CMS Releases FY 2022 IRF PPS Final Rule; Finalizes Much of the Proposed Rule


By AMRPA Headquarters posted 08-16-2021 18:25


CMS Releases FY 2022 IRF PPS Final Rule; Finalizes Much of the Proposed Rule

1.5% Increase in Overall Payments, Finalized QRP Proposals

By: Kate Beller, Jonathan Gold, Remy Kerr, and Kristen O’Brien

On July 29, the Centers for Medicare and Medicaid Services (CMS) released the Fiscal Year (FY) 2022 Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) final rule. Consistent with the proposed rule, CMS’ final regulation is a relatively straightforward payment update, and also includes a number of changes to the Inpatient Rehabilitation Facility (IRF) Quality Reporting Program (QRP) that are being made in response to the COVID-19 public health emergency (PHE). The rule will go into effect
on October 1, 2021. In all, AMRPA commends CMS for its responsiveness to the Association and recognition of the ongoing demands of the PHE on our hospitals and units. We also appreciate CMS’ acknowledgement that “inpatient rehabilitation facilities (IRFs), as the leader in rehabilitation services, will be very involved in treating the sequela of the COVID-19 infection in patients” in FY 2022 and future years, and that CMS expects to see “evidence of the PHE in the data for FY 2022 and beyond.” Going forward, AMRPA staff will continue to engage with CMS to ensure it effectively considers the impact of current and future PHE surges on the field.

I. FY 2022 Finalized Payment Changes
CMS has finalized modified annual updates to the IRF PPS market basket, case-mix group weights, average lengths of stay, outlier payment threshold, and the labor-related share of IRF PPS payments. All of these adjustments factor into the new finalized standard payment conversion factor used as a baseline for IRF Medicare payments. Overall, CMS is estimating IRF payments will increase by 1.5% across all providers in FY 2022 after all of these changes are accounted for.

i. FY 2022 Case Mix Groups and Average Lengths of Stay Changes
Utilizing the most recent cost report and claims data, CMS has finalized updates to the weights o f case-mix groups (CMGs) as well as the average length of stay (ALOS) for each CMG. Table 2 on page 22 of the display version of the final rule presents the finalized relative weights for all CMGs and tiers, as well as the new ALOS. CMS’ analysis shows that 97.2 percent of all IRF cases are in CMGs and tiers that will experience less than a 5 percent change (either increase or decrease) in the relative weight. However, CMS’ analysis also indicates 1.6 percent of CMGs will receive a decrease of between 5 and 15 percent, and 1.2 percent of cases will receive a decrease of that same magnitude. In addition, CMS states that the finalized changes in the ALOS for FY 2022 are small and do not show any particular trends. Since CMG weight changes must be budget neutral, CMS is applying a budget neutrality factor of 1.0005 to the updated standard payment conversion factor to account for these weight changes.

ii. Market Basket Update
CMS utilizes an IRF market basket to track the changes in costs for the mix of goods and services used to provide care in IRFs. A CMS contractor is hired to forecast the growth in the items and services that make up the IRF market basket. Utilizing updated data, CMS’ contractor is now forecasting a 2.6 percent update in the market basket for FY 2022. This is an increase from the 2.4 percent that was provided in the proposed rule. However, CMS is also required to adjust the market basket update by a productivity adjustment. It uses Bureau of Labor projections for economy-wide productivity to make that adjustment. In this final rule, CMS said the current projection for FY 2022 is 0.7 percent, an increase from the 0.2 percent forecast in the proposed rule. Therefore, CMS finalized an overall 1.9 percent increase in the IRF market basket for FY 2022.

iii. Labor Related Share
For IRF reimbursement purposes, a wage index adjustment is applied to the labor-related share of payments to determine a facility-specific payment. Based on its updated market basket estimates, CMS is finalized a labor-related share for FY 2022 of 72.9 percent, which is the same as was proposed. This is a slight decrease from the current labor-related share of 73.0 percent. Table 4 on page 42 of the proposed rule breaks down the factors that contributed to the small change in the labor-related share. Since labor-related share changes must also be budget neutral, CMS is applying a 1.0032 budget neutrality factor to the standard payment conversion factor to adjust for this change. 

