[Federal Register Volume 87, Number 146 (Monday, August 1, 2022)]
[Rules and Regulations]
[Pages 47038-47092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-16225]



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Vol. 87

Monday,

No. 146

August 1, 2022

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 2023 and Updates to the IRF Quality 
Reporting Program; Final Rule

  Federal Register / Vol. 87 , No. 146 / Monday, August 1, 2022 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

[CMS-1767-F]
RIN 0938-AU78


Medicare Program; Inpatient Rehabilitation Facility Prospective 
Payment System for Federal Fiscal Year 2023 and Updates to the IRF 
Quality Reporting Program

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) 
2023. As required by statute, this final rule includes the 
classification and weighting factors for the IRF prospective payment 
system's case-mix groups and a description of the methodologies and 
data used in computing the prospective payment rates for FY 2023. In 
addition, this final rule codifies CMS' existing teaching status 
adjustment policy through amendments to the regulation text and updates 
and clarifies the IRF teaching policy with respect to IRF hospital 
closures and displaced residents. This rule establishes a permanent cap 
policy to smooth the impact of year-to-year changes in IRF payments 
related to decreases in the IRF wage index. This final rule also 
includes updates for the IRF Quality Reporting Program (QRP).

DATES: 
    Effective date: These regulations are effective on October 1, 2022.
    Applicability dates: The updated IRF prospective payment rates are 
applicable for IRF discharges occurring on or after October 1, 2022, 
and on or before September 30, 2023 (FY 2023).

FOR FURTHER INFORMATION CONTACT: 
    Gwendolyn Johnson, (410) 786-6954, for general information.
    Catie Cooksey, (410) 786-0179, for information about the IRF 
payment policies and payment rates.
    Kim Schwartz, (410) 786-2571, and Gwendolyn Johnson, (410) 786-
6954, for information about the IRF coverage policies.
    Ariel Cress, (410) 786-8571, for information about the IRF quality 
reporting program.

SUPPLEMENTARY INFORMATION:

Availability of Certain Information Through the Internet on the CMS 
Website

    The IRF prospective payment system (IRF PPS) Addenda along with 
other supporting documents and tables referenced in this final rule are 
available through the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS.
    We note that prior to 2020, each rule or notice issued under the 
IRF PPS has included a detailed reiteration of the various regulatory 
provisions that have affected the IRF PPS over the years. That 
discussion, along with detailed background information for various 
other aspects of the IRF PPS, is now available on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS.

I. Executive Summary

A. Purpose

    This final rule updates the prospective payment rates for IRFs for 
FY 2023 (that is, for discharges occurring on or after October 1, 2022, 
and on or before September 30, 2023) 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 final rule includes the 
classification and weighting factors for the IRF PPS's case-mix groups 
(CMGs) and a description of the methodologies and data used in 
computing the prospective payment rates for FY 2023. This final rule 
codifies CMS' existing teaching status adjustment policy through 
amendments to the regulation text and updates and clarifies the IRF 
teaching policy with respect to IRF hospital closures and displaced 
residents. We also establish a permanent cap policy to smooth the 
impact of year-to-year changes in IRF payments related to decreases in 
the IRF wage index. This rule also requires quality data reporting on 
all IRF patients beginning with the FY 2026 IRF QRP and amends the 
regulations consistent with the requirements. This final rule also 
corrects an error in the regulations text at Sec.  412.614(d)(2).

B. Summary of Major Provisions

    In this final rule, we use the methods described in the FY 2022 IRF 
PPS final rule (86 FR 42362) to update the prospective payment rates 
for FY 2023 using updated FY 2021 IRF claims and the most recent 
available IRF cost report data, which is FY 2020 IRF cost report data. 
This final rule codifies CMS' existing teaching status adjustment 
policy through amendments to the regulation text and updates and 
clarifies the IRF teaching status adjustment policy with respect to IRF 
hospital closures and displaced residents.
    We establish a permanent cap policy to smooth the impact of year-
to-year changes in IRF payments related to decreases in the IRF wage 
index. This final rule also requires quality reporting data for all IRF 
patients beginning with the FY 2026 IRF QRP and revises the regulations 
accordingly.

C. Summary of Impact
[GRAPHIC] [TIFF OMITTED] TR01AU22.000

II. Background

A. Statutory Basis and Scope for IRF PPS Provisions

    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. 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) and we provided a general description of the IRF PPS for FYs 
2007 through 2019 in the FY 2020 IRF PPS final rule (84 FR 39055 
through 39057). A general description of the IRF PPS for FYs 2020 
through 2022, along with detailed background information for various 
other aspects of the IRF PPS, is now available on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS.
    Under the IRF PPS from FY 2002 through FY 2005, the prospective 
payment rates were computed across 100 distinct CMGs, as described in 
the FY 2002 IRF PPS final rule (66 FR 41316). 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 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 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.
    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), 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's) 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; rebasing and revising 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) (hereinafter 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.
    The regulatory history previously included in each rule or notice 
issued under the IRF PPS, including a general description of the IRF 
PPS for FYs 2007 through 2020, is available on the CMS website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS.
    In late 2019,\1\ the United States began responding to an outbreak 
of a virus named ``SARS-CoV-2'' and the disease it causes, which is 
named ``coronavirus disease 2019'' (abbreviated ``COVID-19''). Due to 
our prioritizing efforts in support of containing and combatting the 
PHE for COVID-19, and devoting significant resources to that end, we 
published two interim final rules with comment period affecting IRF 
payment and conditions for participation. The interim final rule with 
comment period (IFC) entitled, ``Medicare and Medicaid Programs; Policy 
and Regulatory Revisions in Response to the COVID-19 Public Health 
Emergency'', published on April 6, 2020 (85 FR 19230) (hereinafter 
referred to as the April 6, 2020 IFC), included certain changes to the 
IRF PPS medical supervision requirements at 42 CFR 412.622(a)(3)(iv) 
and 412.29(e) during the PHE for COVID-19. In addition, in the April 6, 
2020 IFC, we removed the post-admission physician evaluation 
requirement at Sec.  412.622(a)(4)(ii) for all IRFs during the PHE for 
COVID-19. In the FY 2021 IRF PPS final rule, to ease documentation and 
administrative burden, we also removed the post-admission physician 
evaluation documentation requirement at 42 CFR 412.622(a)(4)(ii) 
permanently beginning in FY 2021.
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    \1\ Patel A., Jernigan D.B. Initial Public Health Response and 
Interim Clinical Guidance for the 2019 Novel Coronavirus Outbreak--
United States, December 31, 2019-February 4, 2020. MMWR Morb Mortal 
Wkly Rep 2020;69:140-146. DOI http://dx.doi.org/10.15585/mmwr.mm6905e1.
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    A second IFC entitled, ``Medicare and Medicaid Programs, Basic 
Health Program, and Exchanges; Additional Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency and Delay 
of Certain Reporting Requirements for the Skilled Nursing Facility 
Quality Reporting Program'' was published on May 8, 2020 (85 FR 27550) 
(hereinafter referred to as the May 8, 2020 IFC). Among other changes, 
the May 8, 2020 IFC included a waiver of the ``3-hour rule'' at Sec.  
412.622(a)(3)(ii) to reflect the waiver required by section 3711(a) of 
the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) 
(Pub. L. 116-136, enacted on March 27, 2020). In the May 8, 2020 IFC, 
we also modified certain IRF coverage and classification requirements 
for freestanding IRF hospitals to relieve acute care hospital capacity 
concerns in States (or regions, as applicable) experiencing a surge 
during the PHE for COVID-19. In

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addition to the policies adopted in our IFCs, we responded to the PHE 
with numerous blanket waivers \2\ and other flexibilities,\3\ some of 
which are applicable to the IRF PPS.
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    \2\ CMS, ``COVID-19 Emergency Declaration Blanket Waivers for 
Health Care Providers,'' (updated Feb. 19 2021) (available at 
https://www.cms.gov/files/document/summary-covid-19-emergency-declaration-waivers.pdf).
    \3\ CMS, ``COVID-19 Frequently Asked Questions (FAQs) on 
Medicare Fee-for-Service (FFS) Billing,'' (updated March 5, 2021) 
(available at https://www.cms.gov/files/document/03092020-covid-19-faqs-508.pdf).
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B. Provisions of the PPACA and the Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA) Affecting the IRF PPS in FY 2012 
and Beyond

    The Patient Protection and Affordable Care Act (PPACA) (Pub. L. 
111-148) was enacted on March 23, 2010. The Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised 
several provisions of the PPACA, was enacted on March 30, 2010. In this 
final rule, we refer to the two statutes collectively as the ``Patient 
Protection and Affordable Care Act'' or ``PPACA''.
    The PPACA 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 PPACA also added section 1886(j)(3)(C)(ii)(I) of 
the Act (providing for a ``productivity adjustment'' for FY 2012 and 
each subsequent FY). The productivity adjustment for FY 2023 is 
discussed in section VI.B. of this final rule. Section 
1886(j)(3)(C)(ii)(II) of the Act provides that the application of the 
productivity adjustment to the market basket update may result in an 
update that is less than 0.0 for a FY and in payment rates for a FY 
being less than such payment rates for the preceding FY.
    Sections 3004(b) of the PPACA and section 411(b) of the MACRA (Pub. 
L. 114-10, enacted on April 16, 2015) also addressed the IRF PPS. 
Section 3004(b) of PPACA reassigned the previously designated section 
1886(j)(7) of the Act to section 1886(j)(8) of the Act and inserted a 
new section 1886(j)(7) of the Act, which contains requirements for the 
Secretary to establish a QRP 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 to the 
market basket increase factor otherwise applicable to an IRF (after 
application of paragraphs (C)(iii) and (D) of section 1886(j)(3) of the 
Act) for a FY if the IRF does not comply with the requirements of the 
IRF QRP for that FY. Application of the 2-percentage point reduction 
may result in an update that is less than 0.0 for a FY and in payment 
rates for a FY being less than such payment rates for the preceding FY. 
Reporting-based reductions to the market basket increase factor are not 
cumulative; they only apply for the FY involved. Section 411(b) of the 
MACRA amended section 1886(j)(3)(C) of the Act by adding paragraph 
(iii), which required us to apply for FY 2018, after the application of 
section 1886(j)(3)(C)(ii) of the Act, an increase factor of 1.0 percent 
to update the IRF prospective payment rates.

C. Operational Overview of the Current IRF PPS

    As described in the FY 2002 IRF PPS final rule (66 FR 41316), upon 
the admission and discharge of a Medicare Part A fee-for-service (FFS) 
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 
Advantage (MA) patient, as described in the FY 2010 IRF PPS final rule 
(74 FR 39762 and 74 FR 50712). 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 five-character CMG number. The 
first character is an alphabetic character that indicates the 
comorbidity tier. The last four characters are numeric characters that 
represent the distinct CMG number. A free download of the Grouper 
software is available on the CMS website at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Software.html. The Grouper software is also embedded in the internet 
Quality Improvement and Evaluation System (iQIES) User tool available 
in iQIES at https://www.cms.gov/medicare/quality-safety-oversight-general-information/iqies.
    Once a Medicare Part A FFS patient is discharged, the IRF submits a 
Medicare claim as a Health Insurance Portability and Accountability Act 
of 1996 (HIPAA) (Pub. L. 104-191, enacted on August 21, 1996)-compliant 
electronic claim or, if the Administrative Simplification Compliance 
Act of 2002 (ASCA) (Pub. L. 107-105, enacted on December 27, 2002) 
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 MA 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 (type of bill (TOB) 111), which 
includes Condition Code 04 to their MAC. This will ensure that the MA 
days are included in the hospital's Supplemental Security Income (SSI) 
ratio (used in calculating the IRF LIP adjustment) for FY 2007 and 
beyond. Claims submitted to Medicare must comply with both ASCA and 
HIPAA.
    Section 3 of the ASCA amended section 1862(a) of the Act by adding 
paragraph (22), which requires the Medicare program, subject to section 
1862(h) of the Act, to deny payment under Part A or Part B for any 
expenses for items or services for which a claim is submitted other 
than in an electronic form specified by the Secretary. Section 1862(h) 
of the Act, in turn, provides that the Secretary shall waive such 
denial in situations in which there is no method available for the 
submission of claims in an electronic form or the entity submitting the 
claim is a small provider. In addition, the Secretary also has the 
authority to waive such denial in such unusual cases as the Secretary 
finds appropriate. For more information, see the ``Medicare Program; 
Electronic Submission of Medicare Claims'' final rule (70 FR 71008). 
Our instructions for the limited number of Medicare claims submitted on 
paper are available at http://www.cms.gov/manuals/downloads/clm104c25.pdf.
    Section 3 of the ASCA operates in the context of the administrative 
simplification provisions of HIPAA, which include, among others, the 
requirements for transaction standards and code sets codified in 45 CFR 
part 160 and part 162, subparts A and I through R (generally known as 
the Transactions Rule). The Transactions Rule requires covered 
entities, including covered healthcare 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

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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).

D. Advancing Health Information Exchange

    The Department of Health and Human Services (HHS) has a number of 
initiatives designed to encourage and support the adoption of 
interoperable health information technology and to promote nationwide 
health information exchange to improve health care and patient access 
to their electronic health information.
    To further interoperability in post-acute care settings, CMS and 
the Office of the National Coordinator for Health Information 
Technology (ONC) participate in the Post-Acute Care Interoperability 
Workgroup (PACIO) to facilitate collaboration with interested parties 
from the industry to develop Fast Healthcare Interoperability 
Resources[supreg] (FHIR) standards. These standards could support the 
exchange and reuse of patient assessment data derived from the post-
acute care (PAC) setting assessment tools, such as the Minimum Data Set 
(MDS), Inpatient Rehabilitation Facility-Patient Assessment Instrument 
(IRF-PAI), Long Term Care Hospital (LTCH) Continuity Assessment Record 
and Evaluation (CARE) Data Set (LCDS), Outcome and Assessment 
Information Set (OASIS), and other sources.4 5 The PACIO 
Project has focused on HL7 FHIR implementation guides for functional 
status, cognitive status and new use cases on advance directives, re-
assessment timepoints, and Speech, Language, Swallowing, Cognitive 
communication and Hearing (SPLASCH) pathology.\6\ We encourage PAC 
provider and health information technology (IT) vendor participation as 
the efforts advance.
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    \4\ HL7 FHIR Release 4. Available at https://www.hl7.org/fhir/.
    \5\ HL7 FHIR. PACIO Functional Status Implementation Guide. 
Available at https://paciowg.github.io/functional-status-ig/.
    \6\ The IMPACT Act (Pub. L. 113-185) requires the reporting of 
standardized patient assessment data with regard to quality measures 
and standardized patient assessment data elements. The Act also 
requires the submission of data pertaining to measure domains of 
resource use, and other domains. In addition, the IMPACT Act 
requires assessment data to be standardized and interoperable to 
allow for exchange of the data among post-acute providers and other 
providers. The Act intends for standardized post-acute care data to 
improve Medicare beneficiary outcomes through shared-decision 
making, care coordination, and enhanced discharge planning.
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    The CMS Data Element Library (DEL) continues to be updated and 
serves as a resource for PAC assessment data elements and their 
associated mappings to health IT standards, such as Logical Observation 
Identifiers Names and Codes (LOINC) and Systematized Nomenclature of 
Medicine Clinical Terms (SNOMED).\7\ The DEL furthers CMS' goal of data 
standardization and interoperability. These interoperable data elements 
can reduce provider burden by allowing the use and exchange of 
healthcare data; supporting provider exchange of electronic health 
information for care coordination, person-centered care; and supporting 
real-time, data driven, clinical decision-making.8 9 
Standards in the DEL can be referenced on the CMS website (https://del.cms.gov/DELWeb/pubHome) and in the ONC Interoperability Standards 
Advisory (ISA). The 2022 ISA is available at https://www.healthit.gov/isa/sites/isa/files/inline-files/2022-ISA-Reference-Edition.pdf.
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    \7\ Centers for Medicare & Medicaid Services. Newsroom. Fact 
sheet: CMS Data Element Library Fact Sheet. June 21, 2018. Available 
at https://www.cms.gov/newsroom/fact-sheets/cms-data-element-library-fact-sheet.
    \8\ Centers for Medicare & Medicaid Services. Health Informatics 
and Interoperability Group. Policies and Technology for 
Interoperability and Burden Reduction. Available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Interoperability/index.
    \9\ Bates, David W, and Lipika Samal. ``Interoperability: What 
Is It, How Can We Make It Work for Clinicians, and How Should We 
Measure It in the Future?.'' Health services research vol. 53,5 
(2018): 3270-3277. doi:10.1111/1475-6773.12852.
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    The 21st Century Cures Act (Cures Act), (Pub L. 114-255, enacted 
December 13, 2016) requires HHS to take new steps to enable the 
electronic sharing of health information and to further 
interoperability for providers and settings across the care continuum. 
Section 4003 of the Cures Act required HHS to take steps to advance 
interoperability through the development of a trusted exchange 
framework and common agreement aimed at establishing full network-to-
network exchange of health information nationally. On January 18, 2022, 
ONC announced a significant milestone by releasing the Trusted Exchange 
Framework and Common Agreement Version 1. The Trusted Exchange 
Framework is a set of non-binding principles for health information 
exchange, and the Common Agreement is a contract that advances those 
principles. The Common Agreement and the incorporated by reference 
Qualified Health Information Network Technical Framework Version 1 
establish the technical infrastructure model and governing approach for 
different health information networks and their users to securely share 
clinical information with each other, all under commonly agreed to 
terms. The Common Agreement follows a network-of-networks structure, 
which allows for connection at different levels and is inclusive of 
many different types of entities, such as health information networks, 
healthcare practices, hospitals, public health agencies, and Individual 
Access Services (IAS) Providers.\10\ For more information, we refer 
readers to https://www.healthit.gov/topic/interoperability/trusted-exchange-framework-and-common-agreement.
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    \10\ The Common Agreement defines Individual Access Services 
(IAS) as ``with respect to the Exchange Purposes definition, the 
services provided utilizing the Connectivity Services, to the extent 
consistent with Applicable Law, to an Individual with whom the QHIN, 
Participant, or Subparticipant has a Direct Relationship to satisfy 
that Individual's ability to access, inspect, or obtain a copy of 
that Individual's Required Information that is then maintained by or 
for any QHIN, Participant, or Subparticipant.'' The Common Agreement 
defines ``IAS Provider'' as: ``Each QHIN, Participant, and 
Subparticipant that offers Individual Access Services.'' See Common 
Agreement for Nationwide Health Information Interoperability Version 
1, at 7 (Jan. 2022), https://www.healthit.gov/sites/default/files/page/2022-01/Common_Agreement_for_Nationwide_Health_Information_Interoperability_Version_1.pdf.
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    We invited providers to learn more about these important 
developments and how they are likely to affect IRFs.
    Comment: We received one comment on the information provided in 
this section. The commenter expressed support for efforts across HHS to 
advance health information technology exchange and encouraged use of a 
standard set of data by providers and health IT vendors, including 
efforts through the PACIO project. The commenter also noted a recent 
National Academies report \11\ describing

[[Page 47042]]

technology barriers for post-acute care settings due to not being 
eligible for previous incentives to purchase technology certified under 
the ONC Health IT Certification Program. The commenter supported 
recommendations in the report for HHS to pursue financial incentives 
for post-acute care settings to adopt certified health IT in order to 
enable health information exchange.
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    \11\ The National Imperative to Improve Nursing Home Quality: 
Honoring Our Commitment to Residents, Families & Staff, see https://nap.nationalacademies.org/catalog/26526/the-national-imperative-to-improve-nursing-home-quality-honoring-our.
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    Response: We will take this comment into consideration as we 
coordinate with Federal partners, including ONC, on interoperability 
initiatives, and to inform future rulemaking.

III. Summary of Provisions of the Proposed Rule

    In the FY 2023 IRF PPS proposed rule (the proposed rule), we 
proposed to update the IRF PPS for FY 2023 and the IRF QRP for FY 2025.
    The proposed policy changes and updates to the IRF prospective 
payment rates for FY 2023 are as follows:
     Update the CMG relative weights and average length of stay 
values for FY 2023, in a budget neutral manner, as discussed in section 
IV. of the FY 2023 IRF PPS proposed rule (87 FR 20222 through 20227).
     Update the IRF PPS payment rates for FY 2023 by the market 
basket increase factor, based upon the most current data available, 
with a productivity adjustment required by section 1886(j)(3)(C)(ii)(I) 
of the Act, as described in section V. of the FY 2023 IRF PPS proposed 
rule (87 FR 20227 through 20228).
     Describe the establishment of a permanent cap policy in 
order to smooth the impact of year-to-year changes in IRF payments 
related to certain changes to the IRF wage index, as discussed in 
section V. of the FY 2023 IRF PPS proposed rule (87 FR 20230 through 
20231).
     Update the FY 2023 IRF PPS payment rates by the FY 2023 
wage index and the labor-related share in a budget-neutral manner, as 
discussed in section V. of the FY 2023 IRF PPS proposed rule (87 FR 
20228 through 20229).
     Describe the calculation of the IRF standard payment 
conversion factor for FY 2023, as discussed in section V. of the FY 
2023 IRF PPS proposed rule (87 FR 20232).
     Update the outlier threshold amount for FY 2023, as 
discussed in section VI. of the FY 2023 IRF PPS proposed rule (87 FR 
20235 through 20236).
     Update the cost-to-charge ratio (CCR) ceiling and urban/
rural average CCRs for FY 2023, as discussed in section VI. of the FY 
2023 IRF PPS proposed rule (87 FR 20236).
     Describe the proposed codification of CMS' existing 
teaching status adjustment policy and proposed clarifications and 
updates of the IRF teaching status adjustment policy with respect to 
IRF hospital closures and displaced residents, as discussed in section 
VII. of the FY 2023 IRF PPS proposed rule (87 FR 20236 through 20239).
     Solicit comments on the methodology used to update the 
facility-level adjustment factors, as discussed in section VIII. of the 
FY 2023 IRF PPS proposed rule.
     Solicit comments on the IRF transfer payment policy, as 
discussed in section IX. of the FY 2023 IRF PPS proposed rule.
    We also proposed updates to the IRF QRP and requested information 
in section VII. of the proposed rule as follows:
     Update data reporting requirements under the IRF QRP 
beginning with FY 2025.
     Request information on (1) future measure concepts under 
consideration for the IRF QRP; (2) inclusion of a future dQM for the 
IRF QRP; and (3) CMS' overarching principles for measuring healthcare 
disparities across CMS Quality Programs, including the IRF QRP.

IV. Analysis of and Responses to Public Comments

    We received 61 timely responses from the public, many of which 
contained multiple comments on the FY 2023 IRF PPS proposed rule (87 FR 
20218). 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.

A. Miscellaneous Comments

    Comment: We received several additional comments that were outside 
the scope of the FY 2023 IRF PPS proposed rule. Specifically, we 
received comments regarding Medicare beneficiaries and vaccine status, 
the inclusion of recreational therapy, and general patient access 
issues in post-acute care settings.
    Response: We thank the commenters for bringing these issues to our 
attention, and will take these comments into consideration for 
potential policy refinements.

V. Update to the Case-Mix Group (CMG) Relative Weights and Average 
Length of Stay (ALOS) Values for FY 2023

    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.
    We proposed to update the CMG relative weights and ALOS values for 
FY 2023. Typically, we use the most recent available data to update the 
CMG relative weights and average lengths of stay. For FY 2023, we 
proposed to use the FY 2021 IRF claims and FY 2020 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 2021 IRF cost 
report data are available for analysis, but the majority of the FY 2021 
IRF claims data are available for analysis. We also proposed that if 
more recent data became available after the publication of the proposed 
rule and before the publication of the final rule, we would use such 
data to determine the FY 2023 CMG relative weights and ALOS values in 
the final rule.
    We proposed to apply these data using the same methodologies that 
we have used to update the CMG relative weights and ALOS values each FY 
since we implemented an update to the methodology. The detailed CCR 
data from the cost reports of IRF provider units of primary acute care 
hospitals is used for this methodology, 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 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

[[Page 47043]]

relative weights, using the hospital-specific relative value method.
    Step 4. We normalize the FY 2023 CMG relative weights to the same 
average CMG relative weight from the CMG relative weights implemented 
in the FY 2022 IRF PPS final rule (86 FR 42362).
    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 2023 in such a way that total 
estimated aggregate payments to IRFs for FY 2023 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. We note that, 
as we typically do, we updated our data between the FY 2023 IRF PPS 
proposed and final rules to ensure that we use the most recent 
available data in calculating IRF PPS payments. This updated data 
reflects a more complete set of claims for FY 2021 and additional cost 
report data for FY 2020. To calculate the appropriate budget neutrality 
factor for use in updating the FY 2023 CMG relative weights, we use the 
following steps:
    Step 1. Calculate the estimated total amount of IRF PPS payments 
for FY 2023 (with no changes to the CMG relative weights).
    Step 2. Calculate the estimated total amount of IRF PPS payments 
for FY 2023 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 of 
0.9979 that would maintain the same total estimated aggregate payments 
in FY 2023 with and without the changes to the CMG relative weights.
    Step 4. Apply the budget neutrality factor from step 3 to the FY 
2023 IRF PPS standard payment amount after the application of the 
budget-neutral wage adjustment factor.
    In section VI.E. of this final rule, we discuss the use of the 
existing methodology to calculate the standard payment conversion 
factor for FY 2023.
    In Table 2, ``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 ALOS values for each CMG and 
tier for FY 2023. The ALOS 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.
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[[Page 47046]]


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    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 2023 
would affect particular CMG relative weight values, which would affect 
the overall distribution of payments within CMGs and tiers. We note 
that, because we implement the CMG relative weight revisions in a 
budget-neutral manner (as previously described), total estimated 
aggregate payments to IRFs for FY 2023 are not affected as a result of 
the CMG relative weight revisions. However, the revisions affect the 
distribution of payments within CMGs and tiers.
[GRAPHIC] [TIFF OMITTED] TR01AU22.005

BILLING CODE 4120-01-C
    As shown in Table 3, 98.9 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 revisions for FY 2023. The changes in the ALOS values for FY 2023, 
compared with the FY 2022 ALOS values, are small and do not show any 
particular trends in IRF length of stay patterns.
    The comments we received on our proposed updates to the CMG 
relative weights and ALOS values for FY 2023 and our responses are 
summarized below.
    Comment: Some commenters were supportive of our proposed updates to 
the CMG relative weights and average length of stay values using the 
most recent data available. A few commenters expressed concern 
regarding reductions in the relative weight values associated with 
stroke and traumatic spinal cord injury and suggested that this would 
inappropriately reduce payments. One commenter requested that CMS not 
reduce any CMG relative weight values or LOS values until after the 
COVID-19 PHE has ended and urged CMS to ensure that adequate payment is 
provided for all cases.
    Response: We appreciate these commenters' support for the proposed 
updates. The CMG relative weights are updated each year in a budget 
neutral manner, thus leading to increases in some CMG relative weights 
and corresponding decreases in other CMG relative weights. We note 
that, as we typically do, we have updated our data between the FY 2023 
IRF PPS proposed and this final rule to ensure that we use the most 
recent available data in calculating IRF PPS payments. We have reviewed 
the increases and decreases in the CMG relative weights for this final 
rule and we believe that these changes accurately reflect our best 
estimates of the relative costs of caring for different types of 
patients in the IRF setting for FY 2023 and that it would not be 
appropriate to prevent decreases in these values until after the PHE 
has ended. The relative weights associated with these CMGs include both 
increases and decreases, and the variation for FY 2023 is similar to 
the typical year-to-year variation that we observe. The relative weight 
values are updated each year to ensure that the IRF case mix system is 
as reflective as possible of the current IRF population, thereby 
ensuring that IRF payments appropriately reflect the relative costs of 
caring for all types of IRF patients.
    Comment: A commenter expressed concern that the CMG relative 
weights do not address patient severity and are not aligned with recent 
trends in coding practices. This commenter also recommended that CMS 
revise the CMGs and the underlying data collection to account for new 
populations of cases.
    Response: We believe that these data accurately reflect the 
severity of the IRF patient population and the associated costs of 
caring for these patients in the IRF setting. The CMG relative weights 
are updated each year based on the most recent available data for the 
full population of IRF Medicare fee-for-service beneficiaries. This 
ensures that the IRF case mix system is as reflective as possible of 
changes in the IRF patient populations and the associated coding 
practices.
    After consideration of the comments we received, we are finalizing 
our proposal to update the CMG relative weights and ALOS values for FY 
2023, as shown in Table 2 of this final rule. These updates are 
effective for FY 2023,

[[Page 47048]]

that is, for discharges occurring on or after October 1, 2022 and on or 
before September 30, 2023.

