg] and CARE items and rating scale. We share the commenters' 
concerns related to ensuring data accuracy. We intend to conduct 
comprehensive training prior to implementation of the CARE function 
items, as well as develop comprehensive training materials. Further, to 
ensure data accuracy, we intend to propose through future rulemaking a 
process and program surrounding data validation and accuracy analysis.
    Comment: Several commenters were concerned that historical 
FIM[supreg] data for benchmarking will be lost if the FIM[supreg] 
instrument is replaced by CARE items in the future.
    Response: We appreciate the commenters' concerns about the 
historical availability of FIM[supreg] data. When the IRF-PAI was 
implemented in 2002, researchers examined differences in IRF data prior 
to and after 2002 to better understand adjustments that would be needed 
to make fair comparisons of IRF data across these 
years.54 55
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    \54\ Granger, C.V., Deutsch, A., Russell, C., Black, T., & 
Ottenbacher, K.J. Modifications of the FIM instrument under the 
inpatient rehabilitation facility prospective payment system. 
American Journal of Physical Medicine & Rehabilitation, 2007; 
86(11), 883-892.
    \55\ Deutsch, A., Granger, C.V., Russell, C., Heinemann, A.W., & 
Ottenbacher, K.J. Apparent changes in inpatient rehabilitation 
facility outcomes due to a change in the definition of program 
interruption. Archives of physical medicine and rehabilitation, 
2008; 89(12), 2274-2277.

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[[Page 47108]]

    Comment: A few commenters stated that FIM[supreg] instrument 
functional data should satisfy measure requirements, because the NQF 
measure requires valid function scores.
    Response: To clarify, the proposed function quality measure, an 
Application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan that Addresses Function (NQF 
#2631; endorsed on July 23, 2015), reports standardized functional 
assessment (that is, CARE) data at admission and discharge as well as 
at least one functional status discharge goal. This description is 
consistent with the technical description submitted to NQF for the 
measure, Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan (NQF #2631; endorsed on July 23, 
2015), which is available on the Patient- and Family-Centered Care 
Project Measures Web site at http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867. In our NQF Measure Information 
Form, we defined the valid scores using the CARE 6-level rating scale, 
along with activity not attempted codes, and we listed the names of the 
CARE function items (see Numerator Statement Detail--Section 5.6 of the 
NQF Measure Information Form). The commenter's description of the use 
of ``valid codes'' for the measure seems to refer to the Numerator 
Statement (section 5.4) on the NQF Measure Information Form, which is 
intended to be a brief narrative of the description of the numerator. 
The Numerator Statement Detail (Section 5.6) includes the following 
details: Valid scores/codes for the self-care items are: 06--
Independent, 05--Setup or clean-up assistance, 04--Supervision or 
touching assistance, 03--Partial/moderate, assistance, 02--Substantial/
maximal assistance, 01--Dependent, 07--Patient Refused, 09--Not 
applicable, 88--Not attempted due to medical condition or safety 
concerns. Valid scores/codes for the mobility items are: 06--
Independent, 05--Setup or clean-up assistance, 04--Supervision or 
touching assistance, 03--Partial/moderate assistance, 02--Substantial/
maximal assistance, 01--Dependent, 07--Patient Refused, 09--Not 
applicable, 88--Not attempted due to medical condition or safety 
concerns. Therefore, we disagree that other function items or rating 
scales could be used to calculate this measure. The calculation of this 
measure is based on the CARE scores/codes and labels and stem as a 
result of item testing conducted and provided in the NQF application 
materials, which are available at http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867.
    Comment: One commenter expressed concerns regarding the CARE 
function rating scale and clinician safety. The commenter expressed 
concern over the CARE coding that uses the patient's ``usual 
performance'' versus use of ``most dependent performance'' to determine 
functional status coding and the effect on discharge planning. The 
commenter expressed concerns regarding clinician difficulty in using 
the CARE function rating scale during pilot testing of CARE function 
items and makes suggestions regarding rating scale modification. The 
commenter also considered the definition of the Substantial/Maximal 
Assistance to be too broad and insufficiently precise.
    Response: We share the commenters' commitment to ensuring patient 
and clinician safety, and this is of utmost importance to us. With 
regard to the assessment of usual versus the most dependent 
performance, consistent with current clinical practices, we would 
encourage IRF clinicians to monitor for variation in patient 
functioning at different times of the day or in different environment 
(that is, therapy gym and the patient's room). We agree that 
clinicians' observation of any variation should be shared with the 
patient and family member at the time of discharge, including the 
amount of variation and the time of day or environment. For example, 1 
patient who has a co-existing condition of osteoarthritis may require 
more assistance with toilet transfers in the morning than the evening, 
while a patient after a stroke may require more assistance with toilet 
transfers in the evening compared to the morning due to fatigue. A 
single function score alone does not convey all the information that 
should be shared with the patient and family. In addition, variations 
in patient functioning should also be documented in the patient's 
medical record. With regard to using the concerns about the CARE rating 
scale, we would like to note that we conducted exit interviews as part 
of the PAC-PRD, and that clinical coordinators ``commented positively 
about the coding approach of determining whether a patient could do at 
least half the task or not, and if they could, whether they could 
safely leave the patient to complete the task without supervision. For 
the definition of Substantial/maximal assistance, the LTCH staff 
appreciated being able to note small changes from complete dependence 
to being able to complete a task with much assistance (over half the 
task was completed by the helper), particularly for the most impaired 
populations.'' (March 2012--Post-Acute Care Payment Reform 
Demonstration: Final Report Volume 1 of 4, http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/Downloads/PAC-PRD_FinalRpt_Vol1of4.pdf.)
    We intend to provide training that would include descriptions and 
examples of the CARE rating scale in order to clarify any concerns 
about the rating levels. The development of the CARE function items, 
including the definitions for each activity, were selected based on a 
review of all existing items used by LTCHs, IRFs, SNFs and HHAs, a 
review of the relevant literature, and input from stakeholders such as 
clinicians and researchers. The items were designed to focus on a 
single activity rather than multiple activities, so that clinicians 
completing assessments did not have to determine a person's level of 
independence with multiple activities to then compute a composite score 
based on different levels of independence in these component 
activities. For example, the FIM[supreg] includes an item called 
``Grooming'' that addresses washing hands and face, combing hair, 
brushing teeth, shaving, applying makeup. To score this item, the 
clinician needs to consider how much help was needed for each of these 
component activities and then derive a composite overall assessment of 
the patient's status for the activities as a whole for the FIM[supreg] 
score. For the CARE item, one activity is considered, oral hygiene, and 
there is one score reported that reflects the person's overall level of 
help needed for that activity. The CARE function rating scale was also 
developed based on input from the clinical communities and research 
that used the existing rating scales. During PAC-PRD on-site training, 
when we explained differences between the existing and CARE rating 
scales, we received positive feedback about the CARE rating scale. We 
additionally conducted alpha and beta testing of the items before the 
PAC-PRD began in order to select rating scale, items and definitions 
that made sense to clinicians and were consistent with clinical logic. 
We also maintained a help desk and had frequent phone calls with site 
coordinators to ensure that we clarified any coding issues or item 
definitions. We also conducted extensive exit interviews with

[[Page 47109]]

participating sites. This feedback was incorporated into the CARE items 
that we have proposed for the cross-setting function measure. Based on 
our experiences, we believe that the CARE items and associated rating 
scale represent a simple, but comprehensive method of documenting 
functional abilities at admission and discharge.
    Comment: One commenter stated that the CARE items duplicate the 
existing IRF-PAI Items. This commenter indicated that CMS' description 
of the differences between the CARE items and the existing IRF-PAI 
items are not actually differences.
    Response: As noted in the proposed rule, the key differences 
between the IRF-PAI and the CARE function items include: (1) The data 
collection and associated data collection instructions; (2) the rating 
scales used to score a patient's level of independence; and (3) the 
item definitions. We believe that the proposed standardized (that is, 
CARE) function items do not duplicate existing items currently used for 
data collection within the IRF-PAI. While many of the items to be 
included have labels that are similar to existing items on the IRF-PAI, 
there are several key differences between the assessment item sets that 
may result in variation in the patient assessment results. For example, 
the standardized CARE items are scored using a 6-level rating scale, 
while the existing IRF-PAI items are scored using a 7-level rating 
scale. The CARE items include 4 items focused on the activity or 
walking and 2 items focused on wheelchair mobility. The walking items 
are Walking 10 feet (even surfaces), walking 50 feet with two turns, 
Walking 150 feet and Walking 10 feet on uneven surfaces, and the 
wheelchair mobility items are Wheel 50 feet with 2 turns and Wheel 150 
feet. The FIM[supreg] includes 1 item that is scored based on either 
walking, wheelchair mobility, or both.
    Comment: One commenter disagreed with the CMS's statement in the 
proposed rule that ``[w]e are not aware of any other quality measures 
for functional assessment that have been endorsed or adopted by another 
consensus organization for the IRF setting.'' The commenter notes that 
the FIM[supreg] tool is endorsed by the American Academy of Physical 
Medicine and Rehabilitation and the American Congress of Rehabilitation 
Medicine, and that both of these organizations are considered consensus 
organizations in the IRF industry. The commenter also noted that a 
recent NQF meeting included discussions of the FIM[supreg] instrument 
and the CARE function items.
    Response: The FIM is an assessment tool, and we believe that such a 
tool is different from a quality measure. A quality measure can be 
developed using an instrument or a set of items, but a quality measure 
has defined specifications beyond the instrument or items. For this 
reason, we believe our statement in the proposed rule is accurate.
    Comment: One commenter questioned the utility of the data collected 
under this process measure ``Percent of LTCH Patients With an Admission 
and Discharge Functional Assessment and a Care Plan That Addresses 
Function'' (NQF #2631; endorsed on July 23, 2015).
    Response: We believe that monitoring facility and provider 
activities using process measures initially will allow for the 
development of more robust outcome-based quality measures. By using the 
data collected with this quality measure, the IRF staff can calculate 
the percent of patients who meet or exceed their discharge functional 
status goals, which were established at admission with the patient and 
family. The function goal is established at admission by the IRF 
clinicians with input from the patient and family, demonstrating person 
and family-centered care. It should be noted, we proposed functional 
outcome measures, specifically self-care and mobility quality measures, 
in addition to this proposed cross-setting process measure. These 
outcome function quality measures are intentionally being designed to 
use the same standardized functional assessment items that are included 
in the proposed cross-setting process measure in order to capitalize on 
the data collected using the currently proposed process measure, which 
will inform further development while allowing for the consideration of 
limited additional burden.
    Comment: Several commenters requested specific guidance on scoring 
IRF-PAI items, such as the cognitive patterns items and the self-care 
and mobility items.
    Response: We provide scoring guidance in training manuals, training 
sessions, and through the help desks. We intend to provide 
comprehensive training as they do each time the assessment items 
change, and we will address these types of inquiries as part of our 
training efforts.
    Comment: Many commenters expressed concerns regarding the burden 
associated with the addition of the standardized (that is, CARE) 
function items to the IRF-PAI for quality reporting purposes. Many of 
these commenters indicated they support outcomes-based quality measures 
focused on function, but did not support the proposed cross-setting 
process measure. Several commenters noted their lack of support was due 
to the burden of collecting overlapping items for function, but with 
different scales. Many commenters stated that adding the CARE function 
items to the IRF-PAI would result in data duplication, because the IRF-
PAI includes FIM[supreg] function items, which are used for payment. 
Commenters expressed concerns regarding the subtle differences between 
the 6-level rating scale for the CARE function items and the 7-level 
rating scale for the FIM[supreg] function items, indicating that 
simultaneous use of the 2 scales could result in clinician confusion, 
potential risk to accuracy of clinical communication and data, 
potential risk to patient and clinician safety, and questionable 
validity and reliability of both scales. Several noted the importance 
of minimizing administrative burden on providers to limit duplication 
of effort and the risk of error associated with dual data entry. 
Additional comments included the increased length of the IRF-PAI from 8 
to 18 pages; cost burden, as many IRFs may need to hire additional 
full-time clinical staff; potential for inconsistency associated with 
clinicians collecting and completing risk adjustment data for the 
function quality measures; time and cost burden and resources 
associated with training clinicians in use of the CARE function items, 
in addition to the usual training clinicians have to undergo to learn 
the FIM[supreg] instrument; costs associated with updating electronic 
medical records; and potential for data collection requirements to take 
away from direct patient care time. One commenter suggested CMS to 
consider the effect of the cost of compliance with the new data 
collection requirements on smaller-sized IRF units, including cost 
implications and their ability to provide quality care to 
beneficiaries. One commenter suggested adopting only one function 
measure to reduce burden. Several commenters recommended using the 
FIM[supreg] for quality reporting, including FIM[supreg] change and 
length of stay efficiency measures in IRFs, LTCHs and SNFs. One 
commenter noted that Medicare has a goal of improving the quality or 
care, but was concerned that the proposed regulations would be 
burdensome and require additional clerical staff. One commenter 
recommended that CMS suspend any measure not required by the IMPACT Act 
and those that are not critical to the mission of IRFs. The commenter 
also suggested adopting the minimum

[[Page 47110]]

number of quality measures necessary to meet the IMPACT Act to minimize 
burden on IRFs.
    Response: We believe that the 6-level scale and the additional 
items in section GG allow us to better distinguish change at the 
highest and lowest levels of patient functioning by documenting minimal 
change from no change at the low end of the scale. \56\ This is 
important for measuring progress in some of the most complex cases 
treated in PAC. The items in section GG were developed with input from 
the clinical therapy communities to better measure the change in 
function, regardless of the severity of the individual's impairment. We 
do not agree with the commenters' assertions that the inclusion of 
items that inform 2 different rating scales will cause issues of 
patient safety.
---------------------------------------------------------------------------

    \56\ Barbara Gage et al., ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI International, 
2012).
---------------------------------------------------------------------------

    To reduce potential burden associated with collecting additional 
items, we have included several mechanisms in the new section GG to 
reduce the number of items that apply to any one patient. First, in 
section GG, there are gateway questions pertaining to walking and 
wheelchair mobility that allow the clinician to skip items that ask if 
the patient does not walk or does not use a wheelchair, respectively. 
For example, in Section GG, there is an item that asks whether or not 
the patient walks. If the resident does not walk, items in Section GG 
related to walking ability are skipped. Second, Section GG items will 
only be collected at admission and discharge. The gateway questions and 
skip patterns mean that only a subset of items are needed for most 
patients. However, by including all of them in the form, the 
standardized versions are available when appropriate for an individual 
patient.
    We would like to clarify an issue related to the expected burden of 
collecting the additional items. At least one commenter had estimated 
that the additional staff needed to complete the additional items was 
estimated to be 280 hours per year and would require over 4 additional 
FTE to collect this data. Using an estimate of 2080 hours per FTE, the 
additional time for data collection of these items should add 0.10 
percent additional FTE per year.
    We appreciate the comments pertaining to EMRs. While we applaud the 
use of EMRs, we do not require that providers use EMRs to populate 
assessment data. It should be noted that with each assessment release, 
we provide free software to our providers that allows for the 
completion and submission of any required assessment data. The use of a 
vendor to design software that extracts data from a provider's EMR to 
populate our quality assessments, is a business decision that is made 
solely by the provider. We only require that assessment data be 
submitted via the QIES ASAP system in a specific compatible format. 
Providers can choose to use our free software (the Inpatient 
Rehabilitation Validation and Entry (IRVEN) software product are 
available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/Software.html.), or the 
data submission specifications we provide that allow providers and 
their vendors to develop their own software, while ensuring 
compatibility with the QIES ASAP system.
    Comment: One commenter stated that the CARE item set in the 
proposed IRF-PAI Version 1.4 does not assess eating, bladder, or bowel 
control at discharge. The commenters expressed concerns that eating and 
bladder outcomes cannot be assessed using the CARE function items.
    Response: We would like to clarify that the CARE self-care item set 
on the proposed IRF-PAI Version 1.4 does include the item ``eating'' at 
both admission and discharge, allowing monitoring of eating outcomes. 
Additionally, clinicians have the opportunity to establish a discharge 
goal for eating, if relevant for the patient. Bladder and bowel 
continence are only assessed at admission on the proposed IRF-PAI 
Version 1.4 because these data will only be used for risk adjustment 
for the IRF self-care and mobility quality measures. We are interested 
in developing quality measures focused on bladder and bowel function 
and management. Bladder and bowel functioning have been shown to be an 
independent construct from motor activities, such as self-care and 
mobility. While some functional assessment instruments analyses include 
bladder or bowel function as motor activities, Rasch analysis has shown 
that these items ``misfit,'' suggesting they do not measure the same 
constructs as the motor items.\57\ Quality measures that focus uniquely 
on bladder and bowel function would allow collection of data specific 
to bladder and bowel management, and would be more actionable for 
providers to improve quality of care and patient outcomes.
---------------------------------------------------------------------------

    \57\ Linacre JM, Heinemann AW, Wright BD, Granger CV and 
Hamilton. The Structure and Stability of the Functioning 
Independence Measure. Arch of Phys Med and Rehab 75(2):127-132, 
1994.
---------------------------------------------------------------------------

    Comment: One commenter expressed concern regarding the burden of 
collecting both the existing as well as new proposed function items, 
suggesting that CMS address duplication with a gradual removal of the 
current function items and replacing them with the new function items 
across the item sets for all of the post-acute settings, expressing 
that achieving such standardization and exchangeable patient data will 
enable cross-setting data comparison and improved quality measures with 
consistent risk adjustment so as to achieve the intent of the IMPACT 
Act.
    Response: We interpret the comment to mean that IRFs already 
collect functional assessment data that is setting-specific. We intend 
to work with providers as we implement the requirements of reporting 
standardized data as part of the IMPACT Act. We would like to clarify 
that while the IMPACT Act requires the enablement of interoperability 
through the use of standardized data, there will be instances in which 
some provider types may need more or less standardized items than other 
provider types.
    With regard to risk-adjustment, as noted in our previous response, 
the TEP that reviewed this measure did not recommend that the measure 
be risk-adjusted, because completion of a functional assessment is not 
affected by the medical and functional complexity of the resident/
patient. Rather, clinicians are able to report that an activity was not 
attempted due to a medical condition or a safety concern, and 
clinicians take this complexity into account when setting goals. 
Further, we are aware that patients/resident may have acute events that 
trigger unplanned discharges, and this measure does not require a 
functional assessment to be completed in these circumstances. For 
medically acute patients, functional assessment data are not required. 
This specification is clearly noted in our specifications document. 
Finally, we have included skip patterns on the assessment instrument 
that take into account patient complexity. For example, we have a 
gateway question that asks if the patients walk. If the patient/
resident does not walk, then several walking and stairs items are not 
required to be completed.
    Comment: One commenter focused on the need to measure cognitive 
functioning and link functional assessment, care planning and goals to 
address patient functioning. This commenter noted that such a measure 
would be important for achieving the