iv. Updated Outlier Threshold
The outlier threshold is used to determine when an IRF is entitled to an outlier payment. CMS attempts to set the outlier threshold each year so 3 percent of total payments are outliers. Based on current data, it estimates 3.4 percent of payments in FY 2021 will be outliers. Therefore, CMS finalized an increase to the outlier threshold amount from $7,906 for FY 2021 to $9,491 for FY 2022 to attempt to have outlier payments account for 3 percent of total payments. This is higher than the proposed update of $9,192 from the proposed rule due to the availability of additional data that is used by CMS to forecast payments. Accordingly, CMS estimates overall payments will be reduced by 0.4 percent due to this change compared to FY 2021 levels.

v. Standard Payment Conversion Factor
The standard payment conversion factor is the dollar figure by which the CMG weight is multiplied to calculate payment (which is then further adjusted by other facility-specific factors such as the wage index). CMS updates the standard payment conversion figure based on the previously discussed factors, including the market basket, as well as budget neutrality adjustments due to the wage index, labor-related share, and CMG weight changes. After it applies these adjustments to the FY 2021 standard payment figure of $16,856, the finalized conversion factor is $17,240, slightly lower than the originally proposed $17,273 for FY 2022. Table 5 of the rule on page 49 provides a breakdown of the effect of each of these factors in determining the new standard payment conversion factor.

vi. Total Estimated Payment Changes
After accounting for all of the aforementioned changes, CMS provides estimates of the payment impact across different types of IRFs. Overall, CMS estimates an increase of $130 million in aggregate payments to all IRF providers over FY 2021 payments, or about 1.5 percent. This is a decrease from the $160 million estimated in the proposed rule. CMS says it estimates urban hospitals and units are estimated to see a 1.5% increase and rural hospitals and units will see a 1.6% increase. Table 17 on page 156 of the final rule CMS also provides a breakdown of the distributional effect of its proposed changes on different types of IRFs, including urban, rural, unit, freestanding and other characteristics.

vii. COVID-19 Related Impacts
CMS would typically rely on FY 2020 claims data and FY 2019 cost report data to update its payment methodologies for FY 2022. However, in the proposed rule, CMS solicited comment on whether it should use FY 2019 claims data given impact of the COVID-19 PHE on IRF claims. At AMRPA’s urging, CMS did not suppress the FY 2020 claims data, and finalized use of FY 2020 claims in its updates to the IRF payment factors. CMS agreed that FY 2020 claims data would better reflect the current operational challenges of IRFs due to COVID-19.

Also in response to AMRPA’s request, CMS provided additional analysis of the impact of the PHE on IRF claims. The agency stated that it “did not observe increases and decreases in IRF utilization in the FY 2020 claims data of the same magnitude observed in other Medicare settings.” Further, CMS said it found that an overall 7% decrease in IRF admissions in FY 2020, with the largest declines occurring among lower-extremity joint replacement and pain syndrome patients. Further, CMS stated based on claims analysis, it found that approximately 1% of IRF admissions included a COVID-19 diagnosis, and 4.2% of admissions could be considered a PHE waiver admission. CMS also asserted its appreciation for AMRPA’s suggestion regarding the need for additional analyses in future rule updates to ensure that “evidence of the PHE in data for FY 2022 and beyond” is accurately accounted for in future updates. 

II. Changes Impacting the IRF Quality Reporting Program

i. Care Compare Reporting Scheduling Changes for IRF Patient Assessment Instrument (IRF PAI) and Claims-Based Measures
CMS finalized its proposed approach for accounting for the data lapses affecting the IRF section of Care Compare due to the IRF QRP reporting exemptions granted in March 2020. As a result, CMS will use a truncated number of quarters (outlined in Tables 11 and 12 below) to update IRFs’ Care Compare scores for claims and assessment-based QRP measures. CMS finalized its proposal to consider the 4th quarter of 2019 QRP data, as well as data collected during and after the third quarter of 2020 QRP data, as
reportable and reliable enough to produce accurate QRP measures, while exempting the first and second quarters of 2020. In addition, CMS is finalizing its proposal to publicly report the IRF National Health Safety Network (NHSN) measures and the healthcare personnel Influenza measure using the four most recent non-contiguous non-exempted quarters of data until the time when four contiguous quarters of reporting resumes, in accordance with the CDC’s recommendation.

While CMS acknowledged the concerns raised by AMRPA (including the fact that all CY 2020 data should be exempted from public reporting and the fact that CMS’ truncated approach will place undue weight on quality data reported during ongoing PHE surges), CMS asserts that the “public display of quality data is extremely important.” It adds that the “continued need for access to IRF quality data on Care Compare by beneficiaries outweighs any potential provider impacts.”

