August 10, 2001

CMS Publishes Final Rehabilitation PPS Regulation, No IME Adjustment Included

The Centers for Medicare and Medicaid Services (CMS) published Aug. 7 in the Federal Register [66 FR 41315] the final regulations for the rehabilitation facility prospective payment system (PPS). The rule applies to rehabilitation hospitals and rehabilitation units of acute care hospitals, which are currently excluded from Medicare's inpatient PPS. The Balanced Budget Act of 1997 mandated the rehabilitation facility PPS that will take effect with cost reporting periods beginning on or after Jan.1, 2002.

Under the rehabilitation facility PPS, patients are classified in one of 97 case-mix groups. Each group has a "relative value weight" that is multiplied by a standard payment amount to arrive at a payment for each discharge within a particular group. The payments are adjusted by a wage index to account for geographic variations in wages. The system also includes "outlier" payments for high cost cases. The rehabilitation PPS includes a disproportionate share (DSH) adjustment and an adjustment for rural facilities because CMS's analysis found that rural rehabilitation facilities, and those serving large numbers of low-income patients, had higher costs than other facilities. However, CMS's analysis did not support an indirect medical education (IME) adjustment because it did not show a significant patient care cost difference specifically associated with teaching hospitals.

Information: Karen Fisher, AAMC Division of Health Care Affairs, 202-862-6140.