[[Page 47111]]

best outcomes and for discharge planning.
    Response: We would like to clarify that the Application of Percent 
of LTCH Patients with an Admission and Discharge Functional Assessment 
and a Care Plan That Addresses Function (NQF #2631, endorsed on July 
23, 2015) is for use as a cross-setting quality measure that includes 
self-care and mobility activities that are primarily focused on motor 
function. The quality measure does not include items that are focused 
on cognitive functioning. We do plan to develop quality measures 
focused on cognitive functioning. We are always open to stakeholder 
feedback on measure development and encourage everyone to submit 
comments to our comment email: [email protected].
    Comment: Several commenters noted additional areas of function that 
are key to patients, including cognition, communication, and 
swallowing. One commenter encouraged CMS to consider cognition and 
expressive and receptive language and swallowing as items of function 
and not exclusively as risk adjustors, and offered their expertise to 
CMS for discussions and to develop goals. Another commenter examined 
the SNF, IRF, HHA and LTCH assessment instruments and noted that 
cognitive function is measured differently across the settings in terms 
of content, scoring process, and intended calibration of each tool, and 
encouraged CMS to align items and quality measurement of cognition.
    Response: We are working toward developing quality measures that 
assess areas of cognition and expression, recognizing that these 
quality topic domains are intrinsically linked or associated to the 
domain of function and cognitive function. We appreciate the 
commenter's suggestion to align cognition items across the PAC 
settings. We appreciate the commenter's offer for assistance and 
encourage the submission of comments and measure specification details 
to our comment email: [email protected].
    Comment: Two commenters requested that CMS continue engaging with 
stakeholders, and one requested increased engagement with regard to the 
IMPACT Act and measures that CMS considers. One of the commenters 
criticized CMS, expressing that although CMS engaged with stakeholders, 
the proposals were rushed. The other commenter requested that CMS 
continue to collaborate with stakeholders, stating their appreciation 
for inclusion and opportunity to work with CMS during the 
implementation phases of the IMPACT Act. One commenter also recommended 
that CMS establish a more formal stakeholder group to include 
rehabilitation professionals who can provide expertise on the provision 
of rehabilitation therapy in nursing facilities. This commenter noted 
that the more opportunities stakeholders have to dialogue and recommend 
CMS on the quality measures, the greater the possibility that the 
measures will be accurate and helpful to determining care quality.
    Response: We appreciate the continued involvement of stakeholders 
in all phases of measure development and implementation and we 
recognize the value in strong public-private partnerships. We 
appreciate the request for increased engagement and for a formal 
stakeholder group. We very much agree that outreach and education are 
invaluable, and we intend to continue to provide easy reference 
information, such as a high-level walk-through information pertaining 
to our implementation of the IMPACT Act.
    In addition to the SODF we hosted on the topic of the IMPACT Act, 
we have created a post-acute care quality initiatives Web site, which 
pertains primarily to the IMPACT Act required quality measures/
assessment instrument domains, and allows access to a mail box for 
IMPACT Act provider related questions. We have additionally provided 
nearly a dozen presentations with various stakeholders upon their 
request since January, and during these presentations we have provided 
similar information specific to the IMPACT Act requirements, as they 
pertain to data standardization. We note that the slides used for the 
SODF are accessible on the IMPACT Act/Post-Acute Care Quality 
Initiatives Web site http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html, and these do 
provide high-level background and information, including timelines as 
they pertain to the assessment domains required under the IMPACT Act. 
Further, CMS is in the midst of developing plans for providing 
additional and ongoing education and outreach (to include timelines) in 
the near future, as suggested by commenters. For further information 
and future postings of such documents and information, please continue 
to check the Post-Acute Care Quality Initiatives Web site (listed 
above), as well as the IRF Quality Reporting Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html?redirect=/IRF-Quality-
Reporting/.
    We will take these suggestions into consideration as we continue to 
implement the IMPACT Act.
    Final Decision: Having carefully considered the comments we 
received on the application of the Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan that 
Addresses Function (NQF #2631; endorsed on July 23, 2015), we are 
finalizing the adoption of this measure as proposed for use in the IRF 
QRP as proposed.
3. IRF Functional Outcome Measure: Change in Self-Care Score for 
Medical Rehabilitation Patients (NQF #2633; Under Review)
    The third quality measure that we proposed for the FY 2018 payment 
determination and subsequent years is an outcome measure entitled IRF 
Functional Outcome Measure: Change in Self-Care Score for Medical 
Rehabilitation Patients (NQF #2633; under review). This quality measure 
estimates the risk-adjusted mean change in self-care score between 
admission and discharge among IRF patients. This measure was proposed 
under the authority of section 1886(j)(7)(C) of the Act, and is 
currently under review by the NQF. A summary of the measure 
specifications can be accessed on the NQF Web site at http://www.qualityforum.org/qps/2633. Detailed specifications for this quality 
measure can be accessed at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2633.
    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 status 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. Differences in IRF patients' functional 
outcomes have been found by geographic region, insurance type, and 
race/ethnicity after adjusting for key patient demographic

[[Page 47112]]

characteristics and admission clinical status. Therefore, we believe 
there is an opportunity for improvement in this area. For example, 
Reistetter \58\ 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 \59\ 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 \60\ 
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.
---------------------------------------------------------------------------

    \58\ Reistetter T.A., Karmarkar A.M., Graham J.E., et al. 
Regional variation in stroke rehabilitation outcomes. Arch Phys Med 
Rehabil.95(1):29-38, Jan. 2014.
    \59\ O'Brien S.R., 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.
    \60\ O'Brien S.R., 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.
---------------------------------------------------------------------------

    The functional assessment items included in this quality measure 
were originally developed and tested as part of the Post-Acute Care 
Payment Reform Demonstration version of the CARE Tool,\61\ which was 
designed to standardize assessment of patients' status across acute and 
post-acute providers, including IRFs, SNFs, HHAs and LTCHs. The 
functional status items on the CARE Tool are daily activities that 
clinicians typically assess at the time of admission and/or discharge 
to determine patients' needs, evaluate patient progress and prepare 
patients and families for a transition to home or to another provider.
---------------------------------------------------------------------------

    \61\ Barbara Gage et al., ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI International, 
2012).
---------------------------------------------------------------------------

    This outcome measure requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized clinical assessment items, or data elements that assess 
specific functional self-care activities (for example, eating, oral 
hygiene, toileting hygiene). The self-care function items are coded 
using a 6-level rating scale that indicates the patient's level of 
independence with the activity; higher scores indicate more 
independence. In addition, this measure requires the collection of risk 
factors data, such as patient functioning prior to the current reason 
for admission, bladder continence, communication ability and cognitive 
function, at the time of admission.
    This self-care quality measure will also standardize the collection 
of functional status data, which can improve communication when 
patients are transferred between providers. Most IRF patients receive 
care in an acute care hospital prior to the IRF stay, and many IRF 
patients receive care from another provider after the IRF stay. Use of 
standardized clinical data to describe a patient[acute]s status across 
providers can facilitate communication across providers. Rehabilitation 
programs have traditionally conceptualized functional status in terms 
of the need for assistance from another person. This is the conceptual 
basis for the IRF-PAI/FIM[supreg]* instrument (used in IRFs), the MDS 
function items (used in nursing homes), and the Outcome and Assessment 
Information Set (OASIS) function items (used in home health). However, 
the functional status items on the IRF-PAI, MDS and OASIS are different 
even when items are similar; the item definitions and rating scales are 
different. In a patient-centered health care system, there is a need 
for standardized terminology and assessment items because patients 
often receive care from more than 1 provider. The use of standardized 
items and terminology facilitates clinicians speaking a common language 
that can be understood across clinical disciplines and practice 
settings.
    We released draft specifications for the function quality measures, 
and requested public comment between February 21 and March 14, 2014. We 
received 40 responses from stakeholders with comments and suggestions 
during the public comment period and have updated the specifications 
based on these comments and suggestions. This quality measure was 
submitted to the NQF on November 9, 2014, has been undergoing review at 
NQF.
    Based on the evidence previously discussed, we proposed to adopt 
the quality measure entitled IRF Functional Outcome Measure: Change in 
Self-care Score for Medical Rehabilitation Patients (NQF #2633; under 
review), for the IRF QRP for the FY 2018 payment determination and 
subsequent years. As described in more detail in section IX.I.2. of 
this final rule, the first data collection period is 3 months (October 
1, 2016 to December 31, 2016) for the FY 2018 payment determination, 
and the subsequent data collection periods are 12-months in length and 
follow the calendar year (that is, January 1 to December 31).
    The list of measures under consideration for the IRF QRP, including 
this quality measure, was released to the public on December 1, 2014, 
and early comments were submitted between December 1 and December 5, 
2014. The MAP met on December 12, 2014, sought public comment on this 
measure from December 23, 2014 to January 13, 2015, and met on January 
26, 2015. The NQF provided the MAP's input to us as required under 
section 1890A(a)(3) of the Act in the final report, MAP 2015 
Considerations for Selection of Measures for Federal Programs: Post-
Acute/Long-Term Care, which is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP conditionally supported this measure. 
Refer to section IX.B. of this final rule for more information on the 
MAP.
    In section 1886(j)(7)(D)(ii) of the Act, the exception authority 
provides that in 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. We reviewed the NQF's consensus endorsed 
measures and were unable to identify any NQF-endorsed quality measures 
focused on assessment of functional status for patients in the IRF 
setting. There are related measures, but they are not endorsed for IRFs 
and several focus on 1 condition (for example, knee or shoulder 
impairment). We are not aware a of any other quality measures for 
functional assessment that have been endorsed or adopted by another 
consensus organization for the IRF setting. Therefore, we proposed to 
adopt this measure, IRF Functional Outcome Measure: Change in Self-Care 
Score for Medical Rehabilitation Patients (NQF #2633; under review), 
for use in the IRF QRP for the FY 2018 payment determination and 
subsequent years under the Secretary's authority to select non-NQF-
endorsed measures.
    The specifications and data elements for the quality measure are 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We proposed that data for the quality measure be collected using 
the IRF-PAI, with the submission through the QIES

[[Page 47113]]

ASAP system. For more information on IRF QRP reporting through the QIES 
ASAP system, refer to the CMS Web site at http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html and http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    We proposed to revise the IRF-PAI to include new items that assess 
functional status and the risk factor items. The function items, which 
assess specific self-care functional activities, are based on 
functional items included in the Post-Acute Care Payment Reform 
Demonstration version of the CARE Item Set.
    We sought public comments on our proposal to adopt the quality 
measure entitled IRF Functional Outcome Measure: Change in Self-care 
Score for Medical Rehabilitation Patients (NQF #2633; under review) for 
the IRF QRP, with data collection starting on October 1, 2016, for the 
FY 2018 payment determination and subsequent years. Refer to section 
IX.I.2. of this final rule for more information on the proposed data 
collection and submission timeline for this quality measure. The 
responses to public comments on this measure are discussed below in 
this section of the final rule. We note that we received many comments 
about the standardized (that is, CARE) items that pertain to several of 
the 5 proposed function quality measures. Many of these comments are 
provided above in section IX.G.2. of this final rule as part of the 
review of comments about the quality measure, an Application Percent of 
LTCH Patients with an Admission and Discharge Functional Assessment and 
a Care Plan that Addresses Function (NQF #2631; endorsed on July 23, 
2015). We also received many comments pertaining to more than 1 of the 
4 functional outcomes measures. We provide these comments and our 
responses below as well as 1 comment that uniquely applies to this 
measure, IRF Functional Outcome Measure: Change in Self-care Score for 
Medical Rehabilitation Patients (NQF #2633; under review).
    Comment: MedPAC expressed support for the 4 function outcome 
measures that we proposed for the IRF QRP, and noted measures added to 
the IRF QRP should contribute to meaningful differences in IRF 
patients' outcomes or meaningful comparison of patients' outcomes 
across post-acute care settings.
    Response: We appreciate MedPAC's support for the 4 proposed 
functional outcome measures. These functional status quality measures 
are calculated using standardized functional assessment (that is, CARE) 
data, which is the primary data source for not only these 4 functional 
outcome measures, but also for the standardized cross-setting function 
process measure. Therefore, we are proposing 5 functional status 
quality measures that are derived from 1 data source (CARE data) and 
use the same set of assessment items.
    Comment: One commenter supported the concepts of the 4 IRF outcome 
measures, and was pleased that prior mobility devices were risk 
adjustors for the outcome measures. This commenter encouraged CMS to 
continue to examine data for this quality measure and the risk 
adjustment methodology.
    Response: We appreciate the commenter's support for the proposed 
function quality measure concepts and appreciate the commenter's input 
on risk adjustment. The risk adjustors selected for these proposed 
quality measures were selected based on rigorous literature reviews, 
clinical relevance, TEP input, and empirical findings from the PAC-PRD 
analyses. We also requested input on suggested risk adjustors as part 
of the public comment process, and we appreciate this commenter's input 
during this process. As part of our measure maintenance process, we 
will continue to examine data and refine measures.
    Comment: One commenter encourages CMS to add wheelchair mobility 
items in the mobility quality measures to reflect that some patients 
use a wheelchair as a primary method of mobility, and directed CMS's 
attention to quality measure, CARE: Improvement in Mobility (NQF 
#2612). The commenter encouraged CMS to examine this measure during the 
implementation phase (by which we assume they meant the implementation 
phase of the five IRF function quality measures).
    Response: We appreciate the commenter's suggestion to add 
wheelchair mobility items in the mobility quality measure, and will 
explore that refinement as we further develop and refine these quality 
measures. As part of our maintenance process, we will continue to 
examine data, refine measures, and examine and evaluate the use of 
other quality measures for considerations of future measure 
modifications.
    Comment: One commenter was pleased to see the 4 IRF function 
outcome measures proposed as part of the FY 2016 IRF PPS Proposed Rule. 
The commenter encouraged CMS to propose functional outcome measures for 
LTCHs, SNFs and HHAs in future rulemaking for quality of care and 
payment.
    Response: We agree that the use of outcome measures is important. 
We would like to note that we adopted the quality measure Long-Term 
Care Hospital Functional Outcome Measure: Change in Mobility Among 
Patients Requiring Ventilator Support (NQF #2632; endorsed on July 23, 
2015) in the FY 2015 final rule and data collection for this outcome 
measure begins in LTCHs on April 1, 2016. We are currently developing 
functional outcome measures, specifically self-care and mobility 
quality measures, which may be used for SNFs and HHAs. These functional 
outcome quality measures are intentionally being designed to use the 
same standardized functional assessment items that are included in the 
cross-setting person- and family-centered function process measure in 
order to capitalize on the data collected using the process measure, 
which will inform further development, while allowing for the 
consideration of limited additional burden.
    Comment: One commenter questioned whether the 4 proposed functional 
outcome measures meet the IMPACT Act's requirement of being 
``standardized and interoperable'' and noted the 4 measures were not 
proposed for the SNF QRP and LTCH QRP.
    Response: The 4 proposed functional outcome measures were developed 
for data collection and reporting for the IRF QRP prior to the 
implementation of the IMPACT Act of 2014. We would like to clarify that 
the quality measure, the Application of Percent of LTCH Patients with 
an Admission and Discharge Functional Assessment and a Care Plan that 
Addresses Function (NQF #2631; endorsed on July 23, 2015), meets the 
requirements of the IMPACT Act. We note that the 4 proposed IRF QRP 
functional outcome quality measures contain a common core subset of 
function items that ultimately will allow tracking of patients' 
functional status across settings, as these items also appear in the 
quality measure, the Application of Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan that 
Addresses Function (NQF #2631; endorsed July 23, 2015), that was 
developed to meet the requirements of the IMPACT Act. For this measure, 
there are a set of core items that are identical across the settings; 
that is, the item definitions in each setting are the same. The 
exchangeability of data rests upon common terminology and standardized 
data. The core items use such standardized definitions, enabling

[[Page 47114]]

interoperability. It should be noted, we are currently developing 
functional outcome measures that use the same standardized functional 
assessment items included in the cross-setting function process measure 
in order to capitalize on the data collected using the currently 
proposed process measure in SNFs and LTCHs, which allow for the 
consideration of limited additional burden. We would also like to note 
that while the IMPACT Act requires that we adopt cross-setting quality 
measures in specified measures domains, it does not prohibit the 
development of future setting-specific quality measures.
    Comment: One commenter noted that according to the proposed rule, 
CMS's rationale for proposing the measures was due to 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, and 
questioned how CMS might use the new measure data to address these 
concerns. The commenter had concerns that the introduction of the new 
items could affect the validity and reliability of all function data 
submitted to CMS.
    Response: We understand the comment suggests the introduction of 
the new items could affect the validity and reliability of all function 
data submitted to CMS. Also, the commenter believes that the use of a 
new standardized functional assessment items for quality reporting 
along with the existing functional assessment data used for payment 
purposes could affect the validity and reliability of all of the data 
submitted. We disagree with the commenter's suggestion that the 
utilization of the new functional assessment items for purposes of 
quality reporting will affect the reliability and validity of either 
the new or the existing data because IRFs have received training on the 
current items, which are currently in use, and CMS would provide 
comprehensive training for the new standardized items. We would like to 
note that the inclusion of discussion of the variation by geographic 
region, insurance type, race and ethnicity described by the commenter 
pertains to one of the concerns underlying the need for standardized 
data, as well the need for function quality measures in IRFs. The 
proposed CARE function items, which have acceptable reliability in both 
the IRF setting and other PAC settings, will be useful for measuring 
the impact of rehabilitation services across settings and underscore 
the value of IRF level services for the patients they appropriately 
treat. The IMPACT Act sets the foundation for future reporting of 
quality across the PAC settings. However, we will further monitor these 
key characteristics as we move to future measure development and 
testing.
    Comment: One commenter is concerned that while the proposed 
functional outcome measures do address functional improvement, they do 
not measure the ability for a patient to return to the community. The 
commenter was concerned that some patients--for example, patients with 
complete cervical spinal cord injury or dense hemiplegia from a 
stroke--may not make significant functional gains, but do return to the 
community. This commenter noted the need to consider psychosocial and 
family financial support in prediction models. This commenter 
encouraged CMS to develop quality measures that relate to patient and 
family engagement as PAC reform implementation evolves.
    Response: We appreciate the commenter's concern about specific 
patients who may not show improvement with functional activities that 
are commonly assessed for most IRF patients. We recognized this issue 
during the development of the CARE tool, and specifically addressed 
this topic in the report entitled, ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set. Volume 1 of 3,'' which 
is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/Downloads/The-Development-and-Testing-of-the-Continuity-Assessment-Record-and-Evaluation-CARE-Item-Set-Final-Report-on-the-Development-of-the-CARE-Item-Set-Volume-1-of-3.pdf. In section 7 of this report, 
entitled ``The CARE Tool: Potential Challenges and Future 
Enhancements,'' we describe the need to have items that focus on 
special populations, and we address the spinal cord injury and stroke 
populations that the commenter noted. As noted in the FY 2016 IRF PPS 
proposed rule (80 FR 23332 at 23399), for the 4 proposed functional 
outcome measures, we took into consideration literature reviews and 
discussions with the TEP members convened by our measure development 
contractor, and we excluded patients with certain conditions due to 
limited expected improvement or unpredictable course. The exclusion 
criteria for the proposed functional outcome measures are patients 
with: Coma or persistent vegetative state on admission; complete 
tetraplegia; locked-in syndrome; severe anoxic brain damage, cerebral 
edema, or compression of brain. Excluding these patients from the 
quality measure calculation means that a facility that admits these 
patients will not have a lower average functional improvement score 
attributed to these patients. We believe this is an important issue, 
because including these patients in the quality measure may create 
access barriers.
    We also appreciate the commenter suggesting that we incorporate 
patient and family engagement into the development of our quality 
measures. The proposed function quality measure, the Application of 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan that Addresses Function (NQF #2631; endorsed 
on July 23, 2015), is a person- and family-centered process measure 
that reports standardized functional assessment data at admission and 
discharge, as well as at least one functional status discharge goal. 
The function goal is established at admission by the IRF clinicians 
with input from the patient and family, demonstrating person and 
family-centered care. As we continue our quality measurement 
development process, we will take into full consideration the person 
and family engagement and process of care perspective.
    Comment: One commenter expressed concerns regarding the sensitivity 
to change of the CARE-based functional outcome measures, in terms of 
their precision and ability to capture functional improvement, and 
asked CMS to refrain from implementing the CARE-based functional 
quality measures.
    Response: The self-care and mobility items in the CARE-based 
functional outcome measures were carefully selected to represent a wide 
range of item difficulty, and cover a wide range of patient 
functioning, from low to high functioning. The self-care measure 
includes 7 items, and the mobility measure includes 15 items. Inclusion 
of this number of items allows the patient the opportunity to 
demonstrate gains in a variety of functional activities and tasks. 
Rehabilitation care typically focuses on several aspects of 
functioning, and patients may be expected to make varying amounts of 
improvement, from minimal to large improvement, across different 
functional tasks. In the event that a patient may not demonstrate gains 
in a specific self-care or mobility item, inclusion of a range of self-
care and mobility items in our measures ensures that patients can 
demonstrate functional gains in other items. In addition to improving 
their ability to capture change, including items that target a

[[Page 47115]]

wide range of patient functioning is a key factor for items to be 
applicable across the wide range of patients seen in IRFs, LTCHs, SNFs 
and HHAs.
    We examined patient-level sensitivity to change of the CARE-based 
self-care and mobility outcome measures using data from the PAC-PRD. 
Table 19 shows the distribution of patient-level unadjusted (observed) 
change in self-care scores in 4,769 patients, and change in mobility 
scores in 4,776 patients. Both self-care and mobility change scores 
demonstrated excellent variability at the patient level, with a wide 
range and close to normal distribution. The mean patient-level 
unadjusted self-care change score was 9.92  6.47, while the 
median self-care change score was 10.00. Patient-level self-care change 
scores ranged from -25.00 to 33.00, with a range of 58.00 and an 
interquartile range of 9.00. The mean patient-level unadjusted mobility 
change score was 21.45  13.69, while the median mobility 
change score was 20.50. Patient-level mobility change scores ranged 
from -20.00 to 66.00, with a range of 86.00 and an interquartile range 
of 20.00.

    Table 19--Distribution of Patient-Level Unadjusted (Observed) Change in Self-Care and Mobility Scores for
                                         Medical Rehabilitation Patients
----------------------------------------------------------------------------------------------------------------
   Patient-level unadjusted (observed) change
                     score                           Number         Mean  (SD)     Range  (IQR)       Median
----------------------------------------------------------------------------------------------------------------
Change in Self-Care............................           4,769      9.92 (6.47)          58 (9)           10.00
Change in Mobility.............................           4,776    21.45 (13.69)         86 (20)           20.50
----------------------------------------------------------------------------------------------------------------
N = Number of patients; SD = standard deviation; IQR = interquartile range.

