Rule2025-14780
Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2026 and Updates to the IRF Quality Reporting Program
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Published
August 5, 2025
Effective
October 1, 2025
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This final rule updates the prospective payment rates for inpatient rehabilitation facilities (IRFs) for Federal fiscal year (FY) 2026. 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 2026. It also continues the second year of the 3-year phaseout of the rural adjustment, which began in FY 2025. Additionally, the final rule includes updates to the IRF Quality Reporting Program.
Full Text
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<title>Federal Register, Volume 90 Issue 148 (Tuesday, August 5, 2025)</title>
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[Federal Register Volume 90, Number 148 (Tuesday, August 5, 2025)]
[Rules and Regulations]
[Pages 37678-37724]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-14780]
[[Page 37677]]
Vol. 90
Tuesday,
No. 148
August 5, 2025
Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR 412
Medicare Program; Inpatient Rehabilitation Facility Prospective Payment
System for Federal Fiscal Year 2026 and Updates to the IRF Quality
Reporting Program; Final Rule
Federal Register / Vol. 90, No. 148 / Tuesday, August 5, 2025 / Rules
and Regulations
[[Page 37678]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 412
[CMS-1829-F]
RIN 0938-AV48
Medicare Program; Inpatient Rehabilitation Facility Prospective
Payment System for Federal Fiscal Year 2026 and Updates to the IRF
Quality Reporting Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (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)
2026. 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 2026. It
also continues the second year of the 3-year phaseout of the rural
adjustment, which began in FY 2025. Additionally, the final rule
includes updates to the IRF Quality Reporting Program.
DATES: These regulations are effective on October 1, 2025.
FOR FURTHER INFORMATION CONTACT:
<a href="/cdn-cgi/l/email-protection#df968d99bcb0a9baadbeb8ba9fbcb2acf1b7b7acf1b8b0a9"><span class="__cf_email__" data-cfemail="49001b0f2a263f2c3b282e2c092a243a6721213a672e263f">[email protected]</span></a>, for general information.
Kimberly Schwartz, (410) 786-2571, for information about the IRF
payment policies, payment rates and coverage policies.
Ariel Cress, (410) 786-8571, for information about the IRF quality
reporting program.
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 on the CMS website at <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS</a>.
We note that prior to 2020, each rule or notice issued under the
IRF PPS included a detailed reiteration of the various regulatory
provisions that have affected the IRF PPS over the years. That
discussion, which has been updated to reflect subsequent years, along
with detailed background information for various other aspects of the
IRF PPS, is now available on the CMS website at <a href="https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf">https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf</a>.
Readers who experience any problems accessing any of these online
IRF PPS documents should contact <a href="/cdn-cgi/l/email-protection#cf9faebbbda6aca6aee19baea9bb8faca2bce1a7a7bce1a8a0b9"><span class="__cf_email__" data-cfemail="1e4e7f6a6c777d777f304a7f786a5e7d736d3076766d30797168">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
A. Purpose
This final rule updates the prospective payment rates for inpatient
rehabilitation facilities (IRFs) for Fiscal Year (FY) 2026 (that is,
for discharges occurring on or after October 1, 2025, and on or before
September 30, 2026) 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
prospective payment system (PPS) case-mix groups (CMGs), and a
description of the methodologies and data used in computing the
prospective payment rates for FY 2026.
For the IRF Quality Reporting Program (QRP), this rule finalizes
our proposals to remove two quality measures: (1) the COVID-19
Vaccination Coverage among Healthcare Personnel (HCP) measure,
beginning with the FY 2026 IRF QRP, and (2) the COVID-19 Vaccine:
Percent of Patients/Residents Who Are Up to Date measure, beginning
with the FY 2028 IRF QRP. Next, we are finalizing proposals to remove
four Standardized Patient Assessment Data Elements under the Social
Determinant of Health (SDOH) category from the IRF Patient Assessment
Instrument (IRF-PAI) beginning with the FY 2028 IRF QRP. We are also
finalizing proposals amending our reconsideration policy. Finally, we
provide summaries of the comments received in response to a Request for
Information (RFI) on four separate considerations: (1) future measure
concepts for the IRF QRP; (2) potential revisions to the IRF-Patient
Assessment Instrument (PAI); (3) potential revisions to the data
submission deadlines for assessment data collected for the IRF QRP; and
(4) advancing digital quality measurement in IRFs.
B. Summary of Major Provisions
In this final rule, we use the methods described in the FY 2025 IRF
PPS final rule (89 FR 64276) to update the prospective payment rates
for FY 2026 using the most current and complete data available at this
time, which is FY 2024 IRF claims and FY 2023 IRF cost report data, as
discussed in section VI, of this final rule.
For the IRF QRP, this rule will remove two quality measures, remove
four SDOH standardized patient assessment data elements, and amend our
reconsideration policy. We also include summaries of comments received
in response to Requests for Information (RFIs) on four separate
considerations.
C. Summary of Impact
Table 1--Cost and Transfers
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Provision description Transfers/costs
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FY 2026 IRF PPS payment rate The overall economic impact of this final
update. rule is an estimated $340 million
increase in payments from the Federal
Government to IRFs during FY 2026.
FY 2026 IRF QRP changes...... The overall economic impact of this final
rule is an estimated decrease in costs
of $504,929.84 for IRFs for proposed
measure removal in VII.C.1. and
revisions to reconsiderations policy in
VII.E. beginning with the FY 2026 IRF
QRP.
FY 2028 IRF QRP changes...... The overall economic impact of this final
rule is an estimated decrease in costs
of $1,090,580.75 to IRFs for proposed
measure and item removals in VII.C.2 and
VII.D. beginning with the FY 2028 IRF
QRP.
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[[Page 37679]]
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 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 2025, along with
detailed background information for various other aspects of the IRF
PPS, is now available on the CMS website at <a href="https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf">https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf</a>.
Under the IRF PPS from FYs 2002 through 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
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 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 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).
Any reference to the FY 2006 IRF PPS final rule in this proposed 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.
In response to COVID-19 Public Health Emergency (PHE), 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 permanently removed the post-admission
physician evaluation documentation requirement at Sec.
412.622(a)(4)(ii) beginning in FY 2021.
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 addition to the policies adopted in our
IFCs, we responded to the PHE with numerous blanket waivers \1\ and
other
[[Page 37680]]
flexibilities,\2\ some of which are applicable to the IRF PPS. CMS
finalized these policies in the Calendar Year 2023 Hospital Outpatient
Prospective Payment and Ambulatory Surgical Center Payment Systems
final rule with comment period (87 FR 71748). Subsequently, on May 11,
2023, the U.S. Department of Health and Human Services (``HHS'')
declared the expiration of the COVID-19 PHE. (See <a href="https://www.hhs.gov/about/news/2023/02/09/fact-sheet-covid-19-public-health-emergency-transition-roadmap.html">https://www.hhs.gov/about/news/2023/02/09/fact-sheet-covid-19-public-health-emergency-transition-roadmap.html</a>.) As a result, the ``3-hour rule'' waiver at
Sec. 412.622(a)(3)(ii) and other IRF flexibilities were terminated.
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\1\ CMS, ``COVID-19 Emergency Declaration Blanket Waivers for
Health Care Providers,'' (updated Feb. 19, 2021) (available at
<a href="https://www.cms.gov/files/document/summary-covid-19-emergency-declaration-waivers.pdf">https://www.cms.gov/files/document/summary-covid-19-emergency-declaration-waivers.pdf</a>).