VI. FY 2023 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 for which payment is 
made under the IRF PPS. According to section 1886(j)(3)(A)(i) of the 
Act, the increase factor shall be used to update the IRF prospective 
payment rates for each FY. Section 1886(j)(3)(C)(ii)(I) of the Act 
requires the application of the productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Thus, in the proposed rule, 
we proposed to update the IRF PPS payments for FY 2023 by a market 
basket increase factor as required by section 1886(j)(3)(C) of the Act 
based upon the most current data available, with a productivity 
adjustment as required by section 1886(j)(3)(C)(ii)(I) of the Act.
    We have utilized various market baskets through the years in the 
IRF PPS. For a discussion of these market baskets, we refer readers to 
the FY 2016 IRF PPS final rule (80 FR 47046).
    In FY 2016, we finalized the use of a 2012-based IRF market basket, 
using Medicare cost report data for both freestanding and hospital-
based IRFs (80 FR 47049 through 47068). Beginning with FY 2020, we 
finalized a rebased and revised IRF market basket to reflect a 2016 
base year. The FY 2020 IRF PPS final rule (84 FR 39071 through 39086) 
contains a complete discussion of the development of the 2016-based IRF 
market basket.

B. FY 2023 Market Basket Update and Productivity Adjustment

    For FY 2023 (that is, beginning October 1, 2022 and ending 
September 30, 2023), we proposed to update the IRF PPS payments by a 
market basket increase factor as required by section 1886(j)(3)(C) of 
the Act, with a productivity adjustment as required by section 
1886(j)(3)(C)(ii)(I) of the Act. For FY 2023, we proposed to use the 
same methodology described in the FY 2022 IRF PPS final rule (86 FR 
42373 through 42376).
    Consistent with historical practice, we proposed to estimate the 
market basket update for the IRF PPS for FY 2023 based on IHS Global 
Inc.'s (IGI's) forecast using the most recent available data. Based on 
IGI's fourth quarter 2021 forecast with historical data through the 
third quarter of 2021, the proposed 2016-based IRF market basket 
increase factor for FY 2023 was projected to be 3.2 percent. We also 
proposed that if more recent data became available after the 
publication of the proposed rule and before the publication of the 
final rule (for example, a more recent estimate of the market basket 
update or productivity adjustment), we would use such data, if 
appropriate, to determine the FY 2023 market basket update in this 
final rule.
    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. 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 multifactor productivity 
(as projected by the Secretary for the 10-year period ending with the 
applicable FY, year, cost reporting period, or other annual period) 
(the ``productivity adjustment''). The U.S. Department of Labor's 
Bureau of Labor Statistics (BLS) publishes the official measures of 
productivity for the U.S. economy. We note that previously the 
productivity measure referenced in section 1886(b)(3)(B)(xi)(II) of the 
Act, was published by BLS as private nonfarm business multifactor 
productivity. Beginning with the November 18, 2021 release of 
productivity data, BLS replaced the term multifactor productivity (MFP) 
with total factor productivity (TFP). BLS noted that this is a change 
in terminology only and will not affect the data or methodology. As a 
result of the BLS name change, the productivity measure referenced in 
section 1886(b)(3)(B)(xi)(II) is now published by BLS as private 
nonfarm business total factor productivity. However, as mentioned 
above, the data and methods are unchanged. Please see www.bls.gov for 
the BLS historical published TFP data. A complete description of IGI's 
TFP projection methodology is available on the CMS website at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch. In addition, in 
the FY 2022 IRF final rule (86 FR 42374), we noted that effective with 
FY 2022 and forward, CMS changed the name of this adjustment to refer 
to it as the productivity adjustment rather than the MFP adjustment.
    Using IGI's fourth quarter 2021 forecast, the 10-year moving 
average growth of TFP for FY 2023 was projected to be 0.4 percent. 
Thus, in accordance with section 1886(j)(3)(C) of the Act, we proposed 
to base the FY 2023 market basket update, which is used to determine 
the applicable percentage increase for the IRF payments, on IGI's 
fourth quarter 2021 forecast of the 2016-based IRF market basket. We 
proposed to then reduce this percentage increase by the estimated 
productivity adjustment for FY 2023 of 0.4 percentage point (the 10-
year moving average growth of TFP for the period ending FY 2023 based 
on IGI's fourth quarter 2021 forecast). Therefore, the proposed FY 2023 
IRF update was equal to 2.8 percent (3.2 percent market basket update 
reduced by the 0.4 percentage point productivity adjustment). 
Furthermore, we proposed that if more recent data became available 
after the publication of the proposed rule and before the publication 
of this final rule (for example, a more recent estimate of the market 
basket and/or productivity adjustment), we would use such data, if 
appropriate, to determine the FY 2023 market basket update and 
productivity adjustment in this final rule.
    Based on the more recent data available for this FY 2023 IRF final 
rule (that is, IGI's second quarter 2022 forecast of the 2016-based IRF 
market basket with historical data through the first quarter of 2022), 
we estimate that the IRF FY 2023 market basket update is 4.2 percent. 
Based on the more recent data available from IGI's second quarter 2022 
forecast, the current estimate of the productivity adjustment for FY 
2023 is 0.3 percentage point. Therefore, the current estimate of the FY 
2023 IRF productivity-adjusted market basket increase factor is equal 
to 3.9 percent (4.2 percent market basket update reduced by 0.3 
percentage point productivity adjustment).
    For FY 2023, the Medicare Payment Advisory Commission (MedPAC) 
recommends that we reduce IRF PPS payment rates by 5 percent.\12\ As 
discussed, and in accordance with sections 1886(j)(3)(C) and 
1886(j)(3)(D) of the Act, the Secretary proposed to update the IRF PPS 
payment rates for FY 2023 by a productivity-adjusted IRF

[[Page 47049]]

market basket increase factor of 2.8 percent. Based on more recent 
data, the current estimate of the productivity-adjusted IRF market 
basket increase factor for FY 2023 is 3.9 percent. 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 2023.
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    \12\ https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_SEC.pdf.
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    We invited public comment on our proposals for the FY 2023 market 
basket update and productivity adjustment. The following is a summary 
of the public comments received on the proposed FY 2023 market basket 
update and productivity adjustment and our responses:
    Comment: Several commenters expressed concern that the proposed 
market basket update is inadequate relative to input price inflation 
experienced by IRFs, particularly as a result of COVID-19. These 
commenters stated the PHE, along with inflation, has significantly 
driven up operating costs. The commenters expressed concern that these 
increased costs are not reflected in the market basket update and 
requested that CMS discuss in the final rule how the agency will 
account for these increased costs. Specifically, some commenters noted 
changes to the labor market, such as increased reliance on contract 
nurses and staff due to shortages. Several commenters also mentioned a 
report by the American Hospital Association, which stated there has 
been significant growth in hospital expenses across labor, drugs, and 
supplies due to recent high inflation.
    One commenter had concerns that the proposed market basket forecast 
is neither accurately nor adequately capturing the unique factors 
influencing the hospital and health care market today in general, and 
the market in which IRFs compete specifically. In particular, the 
commenter was concerned that the methods used to estimate inflation in 
IRF spending are not capturing the pandemic-initiated shocks to the 
health care market that are significantly driving up costs, especially 
labor, across the spectrum of hospital inputs. One commenter noted that 
other payment systems (such as for Medicare Advantage plans) have 
higher increases. Several commenters supported and appreciated that CMS 
would use a more recent projection of the market basket but remained 
concerned that the impacts of the PHE would not be adequately factored 
into the payment rate update.
    Commenters had several different suggestions for addressing these 
concerns. One commenter requested that CMS consider an alternative 
approach that would better align market basket increases with increases 
in cost to treat patients. A few commenters requested that CMS consider 
other methods and data sources to calculate the final rule market 
basket update that would better reflect the rapidly increasing input 
prices facing IRFs. A few commenters requested that CMS deviate from 
its typical methodology to update payments in a manner that addresses 
rising costs and reductions in reimbursement to ensure there are not 
disruptions to IRF services for Medicare beneficiaries. One commenter 
urged CMS to consider the pandemic triggers that do not seem to be 
reflected in the market basket forecast and make a PHE-related 
exception to further increase IRF rates to better adjust FY 2023 
payments to IRFs to account for inflation. Finally, another commenter 
requested that CMS provide a one-time payment adjustment to supplement 
the cost of care.
    Response: We are required to update IRF PPS payments by the market 
basket update adjusted for productivity, as directed by section 
1886(j)(3)(C) of the Act. Specifically, section 1886(j)(3)(C)(i) states 
that the increase factor shall be based on an appropriate percentage 
increase in a market basket of goods and services comprising services 
for which payment is made. We believe the 2016-based IRF market basket 
increase adequately reflects the average change in the price of goods 
and services hospitals purchase in order to provide IRF medical 
services, and is technically appropriate to use as the IRF payment 
update factor. As described in the FY 2020 IRF final rule (84 FR 39072 
through 39089), the IRF market basket is a fixed-weight, Laspeyres-type 
index that measures price changes over time and would not reflect 
increases in costs associated with changes in the volume or intensity 
of input goods and services. As such, the IRF market basket update 
would reflect the prospective price pressures described by the 
commenters as increasing during a high inflation period (such as faster 
wage growth or higher energy prices), but would inherently not reflect 
other factors that might increase the level of costs, such as the 
quantity of labor used or any shifts between contract and staff nurses. 
We note that cost changes (that is, the product of price and 
quantities) would only be reflected when a market basket is rebased and 
the base year weights are updated to a more recent time period.
    We agree with the commenters that recent higher inflationary trends 
have impacted the outlook for price growth over the next several 
quarters. At the time of the FY 2023 IRF proposed rule, based on the 
IHS Global Inc. fourth quarter 2021 forecast with historical data 
through third quarter 2021, IHS Global Inc. forecasted the 2016-based 
IRF market basket update of 3.2 percent for FY 2023 reflecting 
forecasted compensation price growth of 3.8 percent (by comparison, 
compensation price growth in the IRF market basket averaged 2.1 percent 
from 2012-2021). In the FY 2023 IRF PPS proposed rule, we proposed that 
if more recent data became available, we would use such data, if 
appropriate, to derive the final FY 2023 IRF market basket update for 
the final rule. For this final rule, we now have an updated forecast of 
the price proxies underlying the market basket that incorporates more 
recent historical data and reflects a revised outlook regarding the 
U.S. economy and expected price inflation for FY 2023 for IRFs. Based 
on IHS Global Inc.'s second quarter 2022 forecast with historical data 
through the first quarter of 2022, we are projecting a FY 2023 IRF 
market basket update of 4.2 percent (reflecting forecasted compensation 
price growth of 4.8 percent) and a productivity adjustment of 0.3 
percentage point. Therefore, for FY 2023 a final IRF productivity-
adjusted market basket update of 3.9 percent (4.2 percent less 0.3 
percentage point) will be applicable, compared to the 2.8 percent that 
was proposed. We note that the final FY 2023 IRF market basket growth 
rate of 4.2 percent would be the highest market basket update 
implemented in a final rule since the beginning of the IRF PPS.
    Regarding commenters' request that CMS consider other methods and 
data sources to calculate the final rule market basket update, 
including the authority under section 1886(j) of the Act, while we 
generally agree that the Secretary has broad authority under the 
statute to establish the methodology for updating the IRF PPS payments, 
we note that our longstanding policy since the inception of the IRF PPS 
has been to update IRF PPS payments based on an appropriate market 
basket. As discussed earlier in this section of this final rule, the 
market basket used to update IRF PPS payments has been rebased and 
revised over the history of the IRF PPS to reflect more recent data on 
IRF cost structures. The IRF market basket was last rebased in the FY 
2020 IRF final rule using 2016 Medicare cost reports (84 FR 39072 
through 39084), the most recent year of complete data available at the 
time of the rebasing. We note that we did review the most recent 
Medicare cost report data available for IRFs submitted as of March 
2022, which includes data through 2020. The compensation cost weight 
(wages and salaries, employee benefits, and contract labor) estimated

[[Page 47050]]

for 2020 was similar to the cost weight in the 2016-based IRF market 
basket (59 percent). Data through 2021 are incomplete at this time. 
Based on this preliminary analysis, the impact on the cost weights 
through 2020 appear minimal and it is unclear whether any trends 
through 2020 are reflective of sustained shifts in the cost structure 
for IRFs or whether they were temporary as a result of the PHE. 
Therefore, we believe the current 2016-based IRF market basket 
continues to appropriately reflect IRF cost structures. We will 
continue to monitor these data and any changes to the IRF market basket 
will be proposed in future rulemaking. We also note that we did not 
propose to use other methods or data sources to calculate the final 
market basket update for FY 2023, and therefore, we are not finalizing 
such an approach for this final rule.
    Finally, consistent with our proposal, we have used more recent 
data to calculate a final IRF productivity-adjusted market basket 
update of 3.9 percent for FY 2023.
    Lastly, regarding commenters' concerns about payment adequacy under 
the IRF PPS, MedPAC did a full analysis of payment adequacy for IRF 
providers in its March 2022 Report to Congress (https://www.medpac.gov/document/march-2022-report-to-the-congress-medicare-payment-policy/) 
and determined that, even considering the cost increases that have 
occurred as a result of the PHE associated with the COVID-19 pandemic, 
payments to IRFs continue to be more than adequate. Although they 
acknowledged that providers' costs have increased significantly under 
the pandemic, they expect these costs to normalize in subsequent years 
and do not anticipate any long-term effects that warrant inclusion in 
the annual update to IRF payments in FY 2023. In fact, MedPAC 
recommended a 5 percent reduction to IRF PPS payments for FY 2023. 
Given MedPAC's analysis, we believe that payments to IRFs continue to 
be more than adequate and do not believe that adjustments to the FY 
2023 IRF market basket update are needed at this time.
    Comment: One commenter stated that the rising labor costs over the 
last several years mean that IRFs may be particularly undercompensated 
given that the IHS Global Inc. market basket forecast uses more 
generalized hospital goods and services, and fails to account for the 
specialized training and experience IRFs require of their therapists, 
nurses, and other clinicians, who in turn require a higher salary than 
those in a more generalized hospital setting. The commenter also stated 
that services that IRFs provide, such as advanced rehabilitation 
technologies and specialized drugs, may also be outpacing other 
hospital-level settings of care and not properly captured in the market 
basket. The commenter also stated that hospitals have had to increase 
quantities of materials such as PPE, which the commenter stated is not 
captured in the market basket forecasts.
    Response: As described previously, the IRF market basket measures 
price changes (including changes in the prices for wages and salaries) 
over time and would not reflect increases in costs associated with 
changes in the volume or intensity of input goods and services until 
the market basket is rebased. As stated previously, we believe the 
2016-based IRF market basket continues to appropriately reflect IRF 
cost structures. To measure price growth for IRF wages and salaries 
costs, the IRF market basket uses the Employment Cost Index for wages 
and salaries for civilian hospital workers. We believe that this ECI is 
the best available price proxy to account for the occupational skill 
mix within IRFs. We note that we reviewed the Bureau of Labor 
Statistics Occupational Employment Statistics (OES) data for NAICS 
622100 (General Medical and Surgical Hospitals). The OES data are one 
of the primary data sources used to derive the weights for the ECI. In 
2016, the base year of the IRF market basket, a little over 50 percent 
of total estimated salaries (total employment multiplied by mean annual 
wage) for NAICS 622100 was attributed to Health Professional and 
Technical occupations, and approximately 20 percent was attributed to 
Health Service occupations. Therefore, in the absence of IRF-specific 
data, we believe that the highly skilled hospital workforce captured by 
the ECI for hospital workers (inclusive of therapists, nurses, other 
clinicians, etc.) is a reasonable proxy for the compensation component 
of the IRF market basket.
    With regard to additional costs incurred by IRFs for PPE, we 
acknowledge the commenters' concern that the market basket update may 
not reflect certain additional costs incurred during the COVID-19 PHE. 
As stated previously, due to the fixed-weight nature of the index, any 
changes to the quantity of inputs purchased (such as increased PPE as 
stated by the commenter) would not be reflected in the IRF market 
basket update for FY 2023. However, as stated in the FY 2022 IRF PPS 
final rule, Medicare providers may have been eligible for additional 
payments to cover health-care related expenses and lost revenues 
attributed to COVID-19, which were intended to help healthcare 
providers respond to the productivity losses and extra expenses caused 
by the PHE. In accordance with statutory requirements, the Provider 
Relief Fund and American Rescue Plan Act (ARPA) (Pub. L. 117-2, March 
11, 2021) rural payments may not be used to reimburse expenses or 
losses that have been reimbursed from other sources or that other 
sources are obligated to reimburse. Likewise, we do not believe that it 
is appropriate to account for PHE-related costs in our IRF rate setting 
to the extent that such costs were reimbursed by the Provider Relief 
Fund or may be reimbursed by the ARPA Rural Distribution program (86 FR 
42375).
    Comment: Several commenters had concerns with the application of 
the productivity adjustment to the market basket update. A couple of 
commenters expressed concern that the continued application of the 
productivity adjustment further undercuts reimbursement for providers. 
The commenters stated that with higher rates of inflation, the 
currently used TFP measure will prove especially harmful to hospitals. 
A few commenters requested that CMS elaborate on the specific 
productivity gains that are the basis of this proposed reduction to the 
market basket as it does not align with actual hospital experience or 
ongoing losses from the pandemic and a nationwide labor shortage.
    One commenter stated that the assumptions underpinning the 
productivity adjustment are fundamentally flawed and strongly disagrees 
with the continuation of this policy--particularly during the PHE. 
Another commenter referenced CMS Office of the Actuary analysis that 
compares the private non-farm multifactor productivity growth measure 
and a hospital-specific measure (https://www.cms.gov/files/document/productivity-memo.pdf). The commenter urged CMS to consider the 
appropriateness of this reduction in context of payment adequacy for 
IRFs. One commenter requested that CMS monitor the impact productivity 
adjustments have on rehabilitation hospitals and requested that CMS 
provide feedback to Congress (as these were statutorily required under 
the Affordable Care Act), and reduce the productivity adjustment.
    One commenter urged CMS to consider its regulatory authority to 
modify the productivity adjustment or make a PHE related exception in 
its application for the FY 2023 update. Another commenter requested 
that CMS work with Congress to permanently eliminate the reduction to 
hospital

[[Page 47051]]

payments from the productivity adjustment and further requested that 
CMS use its section 1135 waiver authority to remove the productivity 
adjustment for any fiscal year that was covered under public health 
emergency determination (for example, 2020, 2021, and 2022) from the 
calculation of market basket for FY 2023 and any year thereafter that 
the PHE continues.
    Response: Section 1886(j)(3)(C)(ii)(I) of the Act requires the 
application of the productivity adjustment described in section 
1886(b)(3)(xi)(II) of the Act to the IRF PPS market basket increase 
factor. As required by statute, the FY 2023 productivity adjustment is 
derived based on the 10-year moving average growth in economy-wide 
productivity for the period ending FY 2023. We recognize the concerns 
of the commenters regarding the appropriateness of the productivity 
adjustment; however, we are required pursuant to section 
1886(j)(3)(C)(ii)(I) of the Act to apply the specific productivity 
adjustment described here. In addition, with respect to providing 
feedback to Congress, we note that MedPAC annually monitors various 
factors for Medicare providers in terms of profitability and 
beneficiary access to care and reports the findings to Congress on an 
annual basis. As stated previously, based on these findings, CMS 
believes payments to IRFs continue to be more than adequate.
    Regarding the suggestion that CMS consider section 1135 waiver 
authority to remove the productivity adjustment, we do not believe that 
section 1135 authority is available in this circumstance. Section 1135 
of the Act authorizes the Secretary to waive or modify only statutory 
provisions and regulations that pertain to the specific types of 
requirements that are enumerated under section 1135(b) of the Act. 
However, payment requirements, such as the application of the 
productivity adjustment under the IRF PPS, are not one of the types 
enumerated under section 1135(b) of the Act. Therefore, we do not 
believe that section 1135 of the Act would authorize the Secretary to 
waive the application of the productivity adjustment.
    Comment: A commenter stated that given there is no provision to 
correct for forecast error in the market basket update in the IRF PPS, 
CMS should do more to account for the unique inflationary challenges 
currently facing the field. Another commenter stated that the forecast 
error adjustment proposed in the FY 2023 SNF PPS proposed rule is 
indicative of the complexity in accurately accounting for the 
unprecedented challenges driving up costs. The commenter requested CMS 
make an additional increase to the IRF PPS market basket factor to more 
closely match payment rates with the cost of IRF operations. One 
commenter provided a table showing the current estimates of the FY 2021 
and FY 2022 IRF market basket increases (2.7 percent and 3.8 percent, 
respectively) relative to the FY 2021 and FY 2022 IRF market basket 
increases implemented in the final rules (2.4 percent and 2.6 percent, 
respectively). The commenter stated that the FY 2021 and the FY 2022 
market basket increases were underestimated, which suggests the base 
rate for IRF PPS payments for FY 2023 is 1.5 percent too low. The 
commenter stated that this further compounds what the commenter 
characterized to be an inadequate increase for FY 2023.
    Response: Section 1886(j)(3) of the Act requires that the Secretary 
shall determine a prospective payment rate for IRFs and establish an 
increase factor based on an appropriate percentage increase in a market 
basket of goods and services, which means that the update relies on a 
mix of both historical data for part of the period for which the update 
is calculated and forecasted data for the remainder. For instance, the 
FY 2023 market basket update in this final rule reflects historical 
data through the first quarter of CY 2022 and forecasted data through 
the third quarter of CY 2023. While there is currently no mechanism to 
adjust for market basket forecast error in the IRF payment update, the 
forecast error for a market basket update is calculated as the actual 
market basket increase for a given year less the forecasted market 
basket increase. Due to the uncertainty regarding future price trends, 
forecast errors can be both positive and negative. This was the case 
for the FY 2020 IRF forecast error, which was -0.8 percentage point, 
and the FY 2021 IRF forecast error, which was +0.3 percentage point; FY 
2022 historical data is not yet available to calculate a forecast error 
for FY 2022. As noted above, forecast errors reflect both upward and 
downward adjustments, as appropriate. For this final rule, we have 
incorporated more recent historical data and forecasts to capture the 
price and wage pressures facing IRFs and believe it is the best 
available projection of inflation to determine the applicable 
percentage increase for the IRF payments in FY 2023. We disagree with 
the suggestion that the FY 2023 base rates are too low based solely on 
the calculation of a forecast error over a short period of time 
(instead of considering forecast errors over longer periods).
    After consideration of the comments we received, we are finalizing 
a FY 2023 IRF productivity-adjusted market basket increase of 3.9 
percent based on the most recent data available.

C. Labor-Related Share for FY 2023

    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 IRFs' costs that are attributable to wages and wage-related costs, 
of the prospective payment rates computed under section 1886(j)(3) of 
the Act, for area differences in wage levels 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 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 proposed to continue to classify a cost category as labor-
related if the costs are labor-intensive and vary with the local labor 
market.
    Based on our definition of the labor-related share and the cost 
categories in the 2016-based IRF market basket, we proposed to 
calculate the labor-related share for FY 2023 as the sum of the FY 2023 
relative importance of Wages and Salaries, Employee Benefits, 
Professional Fees: Labor-related, Administrative and Facilities Support 
Services, Installation, Maintenance, and Repair Services, All Other: 
Labor-related Services, and a portion of the Capital-Related relative 
importance from the 2016-based IRF market basket. For more details 
regarding the methodology for determining specific cost categories for 
inclusion in the 2016-based IRF labor-related share, see the FY 2020 
IRF PPS final rule (84 FR 39087 through 39089).
    The relative importance reflects the different rates of price 
change for these cost categories between the base year (2016) and FY 
2023. Based on IGI's fourth quarter 2021 forecast of the 2016-based IRF 
market basket, the sum of the FY 2023 relative importance for Wages and 
Salaries, Employee Benefits, Professional Fees: Labor-related, 
Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-related Services 
was 69.4 percent. We proposed that the portion of Capital-Related costs 
that are influenced by the local labor market is 46 percent. Since the 
relative importance for Capital-Related costs was 8.2 percent of the 
2016-based IRF market basket for FY 2023, we proposed to take 46 
percent of 8.2 percent to determine the labor-

[[Page 47052]]

related share of Capital-Related costs for FY 2023 of 3.8 percent. 
Therefore, we proposed a total labor-related share for FY 2023 of 73.2 
percent (the sum of 69.4 percent for the labor-related share of 
operating costs and 3.8 percent for the labor-related share of Capital-
Related costs). We proposed that if more recent data became available 
after publication of the proposed rule and before the publication of 
this final rule (for example, a more recent estimate of the labor-
related share), we would use such data, if appropriate, to determine 
the FY 2023 IRF labor-related share in the final rule.
    Based on IGI's second quarter 2022 forecast of the 2016-based IRF 
market basket, the sum of the FY 2023 relative importance for Wages and 
Salaries, Employee Benefits, Professional Fees: Labor-related, 
Administrative and Facilities Support Services, Installation 
Maintenance & Repair Services, and All Other: Labor-related Services is 
69.2 percent. Since the relative importance for Capital-Related costs 
is 8.1 percent of the 2016-based IRF market basket for FY 2023, we take 
46 percent of 8.1 percent to determine the labor-related share of 
Capital-Related costs for FY 2023 of 3.7 percent. Therefore, the 
current estimate of the total labor-related share for FY 2023 is equal 
to 72.9 percent (the sum of 69.2 percent for the labor-related share of 
operating costs and 3.7 percent for the labor-related share of Capital-
Related costs).
    Table 4 shows the FY 2023 final labor-related share and the FY 2022 
final labor-related share using the 2016-based IRF market basket 
relative importance.
[GRAPHIC] [TIFF OMITTED] TR01AU22.006

    We invited public comments on the proposed labor related share for 
FY 2023. The following is a summary of the public comments received on 
the proposed FY 2023 labor-related share and our responses:
    Comment: One commenter suggested that CMS should consider excluding 
the labor portion of capital costs from the calculation of the labor-
related share for FY 2023 and going forward. The commenter noted that 
each increase to the labor related share percentage penalizes any 
facility that has a wage index less than 1.0 and stated that, across 
this country there is a growing disparity between high-wage and low-
wage States and that limiting the increase in the labor-related share 
helps mitigate the growing disparity.
    Response: We proposed to use the FY 2023 relative importance values 
for the labor-related cost categories from the 2016-based IRF market 
basket because it accounts for more recent data regarding price 
pressures and cost structure of IRFs. This methodology is consistent 
with the determination of the labor-related share since the 
implementation of the IRF PPS. The labor-related cost categories 
reflect IRF costs that are related to, influenced by, or vary with the 
local labor market, which would include a portion of the capital-
related costs. Therefore, we disagree with the commenter's suggestion 
to exclude the labor portion of capital-related costs for FY 2023 and 
going forward. As stated in the FY 2023 IRF proposed rule, we also 
proposed that if more recent data became available, we would use such 
data, if appropriate, to determine the FY 2023 labor-related share for 
the final rule. Based on IHS Global Inc.'s second quarter 2022 forecast 
with historical data through the first quarter of 2022, the FY 2023 
labor-related share for the final rule is 72.9 percent, unchanged from 
the FY 2022 labor-related share.

D. Wage Adjustment for FY 2023

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 2023, we proposed to maintain the policies and methodologies 
described in the FY 2022 IRF PPS final rule (86 FR 42377) related to 
the labor market area definitions and the wage index methodology for 
areas with wage data. Thus, we proposed to use the core based 
statistical areas (CBSAs) labor market area definitions and the FY 2023 
pre-reclassification and pre-floor hospital wage index data. In 
accordance with section 1886(d)(3)(E) of the Act, the FY 2023 pre-
reclassification and pre-floor hospital wage index is based on data 
submitted for hospital cost reporting periods beginning on or after 
October 1, 2018, and before October 1, 2019 (that is, FY 2019 cost 
report data).