    In addition to patient-level sensitivity to change, facility-level 
variability is a key psychometric characteristic desired for quality 
measures to ensure that the measures can distinguished among facilities 
with varying performance on the measure. The CARE-based risk-adjusted 
self-care and mobility outcome measures demonstrate very good 
variability at the facility-level. The mean risk adjusted facility-
level change in self-care scores have a mean of 10.02  
1.72, a median of 9.82, a range of 6.53 to 14.78, and an interquartile 
range of 2.07. The mean risk adjusted facility-level change in mobility 
scores have a mean of 20.90  4.67, a median of 21.34, range 
of 9.82 to 31.88, and an interquartile range of 6.03 (Table 20). 
Therefore, we believe that the items developed, tested, and chosen to 
develop the proposed functional quality measures are able to assess 
appropriately functional change, allowing CMS to collect and evaluate 
functional improvement for patients within and across settings. Thus, 
testing of these items demonstrated excellent variability at the 
patient level and very good variability at the facility level, and we 
are confident that they cover a wide range of item difficulty and a 
wide range of patient functioning.

  Table 20--Distribution of Facility-Level Risk Adjusted Change in Mobility Scores for Inpatient Rehabilitation
                                                   Facilities
----------------------------------------------------------------------------------------------------------------
           Risk-adjusted facility-level change score                    N           Mean  (SD)        Median
----------------------------------------------------------------------------------------------------------------
Change in Self-Care............................................              38     10.02 (1.72)            9.82
Change in Mobility.............................................              38     20.90 (4.67)           21.34
----------------------------------------------------------------------------------------------------------------
N = Number of facilities; SD = standard deviation;

    Comment: One commenter raised concerns that level 06 on the CARE 
function item rating scale groups patients who are independent with use 
of an assistive device, and those who are independent without a device. 
The commenters also suggest that a patient, who is independent with use 
of an assistive device, thus receiving a score of 06, may fail to 
receive home health services because the clinician sees that the 
patient has the maximum functional score. The commenter considers the 
level 06 overly broad. The commenter considered these issues safety 
concerns and indicated that they pilot tested the CARE function items 
in the proposed IRF-PAI. The commenter expressed that patients who 
otherwise demonstrated functional progress on the existing numerical 
functional measures on the current IRF-PAI, showed no progress in their 
CARE functional score between admission and discharge.
    Response: Rehabilitation care typically focuses on improvement in 
several aspects of functioning, and patients may be expected to make 
varying amounts of improvement across different functional activities. 
In the event that a patient may not demonstrate gains in one self-care 
or mobility item, an IRF patient will often improve in another 
activity. The inclusion of a 7 self-care and 15 mobility items in the 
proposed quality measures ensures that most patients can demonstrate 
functional gains one or more items.
    The proposed quality measure, IRF Functional Outcome Measure: 
Change in Self-Care Score for Medical Rehabilitation Patients (NQF 
#2633; under review), includes an `upper body dressing' item to address 
self-care. A patient who makes gains in upper body bathing is also very 
likely to make gains in upper body dressing; thus, this patient would 
demonstrate improvement in upper body dressing score. We believe that 
such a patient is also likely to make gains in other self-care items 
primarily requiring upper extremity use, such as eating, and oral 
hygiene. In addition, for the proposed quality measure, IRF Functional 
Outcome Measure: Change in Mobility Score for Medical Rehabilitation 
Patients (NQF #2634; under review), we have included items related to 
ambulation and car transfer. We developed the CARE function items based 
on the approach of the World Health Organization's (WHO) International 
Classification of Functioning, Disability, and Health (ICF) that 
recognizes functional independence and ability regardless of the use of 
assistive devices.\62\ The CARE

[[Page 47116]]

items measure a person's ability to perform functional activities, with 
or without assistive devices. Use of assistive devices remains an 
important part of the patient's functional assessment.
---------------------------------------------------------------------------

    \62\ World Health Organization. International Classification of 
Functioning, Disability and Health: ICF. Geneva, Switzerland: World 
Health Organization; 2001. Retrieved from http://www.who.int/classifications/icf/icf_more/en/.
---------------------------------------------------------------------------

    The CARE Tool used during the PAC-PRD included a list of devices 
used by a patient in order to document the type of device that was 
used. The decision to include devices on the CARE Tool was based on 
input from clinicians who wanted to document that a patient's status 
improved as they transition from one type of device to another. For 
example, a patient may transition from walking with a walker to walking 
with the straight cane. This progress is not currently captured on the 
IRF-PAI, as the FIM[supreg] instrument does not include information 
about the type of device used. Even if the rating scale integrates use 
of an assistive device, the type of device used by the patient is not 
apparent.
    Patients can use an assistive devices regardless of their level 
performance, from 01--Dependent through 06--Independent. For example, a 
patient who uses a wheelchair may be scored level 01--Dependent through 
06--Independent. We do not believe it is important to only 
differentiate between independent function with a device and 
independent function without a device. Rather, to ensure patient 
safety, documentation of assistive device use for every level of 
patient performance is critical. Separate documentation of a patient's 
functional ability and need for an assistive device, together provide 
clinicians with the information needed regarding the patient's 
functional status. In the proposed rule, we proposed including 
wheelchair as a device as part of the admission and discharge 
assessment. We are very sensitive to the issue of burden associated 
with data collection and proposed only the minimal number of items 
needed to calculate the proposed quality measures. We would like to 
note that devices used prior to the current illness, injury or 
exacerbation are included on the proposed IRF-PAI version 1.4, because 
they are important factors associated with functional outcomes and are 
risk adjustors for our functional outcome measures.
    We would also like to state that individual CARE function items are 
not intended to be stand-alone indicators of a patient's need for 
services, such as home health services, after discharge from the IRF. 
Determination of need for home health services should be based on 
comprehensive patient assessment; not on a patient's ability to perform 
a single activity.
    Regarding the CARE function item rating scale, our decision to use 
a 6-level rating scale was based on input from the clinical communities 
and research examining the relationship between minutes of assistance 
and functional assessment scores. Hamilton et al.\63\ found that the 
relationship between function scores and minutes of assistance per day 
was curvilinear, and that persons with high function scores frequently 
did not require any daily assistance. During PAC-PRD on-site training, 
when we explained differences between the existing and CARE rating 
scales, we received positive feedback about the CARE rating scale. We 
also conducted exit interviews with participating sites. The feedback 
was incorporated into the items that we have proposed for the function 
measure. Based on our experiences, we believe that the CARE items and 
associated rating scale represent a simple, but comprehensive method of 
documenting functional limitations at admission and discharge.
---------------------------------------------------------------------------

    \63\ Hamilton BB, Deutsch A, Russell C, Fiedler RC, Granger CV 
Relation of disability costs to function: spinal cord injury Arch. 
Phys. Med. Rehabil. 80(4):385-391, Apr. 1999.
---------------------------------------------------------------------------

    Comment: Several commenters were concerned that the four (4) 
functional outcome measures are not NQF-endorsed. Some of these 
commenters suggested that CMS delay implementation of these quality 
measures until they are NQF-endorsed for all PAC settings.
    Response: We appreciate the commenters' feedback, and we agree that 
the NQF endorsement process is an important part of measure 
development. As previously noted, two of the proposed functional 
outcome quality measures are undergoing review by NQF at this time, and 
two of the measures were endorsed on July 23, 2015. As previously 
discussed, where such measures do not exist for the IRF setting, we may 
adopt measures that are not NQF-endorsed under the Secretary's 
exception authority with respect to the IMPACT Act in section 
1899B(e)(2)(B) and with respect to the IRF QRP in section 
1886(j)(7)(D)(ii) of the Act. It should be noted that for all quality 
measures, we provided a through and rigorous process of construct 
testing and measure selection, guided by the technical expert panels, 
public comments from stakeholders, and recommendations by the MAP.
    Comment: One commenter expressed concern about the reliability and 
validity of the measures based on their belief that the PAC PRD was a 
cross-sectional study. They noted that the study data is now more than 
5 years old, and that IRFs now admit an increasing population with 
neurological conditions. The commenter also expressed concern that the 
demonstration project did not follow patients across venues of care, 
limiting applicability across care settings.
    Response: We would like to clarify that the PAC-PRD was a 
prospective cohort study that collected data at the time of admission 
and discharge form the PAC settings. Coupled with PAC settings, the 
PAC-PRD also collected data in acute care hospitals. The study also 
linked the PAC assessment data with hospital claims, and thus did 
follow patients across care settings. The commenter is correct that the 
data were collected more than 5 years ago. For the data, we would like 
to note that when we adopt quality measures for its QRPs, we also 
implement a process to evaluate quality measures each year by examining 
data submitted for the measure. In addition, there is a process in 
place for endorsement maintenance that also involves systematic 
analyses of measure data, literature reviews, and stakeholder input. 
Finally, the proposed function meaures that use CARE data contain a 
core set of function items selected for cross-setting use and chosen 
for their applicability across all post-acute settings, standardized to 
one another by item and through the use of the standardized 6-level 
rating scale. Items, while tested within each setting, were also tested 
among settings to develop a core set of items that could be used and 
re-used for many purposes across settings. The core set of items were 
developed with TEP input.
    Comment: One commenter asked if CMS intends to ultimately use the 
CARE data for payment purposes, such as performance-based payment, and 
expressed concerns about potential effects on beneficiary access to IRF 
services of doing so.
    Response: As we did not propose to use the CARE data items for any 
payment purposes, this comment is outside the scope of the proposed 
rule. However, we will note the commenter's concerns and consider them 
carefully should we ever consider extending use of the CARE data items 
to payment.
    Comment: One commenter encouraged CMS to continue ongoing 
stakeholder engagement as the function quality measures evolve and as 
new function measures, such as gait speed, are considered.

[[Page 47117]]

    Response: We will consider the input for measure concepts as we 
move through the development of current and future measures for the IRF 
QRP. TEPs are engaged to provide feedback and input on measure 
development.
    Comment: One commenter supported the IRF Functional Outcome 
Measure: Change in Self-Care Score for Medical Rehabilitation Patients 
(NQF #2633; under review), noting that the measure considers essential 
information such as prior functioning.
    Response: CMS appreciate the commenter for their comment and 
support of the proposed quality measure, Change in Self-Care Score for 
Medical Rehabilitation Patients (NQF #2633; under review). We 
understand the commenter's comment to refer to the importance of 
setting function goals and consideration of prior functioning when 
determining the expected functional improvement. IRF staff can report 
goals for each self-care and mobility item, although that is not 
required for this measure. For this measure and all self-care and 
mobility outcome measures, we do apply a risk adjustment for prior 
functioning. We appreciate the comment's support of including prior 
functioning as risk adjustors.
    Final Decision: Having carefully considered the comments we 
received on the IRF Functional Outcome Measure: Change in Self-care 
Score for Medical Rehabilitation Patients (NQF #2633, under review), we 
are finalizing the adoption of this measure for use in the IRF QRP as 
proposed.
4. IRF Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634; Under Review)
    The fourth quality measure we proposed for the FY 2018 payment 
determination and subsequent years is an outcome quality measure 
entitled IRF Functional Outcome Measure: Change in Mobility Score for 
Medical Rehabilitation Patients (NQF #2634; under review). This quality 
measure estimates the risk-adjusted mean change in mobility score 
between admission and discharge among IRF patients. This measure was 
proposed under the authority of section 1886(j)(7)(C) of the Act, and 
is under review at NQF. A summary of this quality measure can be 
accessed on the NQF Web site at http://www.qualityforum.org/qps/2634. 
More detailed specifications for this quality measure can be accessed 
at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2634.
    This outcome measure requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized clinical assessment items, or data elements that assess 
specific functional mobility activities (for example, toilet transfer 
and walking). The mobility function items are coded using a 6-level 
rating scale that indicates the patient's level of independence with 
the activity; higher scores indicate more independence. In addition, 
this measure requires the collection of risk factors data, such as 
patient functioning prior to the current reason for admission, history 
of falls, bladder continence, communication ability and cognitive 
function, at the time of admission.
    As noted in the previous section, IRFs provide intensive 
rehabilitation services to patients with a goal of improving patient 
functioning.
    We released draft specifications for the function quality measures, 
and requested public comment between February 21 and March 14, 2014. We 
received 40 comments from stakeholders and have updated the measures 
specifications based on these comments and suggestions. The quality 
measure was developed by us and was submitted for endorsement review to 
NQF in November 2014. A summary of the quality measure can be accessed 
on the NQF Web site at http://www.qualityforum.org/qps/2634. More 
detailed specifications for this quality measure can be accessed at 
http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2634.
    Based on the evidence previously discussed, we proposed to adopt 
for the IRF QRP for the FY 2018 payment determination and subsequent 
years the quality measure entitled IRF Functional Outcome Measure: 
Change in Mobility Score for Medical Rehabilitation Patients (NQF 
#2634; under review). As described in more detail in section IX.I.2. of 
this final rule, the first data collection period is 3 months (October 
1, 2016 to December 31, 2016), and the subsequent data collection 
periods are 12-months in length and follow the calendar year (that is, 
January 1 to December 31).
    The list of measures under consideration for the IRF QRP, including 
this quality measure, was released to the public on December 1, 2014, 
and early comments were submitted between December 1 and December 5, 
2014. The MAP met on December 9 2014, sought public comment on this 
measure from December 23, 2014 to January 13, 2015, and met on January 
26, 2015. They provided input to us as required under section 
1890A(a)(3) of the Act in the final report, MAP 2015 Considerations for 
Selection of Measures for Federal Programs: Post-Acute/Long-Term Care, 
which is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP conditionally supported 
this measure. Refer to section IX.B. of this final rule for more 
information on the MAP.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed quality measures focused on assessment of 
functional status for patients in the IRF setting. There are related 
measures--for example, Improvement in ambulation/locomotion (NQF 
#0167), Improvement in bed transferring (NQF #0175), Functional status 
change for patients with Knee impairments (NQF #0422), Functional 
status change for patients with Hip impairments (NQF #0423)--but they 
are not endorsed for IRFs, and several focus on 1 condition (for 
example, knee or hip impairment). We are not aware of any other quality 
measures for functional assessment that have been endorsed or adopted 
by another consensus organization for the IRF setting. Therefore, we 
proposed to adopt this measure, IRF Functional Outcome Measure: Change 
in Mobility Score for Medical Rehabilitation Patients (NQF #2634; under 
review), for use in the IRF QRP for the FY 2018 payment determination 
and subsequent years under the Secretary's authority to select non-NQF-
endorsed measures.
    The specifications and data elements for the quality measure are 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We proposed that data for the quality measure be collected using 
the IRF-PAI, with submission through the QIES ASAP system. For more 
information on IRF QRP reporting through the QIES ASAP system, refer to 
the CMS Web site at http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html and 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html.
    We sought public comments on our proposal to adopt the quality 
measure entitled IRF Functional Outcome Measure: Change in Mobility 
Score for Medical Rehabilitation Patients (NQF #2634; under review) for 
the IRF QRP, with data collection starting on October 1, 2016, for the 
FY 2018 payment determination and subsequent years. Refer to section 
IX.I.2. of this final rule for more information on the data

[[Page 47118]]

collection and submission timeline for this quality measure. The 
responses to public comments on this measure are discussed in this 
section of the final rule. We note that we received many comments about 
the standardized (that is, CARE) items that pertain to several of the 5 
proposed function quality measures. These comments are provided in 
section IX.G.2 of this final rule as part of review of comments about 
the measure, an Application Percent of LTCH Patients with an Admission 
and Discharge Functional Assessment and a Care Plan that Addresses 
Function (NQF #2631; endorsed on July 23, 2015). We also received many 
comments pertaining to several of the 4 function outcomes measures, and 
we provide these comments in section IX.G.3 of this final rule as part 
of our review of comments about the measure, IRF Functional Outcome 
Measure: Change in Self-care Score for Medical Rehabilitation Patients 
(NQF #2633; under review). Comments that uniquely apply to the measure, 
IRF Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634; under review), are provided below.
    Comment: One commenter supported the concept of change in mobility 
and noted that measuring mobility is important in determining the 
patient's ability to be independent, and that access to occupational 
and physical therapy services is necessary to improve patient 
functioning.
    Response: We appreciate the commenter's support of this quality 
measure and agree that access to occupational and physical therapy 
services to assist patients to improve functioning is important. In 
addition, we note that it is important for the IRF clinician teams to 
work collaboratively to help support established therapy goals (for 
example, by mobilizing patients when occupational and physical therapy 
services are not available).
    Final Decision: Having carefully considered the comments we 
received on the IRF Functional Outcome Measure: Change in Mobility 
Score for Medical Rehabilitation Patients (NQF #2634; under review), we 
are finalizing the adoption of this measure for use in the IRF QRP as 
proposed.
5. IRF Functional Outcome Measure: Discharge Self-Care Score for 
Medical Rehabilitation Patients (NQF #2635; Endorsed on July 23, 2015)
    The fifth quality measure we proposed for the FY 2018 payment 
determination and subsequent years is an outcome quality measure 
entitled: IRF Functional Outcome Measure: Discharge Self-Care Score for 
Medical Rehabilitation Patients (NQF #2635; endorsed on July 23, 2015). 
This quality measure estimates the percentage of IRF patients who meet 
or exceed an expected discharge self-care score. This measure was 
proposed under the authority of section 1886(j)(7)(C) of the Act and 
was endorsed by NQF on July 23, 2015.
    This outcome measure requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized clinical assessment items, or data elements that assess 
specific functional mobility activities (for example, eating, oral 
hygiene, and dressing). The self-care function items are coded using a 
6-level rating scale that indicates the patient's level of independence 
with the activity; higher scores indicate more independence. In 
addition, this measure requires the collection of risk factors data, 
such as patient functioning prior to the current reason for admission, 
bladder continence, communication ability and cognitive function, at 
the time of admission. The data collection required for this measure is 
the same as the data required for the measure: IRF Functional Outcome 
Measure: Change in Self-Care Score for Medical Rehabilitation Patients 
(NQF #2633; under review).
    As noted in the previous section, IRFs provide intensive 
rehabilitation services to patients with a goal of improving patient 
functioning.
    We released draft specifications for the function quality measures, 
and requested public comment between February 21 and March 14, 2014. We 
received 40 comments from stakeholders and have updated all 4 IRF 
quality measures specifications based on these comments and 
suggestions. A summary of this quality measure can be accessed on the 
NQF Web site at http://www.qualityforum.org/qps/2634. More detailed 
specifications for this quality measure can be accessed at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2634.
    Based on the evidence previously discussed, we proposed to adopt 
for the IRF QRP for the FY 2018 payment determination and subsequent 
years the quality measure entitled IRF Functional Outcome Measure: 
Discharge Self-Care Score for Medical Rehabilitation Patients (NQF 
#2635; endorsed on July 23, 2015).
    The list of measures under consideration for the IRF QRP, including 
this quality measure, was released to the public on December 1, 2014, 
and early comments were submitted between December 1 and December 5, 
2014. The MAP met on December 9, 2014, sought public comment on this 
measure from December 23, 2014 to January 13, 2015, and met on January 
26, 2015. They provided input to us as required under section 
1890A(a)(3) of the Act in the final report, MAP 2015 Considerations for 
Selection of Measures for Federal Programs: Post-Acute/Long-Term Care, 
which is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP conditionally supported 
this measure. Refer to section IX.B. of this final rule for more 
information on the MAP.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed quality measures focused on assessment of 
functional status for patients in the IRF setting. There are related 
measures, but they are not endorsed for IRFs and several focus on one 
condition (for example, knee or shoulder impairment). We are not aware 
of any other quality measures for functional outcomes that have been 
endorsed or adopted by another consensus organization for the IRF 
setting. Therefore, we proposed to adopt this measure, IRF Functional 
Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation 
Patients (NQF #2635; endorsed on July 23, 2015), for use in the IRF QRP 
for the FY 2018 payment determination and subsequent years under the 
Secretary's authority to select non-NQF-endorsed measures. As described 
in more detail in section IX.I.2 of this final rule, the first data 
collection period is 3 months (October 1, 2016 to December 31, 2016), 
and the subsequent data collection periods are 12-months in length and 
follow the calendar year (that is, January 1 to December 31).
    The specifications and data elements for the quality measure are 
available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We proposed that data for the quality measure be collected using 
the IRF-PAI, with submission through the QIES ASAP system. For more 
information on IRF QRP reporting through the QIES ASAP system, refer to 
the CMS Web site at http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html and 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html

[[Page 47119]]