\2\ CMS, ``COVID-19 Frequently Asked Questions (FAQs) on
Medicare Fee-for-Service (FFS) Billing,'' (updated March 5, 2021)
(available at <a href="https://www.cms.gov/files/document/03092020-covid-19-faqs-508.pdf">https://www.cms.gov/files/document/03092020-covid-19-faqs-508.pdf</a>).
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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 2025, is available on the CMS website at
<a href="https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf">https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf</a>.
B. Provisions of the Affordable Care Act 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 (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 Patient Protection and Affordable Care Act,
was enacted on March 30, 2010. In this final rule, we refer to the two
statutes collectively as the ``Affordable Care Act'' or ``ACA''.
The ACA 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 ACA 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 2026 is discussed in
section VI. 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 percentage increase 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.
Section 3004(b) of the ACA 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 ACA 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 IRF market basket
percentage increase 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 lower than payment rates for the preceding FY. Reporting-based
reductions to the IRF market basket percentage increase 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 MA patient, as
described in the FY 2010 IRF PPS final rule (74 FR 39762) and the FY
2010 IRF PPS correction notice (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 <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Software.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/Software.html</a>. The Grouper software is also embedded in the internet
Quality Improvement and Evaluation System (iQIES) User tool available
in iQIES at <a href="https://www.cms.gov/medicare/quality-safety-oversight-general-information/iqies">https://www.cms.gov/medicare/quality-safety-oversight-general-information/iqies</a>.
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, 110 Stat. 1936 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 to their MAC an informational-only bill
(type of bill (TOB) 111) that includes Condition Code 04. 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
[[Page 37681]]
rule (70 FR 71008). Our instructions for the limited number of Medicare
claims submitted on paper are available at <a href="https://www.cms.gov/manuals/downloads/clm104c25.pdf">https://www.cms.gov/manuals/downloads/clm104c25.pdf</a>.
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 <a href="https://www.cms.gov/ElectronicBillingEDITrans/">https://www.cms.gov/ElectronicBillingEDITrans/</a> and listed in the addenda to the Medicare
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).
III. Summary of Provisions of the Final Rule
In this FY 2026 IRF PPS final rule, we are finalizing our proposal
to update the IRF PPS for FY 2026 and the IRF QRP for FY 2026 and FY
2028.
The finalized policy changes and updates to the IRF prospective
payment rates for FY 2026 will be as follows:
<bullet> Update the CMG relative weights and average length of stay
values for FY 2026 in a budget neutral manner, as discussed in section
V of this final rule.
<bullet> Update the IRF PPS payment rates for FY 2026 by the IRF
market basket percentage increase, 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.
<bullet> Update the FY 2026 IRF PPS payment rates by the FY 2026
wage index, applying the second year of the phase-out of the rural
adjustment for IRFs transitioning from rural to urban, and the labor-
related share in a budget-neutral manner, as discussed in section VI.
<bullet> Describe the calculation of the IRF standard payment
conversion factor for FY 2026, as discussed in section VI.
<bullet> Update the outlier threshold amount for FY 2026, as
discussed in section VI.
<bullet> Update the cost-to-charge ratio (CCR) ceiling and urban/
rural average CCRs for FY 2026, as discussed in section VI.
The policy changes and updates to the IRF QRP for FY 2026 will be
as follows:
<bullet> Remove the COVID-19 Vaccination Coverage among Healthcare
Personnel (HCP) measure.
<bullet> Amend the Reconsideration Policy.
The proposed policy changes and updates to the IRF QRP for FY 2028
will be as follows:
<bullet> Remove the COVID-19 Vaccine: Percent of Patients/Residents
Who Are Up to Date measure.
<bullet> Remove four SDOH standardized patient assessment data
elements items from the IRF-PAI.
We summarize the comments we received on the following four RFIs:
<bullet> Request for information on future measure concepts for the
IRF QRP.
<bullet> Request for information on potential revisions to the IRF-
PAI.
<bullet> Request for information on potential revisions to the data
submission deadlines for assessment data collected for the IRF QRP.
<bullet> Request for information on advancing digital quality
measurement in IRFs.
IV. Public Comments
A. Analysis of and Responses to Public Comments
We received 69 timely responses from the public, many of which
contained multiple comments on the FY 2026 IRF PPS proposed rule (90 FR
18534). We received comments from various trade associations, inpatient
rehabilitation facilities, individual physicians, therapists,
clinicians, healthcare industry organizations, healthcare consulting
firms, technology vendors, academic institutions, and anonymous
persons. The following sections, arranged by subject area, include a
summary of the public comments that we received, and our responses.
B. General Comments on the FY 20206 IRF PPS Proposed Rule
In addition to the comments we received on specific proposals
contained within the proposed rule (which we address later in this
final rule), commenters also submitted more general observations on the
IRF PPS and IRF care generally.
Comment: We received comments that were outside the scope of the FY
2026 IRF PPS proposed rule. These comments related to adopting a
national healthcare system, updating the facility level adjustments
based on a 3-year average that is capped for the teaching coefficient,
and considering a future proposal to expand the role of PAs in IRFs and
modify paragraphs (a)(3)(iv) and (a)(4)(ii) of Sec. 412.622. Although
comments also raised concerns regarding several issues related to MA
plans, we did not propose changes to MA and Medicaid managed care plan
regulations in this rule. One commenter urged CMS to allow the
rehabilitation physician the opportunity to determine which disciplines
should provide care within the 3-hour or level of intensity of services
rule and recommended recreational therapy interventions (when
applicable) to be counted towards the level of intensity rule.
Response: We thank the commenters for bringing these issues to our
attention, and we will take these comments into consideration for
potential policy refinements or direct the comments to the appropriate
subject matter experts.
V. Updates to the Case-Mix Group (CMG) Relative Weights and Average
Length of Stay (ALOS) Values for FY 2026
As specified in Sec. 412.620(b)(1), we calculate a relative weight
for each CMG that is proportional to the resources needed for 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.
In this final rule, we update the CMG relative weights and ALOS
values for FY 2026. Typically, we use the most recent available data to
update the CMG relative weights and ALOS values. For FY 2026, we are
using the FY 2024 IRF claims and FY 2023 IRF cost report data (CMS Form
2552-10, OMB No 0938-0050). These data are the most current and
complete data available at the time of this final rule. Currently, only
a small portion of the FY 2024 IRF cost report data is available for
analysis, but the
[[Page 37682]]
majority of the FY 2024 IRF claims data are available for analysis.
In the FY 2026 IRF PPS proposed rule, we 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 2026 CMG relative weights and ALOS values in this
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 cost-
to-charge ratio (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 the 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 Step 1.
Step 3. We use the adjusted costs from Step 2 to calculate CMG
relative weights, using the hospital-specific relative value method.
Step 4. We normalize the FY 2026 CMG relative weights using a
normalization factor that results in the average CMG relative weights
in FY 2026 being the same as the average CMG relative weights in the FY
2025 IRF PPS final rule (89 FR 64276).
Consistent with the methodology that we have used to update the IRF
classification system in each instance in the past, we are updating the
CMG relative weights for FY 2026 in such a way that total estimated
aggregate payments to IRFs for FY 2026 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. To calculate the
appropriate budget neutrality factor for use in updating the FY 2026
CMG relative weights, we use the following steps:
Step 1. Calculate the estimated total amount of IRF PPS payments
for FY 2026 (with no changes to the CMG relative weights).