[[Page 47053]]

    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 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 2023 IRF 
PPS wage index.
    We invited public comment on our proposals regarding the Wage 
Adjustment for FY 2023.
    The following is a summary of the public comments received on the 
proposed revisions to Wage Adjustment for FY 2023 and our responses:
    Comment: Several commenters suggested that CMS revise the IRF wage 
index to adopt the same geographic reclassification and rural floor 
polices that apply to the IPPS wage index. Additionally, commenters 
stated that the IPPS implemented a policy to address disparities 
between high and low wage index hospitals beginning in FY 2020 and 
requested that CMS adopt a similar adjustment to address wage index 
disparities under the IRF PPS. One commenter also reiterated language 
from the FY 2021 IRF PPS final rule where we previously responded to 
similar comments related to the IRF wage index, noting it was unclear. 
The commenter also requested that CMS release data that would allow 
IRFs to crosswalk the IPPS wage index values after the application of 
the low wage index hospital policy to the IRF PPS wage indices.
    Response: We appreciate the commenters' suggestion to adopt the 
IPPS reclassification and rural floor policies for the IRF wage index. 
As we do not have an IRF-specific wage index, we are unable to 
determine the degree, if any, to which a geographic reclassification 
adjustment or a rural floor policy under the IRF PPS would be 
appropriate. The rationale for our current wage index policies was most 
recently published in the FY 2022 IRF PPS final rule (86 FR 42377 
through 42378) and fully described in the FY 2006 IRF PPS final rule 
(70 FR 47880, 47926 through 47928).
    We appreciate the commenters' suggestion to adopt an adjustment to 
address wage disparities between high and low wage index areas under 
the IRF PPS. As most recently discussed in the FY 2021 IRF PPS final 
rule (85 FR 48424), we would like to note that the IRF wage index is 
derived from IPPS wage data, that is, the pre-reclassification and pre-
floor inpatient PPS (IPPS) wage index discussed above in section D. 
Thus, to the extent that increasing wage index values under the IPPS 
for low wage index hospitals results in those hospitals increasing 
employee compensation, this increase would be reflected in the IPPS 
wage data that the IRF wage index is derived from and likely would 
result in higher wage indices for these areas under the IRF PPS. We 
note that IPPS wage index values are based on historical data and 
typically lag by four years. The hospital cost report data would 
reflect any changes in employee compensation, and as this data would 
become the basis for the IRF wage index in future years, any effects of 
these changes would be extended to the IRF setting.
    Further, we are unable to provide crosswalk tables related to IPPS 
wage index policies. Data pertaining to the FY 2023 IPPS proposed rule 
are available at https://www.cms.gov/medicare/medicare-fee-for-service-payment/acuteinpatientpps. We do not have any additional data on this 
for the IRF PPS.
    After consideration of the comments we received, we are finalizing 
our proposal to continue to use the updated pre-reclassification and 
pre-floor IPPS wage index data develop the FY 2023 IRF PPS wage index.
2. Core-Based Statistical Areas (CBSAs) for the FY 2023 IRF Wage Index
    The wage index used for the IRF PPS is calculated using the pre-
reclassification and pre-floor inpatient PPS (IPPS) 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 CBSAs established by the OMB. The CBSA 
delineations (which were implemented for the IRF PPS beginning with FY 
2016) are based on revised OMB delineations issued on February 28, 
2013, in OMB Bulletin No. 13-01. OMB Bulletin No. 13-01 established 
revised delineations for Metropolitan Statistical Areas, Micropolitan 
Statistical Areas, and Combined Statistical Areas in the United States 
and Puerto Rico based on the 2010 Census, and provided guidance on the 
use of the delineations of these statistical areas using standards 
published in the June 28, 2010 Federal Register (75 FR 37246 through 
37252). We refer readers to the FY 2016 IRF PPS final rule (80 FR 47068 
through 47076) for a full discussion of our implementation of the OMB 
labor market area delineations beginning with the FY 2016 wage index.
    Generally, OMB issues major revisions to statistical areas every 10 
years, based on the results of the decennial census. Additionally, OMB 
occasionally issues updates and revisions to the statistical areas in 
between decennial censuses to reflect the recognition of new areas or 
the addition of counties to existing areas. In some instances, these 
updates merge formerly separate areas, transfer components of an area 
from one area to another, or drop components from an area. On July 15, 
2015, OMB issued OMB Bulletin No. 15-01, which provides minor updates 
to and supersedes OMB Bulletin No. 13-01 that was issued on February 
28, 2013. The attachment to OMB Bulletin No. 15-01 provides detailed 
information on the update to statistical areas since February 28, 2013. 
The updates provided in OMB Bulletin No. 15-01 are based on the 
application of the 2010 Standards for Delineating Metropolitan and 
Micropolitan Statistical Areas to Census Bureau population estimates 
for July 1, 2012 and July 1, 2013.
    In the FY 2018 IRF PPS final rule (82 FR 36250 through 36251), we 
adopted the updates set forth in OMB Bulletin No. 15-01 effective 
October 1, 2017, beginning with the FY 2018 IRF wage index. For a 
complete discussion of the adoption of the updates set forth in OMB 
Bulletin No. 15-01, we refer readers to the FY 2018 IRF PPS final rule. 
In the FY 2019 IRF PPS final rule (83 FR 38527), we continued to use 
the OMB delineations that were adopted beginning with FY 2016 to 
calculate the area wage indexes, with updates set forth in OMB Bulletin 
No. 15-01 that we adopted beginning with the FY 2018 wage index.
    On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which 
provided updates to and superseded OMB Bulletin No. 15-01 that was 
issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 
provide detailed information on the update to statistical areas since 
July 15, 2015, and are based on the application of the 2010 Standards 
for Delineating Metropolitan and Micropolitan Statistical Areas to 
Census Bureau population estimates for July 1, 2014 and July 1, 2015. 
In the FY 2020 IRF PPS final rule (84 FR 39090 through 39091), we 
adopted the updates set forth in OMB Bulletin No. 17-01 effective 
October 1, 2019, beginning with the FY 2020 IRF wage index.
    On April 10, 2018, OMB issued OMB Bulletin No. 18-03, which 
superseded the August 15, 2017 OMB Bulletin No. 17-01, and on September 
14, 2018, OMB issued OMB Bulletin No. 18-04, which superseded the April 
10, 2018 OMB Bulletin No. 18-03. These bulletins established revised

[[Page 47054]]

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 may be obtained at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf.
    To this end, as discussed in the FY 2021 IRF PPS proposed (85 FR 
22075 through 22079) and final (85 FR 48434 through 48440) rules, we 
adopted the revised OMB delineations identified in OMB Bulletin No. 18-
04 (available at https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf) beginning October 1, 2020, including a 1-year 
transition for FY 2021 under which we applied a 5 percent cap on any 
decrease in an IRF's wage index compared to its wage index for the 
prior fiscal year (FY 2020). The updated OMB delineations more 
accurately reflect the contemporary urban and rural nature of areas 
across the country, and the use of such delineations allows us to 
determine more accurately the appropriate wage index and rate tables to 
apply under the IRF PPS. OMB issued further revised CBSA delineations 
in OMB Bulletin No. 20-01, on March 6, 2020 (available on the web at 
https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf). However, we determined that the changes in OMB Bulletin No. 
20-01 do not impact the CBSA-based labor market area delineations 
adopted in FY 2021. Therefore, CMS did not propose to adopt the revised 
OMB delineations identified in OMB Bulletin No. 20-01 for FY 2022, and 
for these reasons CMS is likewise not making such a proposal for FY 
2023.
3. Permanent Cap on Wage Index Decreases
    As discussed previously in this section of the rule, we have 
proposed and finalized temporary transition policies in the past to 
mitigate significant changes to payments due to changes to the IRF PPS 
wage index. Specifically, for FY 2016 (80 FR 47068), we implemented a 
50/50 blend for all geographic areas consisting of the wage index 
values computed using the then-current OMB area delineations and the 
wage index values computed using new area delineations based on OMB 
Bulletin No. 13-01. In FY 2021 (85 FR 48434), we implemented a 1-year 
transition to mitigate any negative effects of wage index changes by 
applying a 5 percent cap on any decrease in an IRF's wage index from 
the final wage index from FY 2020. We explained that we believed the 5-
percent cap would provide greater transparency and would be 
administratively less complex than the prior methodology of applying a 
50/50 blended wage index. We indicated that no cap would be applied to 
the reduction in the wage index for FY 2022, and that this transition 
approach struck an appropriate balance by providing a transition period 
to mitigate the resulting short-term instability and negative impacts 
on providers and time for them to adjust to their new labor market area 
delineations and wage index values.
    In the FY 2022 final rule (86 FR 42378), commenters recommended CMS 
extend the transition period adopted in the FY 2021 IRF PPS final rule 
so that wage index values do not change by more than 5 percent from 
year-to-year to protect IRFs from large payment volatility. Although we 
acknowledged at the time that certain changes to wage index policy may 
significantly affect Medicare payments, we reiterated that our policy 
principles with regard to the wage index include generally using the 
most current data and information available and providing that data and 
information, as well as any approaches to addressing any significant 
effects on Medicare payments resulting from these potential scenarios, 
in notice and comment rulemaking. We did not propose to modify the 
transition policy that was finalized in the FY 2021 IRF PPS final rule, 
and therefore did not extend the transition period for FY 2022. With 
these policy principles in mind, for the FY 2023 proposed rule, we 
considered how best to address the potential scenarios about which 
commenters raised concerns in the FY 2022 final rule around IRF payment 
volatility; that is, scenarios in which changes to wage index policy 
may significantly affect Medicare payments.
    In the past, we have established transition policies of limited 
duration to phase in significant changes to labor market areas. In 
taking this approach in the past, we sought to mitigate short-term 
instability and fluctuations that can negatively impact providers due 
to wage index changes. In accordance with the requirements of the IRF 
PPS wage index regulations at Sec.  412.624(a)(2), we use an 
appropriate wage index based on the best available data, including the 
best available labor market area delineations, to adjust IRF PPS 
payments for wage differences. We have previously stated that, because 
the wage index is a relative measure of the value of labor in 
prescribed labor market areas, we believe it is important to implement 
new labor market area delineations with as minimal a transition as is 
reasonably possible. However, we recognize that changes to the wage 
index have the potential to create instability and significant negative 
impacts on certain providers even when labor market areas do not 
change. In addition, year-to-year fluctuations in an area's wage index 
can occur due to external factors beyond a provider's control, such as 
the COVID-19 PHE. For an individual provider, these fluctuations can be 
difficult to predict. So, we also recognize that predictability in 
Medicare payments is important to enable providers to budget and plan 
their operations.
    In light of these considerations, we proposed a permanent approach 
to smooth year-to-year changes in providers' wage indexes. We proposed 
a policy that we believe increases the predictability of IRF PPS 
payments for providers, and mitigates instability and significant 
negative impacts to providers resulting from changes to the wage index.
    As previously discussed, we believed applying a 5-percent cap on 
wage index decreases for FY 2021 provided greater transparency and was 
administratively less complex than prior transition methodologies. In 
addition, we believed this methodology mitigated short-term instability 
and fluctuations that can negatively impact providers due to wage index 
changes. Lastly, we believed the 5-percent cap applied to all wage 
index decreases for FY 2021 provided an adequate safeguard against 
significant payment reductions related to the adoption of the revised 
CBSAs. However, as discussed in the FY 2023 proposed rule (87 FR 
20230), we recognize there are circumstances that a 1-year mitigation 
policy, like the one adopted for FY 2021, would not effectively address 
future years in which providers continue to be negatively affected by 
significant wage index decreases.
    Typical year-to-year variation in the IRF PPS wage index has 
historically been within 5 percent, and we expect this will continue to 
be the case in future years. Because providers are usually experienced 
with this level of wage index fluctuation, we believe applying a 5-
percent cap on all wage index decreases each year, regardless of the 
reason for the decrease, would effectively mitigate instability in IRF 
PPS payments due to any significant wage index decreases that may 
affect providers in a year. We believe this approach would address 
concerns about instability that commenters raised in the FY 2022 IRF 
PPS rule. Additionally, we believe that applying a 5-percent cap on all 
wage index decreases would support

[[Page 47055]]

increased predictability about IRF PPS payments for providers, enabling 
them to more effectively budget and plan their operations. Lastly, 
because applying a 5-percent cap on all wage index decreases would 
represent a small overall impact on the labor market area wage index 
system we believe it would ensure the wage index is a relative measure 
of the value of labor in prescribed labor market areas. As discussed in 
further detail in section XIII.C.2. of the proposed rule, we estimate 
that applying a 5-percent cap on all wage index decreases will have a 
very small effect on the wage index budget neutrality factor for FY 
2023. Because the wage index is a measure of the value of labor (wage 
and wage-related costs) in a prescribed labor market area relative to 
the national average, we anticipate that in the absence of proposed 
policy changes most providers will not experience year-to-year wage 
index declines greater than 5 percent in any given year. We also 
believe that when the 5-percent cap would be applied under this 
proposal, it is likely that it would be applied similarly to all IRFs 
in the same labor market area, as the hospital average hourly wage data 
in the CBSA (and any relative decreases compared to the national 
average hourly wage) would be similar. While this policy may result in 
IRFs in a CBSA receiving a higher wage index than others in the same 
area (such as situations when delineations change), we believe the 
impact would be temporary. Therefore, we anticipate that the impact to 
the wage index budget neutrality factor in future years would continue 
to be minimal.
    The Secretary has broad authority, pursuant to section 1886(j)(6) 
of the Act, to establish appropriate payment adjustments under the IRF 
PPS, including the wage index adjustment. As discussed earlier in this 
section, the IRF PPS regulations require us to use an appropriate wage 
index based on the best available data. Further, we believe that it 
would be appropriate to use a 5-percent cap on wage index decreases for 
purposes of the IRF PPS wage index adjustment for the reasons discussed 
in this section and in the proposed rule. Therefore, for FY 2023 and 
subsequent years, we proposed to apply a 5-percent cap on any decrease 
to a provider's wage index from its wage index in the prior year, 
regardless of the circumstances causing the decline. That is, we 
proposed that an IRF's wage index for FY 2023 would not be less than 95 
percent of its final wage index for FY 2022, regardless of whether the 
IRF is part of an updated CBSA, and that for subsequent years, a 
provider's wage index would not be less than 95 percent of its wage 
index calculated in the prior FY. This also means that if an IRF's 
prior FY wage index is calculated with the application of the 5-percent 
cap, the following year's wage index would not be less than 95 percent 
of the IRF's capped wage index in the prior FY. For example, if an 
IRF's wage index for FY 2023 is calculated with the application of the 
5-percent cap, then its wage index for FY 2024 would not be less than 
95 percent of its capped wage index in FY 2023. Lastly, we proposed 
that a new IRF would be paid the wage index for the area in which it is 
geographically located for its first full or partial FY with no cap 
applied, because a new IRF would not have a wage index in the prior FY. 
As we have discussed in the proposed rule, we believe this methodology 
would maintain the IRF PPS wage index as a relative measure of the 
value of labor in prescribed labor market areas, increase the 
predictability of IRF PPS payments for providers, and mitigate 
instability and significant negative impacts to providers resulting 
from significant changes to the wage index. In section XIII.C.2. of the 
proposed rule, we estimated the impact to payments for providers in FY 
2023 based on the proposed policy. We also noted that we would examine 
the effects of this policy on an ongoing basis in the future in order 
to assess its appropriateness.
    Subject to the aforementioned proposal becoming final, we also 
proposed to revise the regulation text at Sec.  412.624(e)(1) to 
provide that starting October 1, 2022, CMS would apply a cap on 
decreases to the wage index such that the wage index applied is not 
less than 95 percent of the wage index applied to that IRF in the prior 
year.
    We invited public comment on the proposed permanent cap on IRF wage 
index increase for FY 2023.
    The following is a summary of the public comments received on the 
proposed revisions to the IRF wage index increase for FY 2023 and our 
responses:
    Comment: MedPAC expressed support for the 5-percent permanent cap 
on wage index decreases, but recommended that the 5-percent cap limit 
should apply to both increases and decreases in the wage index because 
they stated that no provider should have its wage index value increase 
or decrease by more than 5 percent.
    Response: We appreciate MedPAC's suggestion that the cap on wage 
index changes of more than 5 percent should also be applied to 
increases in the wage index. However, as we discussed in the FY 2023 
IRF PPS proposed rule (87 FR 20230), one purpose of the proposed policy 
is to help mitigate the significant negative impacts of certain wage 
index changes. Likewise, we explained that we believe that applying a 
5-percent cap on all wage index decreases would support increased 
predictability about IRF PPS payments for providers, enabling them to 
more effectively budget and plan their operations (87 FR 20231). That 
is, we proposed to cap decreases because we believe that a provider 
would be able to more effectively budget and plan when there is 
predictability about its expected minimum level of IRF PPS payments in 
the upcoming fiscal year. We did not propose to limit wage index 
increases because we do not believe such a policy would enable IRFs to 
more effectively budget and plan their operations. So, we believe it is 
appropriate for providers that experience an increase in their wage 
index value to receive the full benefit of their increased wage index 
value.
    Comment: A few commenters requested that CMS retroactively apply 
the 5-percent cap policy to the FY 2022 wage index.
    Response: In the FY 2021 IRF PPS rulemaking cycle, CMS proposed and 
finalized a one-time, 1-year transition policy to mitigate the effects 
of adopting OMB delineations updated in OMB Bulletin 18-04 by applying 
a 5-percent cap on any wage index decreases compared to FY 2020 in a 
budget neutral manner. In the FY 2023 proposed rule we did not propose 
to modify the one-time transition policy that was finalized in the FY 
2021 final rule, nor did we propose to extend the transition period for 
FY 2022. We have historically implemented 1-year transitions, as 
discussed in the FY 2006 (70 FR 47921) and FY 2016 (80 FR 47068) final 
rules, to address CBSA changes due to substantial updates to OMB 
delineations. Our policy principles, as noted in the FY 2022 final rule 
(86 FR 42378), with regard to the wage index are to use the most 
updated data and information available. Therefore, the FY 2023 IRF PPS 
wage index policy proposal is prospective and is designed to mitigate 
any significant decreases beginning in FY 2023, not retroactively.
    Comment: A number of commenters suggested the 5-percent cap be 
applied in a non-budget neutral manner.
    Response: We do not believe that the permanent 5-percent cap policy 
for the IRF wage index should be applied in a non-budget-neutral 
manner. Any adjustment or updates made under section 1886(j)(6) of the 
Act for a FY

[[Page 47056]]

must be made in a manner that assures that the aggregated payments 
under this subsection in the fiscal year are not greater or less than 
those that would have been made in the year without such adjustments. 
In accordance with section 1186(j)(6) of the Act, our longstanding 
historical practice has been to implement updates to the wage index 
under the IRF PPS in a budget neutral manner.
    After consideration of the comments we received, we are finalizing 
the proposed permanent 5-percent cap on wage index decreases for the 
IRF PPS, beginning in FY 2023 and are finalizing revisions to the 
regulation text at Sec.  412.624(e)(1) to provide that starting October 
1, 2022, CMS would apply a cap on decreases to the wage index such that 
the wage index applied is not less than 95 percent of the wage index 
applied to that IRF in the prior year.
4. IRF Budget-Neutral Wage Adjustment Factor Methodology
    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 2023 labor-related share based on the 
2016-based IRF market basket relative importance (72.9 percent) to 
determine the labor-related portion of the standard payment amount. A 
full discussion of the calculation of the labor-related share is 
located in section VI.C. of this final rule. We then multiply the 
labor-related portion by the applicable IRF wage index. The wage index 
tables are available on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRF-Rules-and-Related-Files.html.
    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 
proposed to calculate a budget-neutral wage adjustment factor as 
established in the FY 2004 IRF PPS final rule (68 FR 45689) and 
codified at Sec.  412.624(e)(1), as described in the steps below. We 
proposed to use the listed steps to ensure that the FY 2023 IRF 
standard payment conversion factor reflects the proposed update to the 
wage indexes (based on the FY 2019 hospital cost report data) and the 
proposed update to the labor-related share, in a budget-neutral manner:
    Step 1. Calculate the total amount of estimated IRF PPS payments 
using the labor-related share and the wage indexes from FY 2022 (as 
published in the FY 2022 IRF PPS final rule (86 FR 42362)).
    Step 2. Calculate the total amount of estimated IRF PPS payments 
using the FY 2023 wage index values (based on updated hospital wage 
data and considering the permanent cap on wage index decreases policy) 
and the FY 2023 labor-related share of 72.9 percent.
    Step 3. Divide the amount calculated in step 1 by the amount 
calculated in step 2. The resulting quotient is the FY 2023 budget-
neutral wage adjustment factor of 1.0002.
    Step 4. Apply the budget neutrality factor from step 3 to the FY 
2023 IRF PPS standard payment amount after the application of the 
increase factor to determine the FY 2023 standard payment conversion 
factor.
    We discuss the calculation of the standard payment conversion 
factor for FY 2023 in section VI.E. of this final rule.
    We invited public comments on the proposed IRF wage adjustment for 
FY 2023 (and the proposed permanent cap on wage index decreases 
policy).
    We did not receive any comments on the proposed IRF budget-neutral 
wage adjustment factor methodology for FY 2023. Comments related to the 
proposed budget neutral wage index cap policy are addressed in the 
Permanent Cap on Wage Index Decreases section (VI.D.3) above. We are 
finalizing the IRF budget-neutral wage adjustment factor methodology as 
described in this final rule.

E. Description of the IRF Standard Payment Conversion Factor and 
Payment Rates for FY 2023

    To calculate the standard payment conversion factor for FY 2023, as 
illustrated in Table 5, we begin by applying the increase factor for FY 
2023, as adjusted in accordance with sections 1886(j)(3)(C) of the Act, 
to the standard payment conversion factor for FY 2022 ($17,240). 
Applying the 3.9 percent increase factor for FY 2023 to the standard 
payment conversion factor for FY 2022 of $17,240 yields a standard 
payment amount of $17,912. Then, we apply the budget neutrality factor 
for the FY 2023 wage index (taking into account the permanent cap on 
wage index decreases policy), and labor-related share of 1.0002, which 
results in a standard payment amount of $17,916. We next apply the 
budget neutrality factor for the CMG relative weights of 0.9979, which 
results in the standard payment conversion factor of $17,878 for FY 
2023.
    We invited public comments on the proposed FY 2023 standard payment 
conversion factor.
    The following is a summary of the public comments received on the 
proposed revisions to the FY 2023 standard payment conversion factor 
and our responses:
    Comment: One commenter recommended that CMS should increase the 
standard payment conversion factor to account for increased costs 
resulting from the implementation of version 4.0 of the IRF-PAI.
    Response: We appreciate this commenter's concerns. However, we note 
that the IRF PPS payment rates are updated annually 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, as 
required by section 1886(j)(3)(C) of the Act. We do not have the 
statutory authority to make changes to the standard payment conversion 
factor outside of the annual market basket update and to ensure that 
any adjustment or update to the IRF wage index made as specified under 
section 1886(j)(6) of the Act will be made in a budget neutral manner 
that assures that the estimated aggregated payments under this 
subsection in the FY year are not greater or less than those that will 
have been made in the year without such adjustment.
    After consideration of the comments we received, we are finalizing 
the standard payment conversion factor for FY 2023 as proposed.

[[Page 47057]]

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    After the application of the CMG relative weights described in 
section V. of this final rule to the FY 2023 standard payment 
conversion factor ($17,878), the resulting unadjusted IRF prospective 
payment rates for FY 2023 are shown in Table 6.
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[[Page 47059]]


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[[Page 47060]]


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F. Example of the Methodology for Adjusting the Prospective Payment 
Rates

    Table 7 illustrates the methodology for adjusting the prospective 
payments (as described in section VI. of this final rule). The 
following examples are based on two hypothetical Medicare 
beneficiaries, both classified into CMG 0104 (without comorbidities). 
The unadjusted prospective payment rate for CMG 0104 (without 
comorbidities) appears in Table 7.
    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 0.8380, 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 0.8600, and a teaching status adjustment of 
0.0784.
    To calculate each IRF's labor and non-labor portion of the 
prospective payment, we begin by taking the unadjusted prospective 
payment rate for CMG 0104 (without comorbidities) from Table 7. Then, 
we multiply the labor-related share for FY 2023 (72.9 percent) 
described in section VI.C. of this final rule by the unadjusted 
prospective payment rate. To determine the non-labor portion of the 
prospective payment rate, we subtract the labor portion of the Federal 
payment from the unadjusted prospective payment.
    To compute the wage-adjusted prospective payment, we multiply the 
labor portion of the Federal payment by the appropriate wage index 
located in the applicable wage index table. This table is available on 
the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRF-Rules-and-Related-Files.html.
    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 of the Federal payment.
    Adjusting the wage-adjusted Federal payment by the facility-level 
adjustments involves several steps. First, we take the wage-adjusted 
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 prospective 
payment rates. Table 7 illustrates the components of the adjusted 
payment calculation.
[GRAPHIC] [TIFF OMITTED] TR01AU22.010

BILLING CODE 4120-01-C
    Thus, the adjusted payment for Facility A would be $28,817.54, and 
the adjusted payment for Facility B would be $28,257.27.

VII. Update to Payments for High-Cost Outliers Under the IRF PPS for FY 
2023

A. Update to the Outlier Threshold Amount for FY 2023

    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 FY 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

[[Page 47061]]

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 2022 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, 77 FR 44618, 78 FR 47860, 
79 FR 45872, 80 FR 47036, 81 FR 52056, 82 FR 36238, 83 FR 38514, 84 FR 
39054, 85 FR 48444, and 86 FR 42362, respectively) to maintain 
estimated outlier payments at 3 percent of total estimated payments. We 
also stated in the FY 2009 final rule (73 FR 46370 at 46385) that we 
would continue to analyze the estimated outlier payments for subsequent 
years and adjust the outlier threshold amount as appropriate to 
maintain the 3 percent target.
    To update the IRF outlier threshold amount for FY 2023, we proposed 
to use FY 2021 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 41362 through 41363), which is also the same methodology that we 
used to update the outlier threshold amounts for FYs 2006 through 2022. 
The outlier threshold is calculated by simulating aggregate payments 
and using an iterative process to determine a threshold that results in 
outlier payments being equal to 3 percent of total payments under the 
simulation. To determine the outlier threshold for FY 2023, we 
estimated the amount of FY 2023 IRF PPS aggregate and outlier payments 
using the most recent claims available (FY 2021) and the proposed FY 
2023 standard payment conversion factor, labor-related share, and wage 
indexes, incorporating any applicable budget-neutrality adjustment 
factors. The outlier threshold is adjusted either up or down in this 
simulation until the estimated outlier payments equal 3 percent of the 
estimated aggregate payments. 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 3.8 
percent in FY 2022. Therefore, we proposed to update the outlier 
threshold amount from $9,491 for FY 2022 to $13,038 for FY 2023 to 
maintain estimated outlier payments at approximately 3 percent of total 
estimated aggregate IRF payments for FY 2023.
    In the proposed rule we stated we believed that updating the 
outlier threshold for FY 2023 would be appropriate to maintain IRF PPS 
outlier payments at 3 percent of total estimated payments, and we 
recognized that the proposed outlier threshold amount for FY 2023 would 
result in a significant increase from the current outlier threshold 
amount for FY 2022. As we continue to explore the underlying reasons 
for the large change in the proposed outlier threshold amount, we 
welcomed comments from commenters on any observations or information 
related to the increase in the proposed update to outlier threshold 
amount for FY 2023.
    We note that, as we typically do, we updated our data between the 
FY 2023 IRF PPS proposed and final rules to ensure that we use the most 
recent available data in calculating IRF PPS payments. This updated 
data includes a more complete set of claims for FY 2021. Based on our 
analysis using this updated data, we estimate that IRF outlier payments 
as a percentage of total estimated payments are approximately 3.6 
percent in FY 2022. Therefore, we will update the outlier threshold 
amount from $9,491 for FY 2022 to $12,526 for FY 2023 to account for 
the increases in IRF PPS payments and estimated costs and to maintain 
estimated outlier payments at approximately 3 percent of total 
estimated aggregate IRF payments for FY 2023.
    The following is a summary of the public comments received on the 
proposed update to the FY 2023 outlier threshold amount and our 
responses.
    Comment: Some commenters expressed concerns with the proposed 
outlier threshold amount and suggested that CMS consider making 
temporary changes to the outlier threshold methodology to account for 
changes in the data due to the COVID-19 PHE. Commenters suggested using 
data from FY 2019, adjusting the data to account for changes in IRF 
utilization associated with the pandemic, blending multiple years of 
data or averaging the current 2022 threshold with the proposed 
threshold, using a charge inflation factor from prior years, and 
adjusting the CCRs used in the outlier calculation.
    Response: We thank the commenters for the various suggested 
revisions to the outlier threshold methodology. We appreciate the 
suggestions to use FY 2019 data and not FY 2021 claims data in 
determining the outlier threshold for FY 2023. However, we believe the 
FY 2021 data reflect changes in IRF utilization related to the PHE and 
will therefore be more likely to reflect IRF utilization in FY 2023, as 
COVID-19 will continue to impact IRFs in the future.
    We also do not believe the suggestions to blend multiple years of 
data or determine an average of the current threshold and the proposed 
threshold would be appropriate, as arbitrarily lowering the outlier 
threshold would fail to address the fact that for FY 2022 we estimate 
that we are overpaying by 0.6 percent the established outlier pool of 3 
percent for the IRF PPS. Additionally, our simulations assume that 
cost-to-charge ratios accurately reflect IRF costs and we do not 
believe using inflation factors from prior years would reflect the best 
available projection of inflation in FY 2023. We appreciate the 
commenters' suggestions and will take them into consideration as we 
continue to consider revisions to our outlier threshold methodology. We 
will continue to monitor the IRF outlier payments to ensure that they 
continue to compensate IRFs appropriately for treating unusually high-
cost patients.
    Comment: Some commenters suggested that CMS should include 
historical outlier reconciliation dollars in the outlier projections 
consistent with IPPS to ensure a more accurate calibration of the 
outlier payment amounts. These commenters requested that CMS conduct 
further analysis of the increasing concentration of outlier payments 
and provide that analysis for discussion with the field.
    Response: We thank the commenters for their suggestion to include 
historical outlier reconciliation dollars in the outlier projections. 
We will continue to explore and analyze the outlier payments and will 
consider these suggestions for revisions to payment policies in future 
rulemaking, during which we will solicit public comment.
    Comment: Commenters suggested that CMS consider policies that would 
better target outlier payments, such as placing a 10 percent cap on the 
amount of outlier payments any IRF could receive or lowering the 3 
percent outlier pool. Additionally, commenters recommended that changes 
in the outlier threshold should be limited to changes in the market 
basket in a given year.
    Response: We thank the commenters for their suggestion to the 
outlier threshold. Our outlier policy is intended to reimburse IRFs for 
treating extraordinarily costly cases. As most recently discussed in 
the FY 2020 IRF PPS Final Rule (84 FR 39054) 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

[[Page 47062]]

care for certain high-cost populations. We continue to believe that 
maintaining the outlier pool at 3 percent of aggregate IRF payments 
optimizes the extent to which we can reduce financial risk to IRFs of 
caring for highest-cost patients, while still providing for adequate 
payments for all other non-outlier cases as discussed in the FY 2002 
IRF PPS final rule (66 FR 41362 through 41363). Additionally, we do not 
believe it would be appropriate to limit changes in the outlier 
threshold to changes in the market basket as constraining adjustments 
to the outlier threshold may result in a threshold that generates 
outlier payments above or below the 3 percent target.
    After consideration of the comments received and considering the 
most recent available data, we are finalizing the outlier threshold 
amount of $12,526 to maintain estimated outlier payments at 
approximately 3 percent of total estimated aggregate IRF payments for 
FY 2023.