    We sought public comments on our proposal to adopt the quality 
measure entitled IRF Functional Outcome Measure: Discharge Self-Care 
Score for Medical Rehabilitation Patients (NQF #2635; endorsed on July 
23, 2015) for the IRF QRP, with data collection starting on October 1, 
2016, for the FY 2018 payment determination and subsequent years. For 
more information on the proposed data collection and submission 
timeline for this proposed quality measure, refer to section IX.I.2, of 
this final rule. The responses to public comments on this measure are 
discussed below in this section of the final rule. We note that we 
received many comments about the standardized (that is, CARE) items 
that pertain to several of the 5 proposed function quality measures. 
These comments are provided in section IX.G.2 of this final rule as 
part of review of comments about the measure, an Application Percent of 
LTCH Patients with an Admission and Discharge Functional Assessment and 
a Care Plan that Addresses Function (NQF #2631; endorsed on July 23, 
2015). We also received many comments pertaining to several of the 4 
function outcomes measures, and we provide these comments in section 
IX.G.3 of this final rule as part of our review of comments about the 
measure, IRF Functional Outcome Measure: Change in Self-care Score for 
Medical Rehabilitation Patients (NQF #2633; under review). Comments 
that specifically apply to the measure, IRF Functional Outcome Measure: 
Discharge Self-Care Score for Medical Rehabilitation Patients (NQF 
#2635; endorsed on July 23, 2015), are provided below.
    Comment: One commenter noted that this measure is important for 
discharge planning that will enable the ability to achieve the best 
outcomes and avoid readmissions.
    Response: We appreciate the commenter's support of this quality 
measure. We believe that examining patient functioning at discharge 
will help IRFs focus on optimizing patients' functioning and discharge 
planning and supporting patients' transition from the IRF to home or 
another setting.
    Final Decision: Having carefully considered the comments that we 
received on the IRF Functional Outcome Measure: Discharge Self-Care 
Score for Medical Rehabilitation Patients (NQF #2635; endorsed on July 
23, 2015), we are finalizing the adoption of this measure for use in 
the IRF QRP as proposed.
6. IRF Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; Endorsed on July 23, 2015)
    The sixth quality measure we proposed for the FY 2016 
implementation and the FY 2018 payment determination and subsequent 
years is an outcome quality measure entitled: IRF Functional Outcome 
Measure: Discharge Mobility Score for Medical Rehabilitation Patients 
(NQF #2636; endorsed on July 23, 2015). This quality measure estimates 
the percentage of IRF patients who meet or exceed an expected discharge 
mobility score. This measure was proposed under the authority of 
section 1886(j)(7)(C) of the Act, was endorsed by NQF on July 23, 2015. 
A summary of this quality measure can be accessed on the NQF Web site 
at http://www.qualityforum.org/qps/2636. More detailed specifications 
for this quality measure can be accessed at http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2636.
    This outcome measure requires the collection of admission and 
discharge functional status data by trained clinicians using 
standardized clinical assessment items, or data elements that assess 
specific functional mobility activities (for example, bed mobility and 
walking). The mobility function items are coded using a 6-level rating 
scale that indicates the patient's level of independence with the 
activity; higher scores indicate more independence. In addition, this 
measure requires the collection of risk factors data, such as patient 
functioning prior to the current reason for admission, history of 
falls, bladder continence, communication ability and cognitive 
function, at the time of admission. Note that the data collection 
required for this measure is the same as the data required for the 
measure: IRF Functional Outcome Measure: Discharge Mobility Score for 
Medical Rehabilitation Patients (NQF #2634; endorsed on July 23, 2015).
    As noted in the previous section, IRFs provide intensive 
rehabilitation services to patients with a goal of improving patient 
functioning.
    We released draft specifications for the function quality measures, 
and requested public comment between February 21 and March 14, 2014. We 
received 40 comments from stakeholders and have updated all 4 IRF 
outcome quality measures specifications based on these comments and 
suggestions.
    Based on the evidence discussed earlier, we proposed to adopt for 
the IRF QRP for the FY 2018 payment determination and subsequent years 
the quality measure entitled IRF Functional Outcome Measure: Discharge 
Mobility Score for Medical Rehabilitation Patients (NQF #2636; endorsed 
on July 23, 2015). As described in more detail in section IX.I.2. of 
this final rule, the first data collection period is 3 months (October 
1, 2016 to December 31, 2016), and the subsequent data collection 
periods are 12-months in length and follow the calendar year (that is, 
January 1 to December 31).
    The list of measures under consideration for the IRF QRP, including 
this quality measure, was released to the public on December 1, 2014, 
and early comments were submitted between December 1 and December 5, 
2014. The MAP met on December 9, 2014, sought public comment on this 
measure from December 23, 2014 to January 13, 2015, and met on January 
26, 2015. They provided input to us as required under section 
1890A(a)(3) of the Act in the final report, MAP 2015 Considerations for 
Selection of Measures for Federal Programs: Post-Acute/Long-Term Care, 
which is available at http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP conditionally supported 
this measure. Refer to section IX.B. of this final rule for more 
information on the MAP.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed quality measures focused on assessment of 
functional status for patients in the IRF setting. There are related 
measures, but they are not endorsed for IRFs and several focus on one 
condition (for example, knee or shoulder impairment). We are not aware 
of any other quality measures for functional outcomes that have been 
endorsed or adopted by another consensus organization for the IRF 
setting. Therefore, we proposed to adopt this measure, IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients (NQF #2636; endorsed on July 23, 2015), for use in the IRF QRP 
for the FY 2018 payment determination and subsequent years.
    We proposed that data for this quality measure be collected using 
the IRF-PAI, with submission through the QIES ASAP system. For more 
information on IRF QRP reporting through the QIES ASAP system, refer to 
the CMS Web site at http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/index.html and 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-

[[Page 47120]]

Payment/InpatientRehabFacPPS/IRFPAI.html.
    We sought public comments on the quality measure entitled IRF 
Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; endorsed on July 23, 2015) for the 
IRF QRP, with data collection starting on October 1, 2016, for the FY 
2018 payment determination and subsequent years. Refer to section IX.I. 
of this final rule for more information on the proposed data collection 
and submission timeline for this quality measure. The responses to 
public comments on this measure are discussed below in this section of 
the final rule. We note that we received many comments about the 
standardized (that is, CARE) items that pertain to several of the 5 
proposed function quality measures. These comments are provided in 
section IX.G.2 of this final rule as part of review of comments about 
the measure, an Application Percent of LTCH Patients with an Admission 
and Discharge Functional Assessment and a Care Plan that Addresses 
Function (NQF #2631; endorsed on July 23, 2015). We also received many 
comments pertaining to several of the 4 function outcomes measures, and 
we provide these comments in section IX G.3 of this final rule as part 
of our review of comments about the measure, IRF Functional Outcome 
Measure: Change in Self-care Score for Medical Rehabilitation Patients 
(NQF #2633; under review). Comments that specifically apply to the 
measure, IRF Functional Outcome Measure: Discharge Mobility Score for 
Medical Rehabilitation Patients (NQF #2636; endorsed on July 23, 2015).
    Comment: One commenter noted that the measure IRF Functional 
Outcome Measure: Discharge Mobility Score for Medical Rehabilitation 
Patients (NQF #2636; endorsed on July 23, 2015) is important for 
discharge planning so that an individual is able to achieve the best 
outcomes.
    Response: We appreciate the commenter's support of this quality 
measure. We agree that patient functioning is critical information to 
consider as part of discharge planning. Examining patient functioning 
at discharge will help IRFs focus on optimizing patients' functioning 
and supporting patients' transition from the IRF to home or another 
setting.
    Final Decision: Having carefully considered the comments regarding 
the CARE items in Section IX.G.2. of this final rule and the comments 
about the IRF functional outcome measures in section IX.G.3. of this 
final rule and the comment that we received about the measure, IRF 
Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; endorsed on July 23, 2015), we are 
finalizing the adoption of this measure for use in the IRF QRP as 
proposed.

 Table 21--Summary of IRF QRP Measures Affecting the FY 2017 and FY 2018
  Adjustments to the IRF PPS Annual Increase Factor and Subsequent Year
                            Increase Factors
------------------------------------------------------------------------
 
---------------------------------------------------------------------------
Continued IRF QRP Measures Affecting the FY 2017 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.\1\
     NQF #0431: Influenza Vaccination Coverage among Healthcare
     Personnel.\1\
     NQF #0680: Percent of Residents or Patients Who Were
     Assessed and Appropriately Given the Seasonal Influenza Vaccine
     (Short-Stay).
     NQF #1716: National Healthcare Safety Network (NHSN)
     Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant
     Staphylococcus aureus (MRSA) Bacteremia Outcome Measure.\1\
     NQF #1717: National Healthcare Safety Network (NHSN)
     Facility-Wide Inpatient Hospital-Onset Clostridium difficile
     Infection (CDI) Outcome Measure.\1\
     NQF #2502: All-Cause Unplanned Readmission Measure for 30
     Days Post-Discharge from IRFs.4 2
     NQF #0678: Percent of Residents or Patients with Pressure
     Ulcers That Are New or Worsened (Short-Stay).\4\
Newly adopted IRF QRP Measures Affecting FY 2018 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 IRFs.4 2
     NQF #0678: Percent of Residents or Patients with Pressure
     Ulcers That Are New or Worsened (Short-Stay).4 3
     NQF #0674: An application of Percent of Residents
     Experiencing One or More Falls with Major Injury (Long-Stay).5 3
     NQF #2631; endorsed on July 23, 2015: An application of
     Percent of LTCH Patients with a an Admission and Discharge
     Functional Assessment and a Care Plan that Addresses Function.5 3
     NQF #2633; under review: IRF Functional Outcome Measure:
     Change in Self-Care Score for Medical Rehabilitation Patients.6 3
     NQF #2634; under review: IRF Functional Outcome Measure:
     Change in Mobility Score for Medical Rehabilitation Patients.6 3
     NQF #2635; endorsed on July 23, 2015 IRF Functional Outcome
     Measure: Discharge Self-Care Score for Medical Rehabilitation
     Patients.\3\
     NQF #2636; endorsed on July 23, 2015: IRF Functional
     Outcome Measure: Discharge Mobility Score for Medical
     Rehabilitation Patients.\3\
        1. Using CDC/NHSN.
        2. Medicare Fee-for-Service claims data.
        3. New or modified IRF-PAI items.
        4. Previously adopted quality measure that was re-adopted for
         FY2018 and subsequent years.
        5. Not NQF-endorsed for the IRF setting.
        6. Not NQF-endorsed, CMS submitted the measure for NQF review in
         November 2014.
------------------------------------------------------------------------

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

    We sought public comments on relevance and applicability of each of 
the quality measures and quality measure concepts listed in Table 22 
for future years in the IRF QRP. Specifically, we sought public 
comments regarding the clinical importance, the feasibility of data 
collection and implementation to inform and improve quality of care 
delivered to IRF patients. The responses to public comments on future 
measures are discussed below in this section of the final rule.

[[Page 47121]]



 Table 22--Future Measures and Measure Concepts Under Consideration for
                    the IRF Quality Reporting Program
------------------------------------------------------------------------
 
---------------------------------------------------------------------------
National Quality Strategy Priority: Patient Safety:
    Venous Thromboembolism Prophylaxis.
    Medication Reconciliation.*
National Quality Strategy Priority: Effective Communication and
 Coordination of Care:
    Transfer of health information and care preferences when an
     individual transitions.*
    All-Condition Risk-Adjusted Potentially Preventable Hospital
     Readmission Rates.*
National Quality Strategy Priority: Patient- and Caregiver-Centered
 Care:
    Discharge to Community.*
    Patient Experience of Care.
    Percent of Patients with Moderate to Severe Pain.
National Quality Strategy Priority: Affordable Care:
    Medicare Spending per Beneficiary.*
------------------------------------------------------------------------
* Indicates that this is a cross-setting measure domain listed in the
  IMPACT Act of 2014.

    Comment: We received several comments about the relevance and 
applicability of each of the quality measures and quality measure 
concepts listed for future years in the IRF QRP. For example, several 
supported measures related to skin integrity, medication 
reconciliation, major falls, transfer of health information, functional 
improvement and discharge to home, noting that these are already areas 
of ongoing focus in the IRF industry. Some commenters noted that while 
they support measures related to functional improvement and discharge 
to home, they believed they were already reporting these outcomes using 
the FIM[supreg] instrument on the IRF-PAI.
    Response: We will take these comments into consideration to inform 
our ongoing measure development efforts for this measure and our 
ongoing consideration of the potential to adopt these measures in the 
IRF QRP through future rulemaking. We are aware of the perception of 
duplicative reporting with regard to the data items that inform the 
functional status measures that we are finalizing in this final rule 
and the current and continued use of the FIM[supreg] instrument, which 
is used for payment purposes. For an expanded discussion on this topic, 
we refer you to the comments and responses under section IX.G.2 of this 
final rule.
    Comment: One commenter recommends that CMS adopt a more direct 
approach for engaging patients to ensure the transfer of health 
information and care preferences of a patient is accurately 
communicated.
    Response: We thank the commenter for their comment. We are 
dedicated to the consideration and inclusion of patient preferences as 
they relate to the care that patients receive. It is our contractor's 
policy to include patients as part of the TEPs that it convenes 
throughout all stages of measure development.
    Comment: Some commenters noted suggestions related to specific 
quality measures included in our list of potential future measures. One 
commenter noted that Discharge to Community should be amended to 
include Long-Term Care/Intermediate Care Facilities as a community 
discharge if this is the level of modified independence the patient 
chooses as a best option for themselves. One commenter noted that 
Patient Experience of Care should be measured utilizing a tool that 
evaluated the patient's experience as an interdisciplinary event, but 
cautioned CMS against survey fatigue. One commenter recommended that 
SNFs and LTCHs also be required to report the same FIM[supreg] change, 
length of stay efficiency, and successful discharge to community, 
noting that this would give CMS beneficiaries a better picture of the 
quality of different post-acute care settings. Another commenter stated 
Medication Reconciliation depends heavily on the information provided 
by the transferring facility and that approximately 95 percent of all 
patients admitted to an IRF come directly from an acute care hospital, 
noting that IRFs are typically the recipient of information and have 
far less control of the accuracy and completeness of the data received.
    Response: We will take these recommendations into account 
throughout the measure development process.
    Comment: One commenter stated that they did not support the 
addition of further process measures to the IRF QRP, and noted that 
outcome measures are more meaningful to patients and healthcare 
providers. A few commenters recommended that CMS postpone any 
additional measures outside the requirements of the IMPACT Act, due to 
the increased burden on providers.
    Response: While we agree that outcome measures are important and 
meaningful, and we intend to implement outcomes based measures 
throughout the life of the IRF QRP, we also believe that process 
measures are important. We believe that by monitoring facility and 
provider activities by using process measures initially will allow for 
the development of more robust outcome-based quality measures. While 
some commenters feel that we should suspend quality measures not 
related to the IMPACT Act, we would also like to note that while the 
IMPACT Act does require that we adopt specific cross-setting quality 
measures, it does not prohibit the development of future setting-
specific quality measures. We also believe that while cross-setting 
metrics are important for comparison purposes, setting-specific 
measures are equally important, as the patient populations for each PAC 
setting are unique, and thus have unique considerations for patient 
care and quality.

I. Form, Manner, and Timing of Quality Data Submission for the FY 2018 
Payment Determination and Subsequent Years

1. Background
    Section 1886(j)(7)(C) of the Act requires that, for the FY 2014 
payment determination and subsequent years, each IRF submit to the 
Secretary data on quality measures specified by the Secretary. In 
addition, section 1886(j)(7)(F) of the Act, as added by the IMPACT Act, 
requires that, for the FY beginning on the specified application date, 
as defined in section 1899B(a)(2)(E) of the Act, and each subsequent 
year, each IRF submit to the Secretary data on measures specified by 
the Secretary under section 1899B of the Act. The data required under 
section 1886(j)(7)(C) and (F) must be submitted in a form and manner, 
and at a time, specified by the Secretary. As required by section 
1886(j)(7)(A)(i) of the Act, for any IRF that does not submit data in

[[Page 47122]]

accordance with section 1886(j)(7)(C) and (F) of the Act with respect 
to a given fiscal year, the annual increase factor for payments for 
discharges occurring during the fiscal year must be reduced by 2 
percentage points.
2. Timeline for Data Submission Under the IRF QRP for the FY 2018 and 
FY 2019 Payment Determinations
    We proposed the following data submission timeline for the quality 
measures for the FY 2018 adjustments to the IRF PPS annual increase 
factor. We proposed that IRFs would be required to submit IRF-PAI data 
on discharges occurring between October 1, 2016 and December 31, 2016 
(first quarter), for the FY 2018 adjustments to the IRF PPS annual 
increase factor. For FY 2019, we proposed that IRFs would be required 
to submit data on discharges occurring between January 1, 2017 and 
December 31, 2017 (1 year). We proposed this time frame because we 
believe this will provide sufficient time for IRFs, and we can put 
processes and procedures in place to meet the additional quality 
reporting requirements. Given that these measures are collected via the 
IRF-PAI, and IRFs are already familiar with the QIES ASAP system, we 
believe this proposed timeframe would allow IRFs ample opportunity to 
begin reporting the newly proposed measures, should they be finalized. 
We also proposed that the quarterly data submission deadlines (for 
submitting IRF-PAI corrections) for the FY 2018 and FY 2019 adjustments 
to the IRF PPS annual increase factor would occur approximately 135 
days after the end of the quarter, as outlined in the Table 23 (FY 
2018) and Table 24 (FY 2019). 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.
    We sought public comment on these proposed timelines for data 
submission for the proposed IRF QRP quality measures for the FY 2018 
and FY 2019 adjustments to the IRF PPS annual increase factor. The 
responses to public comments on timelines for data submission are 
discussed in this section of the final rule.
    Comment: Several commenters suggested using the patient's admission 
date instead of their discharge date for the effective date for the 
IRF-PAI Version 1.4, citing EMR burden and uncertainty about which IRF-
PAI items would be required for which patients at the time of their 
admission.
    Response: Because the IRF-PAI is submitted to CMS for payment 
purposes, as well as quality purposes, and both the admission data and 
discharge data are only submitted upon discharge of the patient, we 
believe requiring any discharge that occurs on or after the date of 
implementation of a new version of the IRF-PAI allows for the reporting 
of the most accurate and current data. We historically released, and 
will continue to release, training manuals that accompany new 
iterations of our data collection instruments. Additionally, we plan on 
providing national-level training for IRFs related to the release of 
the IRF-PAI version 1.4. Please continue to check the IRF Quality 
Reporting Training Web page for information on such trainings. The IRF 
Quality Reporting Training Web page is accessible at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Training.html.
    Final Decision: After consideration of public comments on the 
timeline for data submission under the IRF QRP for the FY 2018 and FY 
2019 payment determinations, we are finalizing this policy, as 
proposed.

Table 23--Data Collection Time Frame and Submission Deadlines for IRF QRP Quality Data for Measures * Using IRF-
               PAI as Data Collection Mechanism, FY 2018 Adjustments to the Annual Increase Factor
----------------------------------------------------------------------------------------------------------------
                                                                  Deadline submission of  Annual increase factor
      Quarter (calendar year)         Data collection time frame    IRF-PAI corrections          affected
----------------------------------------------------------------------------------------------------------------
Quarter 4 (CY 2016)................  October 1, 2016-December     May 15, 2017..........  FY 2018.
                                      31, 2016.
----------------------------------------------------------------------------------------------------------------
* Includes data required for the 3 cross-setting IMPACT Act measures.