Step 2. Calculate the estimated total amount of IRF PPS payments
for FY 2026 by applying the proposed changes to the CMG relative
weights (as discussed in this proposed rule).
Step 3. Divide the amount calculated in Step 1 by the amount
calculated in Step 2 to determine the budget neutrality factor of
0.9985 that would maintain the same total estimated aggregate payments
in FY 2026 with and without the proposed changes to the final CMG
relative weights.
Step 4. Apply the budget neutrality factor from Step 3 to the FY
2026 IRF PPS standard payment amount after the application of the
budget-neutral wage adjustment factor.
In section V of this final rule, we discuss the proposed use of the
existing methodology to calculate the proposed standard payment
conversion factor for FY 2026.
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 2026. 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.
Table 2--Relative Weights and Average Length of Stay Values for the Case-Mix-Groups
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Relative weight Average length of stay
CMG description -------------------------------------------------------------------------------------------------------------------------------
CMG (M=motor, A=age) No Comorbidity No Comorbidity
Tier 1 Tier 2 Tier 3 tier Tier 1 Tier 2 Tier 3 tier
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
0101.................................. Stroke M >=72.50........ 0.9669 0.8586 0.7779 0.7379 8 9 9 8
0102.................................. Stroke M >=63.50 and M 1.2306 1.0928 0.9901 0.9392 11 11 11 10
<72.50.
0103.................................. Stroke M >=50.50 and M 1.5798 1.4029 1.2710 1.2056 14 15 13 13
<63.50.
0104.................................. Stroke M >=41.50 and M 2.0177 1.7918 1.6234 1.5398 16 17 16 16
<50.50.
0105.................................. Stroke M <41.50 and A 2.5146 2.2330 2.0231 1.9190 23 21 20 19
>=84.50.
0106.................................. Stroke M <41.50 and A 2.8325 2.5153 2.2789 2.1616 24 24 22 22
<84.50.
0201.................................. Traumatic brain injury M 1.0614 0.8440 0.7710 0.7244 10 9 8 9
>=73.50.
0202.................................. Traumatic brain injury M 1.3861 1.1021 1.0069 0.9460 12 11 11 10
>=61.50 and M <73.50.
0203.................................. Traumatic brain injury M 1.7233 1.3702 1.2518 1.1761 14 14 13 12
>=49.50 and M <61.50.
0204.................................. Traumatic brain injury M 2.1239 1.6887 1.5428 1.4495 17 17 15 15
>=35.50 and M <49.50.
0205.................................. Traumatic brain injury M 2.7248 2.1665 1.9793 1.8596 28 22 19 18
<35.50.
0301.................................. Non-traumatic brain 1.1939 0.9462 0.8822 0.8259 10 10 9 9
injury M >=65.50.
0302.................................. Non-traumatic brain 1.5445 1.2241 1.1412 1.0683 12 12 11 11
injury M >=52.50 and M
<65.50.
[[Page 37683]]
0303.................................. Non-traumatic brain 1.8262 1.4474 1.3494 1.2633 14 14 13 13
injury M >=42.50 and M
<52.50.
0304.................................. Non-traumatic brain 2.1635 1.7147 1.5985 1.4965 18 17 16 15
injury M <42.50 and A
>=78.50.
0305.................................. Non-traumatic brain 2.3699 1.8783 1.7511 1.6393 19 19 17 16
injury M <42.50 and A
<78.50.
0401.................................. Traumatic spinal cord 1.3548 1.1074 1.0783 0.9757 12 12 11 11
injury M >=56.50.
0402.................................. Traumatic spinal cord 1.6985 1.3883 1.3518 1.2232 15 14 14 13
injury M >=47.50 and M
<56.50.
0403.................................. Traumatic spinal cord 1.9604 1.6024 1.5602 1.4118 17 15 15 16
injury M >=41.50 and M
<47.50.
0404.................................. Traumatic spinal cord 3.1765 2.5964 2.5281 2.2877 23 33 25 22
injury M <31.50 and A
<61.50.
0405.................................. Traumatic spinal cord 2.5161 2.0566 2.0025 1.8121 19 20 21 19
injury M >=31.50 and M
<41.50.
0406.................................. Traumatic spinal cord 3.3100 2.7055 2.6343 2.3838 23 29 26 24
injury M >=24.50 and M
<31.50 and A >=61.50.
0407.................................. Traumatic spinal cord 4.5328 3.7050 3.6075 3.2644 42 36 33 33
injury M <24.50 and A
>=61.50.
0501.................................. Non-traumatic spinal 1.3090 1.0060 0.9359 0.8625 11 10 10 10
cord injury M >=60.50.
0502.................................. Non-traumatic spinal 1.6251 1.2489 1.1618 1.0707 14 13 12 12
cord injury M >=53.50
and M <60.50.
0503.................................. Non-traumatic spinal 1.8402 1.4142 1.3156 1.2124 16 14 14 13
cord injury M >=48.50
and M <53.50.
0504.................................. Non-traumatic spinal 2.1989 1.6898 1.5720 1.4487 18 16 16 15
cord injury M >=39.50
and M <48.50.
0505.................................. Non-traumatic spinal 3.1242 2.4009 2.2336 2.0584 26 23 22 20
cord injury M <39.50.
0601.................................. Neurological M >=64.50.. 1.3095 0.9918 0.9341 0.8390 11 10 9 9
0602.................................. Neurological M >=52.50 1.6289 1.2337 1.1619 1.0437 13 12 11 11
and M <64.50.
0603.................................. Neurological M >=43.50 1.9370 1.4670 1.3817 1.2411 15 14 13 13
and M <52.50.
0604.................................. Neurological M <43.50... 2.4498 1.8553 1.7475 1.5696 20 17 16 16
0701.................................. Fracture of lower 1.2269 0.9809 0.9316 0.8513 11 11 10 9
extremity M >=61.50.
0702.................................. Fracture of lower 1.5165 1.2125 1.1515 1.0523 13 13 12 11
extremity M >=52.50 and
M <61.50.
[[Page 37684]]
0703.................................. Fracture of lower 1.8578 1.4854 1.4108 1.2892 16 15 14 14
extremity M >=41.50 and
M <52.50.
0704.................................. Fracture of lower 2.2940 1.8342 1.7420 1.5918 18 18 17 16
extremity M <41.50.
0801.................................. Replacement of lower- 1.1781 0.9922 0.8869 0.8310 10 10 9 9
extremity joint M
>=63.50.
0802.................................. Replacement of lower- 1.3428 1.1310 1.0109 0.9472 10 10 10 10
extremity joint M
>=57.50 and M <63.50.
0803.................................. Replacement of lower- 1.4778 1.2447 1.1126 1.0424 13 12 11 11
extremity joint M
>=51.50 and M <57.50.
0804.................................. Replacement of lower- 1.6788 1.4140 1.2639 1.1842 14 14 12 12
extremity joint M
>=42.50 and M <51.50.
0805.................................. Replacement of lower- 2.0910 1.7611 1.5742 1.4749 17 17 15 14
extremity joint M
<42.50.
0901.................................. Other orthopedic M 1.2385 0.9381 0.8862 0.8084 11 10 9 9
>=63.50.