B. Update to the IRF Cost-to-Charge Ratio Ceiling and Urban/Rural 
Averages for FY 2023

    CCRs are used to adjust charges from Medicare claims to costs and 
are computed annually from facility-specific data obtained from MCRs. 
IRF specific CCRs are used in the development of the CMG relative 
weights and the calculation of outlier payments under the IRF PPS. In 
accordance with the methodology stated in the FY 2004 IRF PPS final 
rule (68 FR45692 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 2023, based on analysis of the most 
recent data available. We apply the national urban and rural CCRs in 
the following situations:
     New IRFs that have not yet submitted their first MCR.
     IRFs whose overall CCR is in excess of the national CCR 
ceiling for FY 2023, as discussed below in this section.
     Other IRFs for which accurate data to calculate an overall 
CCR are not available.
    Specifically, for FY 2023, we proposed to estimate a national 
average CCR of 0.463 for rural IRFs, which we calculated by taking an 
average of the CCRs for all rural IRFs using their most recently 
submitted cost report data. Similarly, we proposed to estimate a 
national average CCR of 0.393 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 total costs factor more heavily into the averages than the 
CCRs of IRFs with lower total costs. For this final rule, we have used 
the most recent available cost report data (FY 2020). This includes all 
IRFs whose cost reporting periods begin on or after October 1, 2019, 
and before October 1, 2020. If, for any IRF, the FY 2020 cost report 
was missing or had an ``as submitted'' status, we used data from a 
previous FY's (that is, FY 2004 through FY 2019) 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. 
Using updated FY 2020 cost report data for this final rule, we estimate 
a national average CCR of 0.466 for rural IRFs, and a national average 
CCR of 0.392 for urban IRFs.
    In accordance with past practice, we proposed to set the national 
CCR ceiling at 3 standard deviations above the mean CCR. Using this 
method, we proposed a national CCR ceiling of 1.40 for FY 2023. This 
means that, if an individual IRF's CCR were to exceed this ceiling of 
1.40 for FY 2023, we will replace the IRF's CCR with the appropriate 
proposed national average CCR (either rural or urban, depending on the 
geographic location of the IRF). We calculated the proposed national 
CCR ceiling by:
    Step 1. Taking the national average CCR (weighted by each IRF's 
total costs, as 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 also proposed that if more recent data became available after 
the publication of the proposed rule and before the publication of this 
final rule, we would use such data to determine the FY 2023 national 
average rural and urban CCRs and the national CCR ceiling in the final 
rule. Using the updated FY 2020 cost report data for this final rule, 
we estimate a national average CCR ceiling of 1.41, using the same 
methodology.
    We invited public comment on the proposed update to the IRF CCR 
ceiling and the urban/rural averages for FY 2023.
    However, we did not receive any comments on the proposed revisions 
to the IRF CCR ceiling and the urban/rural averages for FY 2023, and 
therefore, we are finalizing a national average urban CCR at 0.392, the 
national average rural CCR at 0.466, and the national average CCR 
ceiling at 1.41 for FY 2023.

VIII. Codification and Clarifications of IRF Teaching Status Adjustment 
Policy

    In the FY 2006 IRF PPS final rule (70 FR 47928 through 47932), we 
implemented Sec.  412.624(e)(4) to establish a facility level 
adjustment for IRFs that are teaching hospitals or units of teaching 
hospitals. The teaching status adjustment accounts for the higher 
indirect operating costs experienced by IRFs that participate in 
training residents in graduate medical education (GME) programs. The 
teaching status payment adjustment is based on the ratio of the number 
of full-time equivalent (FTE) interns and residents training in the IRF 
divided by the IRF's average daily census. Section 1886(j)(3)(A)(v) of 
the Act requires the Secretary to adjust the prospective payment rates 
for the IRF PPS by such factors as the Secretary determines are 
necessary to properly reflect the variations in necessary costs of 
treatment among rehabilitation facilities.
    We established the IRF teaching status adjustment in a manner that 
limited the incentives for IRFs to add FTE interns and residents for 
the purpose of increasing their teaching status adjustment, as has been 
done in the payment systems for Inpatient Psychiatric Facilities (IPF) 
and acute care hospitals. That is, we imposed a cap on the number of 
FTE interns and residents that the IRF can count for the purpose of 
calculating the teaching status adjustment. This cap is similar to the 
cap established by the Balanced Budget Act of 1997 (Pub. L. 105-33, 
enacted August 5, 1997) section 4621, that added section 
1886(d)(5)(B)(v) of the Act (indirect medical education (IME) FTE cap 
for IPPS hospitals. The cap limits the number of FTE interns and 
residents that teaching IRFs may count for the purpose of calculating 
the IRF PPS teaching status adjustment, not the number of interns and 
residents that teaching institutions care hire or train. The cap is 
equal to the number of FTE interns and residents that trained in the

[[Page 47063]]

IRF during a ``base year,'' that is based on the most recent final 
settled cost report for a cost reporting period ending on or before 
November 15, 2004. A complete discussion of how the IRF teaching status 
adjustment was calculated appears in the FY 2006 IRF PPS final rule (70 
FR 47928 through 47932).
    In the FY 2012 IRF PPS final rule (76 FR 47846 through 47848) 
published on August 5, 2011, we updated the IRF PPS teaching status 
adjustment policy in order to maintain consistency, to the extent 
feasible, with the indirect medical education (IME) teaching policies 
that were finalized in the IPPS FY 1999 final rule (64 FR 41522), the 
IPPS FY 2001 final rule (66 FR 39900), and the IPF PPS teaching 
adjustment policies finalized in the 2012 IPF PPS final rule (76 FR 
26454 through 26456). In that final rule, we adopted a policy which 
permits a temporary increase in the FTE intern and resident cap when an 
IRF increases the number of FTE residents it trains, in order to accept 
displaced residents because another IRF closes or closes a medical 
residency training program. We refer to a ``displaced'' resident or 
intern as one that is training in an IRF and is unable to complete 
training in that IRF, either because the IRF closes or closes a medical 
residency training program.
    The cap adjustment for IRFs, adopted in the FY 2012 IRF PPS final 
rule, is considered temporary because it is resident-specific and will 
only apply to the residents until they have completed their training in 
the program in which they were training at the time of the IRF closure 
or the closure of the program. Similar to the IPPS and IPF policy for 
displaced residents, the IRF PPS temporary cap adjustment only applies 
to residents that were still training at the IRF at the time the IRF 
closed or at the time the IRF ceased training residents in the 
residency training program(s). Residents who leave the IRF, for 
whatever reason, before the closure of the IRF or the closure of the 
medical residency training program are not considered displaced 
residents for purposes of the IRF temporary cap adjustment policy.
    In the FY 2012 IRF PPS final rule, we also adopted the IPPS 
definition of ``closure of a hospital'' at Sec.  413.79(h)(1)(i) to 
refer to circumstances in which the IRF terminates its Medicare 
provider agreement, as specified in Sec.  489.52. In this instance, we 
allow a temporary adjustment to an IRF's FTE cap to reflect residents 
added to their medical residency training program because of an IRF's 
closure. We allow an adjustment to an accepting IRF's FTE cap if the 
IRF meets the criteria outlined in the FY 2012 IRF PPS final rule (76 
FR 47847). After the displaced residents leave the accepting IRF's 
training program or complete their medical residency training program, 
the accepting IRF's cap will revert to its original level. As such, the 
temporary adjustment to the FTE cap will be available to the IRF only 
for the period of time necessary for the displaced residents to 
complete their training.
    Additionally, in the FY 2012 IRF PPS final rule, we adopted the 
IPPS definition of ``closure of a hospital residency training 
program,'' as specified in Sec.  413.79(h)(1)(ii), which means that the 
hospital ceases to offer training for interns and residents in a 
particular approved medical residency training program. In this 
instance, if an IRF ceases training residents in a medical residency 
training program(s) and agrees to temporarily reduce its FTE cap, 
another IRF may receive a temporary adjustment to its FTE cap to 
reflect the addition of the displaced residents. For more discussion 
regarding the methodology for adjusting the caps for the ``receiving 
IRF'' and the ``IRF that closed its program,'' refer to the FY 2012 IRF 
PPS final rule (76 FR 47847).

A. Codification of Existing Teaching Status Adjustment Policies

    In an effort to streamline the IRF PPS teaching status adjustment 
policies that were finalized in the FY 2006 IRF PPS final rule (70 FR 
47928 through 47932) and the FY 2012 IRF PPS final rule (76 FR 47846 
through 47848), we are codifying the longstanding policy so that these 
policies can be easily located by IRF providers and can also align, to 
the extent feasible, with the IPPS IME and IPF teaching adjustment 
policy regulations.
    First, we are codifying the policy that was finalized in the FY 
2006 IRF PPS final rule with respect to how CMS adjusts the Federal 
prospective payment on a facility basis by a factor to account for 
indirect teaching costs. When the teaching status adjustment policy was 
finalized in the FY 2006 IRF PPS final rule (70 FR 47928 through 
47932), the definition of this ``factor'' and explanations of how it is 
computed were not included in the regulations. Rather, the more 
detailed definition and the explanation of the teaching status payment 
adjustment provided in the FY 2006 IRF PPS final rule, were published 
in the Medicare Claims Processing Manual (100-04, chapter 3, 
140.2.5.4). Currently, Sec.  412.624(e)(4) states that for discharges 
on or after October 1, 2005, CMS adjusts the Federal prospective 
payment on a facility basis by a factor as specified by CMS for 
facilities that are teaching institutions or units of teaching 
institutions. This adjustment is made on a claim basis as an interim 
payment and the final payment in full for the claim is made during the 
final settlement of the cost report.
    Second, we are codifying the IRF policy that was adopted in the FY 
2012 IRF PPS final rule (76 FR 47846 through 47848) allowing an IRF to 
receive a temporary adjustment to its FTE cap to reflect residents 
added to its teaching program because of another IRF's closure or an 
IRF's medical residency training program closure. We believe that 
codifying these longstanding policies would improve clarity and reduce 
administrative burden on IRF providers and others trying to locate all 
relevant information pertaining to the teaching hospital adjustment.
    Thus, we are codifying CMS' existing IRF PPS' teaching hospital 
adjustment policies through amendments to Sec. Sec.  412.602 and 
412.624(e)(4) presented in this final rule; except as specifically 
noted in this final rule, our intent is to codify the existing IRF PPS 
teaching status adjustment policy.
    We invited public comment on our proposal to amend Sec. Sec.  
412.602 and 412.624(e)(4) to codify our longstanding policies regarding 
the teaching status adjustment.
    The following is a summary of the public comments received on the 
proposed revisions to codify the existing IRF PPS teaching status 
adjustment policy and our responses:
    Comment: Most commenters were supportive of CMS codifying and 
consolidating the definition of the teaching status adjustment factor 
and how the adjustment is calculated in the regulation.
    Response: We thank the commenters for their support to codify 
current regulatory guidelines that were previously located in the 
Medicare Claims Processing Manual, Chapter 3, Section 140 and were 
established in the FY 2006 IRF PPS Final Rule (70 FR 47880) and 
modified in the FY 2012 IRF PPS Final Rule (76 FR 47836). We continue 
to believe that codifying the requirements will improve clarity and 
reduce administrative burden for IRFs.
    After consideration of the comments we received, we are codifying 
the IRF PPS teaching status adjustment calculation in Sec. Sec.  
412.602 and 412.624(e)(4), as proposed.

[[Page 47064]]

B. Update to the IRF Teaching Policy on IRF Program Closures and 
Displaced Residents

    For FY 2023, we proposed to change the IRF policy pertaining to 
displaced residents resulting from IRF closures and closures of IRF 
residency teaching programs. Specifically, we proposed to adopt 
conforming changes to the IRF PPS teaching status adjustment policy to 
align with the policy changes that the IPPS finalized in the FY 2021 
IPPS final rule (85 FR 58432, 58865 through 58870) and that the IPF 
finalized in the FY 2022 IPF PPS final rule (86 FR 42608, 42618 through 
42621). We believe that the IRF teaching status adjustment policy 
relating to hospital closure and displaced residents is susceptible to 
the same vulnerabilities as the IPPS IME policy. Hence, if an IRF with 
residents training in its residency program announces it is closing, 
these residents will become displaced and will need to find alternative 
positions at other IRFs or risk being unable to become board-certified.
    We proposed to implement the policy discussed in this section to 
remain consistent with the IPPS policy for calculating the temporary 
IME resident cap adjustment in situations where the receiving hospital 
assumes the training of displaced residents due to another hospital or 
residency program's closure. We also proposed that, in the future, we 
would deviate from the IPPS IME policy as it pertains to counting 
displaced residents for the purposes of the IRF teaching status 
adjustment only when it is necessary and appropriate for the IRF PPS.
    The policy adopted in the FY 2012 IRF PPS final rule (76 FR 47846 
through 47848), published August 5, 2011, permits an IRF to temporarily 
adjust its FTE cap to reflect displaced residents added to their 
residency program because of another IRF closure or IRF residency 
program closure. In that final rule, we adopted the IPPS definition of 
``closure of a hospital'' at Sec.  413.79(h)(1)(i) to also apply to 
IRF, and to mean that the IRF terminates its Medicare provider 
agreement as specified in Sec.  489.52. We also adopted the IPPS 
definition of ``closure of a hospital residency training program'' as 
it is currently defined at Sec.  413.79(h)(1)(ii) to also apply to IRF 
residency training program closures, and to mean that the IRF ceases to 
offer training for residents in a particular approved medical residency 
training program. In this final rule, we are codifying both of these 
definitions within the IRF PPS definitions section provided at Sec.  
412.602 so that the IRF teaching policies are more centrally located 
and more easily accessible.
    Although not explicitly stated in the regulations, our current 
policy is that a displaced resident is one that is physically present 
at the hospital training on the day prior to or the day of hospital or 
residency program closure. This longstanding policy derived from the 
fact that there are requirements that the receiving IRF identifies the 
residents ``who have come from the closed IRF'' or identifies the 
residents ``who have come from another IRF's closed residency 
program,'' and that the IRF that closed its program identifies ``the 
residents who were in training at the time of the residency program's 
closure.'' We considered the residents who were physically present at 
the IRF to be those residents who were ``training at the time of the 
program's closure,'' thereby granting them the status of ``displaced 
residents.'' Although we did not want to limit the ``displaced 
residents'' to only those physically present at the time of closure, it 
becomes much more administratively challenging for the following groups 
of residents at closing IRFs/residency programs to continue their 
training:
    (1) Residents who leave the program after the closure is publicly 
announced to continue training at another IRF, but before the actual 
closure;
    (2) Residents assigned to and training at planned rotations at 
other IRFs who will be unable to return to their rotations at the 
closing IPF or program; and
    (3) Individuals (such as medical students or would-be fellows) who 
matched into resident programs at the closing IRF or residency program, 
but have not yet started training at the closing IRF or residency 
program.
    Other groups of residents who, under current policy, are already 
considered ``displaced residents'' include--
    (1) Residents who are physically training in the IRF on the day 
prior to or day of residency program or IRF closure; and
    (2) Residents who would have been at the closing IRF or IRF 
residency program on the day prior to or day of closure, but were on 
approved leave at that time, and are unable to return to their training 
at the closing IRF or IRF residency training program.
    We proposed to amend our IRF policy with regard to closing teaching 
IRFs and closing IRF medical residency training programs to address the 
needs of interns and residents attempting to find alternative IRFs in 
which to complete their training. Additionally, this proposal addresses 
the incentives of originating and receiving IRFs with regard to 
ensuring we appropriately account for their indirect teaching costs by 
way of an appropriate IRF teaching adjustment based on each program's 
FTE resident count. We proposed to make changes to the current IRF 
teaching status adjustment policy related to displaced residents as 
discussed below.
    First, rather than link the status of displaced residents for the 
purpose of the receiving IRF's request to increase their FTE cap to the 
resident's presence at the closing IRF or program on the day prior to 
or the day of the residency program or IRF closure, we proposed to link 
the status of the displaced residents to the day that the closure was 
publicly announced (for example, via a press release or a formal notice 
to the Accreditation Council on Graduate Medical Education). This would 
provide great flexibility for the interns and residents to transfer 
while the IRF operations or teaching programs are winding down, rather 
than waiting until the last day of IRF or IRF teaching program 
operation. This would address the needs of the group of residents who 
would leave the program after the closure was publicly announced to 
continue training at another hospital, but before the day of actual 
closure.
    Second, by removing the link between the status of displaced 
residents and their presence at the closing IRF or residency program on 
the day prior to or the day of the IRF closure or program closure, we 
proposed to also allow the residents assigned to and training at 
planned rotations at other IRFs who will be unable to return to their 
rotations at the closing IRF or program and individuals (such as 
medical students or would-be fellows) who matched into resident 
programs at the closing IRF or residency program, but have not yet 
started training at the closing IRF or residency program, to be 
considered a displaced resident.
    Thus, we proposed to revise our teaching policy with regard to 
which residents can be considered ``displaced'' for the purpose of the 
receiving IRF's request to increase their IRF cap in the situation 
where an IRF announces publicly that it is closing, and/or that it is 
closing an IRF residency program. Specifically, we proposed to adopt 
the FY 2021 IPPS final rule definition of ``displaced resident'' as 
defined at Sec.  413.79(h)(1)(ii), for the purpose of calculating the 
IRF's teaching status adjustment.
    In addition, we proposed to change another detail of the policy 
specific to the requirements for the receiving IRF. To apply for the 
temporary increase in

[[Page 47065]]

the FTE resident cap, the receiving IRF would have to submit a letter 
to its Medicare Administrative Contractor (MAC) within 60 days after 
beginning to train the displaced interns and residents. As established 
in the FY 2012 IRF PPS final rule, this letter must identify the 
residents who have come from the closed IRF or closed residency program 
and caused the receiving IRF to exceed its cap, and must specify the 
length of time that the adjustment is needed. Furthermore, to maintain 
consistency with the IPPS IME policy, we proposed that the letter must 
also include:
    (1) The name of each displaced resident;
    (2) The last four digits of each displaced resident's social 
security number; this will reduce the amount of personally identifiable 
information (PII);
    (3) The name of the IRF and the name of the residency program or 
programs in which each resident was training at previously; and
    (4) The amount of the cap increase needed for each resident (based 
on how much the receiving IRF is in excess of its cap and the length of 
time for which the adjustments are needed).
    As we previously discussed in the FY 2012 IRF PPS final rule (76 FR 
47846 through 47848), we are also clarifying that the maximum number of 
FTE resident cap slots that could be transferred to all receiving IRFs 
is the number of FTE resident cap slots belonging to the IRF that has 
closed the resident training program, or that is closing. Therefore, if 
the originating IRF is training residents in excess of its cap, then 
being a displaced resident does not guarantee that a cap slot will be 
transferred along with the resident. Therefore, we proposed that if 
there are more IRF displaced residents than available cap slots, the 
slots may be apportioned according to the closing IRF's discretion. The 
decision to transfer a cap slot if one is available would be voluntary 
and made at the sole discretion of the originating IRF. However, if the 
originating IRF decides to do so, then it would be the originating 
IRF's responsibility to determine how much of an available cap slot 
would go with a particular resident (if any). We also note that, as we 
previously discussed in the FY 2012 IRF PPS final rule (76 FR 47846 
through 47848), only to the extent a receiving IRF would exceed its FTE 
cap by training displaced residents would it be eligible for a 
temporary adjustment to its resident FTE cap. As such, displaced 
residents are factored into the receiving IRF's ratio of resident FTEs 
to the facility's average daily census.
    We invited public comment on the proposed updates to the IRF 
teaching policy.
    The following is a summary of the public comments received on the 
proposed updates to the IRF teaching policy and our responses:
    Comment: Commenters were generally supportive of our proposal to 
amend Sec. Sec.  412.602 and 412.624(e)(4) to codify our longstanding 
policies regarding the teaching status adjustment. These commenters 
stated that they appreciated us clarifying the definition of a 
displaced resident for the purpose of reallocating the FTE to a new 
IRF, mitigating prior delayed transfer issues.
    Response: We thank the commenters for their support to codify 
longstanding policies regarding the teaching status adjustment.
    Comment: While expressing support for the proposed codification of 
the regulations, one commenter stated that the increases in the FTE 
resident caps for IRFs should be made permanent, similar to what is 
done for IPPS hospitals in accordance with Section 5506 of the Patient 
Protection and Affordable Care Act (PPACA) (Pub. L. 111-148).
    Response: We appreciate the commenter's concern, but Section 5506 
of the PPACA does not apply to IRFs, and we do not believe that it 
would be appropriate to permanently increase the number of FTE resident 
cap slots available in the IRF PPS.
    After consideration of the comments we received, we are finalizing 
the proposed updates to the IRF teaching policies in Sec. Sec.  412.602 
and 412.624(e)(4), as proposed.

IX. Solicitation of Comments Regarding the Facility-Level Adjustment 
Factor Methodology

    Section 1886(j)(3)(A)(v) of the Act confers broad authority upon 
the Secretary to adjust the per unit payment rate ``by such other 
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 prospective 
payment amount associated with a CMG to account for facility-level 
characteristics such as a facility's percentage of low-income patients 
(LIP), teaching status, and location in a rural area, if applicable, as 
described in Sec.  412.624(e).
    The facility-level adjustment factors are intended to account for 
differences in costs attributable to the different types of IRF 
providers and to better align payments with the costs of providing IRF 
care. The LIP and rural facility-level adjustment factors have been 
utilized since the inception of the IRF PPS, while the teaching status 
adjustment factor was finalized in the FY 2006 IRF PPS final rule (70 
FR 47880) when our regression analysis indicated that it had become 
statistically significant in predicting IRF costs. Each of the 
facility-level adjustment factors were implemented using the same 
statistical approach, that is, utilizing coefficients determined from 
regression analysis.
    Historically, we have observed relatively large fluctuations in 
these factors from year-to-year which led us to explore a number of 
options to provide greater stability and predictability between years 
and increase the accuracy of Medicare payments for IRFs. In addition to 
holding these factors constant over multiple years to mitigate 
fluctuations in payments, we also implemented a number of refinements 
to the methodology used to calculate the adjustment factors in efforts 
to better align payments with the costs of care. For example, in FY 
2010 (74 FR 39762) we implemented a 3-year moving average approach to 
updating the facility-level adjustment factors to promote more 
consistency in the adjustment factors over time. Additionally, in FY 
2014 (78 FR 47859) we added an indicator variable for a facility's 
freestanding or hospital-based status to the payment regression to 
improve the accuracy of the IRF payment adjustments. This variable was 
added to control for differences in cost structure between hospital-
based and freestanding IRFs in the regression analysis, so that these 
differences would not inappropriately influence the adjustment factor 
estimates. We refer readers to the FY 2015 IRF PPS final rule (79 FR 
45882 through 45883) for a full discussion of the refinements that have 
been made to the methodology used to determine the facility-level 
adjustment factors and other analysis that has been considered over 
time. Due to the revisions to the regression analysis and the 
substantive changes to the facility-level adjustment factors that were 
adopted in the FY 2014 IRF PPS final rule, we finalized a proposal in 
the FY 2015 IRF PPS final rule (79 FR 45871) to freeze the facility-
level adjustment factors for FY 2015 and all subsequent years at the FY 
2014 levels while we continued to monitor changes in the adjustment 
factors over time. Table 8 shows how the IRF facility-level adjustment 
factors have changed over time since the start of the IRF PPS:
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[[Page 47066]]

[GRAPHIC] [TIFF OMITTED] TR01AU22.011

    We have continued monitoring the adjustment factors using the same 
methodology described in the FY 2014 IRF PPS final rule (78 FR 47869). 
That is, we have continued to calculate the facility-level adjustment 
factors using the following the steps:
    (Steps 1 and 2 are performed independently for each of three years 
of IRF claims data)
    Step 1. Calculate the average cost per case for each IRF in the 
available IRF claims data.
    Step 2. Perform a logarithmic regression analysis on the average 
cost per case to compute the coefficients for the rural, LIP, and 
teaching status adjustments. This regression analysis incorporates an 
indicator variable to account for whether a facility is a freestanding 
IRF hospital or a unit of an acute care hospital (or a CAH).
    Step 3. Calculate a mean for each of the coefficients across the 3 
years of data (using logarithms for the LIP and teaching status 
adjustment coefficients (because they are continuous variables), but 
not for the rural adjustment coefficient (because the rural variable is 
either zero (if not rural) or 1 (if rural)). To compute the LIP and 
teaching status adjustment factors, we convert these factors back out 
of the logarithmic form.
    Additional information on the regression analysis used to calculate 
the facility-level adjustment factors can be found on the CMS website 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Research. We have continued to monitor changes in 
the facility-level adjustment factors for each FY since they were 
frozen in FY 2015 at the FY 2014 levels. Table 9, contains the rural, 
LIP, and teaching status adjustment factors for each FY since they were 
frozen at their 2014 levels.
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[GRAPHIC] [TIFF OMITTED] TR01AU22.012


[[Page 47067]]


    Table 10 shows the potential estimated impacts of updating the 
facility-level adjustments for FY 2023.
[GRAPHIC] [TIFF OMITTED] TR01AU22.013


[[Page 47068]]


[GRAPHIC] [TIFF OMITTED] TR01AU22.014

    Table 10 shows how we estimated that the application of the FY 2023 
facility-level adjustment factors would affect particular groups if we 
were to implement updates to these factors for FY 2023. Table 10 
categorizes IRFs by geographic location, including urban or rural 
location, and location for CMS' 9 Census divisions of the country. In 
addition, Table 10 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).
    Note that, because the facility-level adjustment factors are 
implemented in a budget-neutral manner, total estimated aggregate 
payments to IRFs would not be affected. However, these updates would 
affect the distribution of payments across providers.
    Typically, the facility-level adjustment factors have been updated 
on an intermittent basis to reflect changes in the costs of caring for 
patients. However, given the magnitude of the increases we are 
consistently seeing in the teaching status adjustment we do not believe 
that they are true reflections of the higher costs of teaching IRFs. In 
addition, we are concerned with the negative effects that the 
inordinately high teaching status adjustments would have on rural IRFs, 
given that the updates would be implemented in a budget neutral manner.
    Given the changes in the teaching status adjustment and the rural 
adjustment from their 2014 levels and the potential payment impacts 
associated with these adjustments, we solicited comments from 
interested parties on the methodology used to determine the facility-
level adjustment factors and suggestions for possible updates and 
refinements to this methodology. Additionally, we welcomed ideas and 
suggestions as to what could be driving the changes observed in these 
adjustment factors from year-to-year.
    While we will not be responding to specific comments submitted in 
response to the solicitation of comments regarding the facility-level 
adjustment factor methodology in this final rule, we appreciate all of 
the comments we received. We will take these comments and suggestions 
into account in future development of payment policies.