 Table 24--Data Collection Time Frame and Submission Deadlines for IRF QRP Quality Data for Measures Using IRF-
               PAI as Data Collection Mechanism, FY 2019 Adjustments to the Annual Increase Factor
----------------------------------------------------------------------------------------------------------------
                                                                  Deadline submission of  Annual increase factor
      Quarter (calendar year)         Data collection time frame    IRF-PAI corrections          affected
----------------------------------------------------------------------------------------------------------------
Quarter 1 (CY 2017)................  January 1, 2017-March 31,    August 15, 2017.......  FY 2019.
                                      2017.
Quarter 2 (CY 2017)................  April 1, 2017-June 30, 2017  November 15, 2017.....  FY 2019.
Quarter 3 (CY 2017)................  July 1, 2017-September 30,   February 15, 2018.....  FY 2019.
                                      2017.
Quarter 4 (CY 2017)................  October 1, 2017-December     May 15, 2018..........  FY 2019.
                                      31, 2017.
----------------------------------------------------------------------------------------------------------------

3. Revision to the Previously Adopted Data Collection Timelines and 
Submission Deadlines
    We proposed that the quality measures in the IRF QRP have a data 
collection time frame based on the calendar year, unless there is a 
clinical reason for an alternative data collection time frame. For 
example, for Influenza Vaccination Coverage among Healthcare Personnel 
(NQF #0431) and Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay) (NQF 
#0680), the data collection period is tied to the influenza vaccination 
season. At this time, three of the quality measures submitted via CDC's 
NHSN (that is, the CAUTI measure [NQF #0138], the MRSA measure [NQF 
#1716], and the CDI measure [NQF #1717]) use a quarterly data 
collection time frame based on the calendar year. The pressure ulcer 
measure [NQF #0678], which is submitted using the IRF-PAI, follows a 
fiscal year data collection time frame due to the current fiscal-year-
based release schedule of the IRF-PAI. The 2 influenza vaccination 
quality measures (Percent of Residents or Patients Who Were Assessed 
and Appropriately Given the Seasonal Influenza Vaccine [NQF #0680], 
Influenza Vaccination Coverage among Healthcare Personnel [NQF #0431]) 
use a data collection time frame that is consistent with the influenza 
vaccination season (that is, October 1 [or when the vaccine becomes 
available] to March 31).
    We proposed to revise the data collection time frame to follow the

[[Page 47123]]

calendar year, unless there is a clinical reason for an alternative 
data collection time frame. We posited this change would simplify the 
data collection and submission time frame under the IRF QRP for IRF 
providers. It would also eliminate the situation in which data 
collection during a quarter in the same calendar year can affect 2 
different years of annual payment update determination (that is, 
October 1 to December 31 is first quarter of data collection for 
quality measures with fiscal year data collection time frame and the 
last quarter of data collection for quality measures with calendar data 
collection time frame). If this proposal was implemented, when 
additional quality measures that use IRF-PAI as the data collection 
mechanism are adopted for future use in the IRF QRP, the first data 
collection time frame for those newly-adopted measures will be 3 months 
(October to December) and subsequent data collection time frame would 
follow a calendar year data collection time frame.
    We sought public comments on our proposal to adopt calendar year 
data collection time frames, unless there is a clinical reason for an 
alternative data collection time frame. The responses to public 
comments on revisions to data submission timelines are discussed in 
this section of the final rule.
    Comment: Several commenters supported the proposal to modify data 
collection timelines from fiscal year to calendar year for all 
measures, unless there is a clinical reason for an alternative 
timeline.
    Response: We thank the commenters for their feedback and support to 
revise the data collection period to calendar year for quality 
measures, unless there is a clinical reason for an alternate data 
collection period. We agree that this would simplify the data 
collection and reporting process.
    Final Decision: After consideration of public comments, we are 
finalizing this policy as proposed.
4. Data Submission Mechanisms for the FY 2018 and Subsequent Years 
Payment Determination for Additional IRF QRP Quality Measures and for 
Revisions to Previously Adopted Quality Measures
    We proposed that all IRFs would be required to collect data using a 
revised IRF-PAI Version 1.4 (IRF-PAI 1.4) for the pressure ulcer 
measure and the additional 6 quality measures: (1) Percent of Residents 
or Patients with Pressure Ulcers That Are New or Worsened (Short-Stay) 
(NQF #0678); (2) an application of Percent of Residents Experiencing 
One or More Falls with Major Injury (Long-Stay) (NQF #0674); (3) an 
application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on July 23, 2015); (4) IRF Functional Outcome Measure: 
Change in Self-Care Score for Medical Rehabilitation Patients (NQF 
#2633; under review); (5) IRF Functional Outcome Measure: Change in 
Mobility Score for Medical Rehabilitation Patients (NQF #2634; under 
review); (6) IRF Functional Outcome Measure: Discharge Self-Care Score 
for Medical Rehabilitation Patients (NQF #2635; endorsed on July 23, 
2015); and (7) IRF Functional Outcome Measure: Discharge Mobility Score 
for Medical Rehabilitation Patients (NQF #2636; endorsed on July 23, 
2015). IRF-PAI Version 1.4 would have modified pressure ulcer items 
collected at admission and discharge, new fall items collected at 
discharge, new self-care and mobility functional status items collected 
at admission and discharge, and new risk factor items for the self-care 
and mobility measures collected at admission. The proposed IRF-PAI 
Version 1.4 is available at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    The QIES ASAP system would remain the data submission mechanism for 
the IRF-PAI. We will release the technical data submission 
specifications and update the IRF-PAI Training Manual to include items 
related to the new and updated quality measures in CY 2015. Further 
information on data submission of the IRF-PAI for the IRF QRP using the 
QIES ASAP system is available at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRFPAI.html. We sought 
public comments on these data submission requirements. The responses to 
public comments on data submission requirements are discussed in this 
section of the final rule.
    Comment: Some commenters noted the need for CMS to issue direction 
with regard to which IRF-PAI version 1.4 data items are voluntary 
versus mandatory. Others noted that the IRF community needs clear 
training manuals and specifications.
    Response: We have historically released, and are planning to 
release, the IRF-PAI Training Manual, as well as data submission 
specifications, both of which will guide providers with respect to 
mandatory items. Additionally, we are planning a national IRF Train the 
Trainer conference, during which we will also present such information. 
We invite providers to visit our IRF Quality Reporting Training Web 
page for further information on upcoming manual releases and training 
events. The IRF Quality Reporting Training Web page can be found at 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Training.html.
    Final Decision: After consideration of public comments, we are 
finalizing this policy, as proposed.

J. Timing for New IRFs To Begin Submitting Quality Data Under the IRF 
QRP for the FY 2018 Payment Determination and Subsequent Years

    In the FY 2015 IRF PPS (79 FR 45918), we finalized that beginning 
with the FY 2017 payment determination and that of subsequent fiscal 
years, new IRFs are required to begin reporting data under the IRF QRP 
requirements no later than the first day of the calendar quarter 
subsequent to the quarter in which it was designated as operating in 
the Certification and Survey Provider Enhanced Reports (CASPER) system.
    To ensure that all IRFs have a minimum amount of time to prepare to 
submit quality data to CMS under the requirements of the IRF QRP, we 
proposed that a new IRF would be required to begin reporting quality 
data under the IRF QRP by no later than the first day of the calendar 
quarter subsequent to 30 days after the date on its CMS Certification 
Number (CCN) notification letter. For example, if an IRF's CCN 
notification letter is dated March 15th, then the IRF would be required 
to begin reporting quality data to CMS beginning on July 1st (March 15 
+ 30 days = April 14 (quarter 2). The IRF would be required to begin 
collecting quality data on the first day of the quarter subsequent to 
quarter 2, which is quarter 3, or July 1st). The collection of quality 
data would begin on the first day of the calendar year quarter 
identified as the start date, and would include all IRF admissions and 
subsequent discharges beginning on, and subsequent to, that day; 
however, the actual submission of quality data would be required by 
previously finalized quarterly deadlines, which fall approximately 135 
days post the end of each CY quarter. To determine which quality 
measure data an IRF would need to begin submitting, we refer you to 
section IX.E of this final rule, as it will vary depending upon the 
timing of the CY quarter identified as a start date.
    In the FY 2016 IRF PPS proposed rule, we indicated that the 
proposed requirements would apply beginning with the FY 2017 payment 
determination. We note that the

[[Page 47124]]

inclusion of ``FY 2018'' in this section heading in the FY 2016 IRF PPS 
proposed rule was a technical error, and that the reference to FY 2017 
in proposed policy was correct, and is feasible for us to implement. 
However, it remains feasible for us to implement these requirements for 
FY 2018 payment determination and subsequent years, as we proposed. 
Therefore, we are not finalizing this proposal for the FY 2018 payment 
determination, but we are finalizing this proposal for FY 2017 payment 
determination and subsequent years.
    We proposed to add the IRF QRP participation requirements at Sec.  
412.634 and sought public comments on our proposal to the participation 
requirements for new IRFs. The responses to public comments on the IRF 
QRP participation requirements are discussed in this section of the 
final rule.
    Comment: We received several supportive comments regarding the 
change to our policy that directs when new IRFs are required to begin 
reporting data, some stating that the expanded timeframe will be 
beneficial to new providers.
    Response: We agree that the expanded timeframe surrounding when new 
IRF providers need to begin submitting quality data to CMS is 
beneficial in that it allows each provider ample time to begin 
reporting, whether their certification falls at the beginning or end of 
a calendar year quarter, and has removed any advantage for providers 
certified at the beginning of a calendar year quarter.
    Final Decision: After consideration of public comments, and as 
previously discussed, we are finalizing this policy for the FY 2017, 
payment determination and subsequent years.

K. IRF QRP Data Completion Thresholds for the FY 2016 Payment 
Determination and Subsequent Years

    In the FY 2015 IRF PPS final rule (79 FR 45921 through 45923), we 
finalized IRF QRP thresholds for completeness of IRF data submissions. 
To ensure that IRFs are meeting an acceptable standard for completeness 
of submitted data, we finalized the policy that, beginning with the FY 
2016 payment determination and for each subsequent year, IRFs must meet 
or exceed two separate data completeness thresholds: one threshold set 
at 95 percent for completion of quality measures data collected using 
the IRF-PAI submitted through the QIES and a second threshold set at 
100 percent for quality measures data collected and submitted using the 
CDC NHSN.
    Additionally, we stated that we will apply the same thresholds to 
all measures adopted as the IRF QRP expands and IRFs begin reporting 
data on previously finalized measure sets. That is, as we finalize new 
measures through the regulatory process, IRFs will be held accountable 
for meeting the previously finalized data completion threshold 
requirements for each measure until such time that updated threshold 
requirements are proposed and finalized through a subsequent regulatory 
cycle.
    Further, we finalized the requirement that an IRF must meet or 
exceed both thresholds to avoid receiving a 2 percentage point 
reduction to their annual payment update for a given fiscal year, 
beginning with FY 2016 and for all subsequent payment updates. We did 
not propose any changes to these policies. Refer to the FY 2015 IRF PPS 
final rule (79 FR 45921 through 45923) for a detailed discussion of the 
finalized IRF QRP data completion requirements.
    While we did not seek comment on previously finalized IRF QRP 
thresholds for completeness of IRF data submissions, we received 
several comments.
    Comment: One commenter expressed concerns about the data completion 
thresholds, citing that they are too high given CMS' acknowledgment 
that achieving 100 percent data completion would be difficult at best. 
The commenter was also concerned that the threshold would be applied to 
data collected in FY 2014, despite being proposed after FY 2014 had 
already begun, and noted that CMS should avoid policies that have a 
retroactive impact on payment. The commenter suggested CMS to suspend 
the data completion threshold and work with stakeholders to develop a 
new policy.
    Response: To clarify, the IRF QRP has two data completion 
thresholds: a threshold of 95 percent regarding quality data submitted 
via the IRF-PAI Quality Indicator section; and a threshold of 100 
percent regarding the quality data submitted via the CDC's NHSN. We 
have continually maintained that providers should be submitting 
complete and accurate data, and the adoption of the data completion 
thresholds in the FY 2015 IRF PPS final rule did not change this 
policy. We believe that both data completion thresholds are achievable, 
as evidenced by the 91 percent of IRFs that were able to achieve these 
thresholds for purposes of the FY 2015 payment determination. We have 
also taken strides to increase compliance, including regular 
notification of upcoming deadlines, updated guidance documents, 
increased alarms for incomplete data submissions, and the development 
of several reports which will help providers better determine where 
they stand with respect to compliance throughout the year.

L. Proposed Suspension of the IRF QRP Data Validation Process for the 
FY 2016 Payment Determination and Subsequent Years

    Validation is intended to provide added assurance of the accuracy 
of the data that will be reported to the public as required by sections 
1886(j)(7)(E) and 1899B(g) of the Act. In the FY 2015 IRF PPS rule (79 
FR 45923), we finalized, for the FY 2016 adjustments to the IRF PPS 
annual increase factor and subsequent years, a process to validate the 
data submitted for quality purposes. In the FY 2016 IRF PPS proposed 
rule (80 FR 23386), we proposed to temporarily suspend the 
implementation of this policy. We proposed that, through the suspension 
of this previously finalized policy, data accuracy validation will have 
no bearing on the applicable FY annual increase factor reduction for FY 
2016 and subsequent years unless and until we propose to either reenact 
this policy, or propose to adopt a new validation policy through future 
rulemaking. At this time, we are working to develop a more 
comprehensive data validation policy that is aligned across the PAC 
quality reporting programs, and believe that we can implement a policy 
that increases the efficiency with which data validation is performed. 
We are also considering ways to reduce the labor and cost burden on 
IRFs through the development of a new data accuracy validation policy.
    We sought comment on our proposal.
    Comment: Several commenters supported CMS' proposal to temporarily 
suspend the data validation policy.
    Response: We appreciate the commenters for their support.
    Final Decision: After careful consideration of public comments, we 
are finalizing our decision to temporarily suspend the IRF data 
accuracy validation policy, as proposed.

M. Previously Adopted and Proposed IRF QRP Submission Exception and 
Extension Requirements for the FY 2017 Payment Determination and 
Subsequent Years

    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 reporting requirements of the IRF QRP for one or 
more quarters, beginning with the FY 2015 payment determination and

[[Page 47125]]

for subsequent years when there are extraordinary circumstances beyond 
the control of the provider. We also finalized a policy that allows us 
to grant exemptions or extensions to IRFs that did not request them 
when it is determined that an extraordinary circumstance affects an 
entire region or locale.
    In the FY 2015 IRF PPS final rule (79 FR 45920 through 45921), we 
adopted the policies and procedures previously finalized in the FY 2014 
IRF PPS final rule for the FY 2017 payment determination and that of 
subsequent years. We also finalized the policy that grants an exception 
or extension to IRFs if we determine that a systemic problem with 1 of 
our data collection systems directly affected the ability of an IRF to 
submit data.
    We did not propose any changes to the previously finalized policies 
and procedures for the FY 2018 payment determination and beyond.
    In the FY 2014 IRF PPS final rule and the FY 2015 IRF PPS final 
rule, we stated that IRFs must request an exception or extension by 
submitting a written request along with all supporting documentation to 
CMS via email to the IRF QRP mailbox at 
[email protected]. We further stated that exception or 
extension requests sent to us through any other channel would not be 
considered as a valid request for an exception or extension from the 
IRF QRP's reporting requirements for any payment determination. To be 
considered, a request for an exception or extension must contain all of 
the requirements as outlined on CMS Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Reconsideration-and-Exception-and-Extension.html.
    We proposed to add the IRF QRP Submission Exception and Extension 
Requirements at Sec.  412.634. Refer to the FY 2014 IRF PPS final rule 
(78 FR 47920) and the FY 2015 IRF PPS final rule (79 FR 45920 through 
45921) for detailed discussions of the IRF QRP Submission Exception and 
Extension Requirements.
    Final Decision: We did not receive any public comments on this 
previously finalized policy, and, as such, are not making any changes 
to the policy. We are finalizing our proposal to codify our Data 
Submission Exception and Extension Requirements at Sec.  412.634.

N. Previously Adopted and Proposed IRF QRP Reconsideration and Appeals 
Procedures for the FY 2017 Payment Determination and Subsequent Years

    At the conclusion of each FY reporting cycle, we review the data 
received from each IRF to determine if the IRF met the reporting 
requirements set forth for that reporting cycle. IRFs that are found to 
be non-compliant will receive a reduction in the amount of 2 percentage 
points to their annual payment update for the applicable fiscal year. 
In the FY 2015 IRF PPS final rule (79 FR 45919 through 45920), we 
described and adopted an updated process that enables 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.
    Any IRF that wishes to submit a reconsideration request must do so 
by submitting an email to CMS containing all of the requirements listed 
on the IRF program Web site at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Reconsideration-and-Exception-and-Extension.html. 
Email sent to [email protected] is the only form of 
submission that will be accepted by us. Any reconsideration requests 
received through another channel, including U.S. postal service or 
phone, will not be considered as a valid reconsideration request.
    We proposed to continue using the IRF QRP Reconsideration and 
Appeals Procedures that were adopted in the FY 2015 IRF PPS final rule 
(79 FR 45919 through 45920) for the FY 2017 payment determination and 
subsequent years with an exception regarding the way in which non-
compliant IRFs are notified of this determination.
    Currently IRFs found to be non-compliant with the reporting 
requirements set forth for a given payment determination received a 
notification of this finding along with instructions for requesting 
reconsideration in the form of a certified United States Postal Service 
(USPS) letter. In an effort to communicate as quickly, efficiently, and 
broadly as possible with IRFs regarding annual compliance, we proposed 
changes to our communications method regarding annual notification of 
reporting compliance in the IRF QRP. In addition to sending letters via 
regular USPS mail, beginning with the FY 2016 payment determination and 
for subsequent fiscal years, we proposed to use the QIES as a mechanism 
to communicate to IRFs regarding their compliance with the reporting 
requirements for the given reporting cycle.
    We proposed that all Medicare-certified IRF compliance letters be 
uploaded into the QIES system for each IRF to access. Instructions to 
download files from QIES may be found at https://www.qtso.com/irfpai.html. We proposed to disseminate communications regarding the 
availability of compliance reports in IRFs' QIES files through routine 
channels to IRFs and vendors, including, but not limited to, issuing 
memos, emails, Medicare Learning Network (MLN) announcements, and 
notices on http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/Reconsideration-and-Disaster-Waiver-Requests.html.
    The purpose of the compliance letter is to notify an IRF that it 
has been identified as either being compliant or non-compliant with the 
IRF QRP reporting requirements for the given reporting cycle. If the 
IRF is determined to be non-compliant, then the notification would 
indicate that the IRF is scheduled to receive a 2 percentage point 
reduction to its upcoming annual payment update and that it may file a 
reconsideration request if it disagrees with this finding. IRFs may 
request a reconsideration of a non-compliance determination through the 
CMS reconsideration request process. We also proposed that the 
notifications of our decision regarding all received reconsideration 
requests will be made available through the QIES system. We did not 
propose to change the process or requirements for requesting 
reconsideration. Refer to the FY 2015 IRF PPS final rule (79 FR 45919 
through 45920) for a detailed discussion of the IRF QRP Reconsideration 
and Appeals Procedures.
    Below, we discuss a proposal to publish a list of IRFs who 
successfully meet the reporting requirements for the applicable payment 
determination on the IRF QRP Web site http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/. As proposed, we also update the list of IRFs who 
successfully meet the reporting requirements after all reconsideration 
requests have been processed on an annual basis.

[[Page 47126]]

    We proposed to add the IRF QRP Reconsideration and Appeal 
Procedures at Sec.  412.634.
    We sought comment on the proposals to change the communication 
mechanism to the QIES system for the dissemination of compliance 
notifications and reconsideration decisions and to add these processes 
at Sec.  412.634.
    Comment: Several commenters supported CMS' proposal to notify non-
compliant IRFs using QIES, as well as via USPS.
    Response: We appreciated the commenters for their support.
    Comment: One commenter appreciated CMS' attempts to improve 
communication but suggested CMS to consider transferring the IRF QRP 
reporting to QualityNet, which is the current clearinghouse for all 
other Medicare quality reporting programs. This commenter suggested 
that doing so would reduce provider confusion, promote program 
alignment, and enhance compliance rates.
    Response: We thank the commenter for their feedback about 
communication and will take their suggestion into consideration for 
future rulemaking.
    Final Decision: After careful consideration of public comments, we 
are finalizing these policies, as proposed.