0902.................................. Other orthopedic M 1.5733 1.1917 1.1257 1.0270 13 12 12 11
>=51.50 and M <63.50.
0903.................................. Other orthopedic M 1.8670 1.4141 1.3358 1.2187 15 14 13 13
>=44.50 and M <51.50.
0904.................................. Other orthopedic M <44.5 2.2482 1.7029 1.6086 1.4675 18 17 16 15
1001.................................. Amputation lower 1.2289 1.0211 0.9268 0.8605 11 10 10 9
extremity M >=64.50.
1002.................................. Amputation lower 1.4929 1.2405 1.1259 1.0454 13 13 12 11
extremity M >=55.50 and
M <64.50.
1003.................................. Amputation lower 1.7768 1.4764 1.3400 1.2442 15 16 14 13
extremity M >=47.50 and
M <55.50.
1004.................................. Amputation lower 2.3634 1.9638 1.7824 1.6550 19 19 17 17
extremity M <47.50.
1101.................................. Amputation non-lower 1.3524 1.2804 1.1019 0.9641 12 13 11 11
extremity M >=58.50.
1102.................................. Amputation non-lower 1.5444 1.4621 1.2582 1.1009 13 13 13 11
extremity M >=52.50 and
M <58.50.
1103.................................. Amputation non-lower 1.9344 1.8313 1.5760 1.3789 16 17 15 13
extremity M <52.50.
1201.................................. Osteoarthritis M >=61.50 1.3247 1.0514 0.9396 0.8702 11 11 9 10
1202.................................. Osteoarthritis M >=49.50 1.5576 1.2362 1.1047 1.0231 13 12 12 11
and M <61.50.
1203.................................. Osteoarthritis M <49.50 2.0850 1.6548 1.4788 1.3696 16 16 15 14
and A >=74.50.
1204.................................. Osteoarthritis M <49.50 2.1465 1.7037 1.5225 1.4100 17 16 15 15
and A <74.50.
1301.................................. Rheumatoid other 1.2527 1.0015 0.9176 0.8336 10 10 9 9
arthritis M >=62.50.
1302.................................. Rheumatoid other 1.5360 1.2280 1.1252 1.0221 12 12 11 11
arthritis M >=51.50 and
M <62.50.
[[Page 37685]]
1303.................................. Rheumatoid other 1.7752 1.4192 1.3004 1.1812 14 14 13 12
arthritis M >=44.50 and
M <51.50 and A >=64.50.
1304.................................. Rheumatoid other 2.2912 1.8318 1.6784 1.5246 16 17 16 15
arthritis M <44.50 and
A >=64.50.
1305.................................. Rheumatoid other 2.2867 1.8281 1.6750 1.5216 17 18 16 14
arthritis M <51.50 and
A <64.50.
1401.................................. Cardiac M >=68.50....... 1.1175 0.9002 0.8323 0.7654 10 9 9 8
1402.................................. Cardiac M >=55.50 and M 1.4236 1.1468 1.0603 0.9751 12 12 11 10
<68.50.
1403.................................. Cardiac M >=45.50 and M 1.7207 1.3861 1.2816 1.1786 14 14 13 12
<55.50.
1404.................................. Cardiac M <45.50........ 2.1468 1.7294 1.5991 1.4705 18 17 15 15
1501.................................. Pulmonary M >=68.50..... 1.3103 1.0536 0.9867 0.9432 10 10 9 9
1502.................................. Pulmonary M >=56.50 and 1.6022 1.2883 1.2065 1.1534 12 12 11 11
M <68.50.
1503.................................. Pulmonary M >=45.50 and 1.8680 1.5020 1.4066 1.3446 15 14 13 13
M <56.50.
1504.................................. Pulmonary M <45.50...... 2.3425 1.8835 1.7639 1.6862 20 16 16 15
1601.................................. Pain syndrome M >=65.50. 1.0512 0.9420 0.8617 0.7811 9 10 9 9
1602.................................. Pain syndrome M >=58.50 1.2648 1.1335 1.0368 0.9399 11 12 11 10
and M <65.50.
1603.................................. Pain syndrome M >=43.50 1.5317 1.3727 1.2557 1.1382 13 14 13 12
and M <58.50.
1604.................................. Pain syndrome M <43.50.. 2.0049 1.7968 1.6436 1.4898 14 19 16 15
1701.................................. Major multiple trauma 1.3191 1.0450 0.9702 0.8932 12 10 10 10
without brain or spinal
cord injury M >=57.50.
1702.................................. Major multiple trauma 1.6260 1.2881 1.1960 1.1010 13 13 12 12
without brain or spinal
cord injury M >=50.50
and M <57.50.
1703.................................. Major multiple trauma 1.9078 1.5114 1.4033 1.2919 15 15 14 13
without brain or spinal
cord injury M >=41.50
and M <50.50.
1704.................................. Major multiple trauma 2.1953 1.7392 1.6148 1.4866 18 17 16 15
without brain or spinal
cord injury M >=36.50
and M <41.50.
1705.................................. Major multiple trauma 2.5557 2.0247 1.8799 1.7306 19 19 18 17
without brain or spinal
cord injury M <36.50.
1801.................................. Major multiple trauma 1.1189 0.9154 0.8421 0.7904 12 10 9 9
with brain or spinal
cord injury M >=67.50.
[[Page 37686]]
1802.................................. Major multiple trauma 1.4223 1.1636 1.0704 1.0047 14 13 11 11
with brain or spinal
cord injury M >=55.50
and M <67.50.
1803.................................. Major multiple trauma 1.7694 1.4475 1.3316 1.2498 17 15 14 13
with brain or spinal
cord injury M >=45.50
and M <55.50.
1804.................................. Major multiple trauma 2.0665 1.6906 1.5552 1.4597 19 17 15 16
with brain or spinal
cord injury M >=40.50
and M <45.50.
1805.................................. Major multiple trauma 2.4792 2.0282 1.8658 1.7512 23 20 18 18
with brain or spinal
cord injury M >=30.50
and M <40.50.
1806.................................. Major multiple trauma 3.5919 2.9385 2.7032 2.5372 36 28 27 24
with brain or spinal
cord injury M <30.50.
1901.................................. Guillain-Barr[eacute] M 1.3407 0.9475 0.8237 0.8240 11 10 9 9
>=66.50.
1902.................................. Guillain-Barr[eacute] M 1.9505 1.3785 1.1984 1.1987 15 14 13 13
>=51.50 and M <66.50.
1903.................................. Guillain-Barr[eacute] M 2.7597 1.9504 1.6956 1.6960 20 18 17 18
>=38.50 and M <51.50.
1904.................................. Guillain-Barr[eacute] M 4.2436 2.9991 2.6072 2.6080 37 30 25 25
<38.50.
2001.................................. Miscellaneous M >=66.50. 1.1884 0.9531 0.8864 0.8114 10 10 9 9
2002.................................. Miscellaneous M >=55.50 1.4755 1.1833 1.1004 1.0074 12 12 11 11
and M <66.50.
2003.................................. Miscellaneous M >=46.50 1.7326 1.3895 1.2922 1.1830 14 13 13 12
and M <55.50.
2004.................................. Miscellaneous M <46.50 2.1131 1.6946 1.5760 1.4427 17 16 15 15
and A >=77.50.
2005.................................. Miscellaneous M <46.50 2.2118 1.7738 1.6496 1.5101 18 17 16 15
and A <77.50.