X. Solicitation of Comments Regarding the IRF Transfer Payment Policy

    In the Medicare Program; Prospective Payment System for Inpatient 
Rehabilitation Facilities final rule that appeared in the August 7, 
2001 Federal Register (66 FR 41353 through 41355), we finalized a 
transfer payment policy under Sec.  412.624(f) to provide for payments 
that more accurately reflect facility resources used and services 
delivered. This reflected our belief that it is important to minimize 
the inherent incentives specifically associated with the early transfer 
of patients in a discharge-based payment system. Specifically, we were 
concerned that incentives might exist for IRFs to discharge patients 
prematurely, as well as to admit patients that may not be able to 
endure intense inpatient therapy services. Even if patients were 
transferred before receiving the typical, full course of inpatient 
rehabilitation, the IRF could still be paid the full CMG payment rate 
in the absence of a transfer payment policy. Length of stay has been 
shown to be a good proxy measure of costs. Thus, in general, reducing 
lengths of stay would be profitable under the IRF prospective payment 
system. To address these concerns, we therefore implemented a transfer 
payment policy, which took effect beginning January 1, 2002, that, 
under certain circumstances, reduced the full CMG payment rate when a 
Medicare beneficiary is transferred.
    The IRF transfer payment policy applies to IRF stays that are less 
than the average length of stay for the applicable CMG and tier and are 
transferred directly to another institutional site, including another 
IRF, an inpatient hospital, a nursing home that accepts payment under 
Medicare and Medicaid, or a long-term care hospital. However, the IRF 
transfer payment policy currently does not apply to IRF stays that are 
less than the average length of stay for the applicable CMG and tier 
and are transferred to home health care.
    In the August 7, 2001 final rule (66 FR 41353 through 41355), we 
stated that we did not propose to include early discharges to home 
health care as part of the transfer payment policy because there were 
analytical challenges as a result of the recent implementation of the 
new home health prospective payment system. However, to date, the 
analytical challenges would not present an issue as we believe the home 
health payment system is well established with an adequate supply of 
claims data.

[[Page 47069]]

    A recent Office of Inspector General (OIG) report, ``Early 
Discharges From Inpatient Rehabilitation Facilities to Home Health 
Services'' \13\ recommends that CMS expand the IRF transfer payment 
policy to apply to early discharges to home health. The OIG recommends 
that the IRF PPS should update its transfer payment policy, similar to 
the IPPS transfer payment policy, to include home health. The OIG 
conducted an audit of calendar year 2017 and 2018 Medicare claims data 
and determined that if CMS had expanded its IRF transfer payment policy 
to include early discharges to home health it could have realized a 
significant savings of approximately $993 million over the 2-year 
period to Medicare.
---------------------------------------------------------------------------

    \13\ Office of the Inspector General. December 7, 2021 Early 
Discharges From Inpatient Rehabilitation Facilities to Home Health 
Services [Report No. A-01-20-00501] https://oig.hhs.gov.
---------------------------------------------------------------------------

    Initially, home health was not added to the IRF transfer policy due 
to a lack of home health claims data under the newly-established 
prospective payment system that we could analyze to determine the 
impact of this policy change. However, given the findings from the 
recent OIG report mentioned above, we plan to analyze home health 
claims data to determine the appropriateness of including home health 
in the IRF transfer policy:
     Beyond the existing Medicare claims data, under what 
circumstances, and for what types of patients (in terms of clinical, 
demographic, and geographic characteristics) do IRFs currently transfer 
patients to home health?
     Should we consider a policy similar to the IPPS transfer 
payment policy (see Sec.  412.4(a), (b) and (c))--such as including as 
part of the IRF transfer payment policy a discharge from an IRF to home 
health under a written plan for the provision of home health services 
from a home health agency and those services to begin within 48 hours 
of referral, or within 48 hours of the patient's return home (see Sec.  
484.55(a)(1)), or on the provider's start of care date?
     What impact, if any, do interested parties believe this 
proposed policy change could have on patient access to appropriate 
post-acute care services?
    While we will not be responding to specific comments submitted in 
response to the solicitation of comments regarding the IRF transfer 
payment policy in this final rule, we appreciate all of the comments we 
received. We will use this information from public commenters in 
conjunction with our future analysis for potential rulemaking.

XI. Inpatient Rehabilitation Facility (IRF) Quality Reporting Program 
(QRP)

A. Background and Statutory Authority

    The Inpatient Rehabilitation Facility Quality Reporting Program 
(IRF QRP) is authorized by section 1886(j)(7) of the Act, and it 
applies to freestanding IRFs, as well as inpatient rehabilitation units 
of hospitals or Critical Access Hospitals (CAHs) paid by Medicare under 
the IRF PPS. Under the IRF QRP, the Secretary must reduce by 2 
percentage points the annual increase factor for discharges occurring 
during a fiscal year for any IRF that does not submit data in 
accordance with the IRF QRP requirements established by the Secretary. 
For more information on the background and statutory authority for the 
IRF QRP, we refer readers to the FY 2012 IRF PPS final rule (76 FR 
47873 through 47874), 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 68503), 
the FY 2014 IRF PPS final rule (78 FR 47902), the FY 2015 IRF PPS final 
rule (79 FR 45908), the FY 2016 IRF PPS final rule (80 FR 47080 through 
47083), the FY 2017 IRF PPS final rule (81 FR 52080 through 52081), the 
FY 2018 IRF PPS final rule (82 FR 36269 through 36270), the FY 2019 IRF 
PPS final rule (83 FR 38555 through 38556), the FY 2020 IRF PPS final 
rule (84 FR 39054 through 39165), and the FY 2022 IRF PPS final rule 
(86 FR 42384 through 42408).

B. General Considerations Used for the Selection of Measures for the 
IRF QRP

    For a detailed discussion of the considerations we use for the 
selection of IRF QRP quality, resource use, or other measures, we refer 
readers to the FY 2016 IRF PPS final rule (80 FR 47083 through 47084).
1. Quality Measures Currently Adopted for the FY 2023 IRF QRP
    The IRF QRP currently has 18 measures for the FY 2023 program year, 
which are set out in Table 11.

[[Page 47070]]

[GRAPHIC] [TIFF OMITTED] TR01AU22.015

    There were no proposals in the proposed rule for new measures for 
the IRF QRP.

C. IRF QRP Quality Measure Concepts for Future Years: Request for 
Information (RFI)

    We sought input on the importance, relevance, and applicability of 
each of the concepts under consideration listed in Table 12 for future 
years in the IRF QRP. More specifically, we sought input on a cross-
setting functional measure that would incorporate the domains of self-
care and mobility. Our measure development contractor for the cross-
setting functional outcome measure convened a Technical Expert Panel 
(TEP) on June 15 and June 16, 2021 to obtain expert input on the 
development of a functional outcome measure for PAC. During this 
meeting, the possibility of creating one measure to capture both self-
care and mobility was discussed. We also sought input on measures of 
health equity, such as structural measures that assess an 
organization's leadership in advancing equity goals or assess progress 
toward achieving equity priorities. Finally, we sought input on the 
value of a COVID-19 Vaccination Coverage measure that would assess 
whether IRF patients were up to date on their COVID-19 vaccine.

[[Page 47071]]

[GRAPHIC] [TIFF OMITTED] TR01AU22.016

BILLING CODE 4120-01-C
    We received several comments on this RFI, which are summarized 
below:
    Comment: A majority of commenters generally supported the inclusion 
of a cross-setting function measure in the IRF QRP, while many 
commenters requested additional information pertaining to data 
collection and measure specifications. Several commenters urged CMS to 
ensure the measure is meaningful and appropriately implemented for all 
settings. One commenter stated they preferred separate quality measures 
for self-care and mobility, but would support the initial use of a 
composite measure reflecting both self-care and mobility function.
    Commenters did not address the concept of a health equity measure 
but cautioned CMS on additional provider burden for new measures and 
encouraged CMS to leverage existing data elements.
    Several commenters were generally supportive of the inclusion of 
the PAC--COVID-19 Vaccination Coverage among Patients measure in the 
IRF QRP. However, some caveated their support and requested further 
details regarding measure specifications and NQF endorsement. Several 
commenters raised concerns about the guidance around boosters, as well 
as whether an IRF length of stay allows for meaningful distinctions 
among facilities.
    Response: We appreciate the input provided by commenters. While we 
will not be responding to specific comments submitted in response to 
this RFI in this final rule, we intend to use this input to inform our 
future measure development efforts.

D. Inclusion of the National Healthcare Safety Network (NHSN) 
Healthcare-Associated Clostridioides difficile Infection Outcome 
Measure in the IRF QRP--Request for Information

1. Solicitation of Public Comment
    In section XI.D. of the proposed rule, we requested stakeholder 
input on the potential electronic submission of quality data from IRFs 
via their electronic health records (EHRs) under the IRF QRP. We 
specifically sought comment on the future inclusion of the NHSN 
Healthcare-Associated Clostridioides difficile Infection Outcome 
measure (HA-CDI) (MUC2021-098) as a digital quality measure in the IRF 
QRP.
    Specifically, we sought comment on the following:
     Would you support utilizing IRF EHRs as the mechanism of 
data collection and submission for IRF QRP measures?
     Would your EHR support exposing data via HL7 FHIR to a 
locally installed Measure Calculation Tool (MCT)? For IRFs using 
certified health IT systems, how can existing certification criteria 
under the Office of the National Coordinator (ONC) Health Information 
Technology (IT) Certification Program support reporting of this data? 
What updates, if any, to the Certification Program would be needed to 
better support capture and submission of this data?
     Is a transition period between the current method of data 
submission and an electronic submission method necessary? If so, how 
long of a transition would be necessary and what specific factors are 
relevant in determining the length of any transition?
     Would vendors, including those that service IRFs, be 
interested in or willing to participate in pilots or voluntary 
electronic submission of quality data?
     Do IRFs anticipate challenges, other than the adoption of 
EHR to adopting the HA-CDI, and if so, what are potential solutions for 
those challenges?
    We received several comments on this RFI, which are summarized 
below:
    Comment: In response to the question of whether IRFs would support 
utilizing EHRs as the mechanism of data collection and submission for 
IRF QRP measures, we received several supportive comments, citing the 
increased accuracy by relying ``on both microbiologic evidence of C. 
diff in stool and evidence of antimicrobial treatment using data 
derived from the electronic health record (EHR)'' and decreased 
provider burden associated with a digital measure. One of these 
commenters recommended CMS adopt the measure in larger acute care 
hospitals where use of EHRs is already more prevalent, prior to 
adopting it in IRFs.
    However, commenters raised concerns about the cost associated with 
IRFs adopting EHR systems that are equipped to collect and exchange 
digital quality measure (dQM) data. They stated EHR adoption has been 
slower and less uniform than it was in acute care hospitals, due to the 
lack of incentive payments available to IRFs. They urged CMS to provide 
incentive payments to IRFs as they did for acute care hospitals through 
the Health Information Technology for Economic and Clinical Health 
(HITECH) Act prior to requiring IRFs' transition to dQMs. One of these 
commenters noted that IRFs could use those incentive payments to offset 
implementation costs, such as additional staff, licensing fees and new 
software and systems.
    Commenters also supported the idea of a transition period between 
the current method of data submission and an electronic submission, and 
several commenters suggested a 2-year transition period. One commenter 
stated that some IRFs would need time to implement an EHR system while 
IRFs that already use EHRs would still need to make refinements to 
their system. Another commenter recommended that CMS launch a pilot for 
this measure and/or establish a process for manual data submission as a 
backup for a specified time before the digital measure is fully 
implemented.
    One commenter indicated their interest in participating in a pilot 
or voluntary electronic submission of quality data. Other commenters 
stated they would be willing to participate in a pilot prior to 
implementation of a digital quality measure (dQM).
    In response to the solicitation of comments about challenges IRFs 
anticipate in the adoption of the NHSN HA-CDI measure, we received one 
comment about the challenges posed by the adoption of new terminology 
to end users as well as the challenges associated with implementing new 
technology into IRF workflows. This commenters also pointed out that 
the RFI in the proposed rule noted that the Centers for Disease Control 
and Prevention (CDC) plans to enable reporting using the existing HL7 
Clinical Document Architecture and potentially other formats, while 
continuing to support the current CDI measure until sufficient 
experience is achieved with the new measure, and

[[Page 47072]]

while they appreciate CDC's flexibility, they questioned the data 
integrity across all facilities when so many technology options are in 
use. Another commenter raised concerns about cyber security, and noted 
the potential security risk might not outweigh the time involved in 
manual submission.
    Finally, several commenters did not support the idea of the NHSN 
HA-CDI measure for the IRF QRP, citing a low incidence rate in IRFs, 
and the lack of meaningful differences in provider performance.
    Response: We appreciate the input provided by commenters. While we 
will not be responding to specific comments submitted in response to 
this RFI in this final rule, we intend to use this input to inform our 
future measure development efforts. One commenter questioned whether it 
would be worth the cost to IRFs to make the necessary changes to the 
EHR when incidence is low in IRF patients.

E. Overarching Principles for Measuring Equity and Healthcare Quality 
Disparities Across CMS Quality Programs--Request for Information

1. Solicitation of Public Comment
    The goal of the request for information in section XI.E. of the 
proposed rule was to describe key principles and approaches that we 
would consider when advancing the use of quality measure development 
and stratification to address healthcare disparities and advance health 
equity across our programs.
    We invited general comments on the principles and approaches 
described previously in this section of the rule, as well as additional 
thoughts about disparity measurement or stratification guidelines 
suitable for overarching consideration across CMS' QRP programs. 
Specifically, we invited comment on:
     Identification of Goals and Approaches for Measuring 
Healthcare Disparities and Using Measure Stratification Across CMS 
Quality Reporting Programs
    ++ The use of the within- and between-provider disparity methods in 
IRFs to present stratified measure results.
    ++ The use of decomposition approaches to explain possible causes 
of measure performance disparities.
    ++ Alternative methods to identify disparities and the drivers of 
disparities.
     Guiding Principles for Selecting and Prioritizing Measures 
for Disparity Reporting
    ++ Principles to consider for prioritization of health equity 
measures and measures for disparity reporting, including prioritizing 
stratification for validated clinical quality measures, those measures 
with established disparities in care, measures that have adequate 
sample size and representation among healthcare providers and outcomes, 
and measures of appropriate access and care.
     Principles for Social Risk Factor and Demographic Data 
Selection and Use
    ++ Principles to be considered for the selection of social risk 
factors and demographic data for use in collecting disparity data 
including the importance of expanding variables used in measure 
stratification to consider a wide range of social risk factors, 
demographic variables, and other markers of historic disadvantage. In 
the absence of patient-reported data we will consider use of 
administrative data, area-based indicators, and imputed variables as 
appropriate.
     Identification of Meaningful Performance Differences
    ++ Ways that meaningful difference in disparity results should be 
considered.
     Guiding Principles for Reporting Disparity Measures
    ++ Guiding principles for the use and application of the results of 
disparity measurement.
     Measures Related to Health Equity
    ++ The usefulness of a Health Equity Summary Score (HESS) for IRFs, 
both in terms of provider actionability to improve health equity, and 
in terms of whether this information would support Care Compare website 
users in making informed healthcare decisions.
    ++ The potential for a structural measure assessing an IRF's 
commitment to health equity, the specific domains that should be 
captured, and options for reporting this data in a manner that would 
minimize burden.
    ++ Options to collect facility-level information that could be used 
to support the calculation of a structural measure of health equity.
    ++ Other options for measures that address health equity.
    We received several comments on the RFI for Overarching Principles 
for Measuring Equity and Healthcare Quality Disparities Across CMS 
Quality Programs. While we will not be responding to specific comments 
submitted in response to this RFI, the following is a summary of some 
comments received:
    Comment: We received several comments on the structural measure for 
health equity. One commenter supported the concept of a structural 
quality measure of health equity and believed it would be a step that 
could lead to more complex measures, and noted that the Leapfrog 
Hospital Safety Grade program has an established framework that can be 
used for this measure, including a standardized set of questions for 
hospitals that capture demographic data elements. Other commenters 
opposed the measure and expressed that it may not provide useful or 
actionable data to differentiate IRFs on quality and equity for IRFs or 
consumers. One commenter noted that larger facilities may have more 
resources to invest in this area, and as such, perform better than 
smaller facilities on this type of measure. Another commenter did not 
support the measure, citing the Measure Application Partnership's 
Hospital Workgroup observation that ``evidence for a linkage between 
the measure and improved health outcomes had not been established'' and 
that ``a performance gap among hospitals for the measure's five 
structural elements (i.e., to which attestation would be required) had 
not been demonstrated.'' Furthermore, they shared that many of the 
priorities in this structural measure are often already addressed by 
IRFs through initiatives to provide culturally competent and inclusive 
care and to meet existing accreditation requirements. Finally, two 
commenters did not support or oppose the measure and requested 
additional information on the measure definition and how it can be used 
to advance health equity.
    We received three comments on performance disparity decomposition. 
Two commenters supported the idea of performance disparity 
decomposition and believed that it would provide valuable data for IRFs 
while minimizing burden. However, one commenter added a caveat stating 
that not all IRFs would have the statistical expertise or resources to 
implement this approach. One commenter opposed the idea, specifically 
the potential application of the Blinder-Oaxaca methodology.
    We received several comments on the concept of the HESS. Some 
commenters supported the concept of the HESS and noted it would provide 
a comprehensive view of a patient's clinical, social, and behavioral 
risks. Despite expressing their support, one commenter noted that the 
development of the HESS presents several technical challenges, such as 
the need for a comprehensive standardized set of demographic data 
elements for each patient, an imputation method for missing data 
elements, and a method for accounting for small sample sizes within an 
IRF. A few commenters opposed the development of a HESS and stated that 
an aggregated quality score would not provide actionable

[[Page 47073]]

insights for IRFs and confuse consumers. Commenters favored more 
transparent and accessible methods to collect and measure health 
equity. Finally, a few commenters requested additional information 
before proceeding with the development of the HESS score, since the 
current HESS metric in Medicare Advantage needs to be modified 
significantly before being applicable to the IRF setting.
    Commenters generally supported the combination of within- and 
between-hospital disparity methods and believed that these 
complementary approaches could provide comprehensive information to 
facilities. Commenters in support of the provision requested that the 
data remain confidential while IRFs become familiar with the data and 
that CMS consider risk adjustment for IRF characteristics for between-
hospital results. One commenter recommended CMS evaluate whether this 
approach is appropriate for all measures, and especially cautioned 
against using between-hospital disparity methods for any potential 
patient experience measures. The commenter stated that ``by 
benchmarking subgroups and making comparisons of those subgroups in 
patient experience data, it can lead to the expectation that it is 
`normal' for certain subgroups to report less favorable patient 
experiences.'' The commenter instead encouraged CMS to compute 
benchmarks for the entire patient population and to introduce 
incentives for reducing the gap in performance between groups.
    Commenters generally supported the addition of data elements like 
race, ethnicity, language preference, sexual orientation, gender, 
stable housing, food insecurity, socioeconomic status, veteran status, 
and other social determinants of health. One commenter encouraged CMS 
to improve measures of patient social risk and prioritize identifying 
social risk factors that should be accounted for in a quality payment 
program using an evidence-based approach. A few commenters emphasized 
the importance of disability status and recommended CMS define, collect 
standardized data for, and measure disability status, particularly for 
IRF care access and outcomes.
    Commenters generally suggested prioritizing the development of 
disparity analysis and reporting before determining the best approach 
to identify meaningful differences in IRF performance. One commenter 
suggested grouping IRFs with similar patients to determine rewards and 
penalties based on comparison with an IRF's peers. Commenters generally 
opposed a ranked ordering and percentile approach to order IRFs based 
on their performance because they believed variations in patient 
populations and IRFs would create challenges in accurately comparing 
IRFs against each other.
    Several commenters encouraged CMS to share stratified results of 
existing measures in confidential feedback reports. Furthermore, one 
commenter encouraged CMS to share these results for topped-out measures 
that were previously removed from programs to determine if these data 
reveal meaningful disparities in performance when stratified. 
Commenters also encouraged CMS to establish high standards for 
stratification and reliability. Relatedly, some suggested strategies 
include establishing a minimum case count for IRFs or pooling data 
across years. Other commenters proposed the inclusion of confidence 
intervals, cut points based on standard deviations, or clustering 
algorithms to help IRFs contextualize their performance.
    Response: Public input is very valuable to the continuing 
development of CMS' health equity quality measurement efforts and 
broader commitment to health equity; a key pillar of our strategic 
vision, as well as a core agency function. Thus, we will continue to 
take all concerns, comments, and suggestions into account for future 
development and expansion of policies to advance health equity across 
the IRF QRP, including by supporting IRFs in their efforts to ensure 
equity for all of their patients, and to identify opportunities for 
improvements in health outcomes.

F. Proposals Relating to the Form, Manner, and Timing of Data 
Submission Under the IRF QRP

1. Background
    We refer readers to the regulatory text at Sec.  412.634(b) for 
information regarding the current policies for reporting IRF QRP data.
2. Proposal To Require Quality Data Reporting on all IRF Patients 
Beginning With the FY 2025 IRF QRP
a. Background
    We have received public input for the past 10 years on the need to 
standardize measurement data collection across all payers in the PAC 
settings. For example, as part of their recommendations on Coordination 
Strategy for Post-Acute Care and Long-term Care Performance 
Measurement,\14\ the National Quality Forum (NQF)-convened Measures 
Application Partnership (MAP) defined priorities and core measure 
concepts for PAC, including IRFs, in order to improve care coordination 
for patients. The MAP concluded that standardized measurement data 
collection is needed to support the flow of information and data among 
PAC providers and recommended CMS collect data across all payers. Since 
the implementation of the Improving Medicare Post-Acute Care 
Transformation Act of 2014 (IMPACT Act) and the development of the 
statutorily required quality measures, we have also received public 
input suggesting that the quality measures used in the IRF QRP should 
be calculated using data collected from all IRF patients, regardless of 
the patients' payer. This input has been provided to us through 
different mechanisms, including comments requested about quality 
measure development. Specifically, in response to the call for public 
comment on quality measures to satisfy the IMPACT Act domain of 
Transfer of Health Information and Care Preferences When an Individual 
Transitions,\15\ the majority of comments expressed concern over the 
non-standardized populations across the PAC setting and urged CMS to 
standardize the patient populations. One commenter stated having an 
all-payer policy in place in some, but not all PAC settings, limits the 
ability of providers and consumers to interpret the information. In the 
FY 2018 IRF PPS proposed rule (82 FR 20740), we sought input on 
expanding the quality measures to include all patients regardless of 
payer status. In response to the Request for Information (RFI), several 
commenters supported expanding the IRF QRP to include all patients 
regardless of payer. The Medicare Payment Advisory Commission (MedPAC) 
was supportive of the effort to ensure quality care for all patients, 
but sensitive to the issue of additional burden, while another 
commenter questioned whether the use of additional data would outweigh 
the burden of additional reporting. Other commenters were also 
supportive, noting that it would not be overly burdensome since most of 
their organizations' members already complete the IRF-PAI on all 
patients, regardless of payer status. One

[[Page 47074]]

commenter supported the idea since collecting information on only a 
subset of patients could be interpreted as having provided different 
levels of care based on the payer.
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    \14\ National Quality Forum. MAP Coordination Strategy for Post-
Acute Care and Long-Term Care Performance Measurement. February 
2012. Available at https://www.qualityforum.org/Publications/2012/02/MAP_Coordination_Strategy_for_Post-Acute_Care_and_Long-Term_Care_Performance_Measurement.aspx. Accessed January 31, 2022.
    \15\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/MMS-Blueprint. Accessed January 31, 2022.
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    In the FY 2020 IRF PPS proposed rule (84 FR 17326 to 17327), CMS 
proposed to expand IRF quality data reporting on all patients 
regardless of payer for purposes of the IRF QRP. In the FY 2020 IRF PPS 
final rule (84 FR 39161 through 39163), we decided not to finalize the 
proposal at the time, but rather use the comments to help inform a 
future all-payer proposal.
b. Support for Expanding Quality Reporting Data on all IRF Patients
    Currently, IRF-PAI assessment data are collected on patients 
admitted under the Medicare Part A fee-for-service (FFS) and Medicare 
Part C benefits.\16\
---------------------------------------------------------------------------

    \16\ In the FY 2010 IRF PPS final rule (74 FR 39798 through 
39800), CMS revised the regulation text in Sec. Sec.  412.604, 
412.606, 412.610, 412.614, and 412.618 to require that all IRFs 
submit IRF-PAI data on all of their Medicare Part C patients.
---------------------------------------------------------------------------

    The concept of requiring quality data reporting on all patients 
regardless of payer is not new; as part of the Long-Term Care Hospital 
(LTCH) quality reporting program, CMS currently collects quality data 
on all patients regardless of payer. CMS also collects quality data on 
all Hospice patients for the Hospice Quality Reporting Program (HQRP) 
regardless of payer. Eligible clinicians participating in the Merit-
based Incentive Payment System (MIPS) who submit quality measure data 
on Qualified Clinical Data Registry (QCDR) measures, MIPS clinical 
quality measures (CQMs) or electronic clinical quality measures (eCQMs) 
must submit such data on a specified percentage of patients regardless 
of payer. Collecting such quality data on all patients in the IRF 
setting would provide the most robust and accurate representation of 
quality in the IRFs since CMS does not have access to other payer 
claims. Additionally, the data would promote higher quality and more 
efficient healthcare for Medicare beneficiaries and all patients 
through the exchange of information and longitudinal analysis of that 
data.
    We believe that data reporting on standardized patient assessment 
data elements using the IRF-PAI should include all IRF patients for the 
same reasons we believe that collecting data on Medicare beneficiaries 
for the IRF QRP's quality measures is important: to achieve equity in 
healthcare outcomes for our beneficiaries by supporting providers in 
quality improvement activities, enabling them to make more informed 
decisions, and promoting provider accountability for healthcare 
disparities.17 18 We believe that we have authority to 
collect all-payer data for the IRF QRP under section 1886(j)(7) of the 
Act. We believe it is necessary to obtain admission and discharge 
assessment information on all patients admitted to IRFs in order to 
obtain full and complete data regarding the quality of care provided by 
the IRF to the Medicare patients receiving care in that facility. We 
note, however, that these data would not be used by CMS for purposes of 
updating the IRF PPS payment rates annually. In addition, we note that 
section 1886(j)(7) of the Act does not limit the Secretary to 
collecting data only on individuals with Medicare, and therefore this 
proposal is not inconsistent with CMS' statutory obligations.
---------------------------------------------------------------------------

    \17\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
    \18\ Report to Congress: Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014 Strategic Plan for Accessing 
Race and Ethnicity Data. January 5, 2017. Available at https://www.cms.gov/About-CMS/Agency-Information/OMH/Downloads/Research-Reports-2017-Report-to-Congress-IMPACT-ACT-of-2014.pdf.
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    We take the appropriate access to care in IRFs very seriously, and 
routinely monitor the QRP measures' performance, including performance 
gaps across IRFs. We intend to monitor closely whether any proposed 
change to the IRF QRP has unintended consequences on access to care for 
high risk patients. Should we find any unintended consequences, we will 
take appropriate steps to address these issues in future rulemaking. We 
wish to clarify that although CMS stated as part of the proposed rule 
that we believed that expanding the reporting of quality measures to 
include all patients, regardless of payer, would ensure that the IRF 
QRP makes publicly available information regarding the quality of 
services furnished to the IRF population as a whole CMS did not make 
any proposals for policies related to publicly reporting IRF QRP data 
collected on non-Medicare patients as part of the proposed rule, and 
therefore is not finalizing any such policies as part of this rule.
    We also take the privacy and security of protected health 
information (PHI) very seriously. Our systems conform to all applicable 
Federal laws and regulations as well as Federal government, Department 
of Health & Human Services (HHS), and CMS policies and standards as 
they relate to information security and data privacy. The system limits 
data access to authorized users and monitors such users to ensure 
against unauthorized data access or disclosures.
    While we appreciate that collecting quality data on all patients 
regardless of payer may create additional burden, we also note that 
this burden may be partially offset by eliminating the effort to 
separate out Medicare beneficiaries from other patients, which is also 
burdensome. We also acknowledge the concerns raised by some 
stakeholders in the past with respect to the administrative challenges 
of implementing all payer data collection and the need to account for 
the burden related to the proposal. In section XII.B. of the proposed 
rule, we provided an estimate of additional burden related to the 
proposal.
c. Proposal To Require Quality Data Reporting on all IRF Patients
    In order to facilitate and ensure that high-quality care is 
delivered to all patients, including Medicare beneficiaries, in the IRF 
setting, we proposed to require that the IRF-PAI assessment be 
collected on each patient receiving care in an IRF, regardless of 
payer, beginning with the FY 2025 IRF QRP. If finalized as proposed, 
IRFs would be required to report these data with respect to admission 
and discharge for all patients, regardless of payer, discharged between 
October 1, 2023 and December 31, 2023. These data would be used (in 
addition to the data collected January 1, 2023 through September 30, 
2023) to calculate an IRF's data completion threshold for the FY 2025 
IRF QRP.
    In the proposed rule we noted that if finalized as proposed, we 
would revise the IRF-PAI in order for IRFs to submit data pursuant to 
the finalized policy. A new item would replace the current item 
identifying payment source on the IRF-PAI admission assessment to 
collect additional payer(s) information. The collection of this item 
would align with the LTCH setting. A draft IRF PAI containing this new 
item would be available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting. We 
would notify stakeholders when the draft IRF PAI is available.
    We invited public comments on this proposal.
    The following is a summary of the public comments received on the 
proposal to collect IRF quality data on all patients regardless of 
payer and our responses:
    Comment: We received support from several commenters on our 
proposal to require quality data reporting on all IRF patients, 
regardless of payer, beginning

