Wednesday, April 17th 2002

Mr. Thomas Scully
Centers for Medicare and Medicaid Services
Room 314G
Hubert H. Humphrey Building
200 Independence Avenue, SW
Washington, DC 20201

Dear Administrator Scully:

On January 1, 2002, the Centers for Medicare and Medicaid Services (CMS) implemented the new inpatient rehabilitation facilities prospective payment system (IRF-PPS). We commend the agency for a thoughtful final rule that has, to date, been exceptionally smooth in its implementation.

This new system provides an opportunity to review the "75 percent rule" which is one of the exclusion criteria used to determine whether a freestanding rehabilitation hospital or rehabilitation unit of a general acute care hospital qualifies for exclusion from the inpatient acute PPS. The undersigned organizations believe now is the time to amend this rule to ensure that it accurately reflects the types of patients who are served by inpatient rehabilitation hospitals and inpatient rehabilitation units of general hospitals, now referred to as inpatient rehabilitation facilities (IRFs). Until this change can occur, we request that CMS place a moratorium on fiscal intermediary audits pertaining to this rule, particularly those occurring in New Jersey and Tennessee, and that any such audits be prospective in their application only.

We are concerned that if the "75 percent rule" is not amended, significant access problems for Medicare beneficiaries seeking rehabilitation services may arise. These access problems will result in increased expenditures for the Medicare program, coupled with poorer outcomes for beneficiaries.
Since its implementation in 1983, the inpatient acute PPS excluded certain hospitals. Freestanding rehabilitation hospitals and rehabilitation units of general hospitals that meet the criteria established by the Secretary are among those excluded. The exclusion is granted to a hospital (or hospital unit) in which 75 percent of its patients, during its most recent twelve-month reporting period, have a diagnosis that falls into one or more of ten specific categories. These conditions have not changed since 1984. They are:

  • Stroke;
  • Spinal Cord Injury;
  • Congenital Deformity;
  • Major Multiple Trauma;
  • Fracture of Femur;
  • Brain Injury;
  • Polyarthritis (including rheumatoid arthritis);
  • Neurological Disorders (including MS, motor neuron disease, polyneuropathy, muscular dystrophy, and Parkinson's disease); and
  • Burns.

The facility must provide intensive rehabilitation services1 to patients. Once a facility meets the regulatory criteria, it is reimbursed according to the payment rules for IRFs. Starting in 1982, Medicare reimbursed IRFs under rules established by the Tax Equity and Fiscal Responsibility Act (TEFRA). The new IRF-PPS, implemented on January 1st of this year, replaces this system. Under the IRF-PPS, an excluded rehabilitation hospital or rehabilitation unit must complete a patient assessment instrument. The patient assessment instrument provides data to classify each Medicare Part A fee-for-service patient into a Rehabilitation Impairment Category (RIC) and then into a Case-Mix Group (CMG).

Recent data used by CMS' IRF PPS contractor (RAND), based on the scoring conventions used by the functional independence measure, indicate that just over 50 percent of the Medicare patients presenting at IRFs were treated for one or more of the ten conditions, substantially different than the 75 percent standard. Currently, IRFs provide intensive rehabilitation services to patients with other conditions, including cardiac conditions, pulmonary conditions, and pain. Although the data based on the functional independence measure is not a perfect crosswalk to how diagnoses are measured for compliance with the 75 percent rule, it clearly supports the conclusion that the conditions "typical" of rehabilitation facilities have significantly changed since the mid-80's. We shared this data with CMS staff in late February.

The time to revise this exclusion criterion for rehabilitation facilities is now. The implementation of the IRF-PPS has eliminated the past concerns about incentives to seek cost-based reimbursement. It has also provided CMS with an administratively efficient and up-to-date description of patient types admitted to IRFs. We encourage CMS to rely upon exclusion criteria that reflect the needs of Medicare patients who need intensive rehabilitative services and who benefit from rehabilitation therapies and other services to improve their functional ability.

In the interest of administrative efficiency and greater clarity to the regulated parties, the undersigned organizations respectfully request that CMS adopt an "administrative presumption" whereby if 75 percent of a rehabilitation hospital or unit's Medicare patients were in 20 of the 21 RICs, then it would be presumed to be in compliance with the 75 percent rule. This proposal, we believe, explicitly aligns the exclusion rules with the incentives of the new IRF PPS. The one RIC not included in the administrative presumption would be RIC 20 (Miscellaneous). The Miscellaneous RIC represents about 11 percent of Medicare patients (and a similar percentage of all patients). Maintaining the Miscellaneous RIC is important, however, because it allows facilities to admit and treat medically complex patients with unique conditions and needs, such as transplant patients, patients with extensive comorbidities, as well as permitting flexibility for providing unanticipated services in the future. Patients classified under this category have functional loss often greater than patients under the other RICs. All patients with functional loss should be able to receive services at the appropriate level, including acute inpatients. We further propose that if the facility did not meet the administrative presumption based on its Medicare patients, it would have an updated 75 percent rule as applied to all admissions as a fallback.

We understand that revising the exclusion criteria may take some time. Thus, until CMS is able to make this change formally, we strongly urge you to place a moratorium on qualifying 75 percent audits, particularly those being conducted now in New Jersey and Tennessee. If these audits remain in place, facilities risk losing their status as rehabilitation hospitals and units and patients will have less access to the high quality rehabilitation services they need.

We would be pleased to talk with you and the staff members responsible for these issues in further detail.


American Medical Rehabilitation Providers Association

American Academy of Neurology

American Academy of Physical Medicine and Rehabilitation

American Hospital Association Federation of American Hospitals

Cc:  Tom Grissom
       Tom Hoyer
       Jeff Flick
       Tom Barker
       Laurence Wilson

1) Over time, "intensive rehabilitation services" has come to mean at least three hours of therapy a day.

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