Fact Sheets

Fiscal Year 2024 Inpatient Rehabilitation Facility Prospective Payment System Final Rule (CMS-1781-F)

On July 27, 2023, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to update Medicare payment policies and rates under the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) and the IRF Quality Reporting Program (QRP) for fiscal year (FY) 2024. CMS is publishing this final rule in accordance with the legal requirements to update Medicare payment policies for IRFs on an annual basis.

For FY 2024, CMS is finalizing updates to the IRF PPS payment rates based on the IRF market basket update, reduced by a productivity adjustment. The final rule includes annual updates to the prospective payment rates, the outlier threshold, the case-mix-group relative weights and average length of stay values, the wage index, and associated impact analysis. In addition, this rule rebases and revises the IRF market basket, as well as modifies regulations to allow hospitals to open and begin billing Medicare for an excluded IRF unit anytime within the cost reporting year.  

CMS is also finalizing two new measures and is modifying another measure for the IRF Quality Reporting Program (QRP). In addition, CMS is finalizing the removal of three measures, and is finalizing one public reporting policy.

This fact sheet discusses the provisions of the final rule. The FY 2024 Inpatient Rehabilitation Facility Prospective Payment System final rule (CMS-1781-F) can be downloaded from the Federal Register at https://www.federalregister.gov/public-inspection/2023-16050/medicare-program-inpatient-rehabilitation-facility-prospective-payment-system-for-federal-fiscal.

Updates to the FY 2024 IRF PPS Payment Policies

For FY 2024, CMS is updating the IRF PPS payment rates by 3.4 percent based on an IRF market basket update of 3.6 percent reduced by a 0.2 percentage point productivity adjustment. In addition, the final rule contains an adjustment to the outlier threshold to maintain outlier payments at 3.0 percent of total payments. We estimate that this adjustment results in a 0.6 percentage point increase in outlier payments. CMS estimates that overall IRF payments for FY 2024 will increase by 4.0 percent (or $355 million) relative to payments in FY 2023.

Modification to the Excluded Unit Regulation

CMS is finalizing its proposal to modify the regulations governing excluded hospital units to allow hospitals to open a new IRF unit and begin being paid under the IRF PPS at any time during the cost reporting period. In order to make this change, hospitals must notify the CMS Regional Office and the Medicare Administrative Contractor in writing at least 30 days before the date of the change and maintain the information needed to accurately determine the costs attributable to the IRF unit. Such a change would also remain in effect for the rest of the cost reporting period. An identical proposal to modify the excluded hospital unit regulation, which pertains to both IRF and IPF units, was also proposed in the FY 2024 Inpatient Psychiatric Facility (IPF) PPS proposed rule. The consolidated change to the regulation is being finalized in the IPF PPS final rule. CMS believes this will alleviate unnecessary burden and administrative complexity placed upon hospitals and increase access to care.

Rebase and Revise the IRF Market Basket

Approximately every four years, CMS rebases and revises the IRF market basket used to update IRF PPS payments to reflect more recent data on IRF cost structures. CMS last rebased and revised the IRF market basket in the FY 2020 IRF PPS rule, where CMS adopted a 2016-based IRF market basket. For FY 2024, CMS will adopt a 2021-based IRF market basket and include changes to the market basket cost weights, price proxies, and labor-related share.

Updates to the IRF QRP

The IRF QRP is a pay-for-reporting program. IRFs that do not meet reporting requirements are subject to a two-percentage point reduction in their annual increase factor.

In the FY 2024 IRF PPS final rule, CMS will:

• Adopt the Discharge Function Score (DC Function) measure beginning with the FY 2025 QRP. This measure assesses functional status by assessing the percentage of IRF patients who meet or exceed an expected discharge function score and uses mobility and self-care items already collected on the IRF Patient Assessment Instrument (IRF-PAI). The adoption of this measure replaces the Application of Percent of Long-Term Care Hospital Patients with an Admission and Discharge Functional Assessment and a Care Plan (Application of Functional Assessment/Care Plan) measure, as discussed below. CMS has also finalized a policy to publicly report data associated with this measure.
• Adopt the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date (Patient/Resident COVID-19 Vaccine) measure beginning with the FY 2026 IRF QRP. The measure reports the percentage of stays in which patients in an IRF are up to date with recommended COVID-19 vaccinations in accordance with the Centers for Disease Control and Prevention’s (CDC’s) most recent guidance. Data will be collected using a new standardized item on the IRF-PAI. CMS has also finalized a policy to publicly report data associated with this measure.
• Modify the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP COVID-19 Vaccine) measure beginning with the FY 2025 IRF QRP. This measure tracks the percentage of healthcare personnel (HCP) in IRFs who are considered up to date with recommended COVID-19 vaccination in accordance with the CDC’s most recent guidance. The prior version of this measure reported only on whether HCP had received the primary vaccination series for COVID-19, while the final modification of this measure requires IRFs to report the cumulative number of HCP who are up-to-date with recommended COVID-19 vaccinations in accordance with the CDC’s most recent guidance.
• Remove three measures from the IRF QRP beginning with the FY 2025 IRF QRP. The measures we are removing include: (1) the Application of Functional Assessment/Care Plan measure; (2) the IRF Functional Outcome Measure: Change in Self-Care Score for Medical Rehabilitation Patients (Change in Self-Care Score) measure; and (3) the IRF Functional Outcome Measure:  Change in Mobility Score for Medical Rehabilitation Patients (Change in Mobility Score) measure. We are removing the Application of Functional Assessment/Care Plan measure because it meets conditions for measure removal factors one (that is, measure performance among IRFs is so high and unvarying that meaningful distinctions in improvements in performance can no longer be made) and six (that is, the final DC Function measure is more strongly associated with desired patient functional outcomes). We are removing the Change in Self-Care Score and Change in Mobility Score measures because they meet the conditions for measure removal factor eight (that is, the costs associated with a measure outweigh the benefits of its use in the IRF QRP). Additionally, the Change in Self-Care Score and Change in Mobility Score measures are similar to or duplicative of other measures within the IRF QRP.
• Begin the public reporting of the Transfer of Health (TOH) Information to the Provider—Post-Acute Care (PAC) Measure and the TOH Information to the Patient—PAC Measure beginning with the September 2024 Care Compare refresh or as soon as possible. These measures report the percentage of patient stays with a discharge assessment indicating that a current reconciled medication list was provided to the subsequent provider or to patients or their families or caregivers at discharge or transfer. In response to the COVID-19 Public Health Emergency, we initially delayed the compliance date for the collection and reporting of these two measures in the IRF QRP and data collection began on these measures with patients discharged on or after October 1, 2022.

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