[[Page 47075]]

with the FY 2025 IRF QRP. Commenters expressed support for CMS's 
intention to standardize data collection for all patients. Relatedly, 
one commenter noted that collecting assessment data on subsets of 
populations could be interpreted as providing different levels of care. 
Other commenters appreciated that collecting all-payer data will allow 
IRF QRP measures to include all patients regardless of payer status to 
ensure representation of the quality of services provided on the 
population as a whole, rather than a subset limited to Medicare, and 
one commenter agreed with CMS that the inclusion of all-payer data will 
more accurately reflect the quality of care provided to IRF patients. 
Another commenter highlighted that by aligning data collection across 
payer types, it will allow health equity issues to be examined 
consistently for all patients, regardless of payer. Regarding burden, 
MedPAC noted that ``since it has long been common practice for 
providers to collect IRF-PAI data on all patients, expanding IRF 
quality measures to include all patients should not be particularly 
onerous and may even relieve burden, to the extent that providers must 
now separate out assessment data for Medicare patients from that of all 
patients.''
    Response: We thank the commenters for their support. We take the 
appropriate access to care in IRFs seriously, and routinely monitor the 
QRP measures' performance, including performance gaps across IRFs. 
Expanding the reporting of quality measures to include all patients, 
regardless of payer, will further inform our quality work at CMS, 
allowing for the continued improvement in quality of care.
    In addition, there were many providers who expressed their 
understanding of CMS' rationale and supported the concept of collecting 
quality data on all IRF patients regardless of payer, but raised 
various concerns about the implementation of the proposal. We will 
address each of these comments here.
    Comment: Several commenters stated that CMS did not provide enough 
information on how the data collection for all IRF patients, regardless 
of payer, would be implemented and operationalized. Commenters 
questioned how the IRF-PAI data would be validated for determining 
reporting compliance when CMS does not have access to claims from other 
payers. Given the financial penalty IRFs face for non-compliance with 
the QRP, they requested more detail on how this would be handled.
    Response: IRFs would be required to collect and submit the QRP data 
for all patients in the same manner and method they are accustomed to 
for patients with Medicare and Medicare Advantage. IRFs will use the 
IRF-PAI assessment instrument and submit the data through iQIES. The 
IRF QRP requires that the data be submitted and accepted by CMS 
according to the established submission timelines. An IRF-PAI for each 
patient discharged from the IRF must be submitted no later than 11:59 
p.m. the day of the quarterly submission deadline. IRFs have generally 
4.5 months after the end of a quarter to submit their data. More 
information about the data submission deadlines can be found on the IRF 
Data Submission Deadlines web page at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Data-Submission-Deadlines. For the 
purposes of calculating compliance, IRF-PAI data submissions for the 
calendar year are reviewed against the requirements of the IRF QRP. Of 
the assessments received, 95 percent must contain 100 percent of the 
data required to calculate the IRF QRP quality measures. The IRF-PAI 
compliance percentage is calculated by dividing the numerator (the 
number of IRF-PAI assessments with 100 percent of the required IRF-PAI 
data elements) by the denominator (the number of assessments submitted 
successfully before the submission deadlines). Each year, CMS issues 
notices to providers found non-compliant. This methodology is not 
dependent on Medicare claims to determine AIF compliance.
    We would remind providers that IRFs are currently required to meet 
the IRF QRP requirements as authorized by section 1886(j)(7) of the 
Act, and it applies to freestanding IRFs, as well as inpatient 
rehabilitation units of hospitals or Critical Access Hospitals (CAHs) 
paid by Medicare under the IRF PPS. Under the IRF QRP, the Secretary 
must reduce by 2 percentage points the annual increase factor for 
discharges occurring during a fiscal year for any IRF that does not 
submit data in accordance with the IRF QRP requirements established by 
the Secretary.
    Comment: Several commenters questioned how CMS would align rules 
between stays covered by private insurers and stays covered by Medicare 
given that private insurers may not recognize interrupted stays.
    Response: CMS does not expect to align rules with private insurers, 
since the completion of the IRF-PAI is for purposes of meeting the IRF 
QRP data collection requirements. An interrupted stay is defined as a 
stay by a patient who is discharged from the IRF and returns to the 
same IRF within 3 consecutive calendar days. CMS treats this situation 
as one combined IRF stay, and the IRF would not need to complete 
another IRF-PAI when the patient returns to the IRF after the 
interruption. However, it is expected that the IRF would update the 
information in the patient's medical record \19\ to make sure that it 
is current (that is, update the patient's condition, comorbidities, 
rehabilitation goals, plan of care, etc.). If the patient returns to 
the IRF in 4 or more consecutive days (that is, it is not considered an 
interrupted stay), then all of the required documentation must be 
completed as with any ``new'' IRF patient. Therefore, IRFs would follow 
this same guidance for interrupted stays, regardless of the patient's 
payer.
---------------------------------------------------------------------------

    \19\ Sec.  482.24 Condition of Participation: Medical Record 
Services.
---------------------------------------------------------------------------

    Comment: A few commenters stated that CMS did not provide enough 
detail in the proposed rule about how they would account for ``certain 
patient populations.'' They used the example of IRFs that treat 
pediatric patients, and do not believe the IRF-PAI is appropriate for 
pediatric patients. The commenters expressed concern that these IRFs 
would be ``faced with conducting an inappropriate IRF-PAI on the 
patient or running the risk of not meeting the data completion 
threshold.''
    Response: We interpret the commenters' concerns to be directed at 
the standardized patient assessment data elements and Transfer of 
Health items that will be collected on/after October 1, 2022. 
Specifically, we interpret the commenters to be concerned that they 
will not be able to complete these new items because they do not 
believe the IRF-PAI is appropriate for pediatric patients, and as a 
result, they will not be able to meet the 95 percent data completion 
threshold.
    We disagree with the commenters who believe the IRF-PAI is 
inappropriate for persons treated in an IRF who are younger than the 
usual Medicare FFS or Medicare Advantage patients. CMS believes these 
items are clinically relevant for younger patients. They were selected 
based on their overall clinical relevance to PAC providers, including 
IRFs, their ability to facilitate care coordination during transitions, 
their ability to capture medical complexity and risk factors, and their 
scientific reliability and validity. Specific examples include the 
hearing, speech, and vision items; the

[[Page 47076]]

Brief Interview for Mental Status (BIMS); the Confusion Assessment 
Method (CAM) and Patient Health Questionnaires; the Pain interference 
items; special services, treatments, and interventions; and SDOH. The 
remainder of this response discusses the appropriateness of each of 
these item categories in the pediatric populations in more detail.
    The intent of the hearing, speech, and vision items is to document 
the patient's ability to hear (with assistive devices, if they are 
used), understand, and communicate with others, and the patient's 
ability to see objects nearby in their environment. Early detection and 
prompt management are essential for the development of normal language 
and psychosocial functioning, as well as to identify potentially 
reversible causes or other underlying problems.\20\ Sensory limitations 
can lead to confusion in new settings, increase isolation, contribute 
to mood disorders, and impede accurate assessment of other medical 
conditions. Failure to appropriately assess, accommodate, and treat 
these conditions increases the likelihood that younger patients will 
require more intensive and prolonged treatment. Individualized 
assessment with accurate screening tools and follow-up evaluations are 
essential to determining which patients need hearing- or vision-
specific medical attention or assistive devices and accommodations, 
including auxiliary aids and/or services, and to ensure that person-
directed care plans are developed to accommodate a patient's needs.
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    \20\ Dimitrov, L., & Gossman, W. (2022). Pediatric Hearing Loss. 
In: StatPearls. StatPearls Publishing, Treasure Island (FL. PMID: 
30855869).
---------------------------------------------------------------------------

    The BIMS was developed to be a brief, objective screening tool, 
with a focus on learning and memory. As a brief screener, the BIMS is 
intended to be a relatively quick and easy-to-score assessment that 
could identify cognitively impaired patients, as well as those who may 
be at risk for cognitive decline and require further assessment. A 
number of underlying chronic conditions,\21\ including traumatic brain 
injury, side effects of medication, metabolic and/or endocrine 
imbalances,\22\ delirium, and depression,\23\ can affect cognitive 
function and mental status in pediatric and adolescent IRF patient 
populations. In alignment with our Meaningful Measures Initiative, 
accurate assessment of cognitive function and mental status of patients 
and in PAC is expected to make care safer by reducing harm caused in 
the delivery of care; promote effective prevention and treatment of 
disease; strengthen person and family engagement as partners in their 
care; and promote effective communication and coordination of care.\24\ 
For example, standardized assessment of cognitive function and mental 
status of younger patients in PAC will support establishing a baseline 
for identifying changes in cognitive function and mental status (for 
example, an adverse drug reaction), anticipating the patient's ability 
to understand and participate in treatments during a PAC stay, ensuring 
patient safety (for example, risk of falls), and identifying 
appropriate support needs at the time of discharge or transfer. We also 
acknowledge that further cognitive tests may be required based on a 
patient's age and conditions.
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    \21\ Compas, B., Jaser, S., Reeslund, K., Patel, N., & Yarboi, 
J. (2017). Neurocognitive deficits in children with chronic health 
conditions. The American Psychologist, 72(4), 326-338. https://doi.org/10.1037/amp0000042.
    \22\ Romani, C. (2018). Cognitive impairments in inherited 
metabolic diseases: Promises and challenges. Cognitive 
Neuropsychology, 35(3-4), 113-119, https://doi.org/10.1080/02643294.2017.1417249.
    \23\ Selph, S.S., & McDonagh, M.S. (2019). Depression in 
Children and Adolescents: Evaluation and Treatment. American Family 
Physician, 100(10), 609-617. Available at https://www.aafp.org/dam/brand/aafp/pubs/afp/issues/2019/1115/p609.pdf. Accessed 6/2/2022.
    \24\ American Psychological Association. Clinical Practice 
Guideline for the Treatment of Depression. (2019). Available at 
https://apa.org/depression-guideline/resources/children-adolescents.
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    Likewise, the CAM and Patient Health Questionnaire-2 to 9 (PHQ-2 to 
9) have value as universal assessments to identify patients in need of 
further clinical evaluation. The prevalence of depression is increasing 
among youth in the United States. The 2005 to 2014 National Surveys on 
Drug Use and Health, which included 172,495 adolescents 12 to 17 years 
of age, found that the percentage of adolescents who experienced one or 
more major depressive episodes in the previous 12 months increased from 
9 percent in 2005 to 11 percent in 2014.\25\ In 2020, an estimated 4.1 
million or 17.0 percent of the U.S. population aged 12 to 17 had at 
least one major depressive episode, and 2.9 million of these had at 
least one major depressive episode with severe impairment. The 
prevalence was highest among adolescents reporting two or more races 
(29.9%). However, among adolescents with a major depressive episode 
with severe impairment, only about 46.9 percent received treatment.\26\ 
Treatment rates have changed little since 2005, raising concern that 
adolescents are not receiving needed care for depression.\27\ The PHQ-2 
mood interview focuses on the two cardinal symptoms of depression, and 
the longer PHQ-9 mood interview assesses presence and frequency of nine 
signs and symptoms of depression. A study of the PHQ-9 for detecting 
major depression among adolescents found it to be an effective choice 
for providers.\28\ Assessments of depression help PAC providers better 
understand the needs of their pediatric and adolescent patients by: 
prompting further evaluation after establishing a diagnosis of 
depression; elucidating the patient's readiness and/or ability to 
participate in therapies for conditions other than depression during 
their stay; and identifying appropriate ongoing treatment and support 
needs at the time of discharge.
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    \25\ National Institute of Mental Health. Major depression. 
Available at https://www.nimh.nih.gov/health/statistics/major-depression.shtml#part_155031.
    \26\ National Institute of Mental Health. Major depression. 
Available at https://www.nimh.nih.gov/health/statistics/major-depression.shtml#part_155031.
    \27\ Selph, S.S., & McDonagh, M.S. (2019). Depression in 
Children and Adolescents: Evaluation and Treatment. American Family 
Physician, 100(10), 609-617. https://www.aafp.org/dam/brand/aafp/pubs/afp/issues/2019/1115/p609.pdf. Accessed 6/2/2022.
    \28\ Richardson, L.P., McCauley, E., Grossman, D.C., McCarty, 
C.A., Richards, J., Russo, J.E., Rockhill, C., & Katon, W. (2010). 
Evaluation of the Patient Health Questionnaire-9 Item for detecting 
major depression among adolescents. Pediatrics, 126(6), 1117-1123. 
https://doi.org/10.1542/peds.2010-0852.
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    Pain interference items (Pain Effect on Sleep, Pain Interference 
with Therapy Activities, and Pain Interference with Day-to-Day 
Activities) are also appropriate for younger patients. Pain is not a 
surprising symptom in PAC patients and residents, where healing, 
recovery, and rehabilitation often require regaining mobility and other 
functions after an acute event. However, in the pediatric population, 
pain is frequently under-recognized and inadequately 
treated.29 30 In acknowledgement of the opioid crisis, these 
items were carefully considered, and stakeholder comment was 
specifically sought prior to adopting these items in light of those 
concerns.

[[Page 47077]]

Opioids are frequently prescribed to children and adolescents after 
surgery or major injury. Children are not immune to opioid use 
disorders,\31\ and prescription opioid misuse is associated with high-
risk behavior in youth, so it is important for healthcare personnel 
caring for children to recognize these risks and maximize nonopioid 
regimens, in addition to educating families.\32\ In pain management, a 
critical part of providing comprehensive care is performance of a 
thorough initial evaluation, including assessment of both the medical 
and any biopsychosocial factors causing or contributing to the pain, 
with a treatment plan to address the causes of pain and to manage pain 
that persists over time. Using a standardized assessment of pain 
interference with sleep, function, and activities of daily living 
(ADLs) is an important first step toward appropriate pain management in 
PAC settings for patients of all ages.
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    \29\ Gai, N., Naser, B., Hanley, J., Peliowski, A., Hayes, J., & 
Aoyama, K. (2020). A practical guide to acute pain management in 
children. Journal of Anesthesia,.;34(3), 421-433. https://doi.org/10.1007/s00540-020-02767-x. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7256029/ Accessed 6/3/2022.
    \30\ Hauer, J., Houtrow, A.J.; & Section on Hospice and 
Palliative Medicine, Council on Children with Disabilities. (2017). 
Pain Assessment and Treatment in Children With Significant 
Impairment of the Central Nervous System. Pediatrics, 139(6), 
e20171002. https://doi.org/10.1542/peds.2017-1002. https://pubmed.ncbi.nlm.nih.gov/28562301/. Accessed 6/3/2022.
    \31\ Groenewald, C.B. Opioid-prescribing Patterns for Pediatric 
Patients in the United States. (2019). Clinical Journal of Pain, 
35(6), 515-520. https://doi.org/10.1097/AJP.0000000000000707. 
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6782052/
#:~:text=Opioid%20misuse%20is%20also%20a,having%20opioid%20use%20diso
rder19. Accessed 6/3/2022.
    \32\ Kelley-Quon, L.I., Kirkpatrick, M.G., Ricca, R.L., et al. 
(2021). Guidelines for Opioid Prescribing in Children and 
Adolescents After Surgery: An Expert Panel Opinion. JAMA Surgery, 
156(1), 76-90. https://doi.org/10.1001/jamasurg.2020.5045. https://jamanetwork.com/journals/jamasurgery/article-abstract/2772855. 
Accessed 6/3/2022.
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    Other items collected on the IRF-PAI version 4.0 include special 
services, treatments, and interventions performed in the IRF. 
Individually or collectively, these items can have a major effect on an 
individual's health status, self-image, and quality of life. The 
assessment of these special services, treatments, and interventions in 
IRFs is important to ensure the continuing appropriateness of care for 
the pediatric or adolescent patients receiving them, and to support 
care transitions from one PAC provider to another, to an acute care 
hospital, or to discharge. For example, standardized assessment of 
special services, treatments, and interventions used in the IRF can 
promote the pediatric or adolescent patient's safety through 
appropriate care planning (for example, mitigating risks such as 
infection or pulmonary embolism associated with central intravenous 
access), and identifying life-sustaining treatments that must be 
continued, such as mechanical ventilation, dialysis, suctioning, and 
chemotherapy, at the time of discharge or transfer.
    Social determinants of health affect nearly everyone in one way or 
another, and have a major impact on people's health, well-being, and 
quality of life.\33\ These seven items (race, ethnicity, preferred 
language, interpreter services, health literacy, transportation, and 
social isolation) were finalized for collection under our authority 
under section 2(d)(2)(B) of the IMPACT Act, as well as section 
1899B(b)(1)(B)(vi) of the Act. We maintain that these data elements 
will inform provider understanding of individual patient risk factors 
and treatment preferences, facilitate coordinated care and care 
planning, and improve patient outcomes. Adolescents and young adults 
are not immune to health disparities.34 35 As stated in 
section X.F.2.b. of the proposed rule, we believe that data reporting 
on standardized patient assessment data elements using the IRF-PAI 
should include all IRF patients (including pediatric and adolescent 
patients) for the same reasons we believe that collecting data on 
Medicare beneficiaries for the IRF QRP's quality measures is important: 
To achieve equity in healthcare outcomes for our beneficiaries by 
supporting providers in quality improvement activities, enabling them 
to make more informed decisions, and promoting provider accountability 
for healthcare disparities.36 37
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    \33\ US Department of Health and Human Services. Office of 
Disease Prevention and Health Promotion. Healthy People 2030. 
Available at https://health.gov/healthypeople/priority-areas/social-determinants-health.
    \34\ Tebb, K.P., Pica, G., Twietmeyer, L., Diaz, A., & Brindis, 
C.D. (2018). Innovative Approaches to Address Social Determinants of 
Health Among Adolescents and Young Adults. Health Equity, 2(1), 321-
328. https://doi.org/10.1089/heq.2018.0011. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6238651/. Accessed 6/3/2022.
    \35\ Viner, R.M., Ozer, E.M., Denny, S., Marmot, M., Resnick, 
M., Fatusi, A., & Currie, C. (2012). Adolescence and the social 
determinants of health. Lancet, 379(9826), 1641-1652. https://doi.org/10.1016/S0140-6736(12)60149-4.
    \36\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
    \37\ Report to Congress: Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014 Strategic Plan for Accessing 
Race and Ethnicity Data. January 5, 2017. Available at https://www.cms.gov/About-CMS/Agency-Information/OMH/Downloads/Research-Reports-2017-Report-to-Congress-IMPACT-ACT-of-2014.pdf.
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    For each of the items, the IRF-PAI guidance manual provides 
instructions for how to code the items if the item does not apply to 
the patient or the patient is unable to respond. Selecting these 
responses when applicable counts toward the data completion threshold. 
Additionally, the assessments of the special services, treatments, and 
interventions with multiple responses are formatted as a ``check all 
that apply'' format. Therefore, when treatments do not apply, the 
assessor need only check one row for ``None of the Above,'' and the 
data completion requirement is met.
    Comment: Several commenters noted that CMS did not provide 
information on how the data collected under this policy would be used. 
They stated CMS would need to carefully consider how any data from non-
Medicare sources is publicly reported on Care Compare, since commercial 
coverage policies are different and may limit patient access to IRF 
services. The commenters stressed the importance of appropriately risk-
adjusting for those differences. These commenters urged CMS to engage 
stakeholders in developing these risk adjustment methods. One commenter 
supported having more aggregate representative data for the Care 
Compare website, since they believe it will more accurately reflect the 
work IRFs provide. One commenter provided several suggestions such as 
providing confidential results to IRFs and stratifying results by payer 
class.
    Response: We interpret the commenters to be referring to how the 
data collected would be used for public reporting and specifically 
those activities associated with public reporting, such as risk 
adjustment for publicly reported measures and the confidential 
facility-level quality measure reports IRFs receive prior to publishing 
results on Care Compare. We clarify for commenters that CMS did not 
make any proposals for policies related to publicly reporting IRF QRP 
data collected on non-Medicare patients. To the extent that CMS is 
interested in such policies in the future, these policies would be 
proposed as part of future notice and comment rulemaking.
    Comment: Two commenters disagreed with our estimated cost of 
implementing a policy to collect IRF QRP data on all patients 
regardless of payer. One commenter said that the expected additional 
237 IRF-PAI assessments per year was a significant underestimation for 
larger urban IRFs. Another commenter believes CMS excluded several 
healthcare personnel who are contributors to the IRF-PAI collection in 
addition to disregarding crucial administrative complexities associated 
with IRF-PAI submission, which in turn underestimated the overall cost 
and burden. This commenter questioned how CMS arrived at its estimate 
and concluded that CMS may have based its estimate on the current 
version of the IRF-PAI since the personnel types we included in the 
burden estimate were Registered Nurses, Licensed Vocational Nurses, 
Respiratory Therapists, Speech and Language Pathologists,

[[Page 47078]]

Occupational Therapists, Physical Therapists, and Psychologists. This 
commenter stated that they believe CMS should have included pharmacists 
and physicians in its cost estimate in addition to increasing the 
percentage of time physical therapists (PTs) and occupational 
therapists (OTs) are involved in the process. They state that PTs and 
OTs are substantially more involved in both the clinical process and as 
PPS coordinators than is reflected in CMS' burden estimate. This 
commenter described a two-stage process to completing the IRF-PAI that 
includes: (1) clinicians providing services and documenting the 
relevant data; and (2) the PPS coordinator compiling, verifying, and 
clarifying the data in preparation for submission. They point out that 
the PPS coordinator may spend the entire 1.8 hours completing the IRF-
PAI, but that does not take into account the assessment of the patient 
and the interdisciplinary communication that goes on in the weekly 
interdisciplinary team conferences.
    Response: We disagree with the commenters about our burden 
estimate. We acknowledge that some IRFs will incur a higher cost than 
was estimated due to their size and volume of admissions. We also 
acknowledge that some IRFs will incur a lower cost. We do agree that 
the additional cost will be dependent on the IRF's current volume of 
non-Medicare and non-Medicare Advantage patients.
    We also want to point out that the estimated burden included in 
section XI.B. of the FY 2023 IRF PPS proposed rule reflects the 
estimated burden associated with collecting the IRF-PAI data on 
patients associated with this proposal: that is, expanding data 
collection from Medicare FFS and Medicare Advantage patients to all 
patients receiving IRF services, regardless of payer. It was not an 
estimate of burden associated with the transition from the IRF-PAI 
version 3.0 to the IRF-PAI version 4.0 (that is, the collection of new 
data elements) since this burden was accounted for in the FY 2020 IRF 
PPS proposed and final rules (84 FR 17333 and 84 FR 39166).
    The 1.8 hours per IRF-PAI is based on past IRF burden calculations 
and represents the time it takes to encode the IRF-PAI. As the 
commenter pointed out in their example, after the patient assessment is 
completed, the IRF-PAI is coded with the information and submitted to 
iQIES, and it is these steps (after the patient assessment) that the 
estimated burden and cost captures. Finally, as we stated in section 
XI.B. of the proposed rule, our assumptions for staff type were based 
on the categories generally necessary to perform an assessment, and 
subsequently encode it, which is consistent with past collection of 
information estimates.\38\ While we acknowledge that some IRFs may use 
PTs and OTs more than others, our estimates are based on the categories 
of personnel necessary to complete the IRF-PAI.
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    \38\ FY 2016 IRF PPS proposed rule (80 FR 23390).
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    Comment: A few commenters opposed the proposal because they stated 
that CMS did not provide information in the proposal to address their 
concerns raised in previous years. Specifically, they stated it was not 
reasonable to compare IRFs and LTCHs since expanding data collection 
for non-Medicare patients is a significantly larger undertaking for 
IRFs due to the fact that the volume of assessments is much higher in 
IRFs than LTCHs. Commenters also disagreed with the comparison to 
Hospices since their assessment is smaller than the current version of 
the IRF-PAI. One commenter called the proposal an ``unfunded mandate'' 
while another referred to it as ``regulatory overreach.''
    Response: We clarify that when CMS referred to the LTCH and Hospice 
QRP programs in the proposed rule, we were not implying that the volume 
of assessments would be similar. We acknowledge that there are more 
IRFs than LTCHs in the U.S. and that an IRF generally has a higher 
number of patients than an LTCH. It is also true that Hospices have a 
higher number of patient stays annually than IRFs (in 2020, more than 
1.7 million Medicare beneficiaries received hospice services compared 
to 379,000 IRF stays).\39\ The intent in referring to the LTCH QRP was 
to provide an example of a CMS program that currently collects QRP data 
on all patients, regardless of payer.
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    \39\ MedPAC Report to the Congress: Medicare Payment Policy. 
March 2022. Available at https://www.medpac.gov/document/march-2022-report-to-the-congress-medicare-payment-policy/. Accessed June 6, 
2022.
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    As we have stated before, we appreciate that collecting quality 
data on all patients regardless of payer may create additional burden. 
We also note that this burden may be partially offset by eliminating 
the effort to separate out Medicare beneficiaries from other patients, 
which is also burdensome. Moreover, section 2(d)(2)(B) of the IMPACT 
Act requires the Secretary to collect or otherwise obtain access to the 
data necessary to carry out the provisions of paragraph (2) of section 
2(d) of the IMPACT Act through both new and existing data sources. 
Accessing standardized data relating to the standardized data elements 
on a national level is necessary to permit CMS to conduct periodic 
analyses; to assess appropriate adjustments to quality measures, 
resource use measures, and other measures; and to assess and implement 
appropriate adjustments to Medicare payments based on those measures. 
Collecting the data as proposed will provide the basis for our periodic 
analyses of the relationship between an individual's health status and 
other factors and quality, resource use, and other measures, as 
required by section 2(d)(2) of the IMPACT Act, and to assess 
appropriate adjustments.
    Comment: Two commenters raised concerns that if finalized, the 
proposal to collect IRF QRP data on all patients, regardless of payer, 
would take time away from the patient care process. One of these 
commenters opposes the collection of patient data from patients who 
have no connection to the Medicare program.
    Response: We disagree that this policy, if finalized, would take 
time away from patient care. The items collected on the IRF-PAI, 
including vision, hearing, cognition, pain interference, functional 
status, and special services, are all important pieces of information 
to developing and administering a comprehensive plan of care. Rather 
than taking time away from patient care, providers will be documenting 
information they are likely already collecting through the course of 
providing care to the patients. We received support from IRFs to our 
RFI in the FY 2018 IRF PPS proposed rule, as well as our proposal in 
the FY 2020 IRF PPS proposed rule (the FY 2020 proposal was not 
subsequently finalized). Many commenters at that time and in response 
to this proposal indicated they are already collecting IRF-PAI data on 
all patients, regardless of payer. Other commenters have told us that 
they already collect many of the SDOH items included within the IRF-PAI 
version 4.0. The Transfer of Health Information items represent 
processes IRFs are likely already doing, since freestanding IRFs or IRF 
units within larger hospitals that participate in Medicare must arrange 
for a patient's discharge plan which likely includes providing a 
legible, complete, reconciled medication list in order to be in 
compliance with hospital Conditions of Participation at Sec.  482.43.
    We also disagree that the data collected under this proposal would 
have no connection to the Medicare program. As we stated in the 
proposed rule, expanding the collection of data to all patients, 
regardless of payer, would