As background, CMS proposed a new approach for updating Care Compare in recognition that the frozen December 2020 Care Compare IRF QRP data may be “increasingly out-of-date and thus less useful for consumers.” CMS therefore issued a proposal to use fewer quarters of data for the IRF PAI-based measures (which typically include 4 quarters of data) as well as the claims-based measures (which typically include 8 quarters of data) to lessen the time before Care Compare could be updated. After a technical analysis of reportability and readability, CMS proposed to use fewer quarters of data using a COVID-19 Affected Reporting (“CAR”) scenario. Specifically, CMS proposed to calculate IRF QRP measures using three quarters (Q3 2020 through Q1 2021) of IRF QRP data for assessment-based measures (compared to the typical four quarters), and six quarters for of IRF QRP data for claims-based measures (compared to the typical eight quarters). CMS proposed to use methodology for the following affected refreshes: (1) for the IRF-PAI based measures, the affected refresh is the December 2021 refresh; (2) for claims-based measures, the affected refreshes occur from December 2021 through June 2023, where the data will be updated in the December 2021 refresh (Q4 2018 through Q4 2019 and Q3 2020) and the September 2022 refresh (Q4 2019 and Q3 2020 through Q3 2021. CMS finalized this proposal to use the CAR scenario to publicly report IRF measures for the December 2021 – June 2023 refreshes as proposed without modification, as reflected in Tables 11 and 12 below:

CMS asserts that it conducted sufficient testing of this methodology, and believes that this approach will result in “acceptable changes in reportability and reliability." It added that CMS “believes that resuming public reporting refreshes starting in December 2021 with fewer quarters of data can assist consumers by providing more recent quality data as well as more actionable data for IRF providers.”

In finalizing its methodology, CMS addressed concerns raised by AMRPA and others about other steps it would consider in conjunction with this type of update. With respect to consumer notification, CMS will provide information as to the fact that fewer quarters are being used to calculate the measures reported on Care Compare (when the site begins to be refreshed on a normal cycle). CMS declines, however, to include additional messaging on the how scores may or may not be affected by the ongoing PHE. CMS explains that it believes such messages “would give the impression the data posted on Care Compare are inaccurate or cannot be used when making informed healthcare decisions, which is not the case given the extensive testing CMS conduct.”

Relatedly, AMRPA submitted our broader Care Compare improvement recommendations (submitted as part of the Care Compare launch in November 2020) as part of our comment letter. CMS acknowledged this submission and asserted that it would take our recommendations into account as it continues to refine Care Compare in the future. AMRPA will be prioritizing Care Compare refinements in the coming months and will be providing updates to our Committees about the status of our work.

ii. COVID-19 Vaccination Coverage Among Healthcare Personnel Measure
As proposed, CMS finalized the provision to add a new IRF QRP measure. The measure - “COVID-19 Vaccination Coverage Among Healthcare Personnel (HCP)” - will be included in the IRF QRP beginning with the FY 2023 IRF QRP, with an initial data submission period of October 1, 2021 through December 31, 2021. CMS reiterated this was due to the “time-sensitive nature of the measure.” Beginning in calendar year (CY) 2022 IRFs will submit data for the entire year. IRFs will be required to submit data one week per month through the CDC’s National Health Safety Network (NHSN) framework. The CDC will then provide a quarterly report to CMS for display on Care Compare. CMS acknowledged several commenters requested a delay in reporting of this measure but stated that it believes the “unprecedented risks associated with the COVID-19 PHE warrant direct attention” at this time.

In terms of measure specifications, IRFs will report the total number of healthcare personnel (HCP) eligible to work in the healthcare facility for at least one day during the reporting period (excluding those with contraindications for the vaccine) for the denominator, and the total number of HCP eligible to work in the IRF for at least one day during the reporting period and who received a complete COVID-19 vaccination series for the numerator. CMS acknowledged that this measure is not currently endorsed by the National Quality Forum (NQF), but stated the agency, along with the CDC, intends to pursue endorsement in the future.