2101.................................. Burns M >=52.50......... 1.6061 1.3503 1.0183 0.9765 15 15 10 11
2102.................................. Burns M <52.50.......... 2.5451 2.1397 1.6136 1.5474 19 18 16 16
5001.................................. Short-stay cases, length 0.0000 0.0000 0.0000 0.1755 0 0 0 3
of stay is 3 days or
fewer.
5101.................................. Expired, orthopedic, 0.0000 0.0000 0.0000 0.8539 0 0 0 8
length of stay is 13
days or fewer.
5102.................................. Expired, orthopedic, 0.0000 0.0000 0.0000 2.0485 0 0 0 20
length of stay is 14
days or more.
5103.................................. Expired, not orthopedic, 0.0000 0.0000 0.0000 0.9118 0 0 0 8
length of stay is 15
days or fewer.
5104.................................. Expired, not orthopedic, 0.0000 0.0000 0.0000 2.1881 0 0 0 20
length of stay is 16
days or more.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 37687]]
Generally, updates to the CMG relative weights result in some
increases and some decreases to the CMG relative weight values. Table 3
shows how we estimate that the application of the revisions for FY 2026
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 2026 would not be affected as a
result of the CMG relative weight revisions. However, the revisions
would affect the distribution of payments within CMGs and tiers.
Table 3--Distributional Effects of the Changes to the CMG Relative
Weights
------------------------------------------------------------------------
Percentage of
Percentage change in CMG relative Number of cases affected
weights cases affected (%)
------------------------------------------------------------------------
Increased by 15% or more................ 80 0.0
Increased by between 5% and 15%......... 2,634 0.6
Changed by less than 5%................. 439,183 99.2
Decreased by between 5% and 15%......... 794 0.2
Decreased by 15% or more................ 11 0.0
------------------------------------------------------------------------
As shown in Table 3, 99.2 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 2026. The changes in the ALOS values for FY 2026,
compared with the FY 2025 ALOS values, are small and do not show any
particular trends in IRF length of stay patterns.
We invited public comment on our proposed updates to the CMG
relative weights and ALOS values for FY 2026.
The following is a summary of the public comments received on the
proposed updates to the CMG relative weights and ALOS and our
responses:
Comment: Public comments generally supported CMS' update to the CMG
relative weights and average length of stay values and encouraged CMS
to use the latest available data to update these values in the final
rule. A few commenters recommend future refinements to computing the
CMGs and use of the ALOS.
Response: We appreciate these commenters' support for updating the
relative weights and ALOS values for FY 2026. We have updated our data
between the FY 2026 IRF PPS proposed and this final rule to ensure that
we use the most recent available data in calculating IRF PPS payments.
The methodology that we use to update the CMG relative weights uses
the most recent cost data reported by IRFs to compute relative weights
that reflect the relative costliness of different IRF cases in a budget
neutral manner. We increase or decrease relative weights of the CMGs
annually, including for those CMGs associated with the 13 conditions
that qualify for the 60 percent rule, under 42 CFR 412.29(b)(2), based
only on the cost data reported to us by IRFs each year.
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 and ensures
that IRF payments appropriately reflect the relative costs of caring
for all types of IRF patients.
Comment: The Medicare Payment Advisory Commission (MedPAC)
submitted a comment recommending that CMS consider using an average-
cost weighting method, rather than the current hospital-specific
relative value method (HSRV), for calculating the CMG relative weights,
to improve the relationship between costs and payments and increase the
uniformity of profitability across IRF cases.
Response: We did not propose any changes to the current HSRV method
used to assign payment weights for FY 2025 and believe that a careful
evaluation of the advantages and disadvantages of moving to an average-
cost weighting method is essential, given the major distributional
shifts that would be associated with such a change. The purpose of the
HSRV method is, in part, to place a greater emphasis on more efficient
IRF providers (that is, those that treat complex IRF patients at lower
costs). CMS believes moving to an average-cost weighting method places
more emphasis on high cost IRF providers, which could have higher costs
because they are operating less efficiently. We will continue
evaluating the effects of changing from HSRV weighting to average-cost
weighting. The results of this analysis will inform future rulemaking.
After consideration of the comments we received, we are finalizing
our proposal to update the CMG relative weights and ALOS values for FY
2026 using the same methodologies that we have used to update the CMG
relative weights and ALOS values for each FY since we implemented an
update to the methodology in FY 2009, as shown in Table 2 of this final
rule. These updates are effective for FY 2026, that is, for discharges
occurring on or after October 1, 2025, and on or before September 30,
2026.
VI. FY 2026 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, we proposed to update
the IRF PPS payments for FY 2026 by a market basket percentage increase
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).
Beginning with FY 2024, we finalized a rebased and revised IRF
market basket
[[Page 37688]]
to reflect a 2021 base year. The FY 2024 IRF PPS final rule (88 FR
50966 through 50988) contains a complete discussion of the development
of the 2021-based IRF market basket.
B. FY 2026 Market Basket Update and Productivity Adjustment
1. FY 2026 Market Basket Update
For FY 2026 (that is, beginning October 1, 2025, and ending
September 30, 2026), we proposed to update the IRF PPS payments by a
market basket percentage increase 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 2026, we proposed to use the
same methodology described in the FY 2025 IRF PPS final rule (89 FR
64285 through 64286).
Consistent with historical practice, we proposed to estimate the
market basket update for the IRF PPS for FY 2026 based on IHS Global
Inc.'s (IGI's) \3\ forecast using the most recent available data at the
time of rulemaking. IGI is a nationally recognized economic and
financial forecasting firm with which CMS contracts to forecast the
components of the market baskets. Based on IGI's fourth quarter 2024
forecast with historical data through the third quarter of 2024, the
proposed 2021-based IRF market basket percentage increase for FY 2026
was projected to be 3.4 percent. 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 (for example, a more recent
estimate of the market basket percentage increase or productivity
adjustment), we would use such data, if appropriate, to determine the
FY 2026 IRF market basket update in this final rule. Based on IGI's
second quarter 2025 forecast with historical data through the first
quarter of 2025, the 2021-based IRF market basket percentage increase
for FY 2026 is 3.3 percent.
---------------------------------------------------------------------------
\3\ <a href="https://www.spglobal.com/en">https://www.spglobal.com/en</a>.
---------------------------------------------------------------------------
2. FY 2026 Productivity Adjustment
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 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 referred to 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 this change, the productivity measure referenced in section
1886(b)(3)(B)(xi)(II) of the Act is now published by BLS as private
nonfarm business total factor productivity. However, as mentioned
above, the data and methods are unchanged. Please see <a href="http://www.bls.gov">www.bls.gov</a> for
the BLS historical published TFP data. A complete description of IGI's
TFP projection methodology is available on the CMS website at <a href="https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information">https://www.cms.gov/data-research/statistics-trends-and-reports/medicare-program-rates-statistics/market-basket-research-and-information</a>. 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.