[[Page 47079]]

ensure that CMS has full and complete data in order to assess the 
relative quality of care provided by IRFs to all patients, and to 
better evaluate the quality of care received by Medicare patients, 
including whether disparities appear to exist. We believe collecting 
such quality data on all patients in the IRF setting would provide the 
most robust and accurate representation of quality in the IRFs.
    Comment: One commenter stated that the proposal provides no benefit 
to patient care and instead would create different patient populations 
for claims-based measures and assessment-based measures, creating more 
confusion in the data publicly reported.
    Response: We acknowledge that claims-based measures and assessment-
based measures would have different patient populations represented by 
the measure denominators. However, currently that issue exists because 
IRF claims-based measures only reflect Medicare FFS patients while IRF 
assessment-based measures reflect Medicare FFS and Medicare Advantage 
patients. We believe that if this proposal is finalized, it will make 
the assessment-based measures more robust and represent the IRF 
population as a whole, rather than limiting it to only those patients 
with Medicare FFS or Medicare Advantage benefits. CMS did not make any 
proposals for policies related to publicly reporting IRF QRP data 
collected on non-Medicare patients. To the extent that CMS is 
interested in such policies in the future, these policies would be 
proposed as a part of future notice and comment rulemaking.
    Comment: One commenter opposes the collection of data on all 
patients, regardless of payer, because not all the information required 
by CMS is utilized for the IRF QRP quality measures and/or public 
reporting. Another commenter referred to a MedPAC report that indicated 
Medicare FFS patients represent 54 percent of IRF discharges. This 
commenter stated that if you factor in Medicare Advantage patients, it 
would increase the total percentage of their patient population and 
mean that ``many IRFs are already submitting IRF-PAIs on most of their 
patients.'' They also point out that in IRFs that have very similar 
section GG functional assessment average numeric change from admission 
to discharge in their Medicare and non-Medicare patients, there is no 
value in submitting non-Medicare patients' IRF-PAIs to Medicare. 
Instead, they suggest requiring only the items on the IRF-PAI that are 
required to generate a case mix group (CMG), length of stay, discharge 
destination, and GG change to be calculated.
    Response: The IRF QRP requires the collection of certain 
standardized patient assessment data elements. These items have gone 
through extensive research, technical expert review, and public 
comment. The proposal for collecting the IRF-PAI data on all patients, 
regardless of payer, is specific to the data elements specified for the 
QRP and can be found on the IRF QRP Measures Information web page at 
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting/IRF-Quality-Reporting-Program-Measures-Information.
    With regard to the comment about how most IRFs are already 
submitting IRF-PAI assessments on most of their patients or that if an 
IRF has similar section GG functional assessment average numeric change 
scores in their Medicare and non-Medicare patients, then there is no 
value in the proposal, CMS disagrees. The functional outcome measures 
calculated using section GG are not the only IRF QRP assessment-based 
measures. There are 10 measures in total, and they reflect a number of 
quality-of-care areas, such as skin integrity, major falls, medication 
reconciliation, and Transfer of Health information.
    Additionally, MedPAC is tasked with reporting to Congress on the 
payment adequacy of Medicare's FFS payment system, the Medicare 
Advantage program, and the Medicare prescription drug program. While 
their numbers reflect average IRF payer penetration, they do not 
represent all IRFs' payer penetration.
    Comment: Some commenters were concerned about CMS' timeline for 
collecting data on all IRF patients. Two commenters noted that starting 
in FY 2025 is too soon because collection would begin one year 
following the implementation of the IRF-PAI version 4.0, which 
increases data collection by over 100 data points and begins October 1, 
2022. While other commenters noted that their members already complete 
an IRF-PAI on all their patients, and will likely continue to do so, 
they point to the increased length and number of items in the IRF-PAI 
version 4.0. As such, these commenters requested that CMS delay 
expanding reporting requirements for the IRF-PAI to all patients to 
October 1, 2024 so that IRFs would have time to develop a clearer 
understanding of the time commitment for collecting the new items. 
These commenters noted it would give them additional time for training 
and development of operational policies and procedures in order to 
ensure compliance with QRP reporting.
    Response: We interpret the comments referring to ``over 100 data 
points'' to be referring to the number of possible response options 
available for the 21 new data elements that have been added to the IRF-
PAI version 4.0. While it is true that there are approximately 106 
response options for these 21 new data elements, we want to note that 
three of the new items have a response option (``None of the above'') 
IRFs can select for patients who are not receiving special nutritional 
approaches, high-risk drug classes, and special treatments, procedures, 
and programs. When ``None of the above'' is selected, 46 of the items 
are eliminated and IRFs do not have to complete them. Additionally, we 
do not believe the vast majority of IRFs would have an issue meeting 
the reporting requirements. For example, in FY 2016, CMS added 58 new 
data elements with a possible 109 data points for the FY 2018 QRP, and 
for the FY 2018 program year, less than 2 percent of IRFs did not meet 
the compliance threshold for the annual increase factor (AIF).
    IRFs have had exposure to many of these items since CMS first 
introduced them in the FY 2018 IRF proposed rule. At that time, CMS did 
not finalize the majority of the standardized patient assessment data 
element proposals in recognition of the concern raised by many 
commenters that we were moving too fast to adopt the data elements. 
Since then, 4 additional years have passed and CMS has provided a 
number of educational resources and training materials for IRFs to take 
advantage of, reducing the burden to IRFs in creating their own 
training resources. Additionally, CMS recognizes that the effort of 
having to separate out Medicare beneficiaries from other patients has 
clinical and work flow implications that introduce burden, and 
collecting data on all patients admitted would remove the burden of 
having to verify the patient's payer's requirements before beginning 
IRF-PAI collection. Data collection could begin immediately upon 
admission without delay. The IRF QRP Helpdesk is also available to 
providers and has been fielding questions about these new items since 
November 2021 when the revised compliance date for the IRF-PAI version 
4.0 was finalized.
    Additionally, CMS has several reports available to providers to 
monitor their compliance with the QRP reporting requirements during the 
year. These reports are available within iQIES to providers, including 
the IRF-Final Validation Report (FVR) and the Provider Threshold Report 
(PTR). The

[[Page 47080]]

IRF FVR is automatically generated in iQIES within 24 hours of the 
submission of a file and placed in the provider's My Reports folder. 
The FVR provides detailed information about the status of submission 
files, including warnings and fatal errors encountered. The PTR allows 
providers to monitor their compliance status regarding the required 
data submission for the IRF QRP measures for the current Annual 
Increase Factor (AIF). It is a user-requested and on-demand report, 
meaning that it can be pulled anytime by the IRF.
    Although we disagree with the specific concerns raised by these 
commenters pertaining the implementation of the IRF-PAI version 4.0, we 
note that as part of this final rule, CMS is updating the proposed 
requirement for the collection of IRF-PAI assessment data on each 
patient receiving care in an IRF, regardless of payer, to begin with 
the FY 2026 IRF QRP, in order to provide additional time for IRFs to 
prepare for the new requirement. Consequently, IRFs will be required to 
collect and report IRF-PAI assessment data with respect to admission 
and discharge for all patients, regardless of payer, discharged on or 
after October 1, 2024.
    Comment: Several commenters disagreed with implementing the 
proposal for FY 2025 because they noted the landscape for IRF providers 
is vastly different than in 2020 when the proposal was last made. The 
commenters were not specific about what is meant by a ``changing 
landscape,'' but we interpret this as being in reference to their later 
comments about how the lingering impacts of the COVID-19 pandemic, 
particularly with respect to nurse staffing, and they noted that they 
do not believe these issues will be resolved by October 1, 2023. A few 
commenters cited a report by the HHS Assistant Secretary for Planning 
and Evaluation (ASPE) finding that ``healthcare workforce shortages 
will continue to persist and significantly worsen by 2030.''
    Response: We believe the commenters are referring to the ASPE Issue 
Brief (HP-2022-13, May 3, 2022), titled Impact of the COVID-19 Pandemic 
on the Hospital and Outpatient Clinician Workforce.\40\ This report 
describes the workforce shortages tied to COVID-19 surges. However, the 
report also details how the pandemic-related disruptions and workforce 
shortages have taken place within the context of significant pre-
pandemic shortages in some geographic areas, many of which have been 
exacerbated by the uneven and extended duration of the pandemic. The 
report goes on to say that shortages and maldistribution of healthcare 
workers were a major concern even before the pandemic. The analysis we 
believe the commenters are referring to was done in 2016, 4 years prior 
to the start of the COVID-19 pandemic.\41\ While relevant, we 
understand that healthcare staffing has been a longstanding challenge, 
and may take time to resolve.
---------------------------------------------------------------------------

    \40\ Office of the Assistant Secretary for Planning and 
Evaluation (ASPE). Impact of the COVID-19 Pandemic on the Hospital 
and Outpatient Clinician Workforce: Challenges and Policy Responses. 
Available at https://aspe.hhs.gov/index.php/reports/covid-19-health-care-workforce.
    \41\ Zhang X., Tai D., Pforsich H., Lin V.W. United States 
registered nurses workforce report card and shortage forecast: A 
revisit.
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    Although CMS believes it will help IRFs, physicians, and other 
practitioners caring for patients in IRFs better prepare for the 
complex and resource-intensive care needs of patients, which is an 
important consideration in preparing for emerging infectious diseases, 
we note that as part of this final rule CMS is updating the proposed 
requirement for the collection of IRF-PAI assessment on each patient 
receiving care in an IRF, regardless of payer to begin with the FY 2026 
IRF QRP, in order to provide additional time for IRFs to prepare for 
the new requirement.
    Comment: A few commenters stated that IRFs are facing increased 
costs to procure supplies and retain staff, and yet the data would not 
be included in payment updates for IRFs despite the increased resource 
use IRFs will have in conducting the additional data collection. One 
commenter stated the increased cost would be easier to absorb once the 
pandemic is truly endemic.
    Response: We acknowledge that IRFs may continue to be impacted by 
the PHE and that collecting quality data on all patients regardless of 
payer may create additional burden for some IRFs. As noted earlier, we 
received several comments from providers and provider organizations 
stating that they are currently collecting IRF-PAI data on all 
patients, regardless of payer. As we described in section XI.F.2.b. of 
the proposed rule, reporting standardized patient assessment data 
elements using the IRF-PAI on all IRF patients is important now in 
order to better understand the impact of the PHE on our healthcare 
system. It will give IRFs the opportunity to analyze their quality of 
care across and between patient populations so that opportunities to 
achieve equity in healthcare outcomes might be more easily recognized, 
promoting provider accountability.\42\ \43\ The significance of the 
information (including, but not limited to health literacy, 
transportation, race, ethnicity, social isolation, high-risk 
medications) will assist IRFs in supporting patients as they make 
health decisions. Although we believe the benefit of having this 
information available in a standardized format outweighs the potential 
burden of collecting this data, we acknowledge the commenters' 
concerns. We note that as part of this final rule CMS is updating the 
proposed requirement for the collection of IRF-PAI assessment on each 
patient receiving care in an IRF, regardless of payer to begin with the 
FY 2026 IRF QRP, in order to provide additional time for IRFs to 
prepare for the new requirement.
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    \42\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
    \43\ Report to Congress: Improving Medicare Post-Acute Care 
Transformation (IMPACT) Act of 2014 Strategic Plan for Accessing 
Race and Ethnicity Data. January 5, 2017. Available at https://www.cms.gov/About-CMS/Agency-Information/OMH/Downloads/Research-Reports-2017-Report-to-Congress-IMPACT-ACT-of-2014.pdf.
---------------------------------------------------------------------------

    Comment: One commenter opposes the proposal to collect IRF QRP 
information on all patients regardless of payer because they are 
concerned that Medicare Administrative Contractors (MACs) may 
inappropriately access PAI information without authority to do so. They 
state MACs are only allowed to access the IRF-PAI data submitted for 
Medicare and Medicare Advantage patients for purposes of Medicare claim 
reviews and IRF 60 percent rule compliance determinations. They stated 
that MACs have at times incorrectly reviewed IRF-PAI data for non-
Medicare patients when conducting these reviews. They are concerned 
that even though CMS says it takes the privacy and security of PHI 
seriously, and that CMS systems conform to applicable Federal laws and 
standards to ensure information security, it does not change the fact 
that ``thousands'' of non-Medicare IRF patients will not be notified or 
able to provide consent for transmission of their sensitive personal 
health information to CMS. They also raise concerns about the security 
of that information when accessed by other agencies or researchers.
    Response: CMS has not been made aware of inappropriate use of IRF-
PAI data by the MACs. If an IRF is aware of inappropriate use of IRF-
PAI data by MACs, we urge them to contact CMS' Privacy Office at 
[email protected].
    We also want to point providers to the IRF-PAI guidance manual, 
specifically Appendix E, which includes a Privacy

[[Page 47081]]

Act Statement and a Data Collection Information Summary available in 
both English and Spanish. As explained in these documents,\44\ the 
authority for data collection is given under section 1886(j)(2)(D) of 
the Act, which authorizes the Secretary to collect the data necessary 
to establish and administer the IRF PPS, and to help evaluate whether 
the IRF meets quality standards and gives appropriate healthcare to its 
patients. Also, as noted in these documents, the IRF-PAI must be used 
to assess every Medicare Part A FFS and Part C (Medicare Advantage) 
inpatient, and it may be used to assess other types of inpatients. 
These documents are intended to give patients notice of a data 
collection as required by section 552a(e)(3) of the Privacy Act of 
1974, and serve as resources for IRF providers to provide to all 
patients upon admission to the IRF to notify them of their privacy 
rights as well as the authority for the data collection under the 
statute.
---------------------------------------------------------------------------

    \44\ The CMS IRF-PAI Manual Version 4.0 Effective 10-1-2022 can 
be found on the IRF-PAI and IRF QRP Manual website and downloaded 
here: https://www.cms.gov/files/zip/cms-irf-pai-manual-version-40-effective-october-1-2022.zip.
---------------------------------------------------------------------------

    In response to the concern about the security of the information 
when accessed by other agencies or researchers, CMS has stringent 
policies and safeguards in place for the use of any data CMS has 
collected. CMS safeguards the IRF-PAI data in a data system. The system 
limits data access to authorized users and monitors such users to 
ensure against unauthorized data access or disclosures. This system 
conforms to all applicable Federal laws and regulations as well as 
Federal government, HHS, and CMS policies and standards as they relate 
to information security and data privacy. The applicable laws and 
regulations include, but are not limited to: the Privacy Act of 1974; 
the Federal Information Security Management Act of 2002; the Computer 
Fraud and Abuse Act of 1986; the Health Insurance Portability and 
Accountability Act of 1996; the E-Government Act of 2002; the Clinger-
Cohen Act of 1996; the Medicare Modernization Act of 2003; and the 
corresponding implementing regulations. Prior to receiving data under 
one of the routine uses specified in the System of Records Notice 
(SORN) (09-70-0521), each prospective recipient must agree in writing 
to ensure the continuing confidentiality and security of the 
information. Furthermore, disclosures of PHI authorized by these 
routine uses may be made only if, and as, permitted or required by the 
``Standards for Privacy of Individually Identifiable Health 
Information'' (45 CFR parts 160 and 164, which are commonly referred to 
as the ``HIPAA Privacy Rule''). These same policies and safeguards 
would exist for information collected under this proposal. 
Additionally, we would also remind stakeholders that the CDC NHSN data 
are already collected on all patients regardless of payer and these 
data are currently safeguarded under the privacy standards previously 
noted.
    Comment: Two commenters opposed the proposal because they believe 
that patients who are not on government-sponsored healthcare plans 
should not be required to report these data and IRFs should not be 
required to collect and submit them. One commenter questioned whether 
non-government patients will have the opportunity to opt out of 
reporting and if they did, what implications it would have on penalties 
for non-compliance. Another commenter challenged CMS statutory 
authority to require IRFs to submit the data, stating they believe CMS' 
proposal violates the Health Insurance Portability and Accountability 
Act (HIPAA) Privacy Rule, the Privacy Act of 1974 (5 U.S.C. 552a), the 
privacy provisions of the E-Government Act of 2002, and potentially 35 
State privacy laws that are more stringent than HIPAA and other Federal 
laws and which may prohibit IRFs from disclosing non-Medicare patient 
health information via the IRF-PAI to CMS.
    Response: We appreciate the commenters' concerns but disagree that 
this proposal is a violation of HIPAA, the Privacy Act of 1974, and the 
E-Government Act of 2002. IRF-PAI data are collected under an existing 
SORN, 09-70-0521 (66 FR 56682). Any disclosure of the data will be made 
in accordance with the Privacy Act and those routine uses outlined in 
the SORN. Medicare patients are currently given a Privacy Act Statement 
and therefore one would be given to every patient under the IRF QRP. 
Section 208 of the E-Government Act of 2002 requires Federal agencies 
to perform Privacy Impact Assessments when acquiring or developing new 
information technology or making substantial changes to existing 
information technology that involves the collection, maintenance, or 
dissemination of information in identifiable form. Because we are not 
acquiring or developing new information technology, or making 
substantial changes to existing information technology under this 
proposal, we disagree that this policy violates the E-Government Act. 
Additionally, the IRF final rule is required for the implementation of 
a Federal program within CMS' authority. As such, CMS attests to 
compliance with all Federal laws, but is not held to State law 
requirements regarding this collection.
    With regard to questions about how CMS would keep non-Medicare data 
secure, we safeguard the IRF-PAI data in a secure data system. The 
system limits data access to authorized users and monitors such users 
to ensure against unauthorized data access or disclosures. This system 
conforms to all applicable Federal laws and regulations, as well as 
Federal government, HHS, and CMS policies and standards as they relate 
to information security and data privacy. The applicable laws and 
regulations include, but are not limited to: the Privacy Act of 1974; 
the Federal Information Security Management Act of 2002; the Computer 
Fraud and Abuse Act of 1986; the Health Insurance Portability and 
Accountability Act of 1996; the E-Government Act of 2002; the Clinger-
Cohen Act of 1996; the Medicare Modernization Act of 2003; and the 
corresponding implementing regulations. With regard to the scope of 
data collection, IRFs would be required to submit quality measure and 
standardized patient assessment data elements required by the IRF QRP.
    We believe that the maturation of the IRF QRP and the modernized 
use of the IRF-PAI instrument by IRFs argue for the collection of IRF-
PAI data on all patients, regardless of payer. Specifically, we believe 
there is a rationale and agency precedent (in the other reporting 
programs, such as LTCH, Hospice, and MIPS) for moving forward with the 
collection of assessment data for the purposes of the IRF QRP. It will 
improve the IRF QRP's ability to assess IRF quality and allow the IRF 
to foster better-quality care for patients regardless of the payer 
source. It will also support CMS' ability to compare standardized 
outcome measures across PAC settings.
    Final Decision: After considering the public comments received, for 
the reasons discussed above and in the FY 2023 IRF PPS proposed rule 
(87 FR 20254), we are finalizing our proposal to begin collection of 
IRF-PAI assessment on each patient receiving care in an IRF, regardless 
of payer. In the proposed rule, we proposed that this collection would 
begin with the FY 2025 IRF QRP, meaning that IRFs would be required to 
report these data with respect to admission and discharge of all 
patients, regardless of payer, discharged between October 1, 2023 and 
December 31, 2023. However, upon consideration of the

[[Page 47082]]

public comments received on this issue, and for the reasons discussed 
above, CMS is finalizing this policy in this final rule to begin with 
the FY 2026 IRF QRP in order to give IRFs more time to prepare for the 
new data collection. IRFs will be required to report these data with 
respect to admission and discharge for all patients, regardless of 
payer, discharged between October 1, 2024 and December 31, 2024. These 
data will be used (in addition to the data collected January 1, 2024 
through September 30, 2024) to calculate an IRF's data completion 
threshold for the FY 2026 IRF QRP.
    As noted in the proposed rule, we will revise the IRF-PAI in order 
for IRFs to submit data pursuant to the finalized policy. A new item 
will replace the current item identifying payment source on the IRF-PAI 
admission assessment to collect additional payer(s) information. The 
collection of this item will align with the LTCH setting. A draft IRF 
PAI containing this new item will be available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/IRF-Quality-Reporting. We will notify stakeholders when the draft IRF PAI 
is available.
3. Revisions to the Regulation Text To Require IRFs To Submit Patient 
Assessments on All Patients Beginning With the FY 2026 IRF QRP
    As discussed in section XI.F.2. of the proposed rule, we proposed 
to require that the IRF-PAI assessment be collected on each patient 
receiving care in an IRF, regardless of payer. Therefore, we also 
proposed, subject to the aforementioned proposal becoming final, to 
revise the regulation text in Sec. Sec.  412.604, 412.606, 412.610, 
412.614, and 412.618 so that the requirements that IRFs must currently 
satisfy with respect to collection and submission of IRF-PAI data for 
Medicare Part A and Medicare Part C patients would also apply to data 
on all other IRF patients, regardless of payer.
    In addition, we note that CMS' regulations at Sec.  412.610(f) 
currently require IRFs to maintain all PAIs completed on Medicare Part 
A FFS patients within the previous 5 years and Medicare Part C 
(Medicare Advantage) patients within the previous 10 years either in a 
paper format in the patient's clinical record or in an electronic 
computer file format that the IRF can easily obtain and produce upon 
request to CMS or its contractors. Subject to the aforementioned all-
payer proposal becoming final, we also proposed to revise the 
regulation text at Sec.  410.610(f) to require that IRFs maintain PAIs 
completed on patients receiving care under all other payer sources 
(that is, other than Medicare Part A and Medicare Part C) for 5 years. 
We proposed a 5-year period for the same reasons we proposed a 5-year 
requirement for Medicare Part A patients in the original Medicare 
Program; Prospective Payment System for Inpatient Rehabilitation 
Facilities final rule that appeared in the August 7, 2001 Federal 
Register (66 FR 41329). Specifically, the assessments may be needed as 
part of a retrospective review conducted at the IRF for various 
purposes, including the fact that the completed patient assessments 
could be beneficial to other entities that appropriately have access to 
these records (for example, a State or Federal agency conducting an 
investigation due to a complaint of patient abuse).
    The proposed revisions are outlined in Sec. Sec.  412.604, 412.606, 
412.610, 412.614, and 412.618 in the regulation text of the proposed 
rule. We invited public comments on this proposal.
    We did not receive any comments on the proposed revisions to the 
regulation text in Sec. Sec.  412.604, 412.606, 412.610, 412.614, and 
412.618 so that the requirements that IRFs must currently satisfy with 
respect to collection and submission of IRF-PAI data for Medicare Part 
A and Medicare Part C patients would also apply to data on all other 
IRF patients, regardless of payer. Therefore, we are finalizing these 
revisions as proposed, with three exceptions. Specifically, we are 
updating the proposed regulation text at Sec. Sec.  412.604(c), 
412.606(a)(1), and 412.606(b)(1) to reflect that the facilities will 
need to start collecting the IRF-PAI assessment data for each patient 
receiving care in an IRF, regardless of payer, beginning on October 1, 
2024, rather than October 1, 2023 as originally proposed.
4. Revisions to Sec.  412.614(d)(2) To Correct an Error to the 
Regulatory Text
    In accordance with the Administrative Procedure Act, 5 U.S.C. 553, 
it is the Secretary's practice to offer interested parties the 
opportunity to comment on proposed regulations.
    However, the regulatory changes in this proposal are necessary to 
correct an error and do not establish any new substantive rules.
    We proposed to revise the regulatory text at Sec.  412.614(d)(2) to 
correct a reference to another part of the regulations. Specifically, 
we proposed to replace a reference to Sec.  412.23(b)(2) with the 
correct reference to Sec.  412.29(b)(1). The proposed revisions were 
outlined in the regulation text of the proposed rule.
    We invited public comments on this proposal.
    We did not receive any comments on the proposed revision to the 
regulatory text at Sec.  412.614(d)(2) to correct a reference to 
another part of the regulations and therefore, we are finalizing the 
revisions as proposed. These changes will be effective with the FY 2026 
IRF QRP.

G. Policies Regarding Public Display of Measure Data for the IRF QRP

    We did not propose any new policies regarding the public display of 
measure data.

XII. Provisions of the Final Regulations

    In this final rule, we are adopting the provisions set forth in the 
FY 2023 IRF PPS proposed rule (87 FR 20218), specifically:
     We will update the CMG relative weights and average length 
of stay values for FY 2022, in a budget neutral manner, as discussed in 
section V. of this final rule.
     We will update the IRF PPS payment rates for FY 2023 by 
the market basket increase factor, based upon the most current data 
available, with a 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 adopt a permanent cap policy in order to smooth 
the impact of year-to-year changes in IRF payments related to certain 
changes to the IRF wage index, as discussed in section VI. of this 
final rule.
     We will update the FY 2023 IRF PPS payment rates by the FY 
2023 wage index and the labor-related share in a budget-neutral manner, 
as discussed in section VI. of this final rule.
     We will calculate the calculation of the IRF standard 
payment conversion factor for FY 2023, as discussed in section VI. of 
this final rule.
     We will update the outlier threshold amount for FY 2023, 
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 2023, as discussed in section VII. of 
this final rule.
     We will codify CMS' existing teaching status adjustment 
policy and clarify and update the IRF teaching status adjustment policy 
with respect to IRF hospital closures and displaced residents, as 
discussed in section VIII. of this final rule.
    We are also adopting updates to the IRF QRP in section XI. of this 
final rule as follows:

[[Page 47083]]

     Update data reporting requirements under the IRF QRP 
beginning with FY 2026.

XIII. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, 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. In 
order 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 refers 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 Beginning With the FY 2026 IRF QRP

    An IRF that does not meet the requirements of the IRF QRP for a 
fiscal year will receive a 2-percentage point reduction to its 
otherwise applicable annual increase factor for that fiscal year.
    We believe that the burden associated with the IRF QRP is the time 
and effort associated with complying with the requirements of the IRF 
QRP. In section X.F.2. of the proposed rule, we proposed to update the 
data reporting requirements for the IRF QRP beginning with the FY 2025 
IRF QRP. We proposed to require IRFs to collect IRF-PAI assessment 
information on each patient receiving care in an IRF, regardless of 
payer. We believe the IRF-PAI items are completed by Registered Nurses 
(RN), Licensed Practical and Licensed Vocational Nurses (LVN), 
Respiratory Therapists (RT), Speech-Language Pathologists (SLP), 
Occupational Therapists (OT), Physical Therapists (PT), and/or 
Psychologists (Psy), depending on the item. We identified the staff 
type per item based on past IRF burden calculations in conjunction with 
expert opinion. Our assumptions for staff type were based on the 
categories generally necessary to perform an assessment. 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 50 percent; LVN 
31.7 percent; RT 7 percent; SLP 6 percent; PT 2.5 percent; OT 2.5 
percent; Psy 2 percent. For the purposes of calculating the costs 
associated with the collection of information requirements, we obtained 
mean hourly wages for these staff from the U.S. Bureau of Labor 
Statistics' May 2020 National Occupational Employment and Wage 
Estimates.\45\ To account for overhead and fringe benefits, we have 
doubled the hourly wage. These amounts are detailed in Table 13.
---------------------------------------------------------------------------

    \45\ https://www.bls.gov/oes/current/oes_nat.htm.
    [GRAPHIC] [TIFF OMITTED] TR01AU22.017
    
    As a result of the proposal, the estimated burden and cost for IRFs 
for complying with requirements of the FY 2026 IRF QRP will increase. 
Specifically, we believe that there will be a 1.8 hours addition in 
clinical staff time to report data for each additional IRF-PAI 
completed. We estimated the collection of an additional 263,988 IRF-
PAIs from 1,115 IRFs annually. This equated to an increase of 475,178 
hours in burden for all IRFs (1.8 hours x 263,988 discharges). Given 
the clinician times estimated in the previous paragraph and the wages 
in Table 13, we calculated a blended hourly rate of $66.82. We 
estimated that each IRF will complete an average of 237 additional IRF-
PAIs per year, the total cost related to the additional reporting 
requirements is estimated at $28,505.41 per IRF annually [(237 
assessment x 1.8 hours) x $66.82], or $31,783,532.15 for all IRFs 
annually ($28.505.41 x 1,115). The increase in burden will be accounted 
for in a revised information collection request under OMB control 
number

[[Page 47084]]

(0938-0842). The required 60-day and 30-day notices will publish in the 
Federal Register and the comment periods will be separate from those 
associated with this rulemaking. A 60-day Federal Register notice was 
published on February 3, 2022 (87 FR 6175) to extend the information 
collection request (ICR). The 60-day comment period for the extension 
ended April 4, 2022. The 30-day Federal Register notices published on 
April 12, 2022 (87 FR 21661) and the ICR is pending at OMB. The 
revision ICR will be submitted at the conclusion of the extension 
process.
    As described in section X.F.2.c. of the proposed rule, a new item 
would replace Item 20 on the IRF-PAI V4.0. However, since this item is 
replacing another item already accounted for in the PRA, we do not 
believe this would add any additional burden to the estimate described 
above.
    We invited public comments on these potential information 
collection requirements. We responded to these comments in section 
XI.F.2. of this final rule. However, for the reasons discussed in 
section XI.F.2., CMS is finalizing this policy to begin with the FY 
2026 IRF QRP in order to give IRFs more time to prepare for the new 
data collection. IRFs will be required to report these data with 
respect to admission and discharge for all patients, regardless of 
payer, discharged between October 1, 2024 and December 31, 2024. These 
data will be used (in addition to the data collected January 1, 2024 
through September 30, 2024) to calculate an IRF's data completion 
threshold for the FY 2026 IRF QRP.

XIV. Regulatory Impact Analysis

A. Statement of Need

    This final rule updates the IRF prospective payment rates for FY 
2023 as required under section 1886(j)(3)(C) of the Act and in 
accordance with section 1886(j)(5) of the Act, which requires the 
Secretary to publish in the Federal Register on or before August 1 
before each FY, the classification and weighting factors for CMGs used 
under the IRF PPS for such FY and a description of the methodology and 
data used in computing the prospective payment rates under the IRF PPS 
for that FY. This final rule also implements section 1886(j)(3)(C) of 
the Act, which requires the Secretary to apply a productivity 
adjustment to the market basket increase factor for FY 2012 and 
subsequent years.
    Furthermore, this final rule also adopts policy changes under the 
statutory discretion afforded to the Secretary under section 1886(j) of 
the Act. We are also finalizing updates to the data reporting 
requirements for the IRF QRP and corresponding amendments to the 
regulations consistent with these requirements. In addition, we are 
also finalizing an amendment to correct an error in the regulations 
text at Sec.  412.614(d)(2).