While CMS finalized the measure specifications as proposed, CMS did make a slight modification in relation to this measure’s public reporting schedule. The COVID-19 Vaccination Coverage Among HCP measure will be publicly reported beginning with the September 2022 Care Compare refresh, “or as soon as technically feasible based on data collected for Q4 2021.” ‎Instead of using four rolling quarters of data during the Care Compare refreshes, CMS modified the proposal and will instead only report the most recent quarter of data available.

iii. Transfer of Health (TOH) Information – Patient Measure
CMS finalized the proposal to refine the TOH-Patient measure denominator beginning with the IRF QRP in FY 2023 without modification. The TOH measures are intended to evaluate the timely transfer of health information. In the proposed rule, CMS proposed refining the measure to exclude patients who are discharged home under the care of a home health agency or hospice service in the measure’s denominator in order to avoid double-counting a group of patients in both the TOH-Patient and TOH-Provider measure. AMRPA supported this proposal, having initially expressed concern of double-counting in the Association’s response to the FY 2020 IRF PPS proposed rule when the measures were initially proposed.

For reference, the TOH-Patient and TOH-Provider measures were finalized in the FY 2020 IRF ‎PPS rule for collection through the IRF PAI v 4.0 beginning with the FY 2022 IRF QRP. In ‎response to the COVID-19 PHE, CMS delayed implementation of the IRF PAI v 4.0 and associated measures and standardized patient assessment data elements (SPADEs) until October 1 of one full fiscal ‎year after the PHE ends via the April 2020 interim final rule. At this time that delay remains ‎in effect, however, the IRF PAI v 4.0 is proposed to go into effect on October 1, 2022 dependent upon the CY 2022 Home Health PPS final rule, and would include the refinement to the TOH-Patient measure denominator finalized for FY 2023 through the FY 2022 IRF PPS rule. AMRPA will be providing a response to the CY 2022 Home Health Prospective Payment System proposed rule addressing this proposal impacting the IRF QRP in the coming weeks.


i. RFI on New QRP Measures

CMS noted that it received feedback on each of the measures that it is considering adding in some form to the QRP in the future: frailty; opioid use and frequency, patient reported outcomes, shared decision making, ‎appropriate pain assessment and pain management, health equity. CMS acknowledged AMRPA’s concern that certain shared decision-making performance measures may cause issues for the purposes of IRF quality reporting, given that shared decision-making requires that multiple options of the same clinical value be presented to the patient. CMS added that commenters were “generally supportive” of other measures, such as health equity.  Finally, CMS noted that it received suggestions for other QRP measures, such as quality of life, mental health, and nutritional status.  CMS is not taking any action on this RFI in the final rule but will use the comments to inform future measure development efforts.

ii. RFIs on Health Equity
CMS acknowledges comments received on its RFI seeking ways to better promote health equity. However, CMS is only considering comments for future policy and did not take any action in the final rule.  CMS notes that the agency hopes to provide additional stratified information to providers related to race and ethnicity if feasible. The goal would be to allow providers to understand how they are performing with respect to certain patient risk groups, to support these providers in their efforts to ensure equity for all of their patients and to identify opportunities for improvements in health outcomes.  No specific timeline was provided in the rule for this additional data.

iii. RFI on Defining Digital Quality Measures by Leveraging the Fast Healthcare Interoperability Resources (FHIR)
CMS did not provide much detail on the feedback they received on the FHIR-focused RFI but noted it would continue working with other agencies and stakeholders to coordinate and leverage health IT standards. Any updates to specific program requirements related to quality measurement and reporting provisions would be addressed through separate and future notice-and-comment rulemaking, as necessary.

IV. Durable Medical Equipment Prosthetics and Orthotics Services (DMEPOS) Proposal

While not included in the IRF proposed rule, CMS is finalizing an exclusion from fee schedule adjustments based on information from the DMEPOS Competitive Bidding Program (CBP) for wheelchair accessories (including seating systems) and seat and back cushions furnished in connection with group 3 or higher complex rehabilitative power wheelchairs. Based on the broad support CMS received from the comments it received, it is also extending this fee schedule adjustment exclusion to wheelchair accessories (including seating systems) and seat and back cushions furnished in connection with complex rehabilitative manual wheelchairs. Additionally, CMS is modifying the definition of “item” under the DMEPOS CBP at 42 CFR 414.402 to exclude complex rehabilitative manual wheelchairs and certain other manual wheelchairs and related accessories when furnished in connection with these wheelchairs from the DMEPOS CBP, as required by the 2020 Further Consolidated Appropriations Act.


We would like to thank AMRPA members for helping inform our response to the FY 2022 rule.  As always, please let AMRPA Policy Staff know if we can provide any other information or assistance on the IRF PPS rule or any other regulatory issue affecting your hospital.