As stated in the proposed rule, using IGI's fourth quarter 2024
forecast, the 10-year moving average growth of TFP for FY 2026 was
projected to be 0.8 percent. In accordance with section 1886(j)(3)(C)
of the Act, we proposed to base the FY 2026 IRF market basket
percentage increase, which is used to determine the applicable
percentage increase for the IRF payments, on IGI's fourth quarter 2024
forecast of the 2021-based IRF market basket. We proposed to then
reduce the market basket percentage increase by the proposed
productivity adjustment for FY 2026 of 0.8 percentage point (the 10-
year moving average growth of TFP for the period ending FY 2026 based
on IGI's fourth quarter 2024 forecast). Therefore, the proposed FY 2026
IRF market basket update was 2.6 percent (3.4 percent market basket
percentage increase reduced by the 0.8 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 percentage increase and productivity adjustment), we
would use such data, if appropriate, to determine the FY 2026 IRF
market basket percentage increase and productivity adjustment in this
final rule.
Using IGI's second quarter 2025 forecast, the 10-year moving
average growth of TFP for FY 2026 is projected to be 0.7 percent. Thus,
in accordance with section 1886(j)(3)(C) of the Act, the FY 2026 market
basket percentage increase, which is used to determine the applicable
percentage increase for the IRF payments, is equal to 3.3 percent using
IGI's second quarter 2025 forecast of the 2021-based IRF market basket.
We then reduce this percentage increase by the estimated productivity
adjustment for FY 2026 of 0.7 percentage point (the 10-year moving
average growth of TFP for the period ending FY 2026 based on IGI's
second quarter 2025 forecast). Therefore, more recent data would
provide a FY 2026 IRF update equal to 2.6 percent (3.3 percent market
basket percentage increase reduced by the 0.7 percentage point
productivity adjustment).
In its March 2025 Report to Congress, MedPAC recommended that
Congress should reduce the IRF PPS base payment rate by 7 percent for
FY 2026.\4\ 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 2026 by the proposed IRF market basket update
of 2.6 percent.
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Based on more recent data, the current estimate of the
productivity-adjusted IRF market basket increase factor for FY 2026
remains 2.6 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 2026.
We invited public comments on the proposed FY 2026 market basket
percentage increase and productivity adjustment. The following is a
summary of the public comments received and our responses.
[[Page 37689]]
Comment: Several commenters expressed agreement with the general
strategy of increasing the standard payment conversion factor. However,
many raised concerns that the proposed FY 2026 IRF payment increase is
insufficient. Respondents indicated that the proposed payment
adjustment fails to keep up with the significant cost increases faced
by IRFs, including those related to labor, drugs, medical supplies,
personal protective equipment (PPE), and capital investments.
Additionally, they highlighted other challenges such as staffing
shortages, supply chain disruptions, escalating cybersecurity
investment needs, higher administrative costs due to MA and commercial
plan practices, and uncertain inflation expectations resulting from
recent and proposed tariff adjustments on goods like medical supplies
and pharmaceuticals from key supplier countries.
Several commenters mentioned that the increasing disparity between
payment inflation and cost inflation is exerting significant financial
pressure on hospitals, leading to a substantial reduction in their
profit margins. A few commenters have expressed that an analysis of the
data in CMS' IRF Rate-Setting File suggests that nearly 40 percent of
all IRFs are projected to experience negative total PPS profit margins
for FY 2025, including over half of hospital-based IRF units and
teaching IRFs. Additionally, one commenter referred to MedPAC's March
2025 Report to Congress, which highlighted that non-profit IRFs tend to
have lower profit margins compared to for-profit IRFs. The report
recommends that Congress reduce the IRF base payment by 7 percent for
FY 2026. However, the commenter suggested that this recommendation
might not be applicable if the analysis had distinctly considered for-
profit and non-profit IRFs, as non-profit IRFs typically exhibit
smaller profit margins. One commenter, MedPAC, stated that the
Secretary is required to update the IRF PPS rates by the market basket
minus a productivity adjustment; however, based on the review of many
payment adequacy indicators, including beneficiary access to IRF
services, the supply of providers, and aggregate IRF Medicare margins
(which have been above 13 percent since 2015), the Commission concluded
that Medicare's current payment rates for IRFs are more than adequate.
Most commenters highlighted that persistent labor shortages and
high-cost inflation necessitate increased payment rates for all IRFs.
They urged CMS to consider the most current inflation data or update
the market basket to reflect actual input costs. One commenter noted
that rural IRFs face even more cost pressures amplified by severe
workforce shortages, heavy dependence on traveling clinicians and
contract staff, lack of community-based alternatives leading to longer
patient stays, and significant transportation and access issues.
Several commenters indicated that the underlying construction of
the IRF market basket may have limitations that do not adequately
capture inflation pressures. They stated that it is perplexing how
hospitals, especially labor-intensive IRFs, could experience a change
in the market basket that is significantly below general inflation. The
commenters noted that the IRF market basket relies on projected growth
in generalized hospital goods and services, which does not consider the
specialized training and experience required by therapists, nurses, and
other clinicians in IRFs. Additionally, some commenters highlighted
that IRFs often incur higher costs for advanced rehabilitation
technologies and specialized medications, which may not be adequately
reflected in the market basket. An example the commenter provided was
CMS' use of the Employment Cost Index (ECI) to measure changes in labor
compensation in the market basket. The commenters stated that the ECI
might not fully capture growth in employment and labor costs, as it
does not account for changes driven by shifts between different
categories of labor. However, the commenters emphasized that this is
just one potential issue and encouraged CMS to comprehensively
reexamine the market basket to identify other areas for refinement.
Several commenters suggested that CMS review the current
forecasting approach used for determining the IRF PPS market basket
update, indicating there may be a systemic issue with IGI's forecasting
that tends toward under-forecasting growth. They observed that since
the COVID-19 PHE, IGI's forecasted growth for the IRF market basket has
consistently been lower than the actual market basket growth. While
acknowledging that forecasts are inherently imperfect, they asserted
that past forecasts were more balanced. The commenters expressed
concern that without action from CMS, these missed forecasts will
become permanently embedded in the standard payment rate for IRFs and
will continue to accumulate. Additionally, they pointed out that these
underpayments affect other payments as well, including those for the
growing MA patient population and commercial insurer payment rates.
Some commenters mentioned that CMS has provided larger increases to MA
plans, such as a recent 5.06 percent rate increase for 2026, and
questioned why there is a significant difference between the MA rate
increase and the IRF FFS rate increase. One commenter noted that the
authorizing statute for the IRF PPS allows CMS to determine a suitable
index for the market basket update and to make appropriate adjustments
to IRF PPS payments and this implies that CMS is not required to use
IGI data, or solely such data, as the basis for the IRF PPS increase
factor.
Response: We acknowledge and appreciate commenters' concerns
regarding recent trends in inflation. 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) of the Act 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. In the FY
2024 IRF PPS final rule, we rebased the IRF market basket to reflect a
2021 base year (88 FR 50966 through 50982). We believe the increase in
the 2021-based IRF market basket adequately reflects the average change
in the price of goods and services hospitals purchase to provide IRF
medical services and is technically appropriate to use as the IRF
payment update factor.
The IRF market basket is a fixed-weight, Laspeyres-type index that
measures the change in price over time of the same mix of goods and
services purchased by IRFs in the base period. As we discussed in
response to similar comments in the FY 2024 IRF PPS final rule (88 FR
50983) and the FY 2025 IRF PPS final rule (89 FR 64286), the IRF market
basket update would reflect the prospective price pressures described
by the commenters as increasing during a high inflation period but
would inherently not reflect other factors that might increase the
level of costs (such as increases in volume or intensity). 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 respectfully disagree that the IRF market basket does not
consider the specialized costs faced by IRFs, as the market basket
weights are derived directly from IRF cost report data, which
inherently captures and reflects the specific cost structures of
inpatient rehabilitation facilities, including expenditures for
specialized
[[Page 37690]]
rehabilitation technologies, advanced therapeutic equipment, and the
unique staffing mix required for IRF services, ensuring that these
facility-specific costs are appropriately represented in the market
basket calculation. Additionally, we note that the IRF market basket is
designed to reflect national-level inflationary price pressures
affecting IRFs, and separate payment adjustments, such as rural add-on
payments and wage index adjustments, exist to address geographic cost
variations and specific challenges faced by rural facilities.