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
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). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in Executive Order 12866.
    Section (6)(a) of Executive Order 12866 provides that a regulatory 
impact analysis (RIA) must be prepared for major rules 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 2023 with those in 
FY 2022. This analysis results in an estimated $275 million increase 
for FY 2023 IRF PPS payments. Additionally, we estimate that costs 
associated with updating the reporting requirements under the IRF QRP 
result in an estimated $31,783,532.15 additional cost in FY 2026 for 
IRFs. Based on our estimates OMB's Office of Information and Regulatory 
Affairs has determined that this rulemaking is ``economically 
significant'' as measured by the $100 million threshold. Also, the rule 
has been reviewed by OMB. Accordingly, we have prepared an RIA that, to 
the best of our ability, presents the costs and benefits of the 
rulemaking.

C. Anticipated Effects

1. Effects on IRFs
    The 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 $8.0 million 
to $41.5 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 https://www.sba.gov/sites/default/files/2019-08/SBA%20Table%20of%20Size%20Standards_Effective%20Aug%2019%2C%202019_Rev.pdf, effective January 1, 2017 and updated on August 19, 2019.) 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 1,118 IRFs, of which approximately 52 
percent are nonprofit facilities) are considered small entities and 
that Medicare payment constitutes the majority of their revenues. HHS 
generally uses a revenue impact of 3 to 5 percent as a significance 
threshold under the RFA. As shown in Table 14, we estimate that the net 
revenue impact of the final rule on all IRFs is to increase estimated 
payments by approximately 3.2 percent. The rates and policies set forth 
in this final rule will not have a significant impact (not greater than 
4 percent) on a substantial number of small entities. The estimated 
impact on small entities is shown in Table 14. MACs are not considered 
to be

[[Page 47085]]

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 an 
RIA 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 shown in Table 14, we estimate that the net revenue 
impact of this final rule on rural IRFs is to increase estimated 
payments by approximately 3.1 percent based on the data of the 134 
rural units and 12 rural hospitals in our database of 1,118 IRFs for 
which data were available. We estimate an overall impact for rural IRFs 
in all areas between 0.5 percent and 4.0 percent. As a result, we 
anticipate that this final rule will not have a significant impact on a 
substantial number of small entities.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-04, enacted on March 22, 1995) (UMRA) 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 2022, that threshold is 
approximately $165 million. This final rule does not mandate any 
requirements for State, local, or tribal governments, or for the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent 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.
2. Detailed Economic Analysis
    This final rule will update the IRF PPS rates contained in the FY 
2022 IRF PPS final rule (86 FR 42362). Specifically, this final rule 
will update the CMG relative weights and ALOS values, the wage index, 
and the outlier threshold for high-cost cases. This final rule will 
apply a productivity adjustment to the FY 2023 IRF market basket 
increase factor in accordance with section 1886(j)(3)(C)(ii)(I) of the 
Act. Further, this final rule codifies CMS' existing teaching status 
adjustment policy through proposed amendments to the regulation text 
and updates and clarifies the IRF teaching policy with respect to IRF 
hospital closures and displaced residents. Additionally, this final 
rule will establish a permanent cap policy to smooth the impact of 
year-to-year changes in IRF payments related to decreases in the IRF 
wage index.
    We estimate that the impact of the changes and updates described in 
this final rule would be a net estimated increase of $275 million in 
payments to IRF providers. The impact analysis in Table 14 of this 
final rule represents the projected effects of the updates to IRF PPS 
payments for FY 2023 compared with the estimated IRF PPS payments in FY 
2022. 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 2023, we are implementing the standard 
annual revisions described in this final rule (for example, the update 
to the wage index and market basket increase factor used to adjust the 
Federal rates). We are also reducing the FY 2023 IRF market basket 
increase factor by a productivity adjustment in accordance with section 
1886(j)(3)(C)(ii)(I) of the Act. We estimate the total increase in 
payments to IRFs in FY 2023, relative to FY 2022, would be 
approximately $275 million.
    This estimate is derived from the application of the FY 2023 IRF 
market basket increase factor, as reduced by a productivity adjustment 
in accordance with section 1886(j)(3)(C)(ii)(I) of the Act, which 
yields an estimated increase in aggregate payments to IRFs of $330 
million. However, there is an estimated $55 million decrease in 
aggregate payments to IRFs due to the proposed update to the outlier 
threshold amount. Therefore, we estimate that these updates would 
result in a net increase in estimated payments of $275 million from FY 
2022 to FY 2023.
    The effects of the updates that impact IRF PPS payment rates are 
shown in Table 14. 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 3.6 percent to 3.0 percent of total estimated 
payments for FY 2023, 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 sections 
1886(j)(3)(A)(i) and (j)(3)(C) of the Act, including a productivity 
adjustment in accordance with section 1886(j)(3)(C)(ii)(I) 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 applying the budget-neutral permanent cap 
on wage index decreases policy.
     The effects of the budget-neutral changes to the CMG 
relative weights and ALOS values under the authority of section 
1886(j)(2)(C)(i) of the Act.
     The total change in estimated payments based on the FY 
2023 payment changes relative to the estimated FY 2022 payments.
3. Description of Table 14
    Table 14 shows the overall impact on the 1,118 IRFs included in the 
analysis.
    The next 12 rows of Table 14 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 972 IRFs located in 
urban areas included in our analysis. Among these, there are 654 IRF 
units of hospitals located in urban areas and 318 freestanding IRF 
hospitals located in urban areas. There are 146 IRFs located in rural 
areas included in our analysis. Among these, there are 134 IRF units of 
hospitals located in rural areas and 12 freestanding IRF hospitals 
located in rural areas. There are 434 for-profit IRFs. Among these, 
there are 399 IRFs in urban areas and 35 IRFs in rural areas. There are 
577 non-profit IRFs. Among these, there are 487 urban IRFs

[[Page 47086]]

and 90 rural IRFs. There are 107 government-owned IRFs. Among these, 
there are 86 urban IRFs and 21 rural IRFs.
    The remaining four parts of Table 14 show IRFs grouped by their 
geographic location within a region, by teaching status, and by DSH 
patient percentage (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 rule to the 
facility categories listed are shown in the columns of Table 14. 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 2023 analysis file.
     Column (3) shows the number of cases in each category in 
our FY 2023 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 labor-related share and wage index, in a budget-neutral manner.
     Column (6) shows the estimated effect of the permanent cap 
on wage index decreases policy, in a budget-neutral manner.
     Column (7) shows the estimated effect of the update to the 
CMG relative weights and ALOS values, in a budget-neutral manner.
     Column (8) compares our estimates of the payments per 
discharge, incorporating all of the policies reflected in this final 
rule for FY 2023 to our estimates of payments per discharge in FY 2022.
    The average estimated increase for all IRFs is approximately 3.2 
percent. This estimated net increase includes the effects of the IRF 
market basket increase factor for FY 2023 of 3.9 percent, which is 
based on a IRF market basket update of 4.2 percent, less a 0.3 
percentage point productivity adjustment, as required by section 
1886(j)(3)(C)(ii)(I) of the Act. It also includes the approximate 0.6 
percent overall decrease in estimated IRF outlier payments from the 
update to the outlier threshold amount. Since we are making the updates 
to the IRF wage index, labor-related share 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.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
4. 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 14.
    For the FY 2023 proposed rule, we used preliminary FY 2021 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 3.8 percent in FY 2022. As we typically do between the 
proposed and final rules each year, we updated our FY 2021 IRF claims 
data to ensure that we are using the most recent available data in 
setting IRF payments. Therefore, based on an updated analysis of the 
most recent IRF claims data for this final rule, we estimate that IRF 
outlier payments as a percentage of total estimated IRF payments are 
3.6 percent in FY 2022. Thus, we are adjusting the outlier threshold 
amount in this final rule to maintain total estimated outlier payments 
equal to 3 percent of total estimated payments in FY 2023. The 
estimated change in total IRF payments for FY 2023, therefore, includes 
an approximate 0.6 percentage point decrease in payments because the 
estimated outlier portion of total payments is estimated to decrease 
from approximately 3.6 percent to 3.0 percent.
    The impact of this outlier adjustment update (as shown in column 4 
of Table 14) is to decrease estimated overall payments to IRFs by 0.6 
percentage point.
5. Impact of the Wage Index and Labor-Related Share
    In column 5 of Table 14, we present the effects of the budget-
neutral update of the wage index and labor-related share. 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.C. of this final rule, the FY 
2023 labor-related share is 72.9 percent, which is the same as the 
labor-related share for FY 2022. In aggregate, we do not estimate that 
these updates will affect overall estimated payments to IRFs. However, 
we do expect these updates to have small distributional effects. We 
estimate the largest decrease in payment from the update to the CBSA 
wage index and labor-related share to be a 1.1 percent decrease for 
IRFs in the Urban New England region and the largest increase in 
payment to be a 1.1 percent increase for IRFs in the Rural New England 
Region.
6. Impact of the Wage Index Policy
    In column 6 of Table 14, we present the effects of the budget-
neutral permanent cap on wage index decreases policy. As discussed in 
section VI.D.3 of this final rule, we are applying a permanent 5-
percent cap on any decrease to a provider's wage index from its wage 
index in the prior year to smooth the impact of year-to-year changes in 
IRF payments related to changes in the IRF wage index. We are required 
by section 1886(j)(6) of the Act to implement changes to the wage index 
in a budget-neutral manner. Thus, there will not be an impact on 
aggregate Medicare payments to IRFs.
7. Impact of the Update to the CMG Relative Weights and ALOS Values.
    In column 7 of Table 14, we present the effects of the budget-
neutral update of the CMG relative weights and ALOS 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, with the largest effect begin a decrease 
in payments of 0.3 percent to IRFs in the Rural Pacific region.
8. Effects of Codification and Clarifications of IRF Teaching Status 
Adjustment Policy
    As discussed in section VIII. of this final rule, we are codifying 
the longstanding teaching status adjustment policy through the 
amendments to the regulation text at Sec.  412.602 and Sec.  
412.624(e)(4) provided in this final rule.
    We do not anticipate a financial impact associated with the 
codification of the IRF teaching status adjustment policies. However, 
the clarification of certain teaching status adjustment policies and 
codification of these policies will enable us to align the IRF policies 
with recent updates to the IPPS and IPF teaching status adjustment 
policies. Aligning the policy guidance with other post-acute care 
setting regulations will also assist stakeholders in providing care for 
Medicare beneficiaries.
9. Effects of Requirements for the IRF QRP for FY 2026
    In accordance with section1886(j)(7)(A) of the Act, the Secretary 
must reduce by 2 percentage points the annual market basket increase 
factor otherwise applicable to an IRF for a fiscal year if the IRF does 
not comply with the requirements of the IRF QRP for that fiscal year. 
In section X.A. of the proposed rule, we discuss the method for 
applying the 2 percentage point reduction to IRFs that fail to meet the 
IRF QRP requirements.
    As discussed in section XI.F.2. of this final rule, we are 
finalizing the proposal to require the reporting of quality data on all 
patients discharged from the IRF beginning with the FY 2026 IRF QRP. We 
describe the estimated burden for the proposal in section XI.B. of the 
proposed rule. In summary, the changes to the IRF QRP will result in a 
burden

[[Page 47089]]

addition of $28,505.41 per IRF annually, or $31,783,532.15 for all IRFs 
annually beginning with the FY 2026 IRF QRP. We note, however, that 
this estimate may be partially offset by eliminating the effort that 
IRFs currently undertake to separate out Medicare beneficiaries from 
other patients, which is also burdensome.

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.
    As noted previously 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 and 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 2023. There is currently no mechanism to adjust 
for market basket forecast error in the IRF payment update and any 
change to the productivity adjusted-market basket update would need to 
be made by a change to the statute at section 1886(j)(3)(C)(ii)(I) of 
the Act. Thus, in accordance with sections 1886(j)(3)(C) of the Act, we 
are updating the IRF prospective payments in this final rule by 3.9 
percent (which equals the 4.2 percent estimated IRF market basket 
increase factor for FY 2023 reduced by a 0.3 percentage point 
productivity adjustment as determined under section 
1886(b)(3)(B)(xi)(II) of the Act (as required by section 
1886(j)(3)(C)(ii)(I) of the Act)).
    We considered maintaining the existing CMG relative weights and 
average length of stay values for FY 2023. 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 maintaining the existing outlier threshold amount for 
FY 2023. However, analysis of updated FY 2021 data indicates that 
estimated outlier payments would be more than 3 percent of total 
estimated payments for FY 2022, by approximately 0.6 percent, unless we 
updated the outlier threshold amount. Consequently, we are adjusting 
the outlier threshold amount in this final rule to reflect a 0.6 
percent decrease thereby setting the total outlier payments equal to 3 
percent, instead of 3.6 percent, of aggregate estimated payments in FY 
2023.
    We considered not amending Sec.  412.602 and Sec.  412.624(e)(4) to 
codify our longstanding guidance on the teaching status adjustment 
policies and update the IRF teaching policy on IRF program closures and 
displaced residents. However, we believe that codifying these 
longstanding policies into regulation text would improve clarity and 
reduce administrative burden on IRF providers trying to locate all 
relevant information regarding the teaching status adjustment. 
Additionally, we believe that we should streamline all teaching status 
adjustment policy information in the same place for ease of reference.

E. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this final rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that the total number of unique 
commenters on the FY 2023 IRF PPS proposed rule will be the number of 
reviewers of this year's final rule. We acknowledge that this 
assumption may understate or overstate the costs of reviewing this 
final rule. It is possible that not all commenters reviewed the FY 2023 
IRF PPS proposed rule in detail, and it is also possible that some 
reviewers chose not to comment on the FY 2023 proposed rule. For these 
reasons, we thought that the number of commenters would be a fair 
estimate of the number of reviewers of this final rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this final rule, and 
therefore, for the purposes of our estimate we assume that each 
reviewer reads approximately 50 percent of the rule.
    Using the national mean hourly wage data from the May 2021 BLS for 
Occupational Employment Statistics (OES) for medical and health service 
managers (SOC 11-9111), we estimate that the cost of reviewing this 
rule is $115.22 per hour, including overhead and fringe benefits 
(https://www.bls.gov/oes/current/oes_nat.htm). Assuming an average 
reading speed, we estimate that it would take approximately 3 hours for 
the staff to review half of this final rule. For each reviewer of the 
rule, the estimated cost is $345.66 (3 hours x $115.22). Therefore, we 
estimate that the total cost of reviewing this regulation is $21,085.26 
($345.66 x 61 reviewers).

F. Accounting Statement and Table

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf), in Table 15 we have prepared an accounting 
statement showing the classification of the expenditures associated 
with the provisions of this final rule. Table 15 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 1,118 IRFs in our database.
[GRAPHIC] [TIFF OMITTED] TR01AU22.020


[[Page 47090]]



G. Conclusion

    Overall, the estimated payments per discharge for IRFs in FY 2023 
are projected to increase by 3.2 percent, compared with the estimated 
payments in FY 2022, as reflected in column 8 of Table 14.
    IRF payments per discharge are estimated to increase by 3.2 percent 
in urban areas and 3.1 percent in rural areas, compared with estimated 
FY 2022 payments. Payments per discharge to rehabilitation units are 
estimated to increase 2.6 percent in urban areas and 2.9 percent in 
rural areas. Payments per discharge to freestanding rehabilitation 
hospitals are estimated to increase 3.7 percent in urban areas and 
increase 3.7 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 4.1 percent increase for IRFs 
located in the Urban West South Central region. The analysis above, 
together with the remainder of this preamble, provides an RIA.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by OMB.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document July 19, 2022.

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:  42 U.S.C. 1302 and 1395hh.


0
2. Amend Sec.  412.602 by adding the definitions of ``Closure of an 
IRF'', ``Closure of an IRF's residency training program'', and 
``Displaced resident'' in alphabetical order to read as follows:


Sec.  412.602  Definitions.

* * * * *
    Closure of an IRF has the same meaning as ``closure of a hospital'' 
as defined in Sec.  413.79(h)(1)(i) as applied to an IRF meeting the 
requirements of Sec.  412.604(b) for the purposes of accounting for 
indirect teaching costs.
    Closure of an IRF's residency training program has the same meaning 
as ``closure of a hospital residency training program'' as defined in 
Sec.  413.79(h)(1)(ii) as applied to an IRF meeting the requirements of 
Sec.  412.604(b) for the purposes of accounting for indirect teaching 
costs.
* * * * *
    Displaced resident has the same meaning as a ``displaced resident'' 
as defined in Sec.  413.79(h)(1)(iii) as applied to an IRF, for 
purposes of accounting for indirect teaching costs.
* * * * *

0
3. Amend Sec.  412.604 by revising paragraph (c) to read as follows:


Sec.  412.604  Conditions for payment under the prospective payment 
system for inpatient rehabilitation facilities.

* * * * *
    (c) Completion of patient assessment instrument. For each Medicare 
part A fee-for-service patient admitted to or discharged from an IRF on 
or after January 1, 2002, the inpatient rehabilitation facility must 
complete a patient assessment instrument in accordance with Sec.  
412.606. IRFs must also complete a patient assessment instrument in 
accordance with Sec.  412.606 for each Medicare Part C (Medicare 
Advantage) patient admitted to or discharged from an IRF on or after 
October 1, 2009. In addition, IRFs must complete a patient assessment 
instrument in accordance with Sec.  412.606 for all other patients, 
regardless of payer, admitted to or discharged from an IRF on or after 
October 1, 2024.
* * * * *

0
4. Amend Sec.  412.606 by revising paragraphs (a) and (b)(1) to read as 
follows:


Sec.  412.606   Patient assessments.

    (a) Patient assessment instrument. An inpatient rehabilitation 
facility must use the CMS inpatient rehabilitation facility patient 
assessment instrument to assess Medicare Part A fee-for-service and 
Medicare Part C (Medicare Advantage) inpatients who are admitted on or 
after January 1, 2002, or were admitted before January 1, 2002, and are 
still inpatients as of January 1, 2002.
    (1) Starting on October 1, 2024, inpatient rehabilitation 
facilities must use the CMS inpatient rehabilitation facility patient 
assessment instrument to assess all inpatients, regardless of payer, 
who are admitted on or after October 1, 2024, or who were admitted 
before October 1, 2024 and are still inpatients as of October 1, 2024.
    (2) [Reserved]
    (b) * * * (1) A clinician of the inpatient rehabilitation facility 
must perform a comprehensive, accurate, standardized, and reproducible 
assessment of each Medicare Part A fee-for-service inpatient using the 
inpatient rehabilitation facility patient assessment instrument 
specified in paragraph (b) of this section as part of his or her 
patient assessment in accordance with the schedule described in Sec.  
412.610. IRFs must also complete a patient assessment instrument in 
accordance with Sec.  412.606 for each Medicare Part C (Medicare 
Advantage) patient admitted to or discharged from an IRF on or after 
October 1, 2009. In addition, IRFs must complete a patient assessment 
instrument in accordance with Sec.  412.606 for all other patients, 
regardless of payer, admitted to or discharged from an IRF on or after 
October 1, 2024.
* * * * *

0
5. Amend Sec.  412.610 by revising paragraphs (a), (b), (c) 
introductory text, (c)(1)(i)(A), (c)(2)(ii)(B) and (f) to read as 
follows:


Sec.  412.610  Assessment schedule

    (a) General. For each inpatient, an inpatient rehabilitation 
facility must complete a patient assessment instrument as specified in 
Sec.  412.606 that covers a time period that is in accordance with the 
assessment schedule specified in paragraph (c) of this section.
    (b) Starting the assessment schedule day count. The first day that 
the inpatient is furnished services during his or her current inpatient 
rehabilitation facility hospital stay is counted as day one of the 
patient assessment schedule.
    (c) Assessment schedules and references dates. The inpatient 
rehabilitation facility must complete a patient assessment instrument 
upon the patient's admission and discharge as specified in paragraphs 
(c)(1) and (2) of this section.
    (1) * * *
    (i) * * *
    (A) General. Time period is a span of time that covers calendar 
days 1 through 3 of the patient's current hospitalization.
* * * * *
    (2) * * *
    (ii) * * *
    (B) The patient stops being furnished inpatient rehabilitation 
services.
* * * * *
    (f) Patient assessment instrument record retention. An inpatient 
rehabilitation facility must maintain all patient assessment data sets 
completed on all Medicare Part A fee-for-service patients within the 
previous 5 years, on

[[Page 47091]]

Medicare Part C (Medicare Advantage) patients within the previous 10 
years, and all other patients within the previous 5 years either in a 
paper format in the patient's clinical record or in an electronic 
computer file format that the inpatient rehabilitation facility can 
easily obtain and produce upon request to CMS or its contractors.

0
6. Amend Sec.  412.614 by--
0
a. Revising paragraphs (a) introductory text, (b)(1) and (d)(2);
0
b. Adding paragraph (d)(3); and
0
d. Revising paragraph (e).
    The revisions and additions read as follows:


Sec.  412.614   Transmission of patient assessment data.

    (a) Data format--General rule. The inpatient rehabilitation 
facility must encode and transmit data for each inpatient--
* * * * *
    (b) * * *
    (1) Electronically transmit complete, accurate, and encoded data 
from the patient assessment instrument for each inpatient to our 
patient data system in accordance with the data format specified in 
paragraph (a) of this section; and
* * * * *
    (d) * * *
    (2) Medicare Part C (Medicare Advantage) data. Failure of the 
inpatient rehabilitation facility to transmit all of the required 
patient assessment instrument data for its Medicare Part C (Medicare 
Advantage) patients to our patient data system in accordance with the 
transmission timeline in paragraph (c) of this section will result in a 
forfeiture of the facility's ability to have any of its Medicare Part C 
(Medicare Advantage) data used in the calculations for determining the 
facility's compliance with the regulations in Sec.  412.29(b)(1).
    (3) All other payer data. Failure of the inpatient rehabilitation 
facility to transmit all of the required patient assessment instrument 
data for all other patients, regardless of payer, to our patient data 
system in accordance with the transmission timeline in paragraph (c) of 
this section will result in a forfeiture of the facility's ability to 
have any of its other payer data used in the calculations for 
determining the facility's compliance with the regulations in Sec.  
412.29(b)(1).
    (e) Exemption to the consequences for transmitting the IRF-PAI data 
late for Medicare Part C (Medicare Advantage) patients and all other 
patients, regardless of payer. CMS may waive the consequences of 
failure to submit complete and timely IRF-PAI data specified in 
paragraph (d) of this section when, due to an extraordinary situation 
that is beyond the control of an inpatient rehabilitation facility, the 
inpatient rehabilitation facility is unable to transmit the patient 
assessment data in accordance with paragraph (c) of this section. Only 
CMS can determine if a situation encountered by an inpatient 
rehabilitation facility is extraordinary and qualifies as a situation 
for waiver of the forfeiture specified in paragraphs (d)(2) or (3) of 
this section. An extraordinary situation may be due to, but is not 
limited to, fires, floods, earthquakes, or similar unusual events that 
inflect extensive damage to an inpatient facility. An extraordinary 
situation may be one that produces a data transmission problem that is 
beyond the control of the inpatient rehabilitation facility, as well as 
other situations determined by CMS to be beyond the control of the 
inpatient rehabilitation facility. An extraordinary situation must be 
fully documented by the inpatient rehabilitation facility.

0
7. Amend Sec.  412.618 by revising the introductory text to read as 
follows:


Sec.  412.618  Assessment process for interrupted stays.

    For purposes of the patient assessment process, if any patient has 
an interrupted stay, as defined under Sec.  412.602, the following 
applies:
* * * * *

0
8. Amend Sec.  412.624 by revising paragraphs (e)(1) and (4) to read as 
follows:


Sec.  412.624   Methodology for calculating the Federal prospective 
payment rates.

* * * * *
    (e) * * *
    (1) Adjustment for area wage levels. The labor portion of a 
facility's Federal prospective payment is adjusted to account for 
geographical differences in the area wage levels using an appropriate 
wage index.
    (i) The application of the wage index is made on the basis of the 
location of the facility in an urban or rural area as defined in Sec.  
412.602.
    (ii) Starting on October 1, 2022, CMS applies a cap on decreases to 
the wage index such that the wage index applied to an IRF is not less 
than 95 percent of the wage index applied to that IRF in the prior FY.
    (iii) Adjustments or updates to the wage data used to adjust a 
facility's Federal prospective payment rate under paragraph (e)(1) of 
this section will be made in a budget neutral manner. CMS determines a 
budget neutral wage adjustment factor, based on any adjustment or 
update to the wage data, to apply to the standard payment conversion 
factor.
* * * * *
    (4) Adjustments for teaching hospitals. (i) General. For discharges 
on or after October 1, 2005, CMS adjusts the Federal prospective 
payment on a facility basis by a factor as specified by CMS for 
facilities that are teaching institutions or units of teaching 
institutions.
    (A) An IRF's teaching adjustment is based on the ratio of the 
number of full-time equivalent residents training in the IRF divided by 
the facility's average daily census.
    (B) As described in Sec.  412.105(f)(1)(iii)(A), residents with 
less than full-time status are counted as partial full time equivalent 
based on the proportion of time assigned to the inpatient 
rehabilitation facility compared to the total time necessary to fill a 
residency slot. Residents rotating to more than one hospital or non-
hospital setting will be counted in proportion to the time they are 
assigned to inpatient rehabilitation facility compared to the total 
time worked in all locations. An inpatient rehabilitation facility 
cannot claim time spent by the resident at another inpatient 
rehabilitation facility or hospital.
    (C) Except as described in paragraph (e)(4)(i)(D) of this section, 
the actual number of current year full-time equivalent residents used 
in calculating the teaching adjustment is limited to the number of 
full-time equivalent residents in the IRF's final settled cost report 
for the most recent cost reporting period ending on or before November 
15, 2004 (base year).
    (D) If the inpatient rehabilitation facility first begins training 
residents in a new approved graduate medical education program after 
November 15, 2004, the number of full-time equivalent residents 
determined under paragraph (e)(4)(i)(C) of this section may be adjusted 
using the method described in Sec.  413.79(e)(1)(i).
    (E) The teaching adjustment is made on a claim basis as an interim 
payment, and the final payment in full for the claim is made during the 
final settlement of the cost report.
    (ii) Closure of an IRF or IRF residency training program. (A) 
Closure of an IRF. For cost reporting periods beginning on or after 
October 1, 2011, an IRF may receive a temporary adjustment to its FTE 
cap to reflect displaced residents added because of another IRFs 
closure if the IRF meets the following criteria:
    (1) The IRF is training additional displaced residents from an IRF 
that closed on or after October 1, 2011.

[[Page 47092]]

    (2) No later than 60 days after the IRF begins to train the 
displaced residents, the IRF submits a request to its Medicare 
contractor for a temporary adjustment by identifying the displaced 
residents who have come from the closed IRF and have caused the IRF to 
exceed its cap, and specifies the length of time the adjustment is 
needed.
    (B) Closure of an IRF's residency training program. If an IRF that 
closes its residency training program on or after October 1, 2011, 
agrees to temporarily reduce its FTE cap according to the criteria 
specified in paragraph (e)(4)(ii)(A)(2) of this section, another IRF(s) 
may receive a temporary adjustment to its FTE cap to reflect displaced 
residents added because of the closure of the residency training 
program if the criteria specified in paragraph (e)(4)(ii)(A)(1) of this 
section are met.
    (1) Receiving IRF(s). For cost reporting periods beginning on or 
after October 1, 2011, an IRF may receive a temporary adjustment to its 
FTE cap to reflect displaced residents added because of the closure of 
another IRF's residency training program if the IRF is training 
additional displaced residents from the residency training program of 
an IRF that closed a program; and if no later than 60 days after the 
IRF begins to train the displaced residents the IRF submits to its 
Medicare Contractor a request for a temporary adjustment to its FTE 
cap, documents that it is eligible for this temporary adjustment by 
identifying the displaced residents who have come from another IRF's 
closed program and have caused the IRF to exceed its cap, specifies the 
length of time the adjustment is needed, and submits to its Medicare 
Contractor a copy of the FTE reduction statement by the hospital that 
closed its program, as specified in paragraph (e)(4)(ii)(A)(2) of this 
section.
    (2) IRF that closed its program. An IRF that agrees to train 
displaced residents who have been displaced by the closure of another 
IRF's program may receive a temporary FTE cap adjustment only if the 
hospital with the closed program temporarily reduces its FTE cap based 
on the FTE of displaced residents in each program year training in the 
program at the time of the programs closure. This yearly reduction in 
the FTE cap will be determined based on the number of those displaced 
residents who would have been training in the program during that year 
had the program not closed. No later than 60 days after the displaced 
residents who were in the hospital that closed its program(s) begin 
training at another hospital must submit to its Medicare Contractor a 
statement signed and dated by its representative that specifies that it 
agrees to the temporary reduction in its FTE cap to allow the IRF 
training the displaced residents to obtain a temporary adjustment to 
its cap; identifies the displaced residents who were in the training at 
the time of the program's closure; identifies the IRFs to which the 
displaced residents are transferring once the program closes; and 
specifies the reduction for the applicable program years.
* * * * *

    Dated: July 25, 2022.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2022-16225 Filed 7-27-22; 4:15 pm]
BILLING CODE 4120-01-P