O. Proposed Public Display of Quality Measure Data for the IRF QRP

    Section 1886(j)(7)(E) of the Act requires the Secretary to 
establish procedures for making the IRF QRP data available to the 
public. In so doing, the Secretary must ensure that IRFs have the 
opportunity to review any such data with respect to the IRF prior to 
its release to the public. Section 1899B(g) of the Act requires the 
Secretary to establish procedures for making available to the public 
information regarding the performance of individual PAC providers with 
respect to the measures required under section 1899B of the Act 
beginning not later than 2 years after the applicable specified 
application date. The procedures must ensure, including through a 
process consistent with the process applied under section 
1886(b)(3)(B)(viii)(VII) for similar purposes, that each PAC provider 
has the opportunity to review and submit corrections to the data and 
information that are to be made public with respect to the PAC provider 
prior to such data being made public. We proposed a policy to display 
performance information regarding the quality measures, as applicable, 
required by the IRF QRP by fall 2016 on a CMS Web site, such as the 
Hospital Compare Web site at http://www.hospitalcompare.hhs.gov, after 
a 30-day preview period. Additional information about preview report 
content and delivery will be announced on the IRF QRP Web site.
    The Hospital Compare Web site is an interactive web tool that 
assists beneficiaries by providing information on hospital quality of 
care to those who need to select a hospital. It further serves to 
encourage beneficiaries to work with their providers to discuss the 
quality of care provided to patients, by providing an additional 
incentive to providers to improve the quality of care that they 
furnish. As we have done on other CMS compare Web sites, we will, at 
some point in the future, report public data using a quality rating 
system that gives each IRF a rating between 1 and 5 stars. Initially, 
however, we will not use the 5-star methodology, until such time that 
we are publicly reporting a sufficient number of quality metrics to 
allow for variation and the differentiation between IRFs using this 
methodology. Decisions regarding how the rating system will determine a 
provider's star rating and methods used for calculations, as well as a 
proposed timeline for implementation, will be announced via regular IRF 
QRP communication channels, including listening sessions, memos, email 
notification, provider association calls, Open Door Forums, and Web 
postings. Providers would be notified via CMS listservs, CMS mass 
emails, and memorandums, IRF QRP Web site announcements and MLN 
announcements regarding the release of IRF Provider Preview Reports 
followed by the posting of data.
    The initial display of information would contain IRF provider 
performance on the following 3 quality measures:
     Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened(Short-Stay) (NQF #0678).
     NHSN CAUTI Outcome Measure (NQF #0138).
     All-Cause Unplanned Readmission Measure for 30 Days Post 
Discharge From IRFs (NQF #2502).
    For the first 2 listed measures, Percent of Residents or Patients 
with Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678) 
and NHSN CAUTI Outcome Measure (NQF #0138), we proposed publicly 
reporting data beginning with data collected on these measures for 
discharges beginning January 1, 2015. Rates would be displayed based on 
4 rolling quarters of data and would initially be reported using 
discharges from January 1, 2015 through December 31, 2015, for 
calculation. As each quarter advances, we would add the subsequent 
calendar year quarter and remove the earliest calendar year quarter. 
For example, initially we would use data from discharges occurring from 
January 1, 2015 through December 31, 2015. The next quarter, we would 
display performance data using discharges that occurred between the 
dates of April 1, 2015 through March 31, 2016, etc.
    For the measure All-Cause Unplanned Readmission Measure for 30 Days 
Post Discharge From IRFs (NQF #2502), we proposed to publicly report 
data beginning with data collected for discharges beginning January 1, 
2013. Rates would be displayed based on 2 consecutive years of data and 
would initially be reported using discharges from January 1, 2013 
through December 31, 2014. As each calendar year advances, we would add 
the subsequent calendar year quarter and remove the earliest calendar 
year.
    Calculations for the CAUTI measure adjust for differences in the 
characteristics of hospitals and patients using a Standardized 
Infection Ratio (SIR). The SIR is a summary measure that takes into 
account differences in the types of patients a hospital treats. The SIR 
may take into account the type of patient care location, laboratory 
testing methods, hospital affiliation with a medical school, bed size 
of the hospital, and bed size of specific patient care locations. It 
compares the actual number of Healthcare Associated Infections (HAIs) 
in a facility or state to a national benchmark based on previous years 
of reported data and adjusts the data based on several risk factors. A 
confidence interval with a lower and upper limit is displayed around 
each SIR to indicate that there is a high degree of confidence that the 
true value of the SIR lies within that interval. An SIR with a lower 
limit that is greater than 1.0 means that there were more HAIs in a 
facility or state than were predicted, and the facility is classified 
as ``Worse than the U.S. National Benchmark''. If the SIR has an upper 
limit that is less than 1, then the facility had fewer HAIs than were 
predicted and is classified as ``Better than the U.S. National 
Benchmark''. If the confidence interval includes the value of 1, then 
there is no statistical difference between the actual number of HAIs 
and the number predicted, and the facility is classified as ``No 
Different than U.S. National Benchmark''. If the number of predicted 
infections is a specific value less than 1, the SIR and confidence 
interval cannot be calculated.
    Calculations for the Percent of Residents or Patients with Pressure

[[Page 47127]]

Ulcers That Are New or Worsened measure application (NQF #0678) will be 
risk-adjusted. Resident- or patient-level covariate risk adjustment is 
performed. Resident- or patient-level covariates are used in a logistic 
regression model to calculate a resident- or patient-level expected 
quality measure (QM) score (the probability that the resident or 
patient will evidence the outcome, given the presence or absence of 
patient characteristics measured by the covariates). Then, an average 
of all resident- or patient-level expected QM scores for the facility 
is calculated to create a facility-level expected QM score. The final 
facility-level adjusted QM score is based on a calculation which 
combines the facility-level expected score and the facility level 
observed score. Additional information about the covariates can be 
found at www.qualityforum.org/QPS/0678.
    Finally, calculation for performance on the measure All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502) will also be risk-adjusted. The risk adjustment methodology is 
available, along with the specifications for this measure, on our IRF 
Quality Reporting Measures Information Web page at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information-.html.
    We are currently developing reports that will allow providers to 
view the data that is submitted to CMS via the QIES ASAP system and the 
CDC's NHSN (Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (Short-Stay) (NQF #0678) and NHSN CAUTI Outcome 
Measure (NQF #0138), respectively). Although initial reports will not 
allow providers to view this data, subsequent iterations of these 
reports will also include provider performance on any currently 
reported quality measure that is calculated based on CMS claims data 
that we plan on publicly reporting (All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge from IRFs (NQF #2502)). Although 
real time results will not be available, the report will refresh all of 
the data submitted at least once a month. We proposed a process to give 
providers an opportunity to review and correct data submitted to the 
QIES ASAP system or to the CDC's NHSN system by utilizing that report. 
Under this process, providers would to have the opportunity to review 
and correct data they submit on all assessment-based measures. 
Providers can begin submitting data on the first discharge day of any 
reporting quarter. Providers are encouraged to submit data early in the 
submission schedule so that they can identify errors and resubmit data 
before the quarterly submission deadline. The data would be populated 
into reports that are updated at least once a month with all data that 
have been submitted. That report would contain the provider's 
performance on each measure calculated based on assessment submissions 
to the QIES ASAP or CDC NHSN system. We believe that the submission 
deadline timeframe, which is 4.5 months beyond the end of each calendar 
year quarter, is sufficient time for providers to be able to submit, 
review data, make corrections to the data, and view their data. We note 
that the quarterly data submission deadline/timeframe only applies to 
the quality indicator section of the IRF-PAI, and has no bearing on the 
current deadline of 27 days that is imposed for payment items. We 
proposed that once the provider has an opportunity to review and 
correct quarterly data related to measures submitted via the QIES ASAP 
or CDC NHSN system, we would consider the provider to have been given 
the opportunity to review and correct this data. We would not allow 
patient-level data correction after the submission deadline or for 
previous years. This is because we must set a deadline to ensure timely 
computation of measure rates and payment adjustment factors. Before we 
display this information, providers will be permitted 30 days to review 
their information as recorded in the QIES ASAP or CDC NHSN system.
    In addition to our proposal, we proposed to publish a list of IRFs 
who successfully meet the reporting requirements for the applicable 
payment determination on the IRF QRP Web site http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/. We proposed updating the list after reconsideration 
requests are processed on an annual basis.
    We sought public comment on the listed proposals.
    Comment: One commenter supported the public display of the NHSN 
CAUTI Outcome Measure (NQF #0138). This commenter also mentioned 
displaying the SIR information for this measure.
    Response: We would like to clarify that while the SIR calculation 
will be communicated to each IRF provider in their Preview Report that 
will be issued during the 30-day preview period prior to public 
reporting, the IRF public reporting Web site will not display this 
information, but rather will display ratings based on whether or not an 
IRF is the same, higher than, or lower than the national average with 
respect to their performance on the CAUTI measure.
    Comment: Several commenters supported public display of IRF QRP 
data, but requested an opportunity to submit corrections during the 
preview period.
    Response: We would like to clarify that once we issue the Preview 
Report to IRF providers, they will have 30 days during which to contest 
the measure calculations contained within that report. We will not 
allow providers to correct patient level data during the preview 
period, as this would have the effect of negating our data submission 
deadlines. We maintain that IRFs have 135 days beyond the end of each 
calendar year quarter during which to review and correct patient-level 
data, and believe that this is a sufficient amount of time. While 
providers may use this time as an extended data submission deadline, 
the original intent of this grace period was to allow for provider 
review and correction of their patient-level data. Our public reporting 
preview period policy aligns with that of the HIQR and other CMS QRPs. 
We suggested to providers to submit data as soon as possible, in order 
to ensure enough time for review and correction of that data.
    Final Decision: After careful consideration of public comments, we 
are finalizing our policy related to the public display of quality 
measure data for the IRF QRP, as proposed.

P. Method for Applying the Reduction to the FY 2016 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 2016 market basket increase factor (1.7 
percent) in calculating an adjusted FY 2016 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

[[Page 47128]]

involved. Table 25 shows the calculation of the adjusted FY 2016 
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, 2014, through December 31, 
2014.

    Table 25--Calculations To Determine the Adjusted FY 2016 Standard
   Payment Conversion Factor for IRFs That Failed To Meet the Quality
                          Reporting Requirement
------------------------------------------------------------------------
               Explanation for adjustment                  Calculations
------------------------------------------------------------------------
Standard Payment Conversion Factor for FY 2015.........          $15,198
Market Basket Increase Factor for FY 2016 (2.4                  x 0.9970
 percent), reduced by 0.5 percentage point 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 1.0033
 Related Share.........................................
Budget Neutrality Factor for the Revisions to the CMG           x 0.9981
 Relative Weights......................................
Final Adjusted FY 2016 Standard Payment Conversion             = $15,174
 Factor................................................
------------------------------------------------------------------------

    We received no comments on the proposed method for applying the 
reduction to the FY 2016 IRF increase factor for IRFs that fail to meet 
the quality reporting requirements.
    Final Decision: As we did not receive any comments on the proposed 
method for applying the reduction to the FY 2016 IRF increase factor 
for IRFs that fail to meet the quality reporting requirements, we are 
finalizing the proposed methodology.

X. Miscellaneous Comments

    Comment: Although one commenter expressed support for the changes 
to the 60 percent rule compliance methodology that we finalized in the 
FY 2014 and FY 2015 IRF PPS final rules, several other commenters 
expressed concerns about the impact of these changes on beneficiary 
access to IRF services and suggested that we revisit them. In addition, 
several commenters suggested that we add specific ICD-10-CM codes to 
the list of codes that would meet the 60 percent rule under the 
presumptive methodology, including specific diagnosis codes related to 
cognition, swallowing, and communication. Further, one commenter 
requested that additional clarity and rationale be added to the 60 
percent rule compliance data files that we posted on the CMS Web site 
in conjunction with the FY 2014 and FY 2015 IRF PPS final rules.
    Response: As we did not propose any changes to the methodology for 
determining IRFs' compliance with the 60 percent rule, these comments 
are outside the scope of the proposed rule. We appreciate the 
commenter's suggestions, and will continue to monitor and assess the 
implications of the changes to the presumptive methodology that we 
finalized in the FY 2014 and FY 2015 IRF PPS final rules to determine 
if any further refinements to the methodology are needed.
    Comment: Several commenters suggested that we use the most recent 3 
years of data to re-examine the conditions that are included on the 
list of tier comorbidities, and that we revise this list for FY 2016. 
One commenter provided a list of specific diagnosis codes to add to the 
list.
    Response: As we did not propose any changes to the list of tier 
comorbidities, these comments are outside the scope of the proposed 
rule. We appreciate the commenters' suggestions, and will consider 
these suggestions for future analyses.
    Comment: One commenter suggested that CMS should be more 
transparent about the criteria the agency is using to determine when 
changes to the facility-level adjustments occur. Another commenter 
encouraged CMS to continue to analyze changes to the facility-level 
adjustments and adjust all three factors at a minimum of every three 
years.
    Response: As we did not propose any changes to the facility-level 
adjustments, these comments are outside the scope of the proposed rule. 
The FY 2016 IRF PPS proposed rule (80 FR 23332 at 23341) included a 
reminder that, in the FY 2015 IRF PPS final rule (79 FR 45872 at 
45882), we froze the facility-level adjustments 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).
    Comment: Several commenters suggested that we consider imposing a 
cap, possibly adjusted by a geographic index, on the amount of outlier 
payments an individual IRF can receive under the IRF PPS.
    Response: Comments regarding the amount of outlier payments an 
individual IRF can receive are outside the scope of this rule. However, 
any future consideration given to imposing a limit on outlier payments 
would have to carefully analyze and take into consideration the effect 
on access to IRF care for certain high-cost populations.
    Comment: One commenter requested clarification of several IRF PPS 
policies, including the therapy data collection that was finalized in 
the FY 2015 IRF PPS final rule (79 FR 45900 through 45903), the 
weighted motor score that is used to classify beneficiaries into CMGs, 
and the definition of a Medicare ``discharge'' under the IRF PPS.
    Response: Comments regarding the therapy data collection that was 
finalized in the FY 2015 IRF PPS final rule are outside the scope of 
this rule. However, additional information on the therapy data 
collection that begins 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. Comments regarding 
the weighted motor score are also outside the scope of this rule. 
However, we refer the commenter to the detailed discussion of the 
weighted motor score in the FY 2006 IRF PPS final rule (70 FR 47880 at 
47896 through 47900). Finally, the definition of an IRF discharge is 
located at Sec.  412.602.
    Comment: Several commenters noted the need for consistency in 
payment policies and regulations across Medicare post-acute care 
settings, and suggested that CMS should reduce or eliminate any 
unnecessary or burdensome IRF regulations and documentation 
requirements, including those associated with the IRF coverage 
requirements or the IRF 60 percent rule. One commenter also discussed 
the Medicare Payment Advisory Commission's site-neutral payment policy 
recommendation for post-acute care.
    Response: Comments regarding the any site-neutral payment policies 
or changes to IRF regulations or documentation requirements are outside 
the scope of this rule.

[[Page 47129]]

    Comment: Several commenters requested that we review the ICD-10-CM 
codes that we finalized in the FY 2015 IRF PPS final rule (79 FR 45905 
through 45908) and add specific ICD-10-CM codes to the diagnosis code 
lists used in the 60 percent rule presumptive methodology and in 
assigning tier comorbidities. In addition, one commenter suggested that 
we perform additional ``end-to-end'' testing of the ICD-10-CM coding to 
ensure that IRFs are able to submit their claims and IRF-PAI forms 
using ICD-10-CM codes in a timely manner and that contractors are able 
to reimburse providers based on ICD-10-CM coding in a timely manner.
    Response: Comments regarding any changes to the ICD-10-CM codes for 
the IRF PPS are outside the scope of the proposed rule. However, we are 
undergoing extensive testing of ICD-10-CM coding of claims and IRF-
PAIs, and will closely monitor the effects of the ICD-10-CM 
implementation on IRFs to ensure that IRF claims are paid appropriately 
and expeditiously. Once we have enough ICD-10-CM data to analyze, we 
also plan to assess the lists of ICD-10-CM codes for the IRF PPS to 
determine whether any revisions to the code lists for the 60 percent 
rule or the tier comorbidities might be needed.

XI. Provisions of the Final Regulations

    In this final rule, we are adopting the provisions set forth in the 
FY 2016 IRF proposed rule (80 FR 23332), except as noted elsewhere in 
the preamble. Specifically:
     We will update the FY 2016 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 IV of this final rule.
     We include a reminder that, in the FY 2015 IRF PPS final 
rule (79 FR 45872 at 45882), we froze the facility-level adjustments 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), as discussed in section V of this final rule.
     We will adopt the IRF-specific market basket, as discussed 
in section VI of this final rule.
     We will update the FY 2016 IRF PPS payment rates by the 
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 the 
productivity adjustment required by section 1886(j)(3)(C)(ii)(I) of the 
Act, as described in section VI of this final rule.
     We will update the FY 2016 IRF PPS payment rates by the FY 
2016 wage index and the labor-related share in a budget-neutral manner 
and the wage adjustment transition as discussed in section VI of this 
final rule.
     We will calculate the final IRF standard payment 
conversion factor for FY 2016, as discussed in section VI of this final 
rule.
     We will update the outlier threshold amount for FY 2016, 
as discussed in section VII of this final rule.
     We will update the cost-to-charge ratio (CCR) ceiling and 
urban/rural average CCRs for FY 2016, as discussed in section VII of 
this final rule.
     We include a reminder of the October 1, 2015 
implementation of the International Classification of Diseases, 10th 
Revision, Clinical Modification (ICD-10-CM) for the IRF PPS, as 
discussed in section VIII of this final rule.
     We will adopt 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 IX of this final rule.

XII. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide 60-day 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 affected public, including automated collection 
techniques.
    This final rule makes reference to associated information 
collections that are not discussed in the regulation text contained in 
this document.

B. Collection of Information Requirements for Updates Related to the 
IRF QRP

    Failure to submit data required under section 1886(j)(7)(C) and (F) 
of the Act will result in the reduction of the annual update to the 
standard federal rate for discharges occurring during such fiscal year 
by 2 percentage points for any IRF that does not comply with the 
requirements established by the Secretary. At the time that this 
analysis was prepared, 91, or approximately 8 percent, of the 1166 
active Medicare-certified IRFs did not receive the full annual 
percentage increase for the FY 2015 annual payment update 
determination. Information is not available to determine the precise 
number of IRFs that will not meet the requirements to receive the full 
annual percentage increase for the FY 2016 payment determination.
    We believe that the burden associated with the IRF QRP is the time 
and effort associated with data collection and reporting. As of April 
1, 2015, there are approximately 1132 IRFs currently reporting quality 
data to CMS. In this final rule, we are finalizing 2 quality measures 
that have already been adopted for the IRF QRP: (1) All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge from IRFs (NQF #2502), 
to establish the newly NQF-endorsed status of this measure; and (2) 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short-Stay) (NQF #0678), to establish its use as a cross-
setting measure that addresses the domain of skin integrity, as 
required by the IMPACT Act of 2014. The All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge from IRFs (NQF #2502) is a Medicare 
claims-based measure; because claims-based measures can be calculated 
based on data that are already reported to the Medicare program for 
payment purposes, we believe there will be no additional impact. We 
also believe that there will be no additional burden associated with 
our re-proposal of the measure Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short-Stay) (NQF #0678), as 
IRFs are already submitting quality data related to this measure.
    We also proposed adoption of 6 additional quality measures. These 6 
new quality measures are: (1) An application of Percent of Residents 
Experiencing One or More Falls with Major Injury (Long-Stay) (NQF 
#0674); (2) an application of Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a

[[Page 47130]]

Care Plan that Addresses Function (NQF #2631; endorsed on July 23, 
2015); (3) IRF Functional Outcome Measure: Change in Self-Care Score 
for Medical Rehabilitation Patients (NQF #2633; under review); (4) IRF 
Functional Outcome Measure: Change in Mobility Score for Medical 
Rehabilitation Patients (NQF #2634; under review); (5) IRF Functional 
Outcome Measure: Discharge Self-Care Score for Medical Rehabilitation 
Patients (NQF #2635; under review); and (6) IRF Functional Outcome 
Measure: Discharge Mobility Score for Medical Rehabilitation Patients 
(NQF #2636; endorsed on July 23, 2015). Additionally we proposed that 
data for these 6 new measures will be collected and reported using the 
IRF-PAI (version 1.4).
    Our burden calculations take into account all ``new'' items 
required on the IRF-PAI (version 1.4) to support data collection and 
reporting for these 6 proposed measures. New items will be included on 
the following assessment: IRF-PAI version 1.4 Admission and Discharge 
assessment. The addition of the new items required to collect the 6 
newly adopted measures is for the purpose of achieving standardization 
of data elements.
    We estimate the additional elements for the 6 newly adopted 
measures will take 25.5 minutes of nursing/clinical staff time to 
report data on admission and 16.0 minutes of nursing/clinical staff 
time to report data on discharge, for a total of 41.5 minutes. We 
believe that the additional IRF-PAI items we proposed will be completed 
by Registered Nurses (RN), Occupational Therapists (OT), Speech 
Language Pathologists (SLP) and/or Physical Therapists (PT), depending 
on the item. We identified the staff type per item based on past LTCH 
and IRF burden calculations in conjunction with expert opinion. Our 
assumptions for staff type were based on the categories generally 
necessary to perform assessment: RN, OT, SLP, and PT. Individual 
providers determine the staffing resources necessary; therefore, we 
averaged the national average for these labor types and established a 
composite cost estimate. This composite estimate was calculated by 
weighting each salary based on the following breakdown regarding 
provider types most likely to collect this data: RN 59 percent; OT 11 
percent; PT 20 percent; SLP 1 percent. In accordance with OMB control 
number 0938-0842, we estimate 390,748 discharges from all IRFs 
annually, with an additional burden of 41.5 minutes. This would equate 
to 270,267.37 total hours or 238.75 hours per IRF. We believe this work 
will be completed by RN, OT, PT, and SLP staff, depending on the item. 
We obtained mean hourly wages for these staff from the U.S. Bureau of 
Labor Statistics' May 2013 National Occupational Employment and Wage 
Estimates (http://www.bls.gov/oes/current/oes_nat.htm), and to account 
for overhead and fringe benefits, we have doubled the mean hourly wage. 
Per the U.S. Bureau of Labor and Statistics, the mean hourly wage for a 
RN is $33.13. However, to account for overhead and fringe benefits, we 
have doubled the mean hourly wage, making it $66.26 for an RN. The mean 
hourly wage for an OT is $37.45, doubled to $74.90 to account for 
overhead and fringe benefits. The mean hourly wage for a PT is $39.51, 
doubled to $79.02 to account for overhead and fringe benefits. The mean 
hourly wage for a SLP is $35.56, doubled to $71.12 to account for 
overhead and fringe benefits. Given these wages and time estimates, the 
total cost related to the six newly proposed measures is estimated at 
$21,239.33 per IRF annually, or $22,529,560.74-$24,042,291.01 for all 
IRFs annually.
    For discussion purposes, we provided a detailed description of the 
burden associated with the requirements in section IX of this final 
rule. However, the burden associated with the aforementioned 
requirements is exempt from the PRA under the IMPACT Act of 2014. 
Section 1899B(m) and the sections referenced in section 1899B(a)(2)(B) 
of the Act exempt modifications that are intended to achieve the 
standardization of patient assessment data. The requirement and burden 
will, however, be submitted to OMB for review and approval when the 
quality measures and the PAC assessment instruments are no longer used 
to achieve the standardization of patient assessment data.
    In section IX.F. of this final rule, we are finalizing 2 quality 
measures that have already been adopted for the IRF QRP: (1) All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502), to establish the newly NQF-endorsed status of this measures; 
and (2) Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short-Stay) (NQF #0678), to establish its use as a 
cross-setting measure that addresses the domain of skin integrity, as 
required by the IMPACT Act of 2014. The All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge from IRFs (NQF #2502) is a Medicare 
claims-based measure; because claims-based measures can be calculated 
based on data that are already reported to the Medicare program for 
payment purposes, we believe there will be no additional impact as a 
result of this measure. We also believe that there will be no 
additional burden associated with our proposal of the measure Percent 
of Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short-Stay) (NQF #0678), as IRFs are already submitting quality data 
related to this measure.
    In section IX.G. of this final rule, we are also finalizing 
adoption of six new quality measures. These 6 proposed quality measures 
are: (1) An application of Percent of Residents Experiencing One or 
More Falls with Major Injury (Long-Stay) (NQF #0674); (2) an 
application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on July 23, 2015); (3) IRF Functional Outcome Measure: 
Change in Self-Care Score for Medical Rehabilitation Patients (NQF 
#2633; under review); (4) IRF Functional Outcome Measure: Change in 
Mobility Score for Medical Rehabilitation Patients (NQF #2634; under 
review); (5) IRF Functional Outcome Measure: Discharge Self-Care Score 
for Medical Rehabilitation Patients (NQF #2635; under review); and (6) 
IRF Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; endorsed on July 23, 2015). 
Additionally, we are finalizing that data for the 6 measures will be 
collected and reported using the IRF-PAI (version 1.4). While the 
reporting of data on quality measures is an information collection, we 
believe that the burden associated with modifications to the IRF-PAI 
discussed in this final rule fall under the PRA exceptions provided in 
1899B(m) of the Act because they are required to achieve the 
standardization of patient assessment data. Section 1899B(m) of the Act 
provides that the PRA does not apply to section 1899B and the sections 
referenced in section 1899B(a)(2)(B) of the Act that require 
modification to achieve the standardization of patient assessment data. 
The requirement and burden will, however, be submitted to OMB for 
review and approval when the modifications to the IRF-PAI or other 
applicable PAC assessment instrument are not used to achieve the 
standardization of patient assessment data. Additionally, while the 
IMPACT Act does not specifically require the IRF Functional Outcome 
Measure: Change in Self-Care Score for Medical Rehabilitation Patients 
(NQF #2633; under review), IRF Functional Outcome Measure: Change in 
Mobility Score for