Therefore, we believe the 2021-based IRF market basket appropriately
reflects IRF cost structures.
To measure price growth for IRF wages and salaries costs in the IRF
market basket, since IRF-specific information is unavailable, we use
the ECI for Wages and Salaries for All Civilian workers in Hospitals.
As stated in the FY 2024 IRF final rule (88 FR 50978) and FY 2025 IRF
final rule (89 FR 64286), we believe that this ECI is the best
available price proxy to account for the occupational skill mix within
IRFs and in the absence of an IRF-specific ECI, we believe that the
highly skilled hospital workforce captured by the ECI for Wages and
Salaries for All Civilian workers in Hospitals (inclusive of
therapists, nurses, other clinicians, etc.) is a reasonable price proxy
for the compensation component of the IRF market basket. The FY 2024
IRF and FY 2025 IRF final rules provide a detailed discussion as it
relates to contract labor in IRFs and their share of overall IRF
compensation costs and hours.
To reflect expected price growth for each of the cost categories in
the IRF market basket, we rely on impartial economic forecasts of the
price proxies used in the market basket from IGI, which is a nationally
recognized economic and financial forecasting firm with which CMS
contracts to forecast the components of the market baskets. At the time
of the FY 2026 IRF PPS proposed rule, based on IGI's fourth quarter
2024 forecast with historical data through the third quarter of 2024,
the 2021-based IRF market basket update was forecasted to be 3.4
percent for FY 2026, reflecting forecasted compensation price growth of
3.6 percent. We also note that when developing its forecast for labor
prices, IGI considers overall labor market conditions (including rise
in contract labor employment due to tight labor market conditions) as
well as trends in contract labor wages, which both have an impact on
wage pressures for workers employed directly by the hospital.
As is our general practice, in the FY 2026 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 2026 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 2026.
Based on IGI's second quarter 2025 forecast with historical data
through the first quarter of 2025, we are projecting a FY 2026 IRF
market basket percentage increase of 3.3 percent (reflecting forecasted
compensation price growth of 3.4 percent). Based on IGI's second
quarter 2025 forecast, we are also projecting a productivity adjustment
of 0.7 percentage point. Therefore, for FY 2026 a final IRF
productivity-adjusted market basket update of 2.6 percent (3.3 percent
less 0.7 percentage point) will be applicable, this update is unchanged
from the proposed IRF market basket update of 2.6 percent. We note that
the final FY 2026 IRF market basket increase is slightly lower than in
the proposed rule (by 0.1 percentage point) reflecting economic
uncertainty. Additionally, the expectation for slower economic growth
contributes to a slightly lower productivity adjustment for FY 2026.
CMS understands that the market basket updates may differ from
other overall inflation indexes such as the topline CPI; however, we
would reiterate that these topline indexes are not comparable since
they measure different mixes of products, services, or wages than the
IRF market basket. Additionally, the market basket updates
appropriately differ from other payment updates (such as projected
increase in the average per capita payments to Medicare Advantage
organizations) that are not consistent in concept with the statutory
requirement as they would reflect anticipated volume and intensity of
services.
Regarding whether IRF PPS payments are adequate to cover costs,
MedPAC's analysis and recommendations as published in MedPAC's March
2025 \5\ Report to Congress concluded that Medicare's current payment
rates for IRFs are more than adequate based on aggregate Medicare
margins above 13 percent since 2015. With respect to the commenters'
concern about payments to non-profits, MedPAC acknowledged that margins
continued to vary widely across types of IRFs, with higher margins in
IRFs that were freestanding, for profit, urban, larger, and with a
greater share of FFS Medicare days.
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We do not have statutory authority to vary payment under the IRF
PPS according to non-profit status but are continuing to explore
changes to the IRF PPS within our regulatory authority, such as
alternative approaches to case mix groups (replacing the hospital-
specific relative value weighting with average cost weighting), which
has been recommended by MedPAC's 2024 Report to Congress.\6\
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Finally, we acknowledge the commenter's recommendation that we
reexamine the market basket to identify other potential areas for
refinement. We will continue to review the IRF market basket, and any
future changes will be proposed in rulemaking.
Comment: Several commenters recommended that we not apply the
productivity adjustment. One commenter urged CMS to consider its
regulatory authority to modify the productivity adjustment or make a
PHE- and inflation-related exception in its application for the FY 2026
update. Additionally, one commenter requested a temporary suspension of
the productivity adjustment to the IRF market basket due to recent
declines in hospital productivity. A commenter asserted an imbalance
between economy-wide productivity measures and IRF-specific
productivity changes, encouraging CMS to explore all available avenues
within the agency's existing authority to provide additional financial
relief for IRFs. Other commenters requested that CMS carefully monitor
the impact of these productivity adjustments on the rehabilitation
hospital sector, provide feedback to Congress as appropriate, and
reduce the productivity adjustment.
Response: 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), to the IRF PPS market basket increase factor. As
required by statute, the FY 2026 productivity adjustment is derived
based on the 10-year moving average growth in economy-wide, private
nonfarm business total factor productivity for the period ending FY
2026. We recognize the concerns of the commenters regarding the
appropriateness of the productivity adjustment; however, as we
explained in response to similar comments in the
[[Page 37691]]
FY 2023, FY 2024 and FY 2025 IRF PPS final rules, we are required under
section 1886(j)(3)(C)(ii)(I) of the Act to apply the specific
productivity adjustment described here.
We have always made available on the CMS website the general method
for calculating the productivity adjustment. This includes providing a
link (<a href="http://www.bls.gov/productivity">http://www.bls.gov/productivity</a>/) to the most recent BLS
historical TFP data, which allows interested parties to obtain
historical TFP annual index levels for 1987 through 2024. We also
provided the IGI projection model (<a href="https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/medicareprogramratesstats/downloads/tfp_methodology.pdf">https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/medicareprogramratesstats/downloads/tfp_methodology.pdf</a>), which is used
to derive annual TFP growth rates for 2025 and 2026. The annual index
level derived from this method is then interpolated to quarterly
levels, and the FY 2026 productivity adjustment is equal to the percent
change in the 40-quarter moving average projected level for the period
ending September 30, 2026, relative to the 40-quarter moving average
projected level for the period ending September 30, 2025. We believe
our methodology for the productivity adjustment is consistent with
section 1886(b)(3)(B)(xi)(II) of the Act, which states that the
productivity adjustment is equal to the 10-year moving average of
changes in annual economy-wide private nonfarm business multi-factor
productivity (as projected by the Secretary for the 10-year period
ending with the applicable fiscal year, year, cost reporting period, or
other annual period).