[[Page 47131]]

Medical Rehabilitation Patients (NQF #2634; under review), IRF 
Functional Outcome Measure: Discharge Self-Care Score for Medical 
Rehabilitation Patients (NQF #2635; recommended for endorsement), and 
IRF Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; endorsed on July 23, 2015), the 
data elements used to inform those measures are part of larger set of 
functional status data items that have been added to the IRF-PAI 
version 1.4, for the purpose of providing standardized data elements 
under the domain of functional status, which is required by the IMPACT 
Act. These same data elements are used to inform different quality 
measures that we are finalizing, each with a different outcome.
    For quality reporting during extraordinary circumstances, as 
discussed in section IX.M. of this final rule, we proposed to codify at 
Sec.  412.634 a process previously finalized for the FY 2017 payment 
determination and subsequent years for IRF providers to request 
exceptions or extensions for the IRF QRP reporting requirements when 
there are extraordinary circumstances beyond the control of the 
provider. The request must be submitted by email within 90 days from 
the date that the extraordinary circumstances occurred.
    While the preparation and submission of the request is an 
information collection, unlike the aforementioned temporary exemption 
of the data collection requirements for the 6 new quality measures, and 
the 2 re-proposed quality measures, the request is not expected to be 
submitted to OMB for formal review and approval since we estimate less 
than 2 requests (total) per year. Since we estimate fewer than 10 
respondents annually, the information collection requirement and 
associated burden is not subject as stated in the implementing 
regulations of the PRA (5 CFR 1320.3(c)).
    As discussed in section IX.N. of this final rule, we proposed to 
codify at Sec.  412.634 a previously finalized process that enables an 
IRF to request reconsiderations of our initial non-compliance decision 
in the event that it believes that it was incorrectly identified as 
being subject to the 2-percentage point reduction to its annual 
increase factor due to non-compliance with the IRF QRP reporting 
requirements. We believe the reconsideration and appeals requirements 
and the associated burden would be incurred subsequent to an 
administrative action. In accordance with the implementing regulations 
for the PRA (5 CFR 1320.4(a)(2) and (c)), the burden associated with 
any information collected subsequent to the administrative action is 
exempt from the requirements of the PRA.
    Comments: Several commenters noted that there was undue burden 
associated with the collection of the 5 functional status measures we 
proposed and are finalizing, as they perceive the data items that 
inform these measures to be duplicative of existing items contained 
within the IRF-PAI.
    Response: We have addressed these concerns under the comment and 
response section of the functional status measure proposals in sections 
IX.G.1. through IX.G.5. of this final rule.
    Comment: Several commenters were concerned with the time and cost 
of updating electronic medical records systems in order to capture the 
new data items related to functional status. Some commenters noted that 
CMS only accounted for the time for the IRF-PAI and not the time for 
documentation in a patient's EMR to support the IRF-PAI information.
    Response: While we applaud the use of EMRs to support the capture 
of IRF-PAI data, we do not require them. We issue free software which 
allows providers to capture and submit the required IRF-PAI data to us. 
Free downloads of the Inpatient Rehabilitation Validation and Entry 
(IRVEN) software product are available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Software.html. We additionally provide data 
submission specifications which allow providers to integrate our 
requirements into their existing electronic systems; however, this is 
solely a business decision on the part of the provider. For the burden 
of EMR documentation, we do not account for the burden of documenting 
data that is considered a routine part of clinical practice.

XIII. Regulatory Impact Analysis

A. Statement of Need

    This final rule updates the IRF prospective payment rates for FY 
2016 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 final rule also 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.
    Furthermore, this final rule also adopts policy changes under the 
statutory discretion afforded to the Secretary under section 1886(j) of 
the Act. Specifically, we adopt an IRF-specific market basket, provide 
for a 1-year phase-in for the revised wage index changes for all IRFs, 
provide a 3-year phase-out of the rural adjustment for certain IRFs, 
and revise and update the quality measures and reporting requirements 
under the IRF quality reporting program.

B. Overall Impacts

    We have examined the impacts of this final 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 final rule with economically significant effects ($100 million or 
more in any 1 year). We estimate the total impact of the policy updates 
described in this final rule by comparing the estimated payments in FY 
2016 with those in FY 2015. This analysis results in an estimated $135 
million increase for FY 2016 IRF PPS payments. As a result, this final 
rule is designated as economically ``significant'' under section 
3(f)(1) of Executive Order 12866, and hence a major rule under the 
Congressional

[[Page 47132]]

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 $7.5 million to $38.5 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 and updated on July 14, 2014.) 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 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 
26, we estimate that the net revenue impact of this final rule on all 
IRFs is to increase estimated payments by approximately 1.8 percent. 
However, we find that certain individual IRF providers would be 
expected to experience revenue impacts greater than 3 percent. We 
estimate that approximately 3 IRFs that would transition from urban to 
rural status as a result of the changes to the delineation of CBSAs 
issued in OMB Bulletin No. 13-01 will gain the 14.9 percent rural 
adjustment, and will therefore experience net increases in IRF PPS 
payments of 16.4 percent. As a result, we anticipate this final rule 
will have a net positive impact on 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 604 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 final rule will not 
have a significant impact (not greater than 3 percent) on a substantial 
number of rural hospitals based on the data of the 145 rural units and 
12 rural hospitals in our database of 1,135 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 2015, that threshold level is approximately 
$144 million. This final rule will not mandate spending costs on state, 
local, or tribal governments, in the aggregate, or by the private 
sector, of greater than $144 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, this final 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 final rule sets forth policy changes and updates to the IRF 
PPS rates contained in the FY 2015 IRF PPS final rule (79 FR 45872). 
Specifically, this final rule introduces an IRF-specific market basket. 
This final rule also updates the CMG relative weights and average 
length of stay values, the wage index, and the outlier threshold for 
high-cost cases. This final rule applies a MFP adjustment to the FY 
2016 IRF 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 2016 IRF market basket increase factor in accordance with 
sections 1886(j)(3)(C)(ii)(II) and -(D)(iv) of the Act. Further, this 
final rule contains revisions to the IRF quality reporting requirements 
that are expected to result in some additional financial effects on 
IRFs. In addition, section IX of this final 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 changes and updates described in 
this final rule will be a net estimated increase of $135 million in 
payments to IRF providers. This estimate 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 XIII.C.9. of 
this final rule). The impact analysis in Table 26 of this final rule 
represents the projected effects of the updates to IRF PPS payments for 
FY 2016 compared with the estimated IRF PPS payments in FY 2015. 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 2016, we are adopting standard annual 
revisions described in this final 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 2016 IRF 
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 2016 IRF 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 2016, relative to FY 2015, 
will be approximately $135 million.
    This estimate is derived from the application of the FY 2016 IRF 
market basket increase factor, as reduced by a

[[Page 47133]]

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 $130 million. 
Furthermore, there is an additional estimated $5 million increase in 
aggregate payments to IRFs due to the update to the outlier threshold 
amount. Outlier payments are estimated to increase from approximately 
2.9 percent in FY 2015 to 3.0 percent in FY 2016. Therefore, summed 
together, we estimate that these updates will result in a net increase 
in estimated payments of $135 million from FY 2015 to FY 2016.
    The effects of the updates that impact IRF PPS payment rates are 
shown in Table 26. The following updates that affect the IRF PPS 
payment rates are discussed separately below:
     The effects of the update to the outlier threshold amount, 
from approximately 2.9 percent to 3.0 percent of total estimated 
payments for FY 2016, consistent with section 1886(j)(4) of the Act.
     The effects of the annual market basket update (using the 
IRF 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)(ii)(II) and -(D)(iv) of the Act.
     The effects of applying the budget-neutral labor-related 
share and wage index adjustment, as required under section 1886(j)(6) 
of the Act.
     The effects of the 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 FY 
2016 payment changes relative to the estimated FY 2015 payments.
2. Description of Table 26
    Table 26 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 26 shows the overall impact on the 1,135 IRFs included in the 
analysis.
    The next 12 rows of Table 26 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 978 IRFs located in 
urban areas included in our analysis. Among these, there are 739 IRF 
units of hospitals located in urban areas and 239 freestanding IRF 
hospitals located in urban areas. There are 157 IRFs located in rural 
areas included in our analysis. Among these, there are 145 IRF units of 
hospitals located in rural areas and 12 freestanding IRF hospitals 
located in rural areas. There are 401 for-profit IRFs. Among these, 
there are 347 IRFs in urban areas and 54 IRFs in rural areas. There are 
661 non-profit IRFs. Among these, there are 568 urban IRFs and 93 rural 
IRFs. There are 73 government-owned IRFs. Among these, there are 63 
urban IRFs and 10 rural IRFs.
    The remaining four parts of Table 26 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 final rule 
to the facility categories listed are shown in the columns of Table 26. 
The description of each column is as follows:
     Column (1) shows the facility classification categories.
     Column (2) shows the number of IRFs in each category in 
our FY 2014 analysis file.
     Column (3) shows the number of cases in each category in 
our FY 2014 analysis file.
     Column (4) shows the estimated effect of the adjustment to 
the outlier threshold amount.
     Column (5) shows the estimated effect of the 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 update to the 
IRF labor-related share and wage index, in a budget-neutral manner. 
This represents the effect of using the most recent wage data 
available, without taking into account the revised OMB delineations. 
That is, the impact represented in this column is solely that of 
updating from the FY 2015 wage index to the FY 2016 wage index without 
any changes to the OMB delineations.
     Column (7) shows the estimated effect of adopting the 
updated OMB delineations for wage index purposes for FY 2016 with the 
blended FY 2016 wage index.
     Column (8) shows the estimated effect of applying the 
adjustment factor to payments to IRFs in rural areas. It includes the 
proposed 3 year budget-neutral phase-out of the rural adjustment for 
rural IRFs that are becoming urban IRFs due to the revised OMB 
delineations.
     Column (9) shows the estimated effect of the update to the 
CMG relative weights and average length of stay values, in a budget-
neutral manner.
     Column (10) compares our estimates of the payments per 
discharge, incorporating all of the policies reflected in this final 
rule for FY 2016 to our estimates of payments per discharge in FY 2015.
    The average estimated increase for all IRFs is approximately 1.8 
percent. This estimated net increase includes the effects of the IRF 
market basket increase factor for FY 2016 of 2.4 percent, reduced by a 
productivity adjustment of 0.5 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.

[[Page 47134]]

It also includes the approximate 0.1 percent overall increase in 
estimated IRF outlier payments from the update to the outlier threshold 
amount. Since we are making the 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.

                                                         Table 26--IRF Impact Table for FY 2016
                                                          [Columns 4 through 10 in percentage]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  IRF
                                             Number of   Number of               Market      Wage                  Change in                    Total
          Facility classification               IRFs       cases     Outlier     basket     index       CBSA         rural      CMG Weights    percent
                                                                                  \1\                           adjustment \2\                  change
(1)                                                 (2)        (3)        (4)        (5)        (6)        (7)             (8)          (9)         (10)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total.....................................        1,135    393,178        0.1        1.7        0.0        0.0             0.0          0.0          1.8
Urban unit................................          739    181,087        0.2        1.7        0.1        0.0             0.0          0.0          1.9
Rural unit................................          145     22,904        0.1        1.7        0.1       -0.2             0.3          0.0          2.0
Urban hospital............................          239    185,036        0.0        1.7       -0.1        0.1             0.0          0.0          1.7
Rural hospital............................           12      4,151        0.0        1.7        0.0       -0.7             0.0         -0.1          0.9
Urban For-Profit..........................          347    172,770        0.1        1.7        0.0        0.0             0.0          0.0          1.7
Rural For-Profit..........................           54      9,677        0.1        1.7       -0.1       -0.4             0.2         -0.1          1.4
Urban Non-Profit..........................          568    174,551        0.1        1.7        0.0        0.1             0.0          0.0          2.0
Rural Non-Profit..........................           93     15,778        0.1        1.7        0.2       -0.3             0.3          0.0          2.1
Urban Government..........................           63     18,802        0.1        1.7       -0.4        0.0            -0.1          0.0          1.4
Rural Government..........................           10      1,600        0.1        1.7        0.0       -0.4             0.0          0.0          1.5
Urban.....................................          978    366,123        0.1        1.7        0.0        0.0             0.0          0.0          1.8
Rural.....................................          157     27,055        0.1        1.7        0.1       -0.3             0.3          0.0          1.8
CBSA Change:
    Urban to Urban........................          959    362,019        0.1        1.7        0.0        0.0             0.0          0.0          1.8
    Rural to Rural........................          154     26,467        0.1        1.7        0.1       -0.3             0.0          0.0          1.6
    Urban to Rural........................            3        588        0.2        1.7        0.7        0.8            12.4          0.2         16.4
    Rural to Urban........................           19      4,104        0.1        1.7        0.5        1.4            -3.7          0.0         -0.1
Urban by region:
    Urban New England.....................           31     16,864        0.1        1.7        0.9       -0.2             0.0          0.1          2.6
    Urban Middle Atlantic.................          143     58,190        0.1        1.7        0.2        0.4             0.0          0.0          2.4
    Urban South Atlantic..................          146     69,975        0.1        1.7       -0.4       -0.1            -0.1          0.0          1.2
    Urban East North Central..............          173     51,912        0.1        1.7        0.2       -0.1             0.0          0.0          2.0
    Urban East South Central..............           54     25,119        0.1        1.7       -0.5       -0.1             0.0          0.0          1.1
    Urban West North Central..............           73     19,092        0.1        1.7        0.0        0.0             0.0          0.1          1.9
    Urban West South Central..............          179     73,556        0.1        1.7       -0.8        0.0             0.0          0.0          0.9
    Urban Mountain........................           77     25,788        0.1        1.7        0.8       -0.1             0.0          0.0          2.5
    Urban Pacific.........................          102     25,627        0.2        1.7        1.1       -0.1             0.0          0.0          2.9
Rural by region:
    Rural New England.....................            5      1,278        0.2        1.7        0.8       -0.1             0.0          0.0          2.6
    Rural Middle Atlantic.................           12      1,809        0.1        1.7        1.9       -2.1             0.0          0.1          1.7
    Rural South Atlantic..................           17      4,282        0.1        1.7       -0.1       -0.3             0.4         -0.1          1.7
    Rural East North Central..............           31      5,170        0.1        1.7       -0.3        0.1             1.0          0.0          2.8
    Rural East South Central..............           18      3,255        0.1        1.7       -0.3       -0.2             0.0          0.0          1.4
    Rural West North Central..............           23      2,881        0.2        1.7        0.2       -0.1             0.0          0.1          2.0
    Rural West South Central..............           42      7,462        0.1        1.7        0.0       -0.5             0.0          0.0          1.2
    Rural Mountain........................            7        736        0.3        1.7       -0.4       -0.1             0.0          0.0          1.6
    Rural Pacific.........................            2        182        0.6        1.7        0.8        0.0             0.0         -0.1          3.0
Teaching status:
    Non-teaching..........................        1,032    351,348        0.1        1.7        0.0        0.0             0.0          0.0          1.7
    Resident to ADC less than 10%.........           61     28,997        0.1        1.7        0.3       -0.2             0.0          0.1          2.0
    Resident to ADC 10%-19%...............           32     11,253        0.2        1.7        0.5        0.3             0.0          0.0          2.8
    Resident to ADC greater than 19%......           10      1,580        0.1        1.7        0.1       -0.3             0.0         -0.1          1.5

[[Page 47135]]

 
Disproportionate share patient percentage
 (DSH PP):
    DSH PP = 0%...........................           34      4,850        0.2        1.7       -0.2       -0.1             0.0          0.1          1.7
    DSH PP <5%............................          172     62,562        0.1        1.7       -0.2        0.3             0.0          0.0          1.9
    DSH PP 5%-10%.........................          326    133,750        0.1        1.7       -0.1        0.0             0.1          0.0          1.7
    DSH PP 10%-20%........................          376    133,463        0.1        1.7        0.1       -0.1            -0.1          0.0          1.8
    DSH PP greater than 20%...............          227     58,553        0.1        1.7        0.2       -0.1             0.0          0.0          1.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This column reflects the impact of the IRF market basket increase factor for FY 2016 (2.4 percent), reduced by 0.5 percentage point for the
  productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) of the Act, and reduced by 0.2 percentage point in accordance with sections
  1886(j)(3)(C)(ii)(II) and (D)(iv) of the Act.
\2\ Providers changing from urban to rural status will receive a 14.9 percent rural adjustment, and providers changing from rural to urban status will
  receive \2/3\ of the 14.9 percent rural adjustment in FY 2016. For those changing from urban to rural, the total impact shown is affected by the
  outlier threshold increasing, which results in smaller outlier payments as part of the total payments. For those changing from rural to urban status,
  the outlier threshold is being lowered by \2/3\ of 14.9 percent, which results in more providers being eligible for outlier payments, increasing the
  outlier portion of their total payments.

3. Impact of the Update to the Outlier Threshold Amount
    The estimated effects of the update to the outlier threshold 
adjustment are presented in column 4 of Table 26. In the FY 2015 IRF 
PPS final rule (79 FR 45872), we used FY 2013 IRF claims data (the 
best, most complete data available at that time) to set the outlier 
threshold amount for FY 2015 so that estimated outlier payments would 
equal 3 percent of total estimated payments for FY 2015.
    For the FY 2016 IRF PPS proposed rule, we used preliminary FY 2014 
IRF claims data, and, based on that preliminary analysis, we estimated 
that IRF outlier payments as a percentage of total estimated IRF 
payments would be 3.2 percent in FY 2015 (80 FR 23367). As we typically 
do between the proposed and final rules each year, we updated our FY 
2014 IRF claims data to ensure that we are using the most recent 
available data in setting IRF payments. Therefore, based on updated 
analysis of the most recent IRF claims data for this final rule, we now 
estimate that IRF outlier payments as a percentage of total estimated 
IRF payments are 2.9 percent in FY 2015. Thus, we are adjusting the 
outlier threshold amount in this final rule to set total estimated 
outlier payments equal to 3 percent of total estimated payments in FY 
2016. The estimated change in total IRF payments for FY 2016, 
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 outlier adjustment update (as shown in column 4 
of Table 26) 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 0.6 percent for rural IRFs 
in the Pacific region.
4. Impact of the Market Basket Update to the IRF PPS Payment Rates
    The estimated effects of the market basket update to the IRF PPS 
payment rates are presented in column 5 of Table 26. In the aggregate 
the update would result in a net 1.7 percent increase in overall 
estimated payments to IRFs. This net increase reflects the estimated 
IRF market basket increase factor for FY 2016 of 2.4 percent, reduced 
by a 0.5 percentage point productivity adjustment as required by 
section 1886(j)(3)(C)(ii)(I) of the Act, and further 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.
5. Impact of the CBSA Wage Index and Labor-Related Share
    In column 6 of Table 26, we present the effects of the budget-
neutral update of the wage index and labor-related share without taking 
into account the revised OMB delineations or the effects of the 1-year 
phase-in of the wage index changes due to the revised OMB delineations, 
which are presented separately in the next column. The 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 changes in the two have a combined effect on payments 
to providers. As discussed in section VI.E. of this final rule, we will 
increase the labor-related share from 69.294 percent in FY 2015 to 71.0 
percent in FY 2016.
6. Impact of the Updated OMB Delineations
    In column 7 of Table 26, we present the effects of the revised OMB 
delineations, and the transition to the new delineations using the 
blended wage index.
    In the aggregate, since these 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 
updates will affect overall estimated payments to IRFs. However, we 
estimate that these updates will have small distributional effects. For 
example, we estimate the largest increase in payments from the update 
to the CBSA wage index and labor-related share of 0.4 percent for urban 
IRFs in the Middle Atlantic region. We estimate the largest decrease in 
payments from the update to the CBSA wage index and labor-related share 
to be a 2.1 percent decrease for rural IRFs in the Middle Atlantic 
region.

[[Page 47136]]

7. Impact of the Phase-Out of the Rural Adjustment for IRFs 
Transitioning From Rural to Urban Designations
    In column 8 of Table 26, we present the effects 3-year phase-out of 
the rural adjustment for IRFs transitioning from rural to urban status 
under the new CBSA delineations. Under the IRF PPS, IRFs located in 
rural areas receive a 14.9 percent adjustment to their payment rates to 
account for the higher costs incurred in treating beneficiaries in 
rural areas. Under the new CBSA delineations, we estimate that 19 IRFs 
will transition from rural to urban status for purposes of the IRF PPS 
wage index adjustment in FY 2016. Without the phase-out of the rural 
adjustment, these 19 IRFs would experience an automatic 14.9 percent 
decrease in payments as a result of this change from rural to urban 
status in FY 2016. To mitigate the effects of this relatively large 
decrease in payments, we will phase-out the rural adjustment for these 
providers over a 3-year period, as discussed in more detail in section 
VI. of this final rule. Thus, these IRF would receive two thirds of the 
rural adjustment in FY 2016, one third of the rural adjustment in FY 
2017, and none of the rural adjustment in FY 2018, thus giving these 
IRFs time to adjust to the reduced payments.
    Column 8 shows the effect on providers of this budget-neutral 
phase-out of the rural adjustment for IRFs transitioning from rural to 
urban status in FY 2016. Under this policy, these providers would only 
experience a reduction in payments of one third of the 14.9 percent 
rural adjustment in FY 2016. As we propose to implement this phase-out 
in a budget-neutral manner, it does not affect aggregate payments to 
IRFs, but we estimate that this policy would have small effects on the 
distribution of payments to IRFs. The largest increase in payments to 
IRFs as a result of the interaction of the rural adjustment with the 
changes to the CBSA delineations is a 12.4 percent increase to 3 IRFs 
that transition from urban to rural status under the new CBSA 
delineations. These 3 IRFs will receive the full 14.9 percent rural 
adjustment for FY 2016. The largest decrease in payments to IRFs as a 
result of this policy change is a 3.7 percent decrease in payments to 
IRFs that transition from rural to urban status under the new CBSA 
delineations. This is a result of these providers only receiving two 
thirds of the 14.9 percent rural adjustment for FY 2016. We note that 
the decrease in payments to these providers is substantially lessened 
from what it otherwise would have been as a result of the phase-out of 
the rural adjustment for these IRFs.
8. Impact of the Update to the CMG Relative Weights and Average Length 
of Stay Values
    In column 9 of Table 26, we present the effects of the 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 0.1 percent increase for rural IRFs in the 
Middle Atlantic and West North Central regions, and urban IRFs in the 
New England and West North Central regions. Rural IRFs in the South 
Atlantic and Pacific regions are estimated to experience a 0.1 percent 
decrease in payments due to the CMG relative weights change.
9. Effects of Requirements for the IRF QRP for FY 2018
    In accordance with section 1886(j)(7) of the Act, we will implement 
a 2 percentage point reduction in the FY 2016 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 IX.P. 
of this final rule, we discuss the finalized method for applying the 2 
percentage point reduction to IRFs that fail to meet the IRF QRP 
requirements. At the time that this analysis was prepared, 91, or 
approximately 8 percent, of the 1166 active Medicare-certified IRFs did 
not receive the full annual percentage increase for the FY 2015 annual 
payment update determination. Information is not available to determine 
the precise number of IRFs that will not meet the requirements to 
receive the full annual percentage increase for the FY 2016 payment 
determination.
    In section IX.L. of this final rule, we discuss our finalized 
policy to suspend the previously finalized data accuracy validation 
policy for IRFs. While we cannot estimate the increase in the number of 
IRFs that will meet IRF QRP compliance standards at this time, we 
believe that this number will increase due to the temporary suspension 
of this policy. Thus, we estimate that the suspension of this policy 
will decrease impact on overall IRF payments, by increasing the rate of 
compliance, in addition to decreasing the cost of the IRF QRP to each 
IRF provider by approximately $47,320 per IRF, which was the estimated 
cost to each IRF provider to the implement the previously finalized 
policy.
    In section IX.F. of this final rule, we are finalizing two quality 
measures that have already been adopted for the IRF QRP: (1) All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502), to establish the newly NQF-endorsed status of this measures; 
and (2) Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short-Stay) (NQF #0678), to establish its use as a 
cross-setting measure that addresses the domain of skin integrity, as 
required by the IMPACT Act of 2014. The All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge from IRFs (NQF #2502) is a Medicare 
claims-based measure; because claims-based measures can be calculated 
based on data that are already reported to the Medicare program for 
payment purposes, we believe there will be no additional impact as a 
result of this measure. We also believe that there will be no 
additional burden associated with our proposal of the measure Percent 
of Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short-Stay) (NQF #0678), which was finalized to establish its use as a 
cross-setting measure that meets the IMPACT Act requirement of adding a 
quality measure that stratifies the domain of skin integrity, as IRFs 
are already submitting quality data related to this measure.
    In section VIII.G. of this final rule, we are also finalizing the 
adoption of 6 new quality measures. The 6 finalized quality measures 
are: (1) An application of Percent of Residents Experiencing One or 
More Falls with Major Injury (Long Stay) (NQF #0674); (2) an 
application of Percent of LTCH Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631; endorsed on July 23, 2015); (3) IRF Functional Outcome Measure: 
Change in Self-Care Score for Medical Rehabilitation Patients (NQF 
#2633; under review); (4) IRF Functional Outcome Measure: Change in 
Mobility Score for Medical Rehabilitation Patients (NQF #2634; under 
review); (5) IRF Functional Outcome Measure: Discharge Self-Care Score 
for Medical Rehabilitation Patients (NQF #2635; under review); and (6) 
IRF Functional Outcome Measure: Discharge Mobility Score for Medical 
Rehabilitation Patients (NQF #2636; endorsed on July 23, 2015). 
Additionally, we have finalized that data for these six measures will 
be collected and reported using the IRF-PAI (version 1.4). The total 
cost related to the six finalized

[[Page 47137]]

measures is estimated at $21,239.33 per IRF annually, or $24,042,291.01 
for all IRFs annually. This is an average increase of 124 percent to 
all IRF providers over the burden discussed in the FY 2015 IRF PPS 
final rule (79 FR 45935), which included all quality measures that IRFs 
are required to report under the QRP with the exception of six new 
quality measures finalized in this final rule.
    We intend to continue 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, IRF provider announcements, Web site postings, CMS 
Open Door Forums, and general and technical help desks.
    We did not receive any comment on the regulatory analysis, and are 
finalizing the analysis, as is.

D. Alternatives Considered

    The following is a discussion of the alternatives considered for 
the IRF PPS updates contained in this final 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. In recent years, IRF PPS payment 
rates have been updated by the RPL market basket. Thus, we did consider 
updating payments using the RPL market basket increase factor for FY 
2016. However, as stated in section VI. of this final rule, we believe 
the use of an IRF market basket that reflects the cost structure of the 
universe of IRF providers is a technical improvement over the use of 
the RPL market basket. The RPL market basket reflects the input costs 
of two additional provider types: Inpatient Psychiatric Facilities and 
Long-term Care Hospitals; and also only includes data from freestanding 
providers. On the other hand, the IRF market basket reflects the input 
costs of only IRF providers. We also received support from several 
commenters on our proposal to replace the RPL market basket with an IRF 
market basket. Additionally, some commenters expressed concerns 
regarding our proposed methodology for deriving compensation related 
costs for hospital-based providers from the cost report. In response to 
the technical comments received, we have adjusted the methodology for 
deriving the wages and salaries and employee benefits for hospital-
based IRFs. Based on these reasons, we are updating payments for FY 
2016 using the market basket increase factor based on the IRF market 
basket, with slight methodological changes to the cost weights from the 
proposed rule. In addition, as noted previously in this final 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 
2016, 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 2016. Thus, in accordance with 
section 1886(j)(3)(C) of the Act, we are updating the IRF federal 
prospective payments in this final rule by 1.7 percent (which equals 
the 2.4 percent estimated IRF market basket increase factor for FY 2016 
reduced by a 0.5 percentage point productivity adjustment as required 
by section 1886(j)(3)(C)(ii)(I) of the Act and further reduced by 0.2 
percentage point). If we had instead continued to use the RPL market 
basket, the final update for the FY 2016 IRF federal prospective 
payments would have also been 1.7 percent (which equals the 2.4 percent 
estimated RPL market basket increase factor for FY 2016 reduced by a 
0.5 percentage point productivity adjustment and further reduced by 0.2 
percentage point).
    We considered maintaining the existing CMG relative weights and 
average length of stay values for FY 2016. 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 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 
2016. However, as discussed in more detail in the FY 2015 final rule 
(79 FR 45872), 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 the previous changes.
    We considered maintaining the existing outlier threshold amount for 
FY 2016. However, analysis of updated FY 2014 data indicates that 
estimated outlier payments would be lower than 3 percent of total 
estimated payments for FY 2016, by approximately 0.1 percent, unless we 
updated the outlier threshold amount. Consequently, we are adjusting 
the outlier threshold amount in this final 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 
2016.
    We considered a number of options for implementing the new CBSA 
designations. Overall, we believe implementing the new OMB delineations 
would result in wage index values being more representative of the 
actual costs of labor in a given area. Further, we recognize that some 
providers (10 percent) would have a higher wage index due to our 
proposed implementation of the new labor market area delineations. 
However, we also recognize that more providers (16 percent) would 
experience decreases in wage index values as a result of our proposed 
implementation of the new labor market area delineations. In prior 
years, we have provided for transition periods when adopting changes 
that have significant payment implications, particularly large negative 
impacts. As discussed in the FY 2006 IRF PPS final rule (70 FR 47921 
through 47926), we evaluated several options to ease the transition to 
the new CBSA system.
    In implementing the new CBSA delineations for FY 2016, we continue 
to have similar concerns as those expressed in the FY 2006 IRF PPS 
final rule. While we believe that implementing the latest OMB labor 
market area delineations would create a more accurate wage index 
system, we recognize that IRFs may experience decreases in their wage 
index as a result of the labor market area changes. Our analysis for 
the FY 2016 IRF PPS final rule indicated that a majority of IRFs either 
expect no change in the wage index or an increase in the wage index 
based on the new CBSA delineations. However, we found that 188 
facilities will experience a decline in their wage index with 29 
facilities experiencing a decline of 5 percent or more based on the 
CBSA changes. Therefore, we believe it would be appropriate to 
consider, as we did in FY 2006, whether or not a transition period 
should be used to implement these changes to the wage index.
    We considered having no transition period and fully implementing 
the new OMB delineations beginning in FY 2016. This would mean that we 
would adopt the revised OMB delineations for all IRF providers on 
October 1, 2015. However, this would not provide any time for IRF 
providers to adapt to the new OMB delineations. As previously 
discussed, more IRFs would experience a decrease in wage index due to

[[Page 47138]]

implementation of the new OMB delineations than would experience an 
increase. Thus, we believe that it would be appropriate to provide for 
a transition period to mitigate the resulting short-term instability 
and negative impacts on these IRF providers, and to provide time for 
these IRFs to adjust to their new labor market area delineations.
    Furthermore, in light of the comments received during the FY 2006 
IRF PPS proposed rule (70 FR 30238 through 30240) to adopt the new CBSA 
definitions without a transition period, we continue to believe that a 
transition period is appropriate. Therefore, we will use a similar 
transition methodology to that used in FY 2006. Specifically, for the 
FY 2016 IRF PPS, we are adopting a budget-neutral 1-year transition 
policy. All IRF providers will receive a 1-year blended wage index 
using 50 percent of their FY 2016 wage index based on the new OMB 
delineations and 50 percent of their FY 2016 wage index based on the 
OMB delineations used in FY 2015. We will apply this 1-year blended 
wage index in FY 2016 for all geographic areas to assist providers in 
adapting to these changes. We believe a 1-year, 50/50 blend will 
mitigate the short-term instability and negative payment impacts due to 
the implementation of the new OMB delineations. This transition policy 
will be for a 1-year period, going into effect October 1, 2016, and 
continuing through September 30, 2017.
    For the reasons previously discussed and based on similar concerns 
to those we expressed during the FY 2006 rulemaking cycle to the 
adoption of the new CBSA definitions, we are adopting a 3-year budget-
neutral phase-out of the rural adjustment for the group of IRFs that 
during FY 2015 were designated as rural and for FY 2016 are designated 
as urban under the new CBSA system. This is in addition to implementing 
a 1-year blended wage index for all IRFs. We considered having no 
transition, but found that a multi-year transition policy would best 
provide a sufficient buffer for rural IRFs that may experience a 
reduction in payments due to being designated as urban. We believe that 
the incremental reduction of the FY 2015 rural adjustment is 
appropriate to mitigate a significant reduction in per case payment. 
Based on similar concerns to those we expressed during the FY 2006 
rulemaking cycle to the proposed adoption of the new CBSA definitions, 
we considered different multi-year transition policies to provide a 
sufficient buffer for rural IRFs that may experience a reduction in 
payments due to being designated as urban. However, fewer IRFs (19) 
will be impacted by the transition from rural to urban status than were 
affected in FY 2006 (34). Additionally, the FY 2016 rural adjustment of 
14.9 percent is less than the FY 2006 rural adjustment of 21.3 percent. 
Therefore, we do not believe a transition period longer than three 
years would be appropriate. We believe a 3-year budget-neutral phase-
out of the rural adjustment will appropriately mitigate the adverse 
payment impacts for these IRFs while also ensuring that payment rates 
for these providers are set accurately and appropriately.

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 27, we have prepared an accounting statement showing 
the classification of the expenditures associated with the provisions 
of this final rule. Table 27 provides our best estimate of the increase 
in Medicare payments under the IRF PPS as a result of the updates 
presented in this final rule based on the data for 1,135 IRFs in our 
database. In addition, Table 27 presents the costs associated with the 
new IRF quality reporting program for FY 2016.

Table 27--Accounting Statement: Classification of Estimated Expenditures
------------------------------------------------------------------------
 Change in estimated transfers from FY 2015 IRF PPS to FY 2016 IRF PPS:
-------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $135 million.
From Whom to Whom?.....................  Federal Government to IRF
                                          Medicare Providers.
------------------------------------------------------------------------
FY 2016 Cost to Updating the Quality
 Reporting Program:
------------------------------------------------------------------------
Category                                 Costs
------------------------------------------------------------------------
Cost for IRFs to Submit Data for the     $24,042,291.01.
 Quality Reporting Program.
------------------------------------------------------------------------

F. Conclusion

    Overall, the estimated payments per discharge for IRFs in FY 2016 
are projected to increase by 1.8 percent, compared with the estimated 
payments in FY 2015, as reflected in column 10 of Table 26. IRF 
payments per discharge are estimated to increase by 1.8 percent in both 
urban and rural areas, compared with estimated FY 2015 payments. 
Payments per discharge to rehabilitation units are estimated to 
increase 1.9 percent in urban areas and 2.0 in rural areas. Payments 
per discharge to freestanding rehabilitation hospitals are estimated to 
increase 1.7 percent in urban areas and 0.9 percent in rural areas.
    Overall, IRFs are estimated to experience a net increase in 
payments as a result of the policies in this final rule. The largest 
payment increase is estimated to be a 3.0 percent increase for rural 
IRFs located in the Pacific region.
    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
1. The authority citation for part 412 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106-113 (113 Stat. 
1501A-332), sec. 1206 of Pub. L. 113-67, and sec. 112 of Pub. L. 
113-93.


0
2. Section 412.634 is added to read as follows:

[[Page 47139]]

Sec.  412.634  Requirements under the Inpatient Rehabilitation Facility 
(IRF) Quality Reporting Program (QRP).

    (a) Participation. (1) For the FY 2018 payment determination and 
subsequent years, an IRF must begin reporting data under the IRF QRP 
requirements no later than the first day of the calendar quarter 
subsequent to 30 days after the date on its CMS Certification Number 
(CCN) notification letter, which designates the IRF as operating in the 
Certification and Survey Provider Enhanced Reports (CASPER) system.
    (2) [Reserved]
    (b) Submission Requirements and Payment Impact. (1) IRFs must 
submit to CMS data on measures specified under section 1886(j)(7)(D), 
1899B(c)(1), and 1899B(d)(1) of the Act, as applicable. Sections 
1886(j)(7)(C) and (j)(7)(F)(iii) of the Act require each IRF to submit 
data on the specified measures in the form and manner, and at a time, 
specified by the Secretary.
    (2) As required by section 1886(j)(7)(A)(i) of the Act, any IRF 
that does not submit data in accordance with section 1886(j)(7)(C) and 
(F) of the Act for a given fiscal year will have its annual update to 
the standard Federal rate for discharges for the IRF during the fiscal 
year reduced by two percentage points.
    (c) Exception and Extension Requirements. (1) An IRF may request 
and CMS may grant exceptions or extensions to the quality data 
reporting requirements, for one or more quarters, when there are 
certain extraordinary circumstances beyond the control of the IRF.
    (2) An IRF must request an exception or extension within 30 days of 
the date that the extraordinary circumstances occurred.
    (3) Exception and extension requests must be submitted to CMS from 
the IRF by sending an email to [email protected] 
containing all of the following information:
    (i) IRF CMS Certification Number (CCN).
    (ii) IRF Business Name.
    (iii) IRF Business Address.
    (iv) CEO or CEO-designated personnel contact information including 
name, telephone number, title, email address, and mailing address. (The 
address must be a physical address, not a post office box.)
    (v) IRF's reason for requesting the exception or extension.
    (vi) Evidence of the impact of extraordinary circumstances, 
including, but not limited to, photographs, newspaper, and other media 
articles.
    (vii) Date when the IRF believes it will be able to again submit 
IRF QRP data and a justification for the proposed date.
    (4) CMS may grant exceptions or extensions to IRFs without a 
request if it is determined that one or more of the following has 
occurred:
    (i) An extraordinary circumstance affects an entire region or 
locale.
    (ii) A systemic problem with one of CMS's data collection systems 
directly affected the ability of an IRF to submit data.
    (5) Email is the only form of submission that will be accepted. Any 
reconsideration requests received through another channel will not be 
considered as a valid exception or extension request.
    (d) Reconsideration. (1) IRFs found to be non-compliant with the 
quality reporting requirements for a particular fiscal year will 
receive a letter of non-compliance through the Quality Improvement and 
Evaluation System Assessment Submission and Processing (QIES-ASAP) 
system, as well as through the United States Postal Service. IRFs must 
submit reconsideration requests no later than 30 calendar days after 
the date identified on the letter of non-compliance.
    (2) Reconsideration requests must be submitted to CMS by sending an 
email to [email protected] containing all of the 
following information:
    (i) IRF CCN.
    (ii) IRF Business Name.
    (iii) IRF Business Address.
    (iv) CEO or CEO-designated personnel contact information including 
name, telephone number, title, email address, and mailing address. (The 
address must be a physical address, not a post office box.)
    (v) CMS identified reason(s) for non-compliance from the non-
compliance letter.
    (vi) Reason(s) for requesting reconsideration.
    (3) The request for reconsideration must be accompanied by 
supporting documentation demonstrating compliance. This documentation 
must be submitted electronically as an attachment to the 
reconsideration request email. Any request for reconsideration that 
does not contain sufficient evidence of compliance with the IRF QRP 
requirements will be denied.
    (4) Email is the only form of submission that will be accepted. Any 
reconsideration requests received through another channel will not be 
considered as a valid exception or extension request.
    (5) The QIES-ASAP system and the United States Postal Service will 
be the two mechanisms used to distribute each IRF's compliance letter, 
as well as our final decision regarding any reconsideration request 
received from the IRF.
    (e) Appeals. (1) An IRF may appeal the decision made by CMS on its 
reconsideration request by filing with the Provider Reimbursement 
Review Board (PRRB) under 42 CFR part 405, subpart R.
    (2) [Reserved]

Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: July 29, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-18973 Filed 7-31-15; 4:15 pm]
 BILLING CODE 4120-01-P