At the time of this final rule, the FY 2026 productivity adjustment
reflects BLS historical TFP data through 2024 (released on March 21,
2025) and IGI's forecasted TFP growth for 2025 and 2026. The average
annual growth rate of historical TFP published by BLS for 2017 through
2024 is currently 0.9 percent and IGI is projecting average TFP growth
of about 0.0 percent for 2025 and 2026 based on IGI's second-quarter
2025 forecast. Combining the historical and projected TFP data over the
entire 10-year time period results in a compound annual growth rate of
TFP of 0.7 percent for 2026. The productivity adjustment (based on the
10-year period ending with FY 2026) for the FY 2026 IRF final rule is
0.1 percentage point lower than in the FY 2026 IRF proposed rule and
primarily reflects the incorporation of a revised outlook from IGI that
has lower projected economic growth over 2025 and 2026. The 0.7 percent
productivity adjustment in the FY 2026 final rule is larger than the
productivity adjustment in prior final rules for FY 2023 and 2024
mainly due to the incorporation of updated BLS historical data.
In response to commenters' concerns about the productivity
adjustment only being applied if it reduces the payment update, we note
that the productivity adjustment was established under the Affordable
Care Act with a specific policy intent to encourage efficiency
improvements in healthcare delivery by linking Medicare payment updates
to economy-wide productivity gains. The statutory language in section
1886(j)(3)(C)(ii) of the Act requires that the Secretary reduce (not
increase) the market basket percentage increase by changes in economy-
wide productivity, therefore, only positive productivity adjustments
are applied.
Comment: Many commenters have noted concerns about CMS's estimation
of the IRF market basket updates since the COVID-19 pandemic, stating
that it has resulted in underpayments to IRF providers. Organizations
report cumulative underpayments between 3.5 to 4.6 percentage points
for fiscal years 2021 to 2024, with an annual financial impact of
approximately $450 million, highlighting discrepancies between
forecasted and actual market basket rates. Commenters suggest that CMS
address these forecast errors as it does in the Skilled Nursing
Facility (SNF) Prospective Payment System and recommend extending this
approach to IRFs. Most organizations are requesting a retrospective
adjustment of 3.5 to 4.6 percentage points for FY 2026, along with
policy changes for ongoing forecast error correction mechanisms like
the SNF PPS.
Concerns have been raised about the IGI forecasting methodology,
which is perceived to lean towards under-forecasting in the post-
pandemic environment. Commenters highlight that inadequate
reimbursement may affect patient access to rehabilitation services and
challenge the long-term stability of IRF providers, potentially causing
care disruptions. According to the commenters, without correction,
these forecast errors become embedded in future payment rates, widening
the gap between actual costs and reimbursement. The consensus among
commenting organizations is that CMS should implement a one-time market
basket adjustment for FY 2026 to account for the cumulative
underpayments due to market basket forecast errors from recent years
and establish mechanisms to prevent similar issues in the future.
Commenters assert that CMS has the statutory and regulatory authority
to make these adjustments, given the precedent set in the SNF payment
system and the agency's general authority over market basket
calculations.
Response: The IRF market basket updates are set prospectively,
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 2026 market basket update
in this final rule reflects historical data through the first quarter
of CY 2025 and forecasted data through the third quarter of CY 2026.
The forecast error has been both positive and negative during past
years, and over longer periods of time the cumulative forecast has not
deviated significantly from the historical measures. Only considering
the forecast error for years when the IRF market basket update was
lower than the actual market basket update would not fully account for
forecast error. After careful consideration of public comments, we are
finalizing a FY 2026 IRF productivity-adjusted market basket increase
of 2.6 percent based on the most recent data available. This reflects a
3.3 percent market basket percentage increase, less the 0.7 percentage
point productivity adjustment required by law.
C. Labor-Related Share for FY 2026
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 2021-based IRF market basket, we proposed to
calculate the labor-related share for FY 2026 as the sum of the FY 2026
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-
[[Page 37692]]
Related Services, and a portion of the Capital-Related relative
importance from the 2021-based IRF market basket. For more details
regarding the methodology for determining specific cost categories for
inclusion in the 2021-based IRF labor-related share, see the FY 2024
IRF PPS final rule (88 FR 50985 through 50988).
The relative importance reflects the different rates of price
change for these cost categories between the base year (2021) and FY
2026. We calculate the labor-related relative importance from the IRF
market basket, and it approximates the labor-related portion of the
total costs after taking into account historical and projected price
changes between the base year and FY 2026. The price proxies that move
the different cost categories in the market basket do not necessarily
change at the same rate, and the relative importance captures these
changes. Based on IGI's fourth quarter 2024 forecast of the 2021-based
IRF market basket, the sum of the FY 2026 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 70.8 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 8.1 percent of the
2021-based IRF market basket for FY 2026, we proposed to take 46
percent of 8.1 percent to determine the labor-related share of Capital-
Related costs for FY 2026 of 3.7 percent. Therefore, we proposed a
total labor-related share for FY 2026 of 74.5 percent (the sum of 70.8
percent for the proposed labor-related share of operating costs and 3.7
percent for the proposed labor-related share of Capital-Related costs).
We also proposed that if more recent data subsequently 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 2026 IRF labor-related share in this final rule.
Based on IGI's second quarter 2025 forecast for the 2021-based IRF
market basket, the sum of the FY 2026 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
70.7 percent. The portion of Capital-Related costs that is influenced
by the local labor market is estimated to be 46 percent, which is the
same percentage applied to the 2016-based IRF market basket (84 FR
39088 through 39089). Since the relative importance for Capital is 8.1
percent of the 2021-based IRF market basket in FY 2026, we took 46
percent of 8.1 percent to determine the labor-related share of Capital-
Related costs for FY 2026 of 3.7 percent. Therefore, the total labor-
related share for FY 2026 based on more recent data is 74.4 percent
(the sum of 70.7 percent for the operating costs and 3.7 percent).
We invited public comments on the proposed labor-related share for
FY 2026.
The following is a summary of the public comments received and our
responses.
Comment: One commenter stated that the proposed 0.1 percent
increase to the labor-related share is inadequate in the context of the
current economic climate of rising labor costs, inflationary pressures,
and workforce shortages. The commenter respectfully requests that CMS
reconsider the proposed labor-related share allocations to ensure they
more accurately reflect the increased resource requirements necessary
to maintain compliance and sustain high-quality patient care.
Response: We proposed to use the FY 2026 relative importance values
for the labor-related cost categories from the 2021-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. As stated in the FY 2026 IRF proposed
rule, we also proposed that if more recent data became available, we
would use such data, if appropriate, to determine the FY 2026 labor-
related share for the final rule. Based on IGI's second quarter 2025
forecast with historical data through the first quarter of 2025, the FY
2026 labor-related share for the final rule is 74.4 percent, reflecting
expectations of a slight softening of the labor market cost pressures
since the proposed rule forecast. We note the FY 2026 labor-related
share is unchanged from the FY 2025 labor-related share. After
consideration of the public comments we received, we are finalizing a
FY 2026 labor-related share of 74.4 percent.
Table 4 shows the estimate of the FY 2026 labor-related share and
the FY 2025 final labor-related share using the 2021-based IRF market
basket relative importance.
Table 4--FY 2026 IRF Labor-Related Share and FY 2025 IRF Labor-Related-
Share
------------------------------------------------------------------------
FY 2026 labor- FY 2025 final
related share labor-related
\1\ share \2\
------------------------------------------------------------------------
Wages and Salaries...................... 49.4 49.4
Employee Benefits....................... 11.8 11.8
Professional Fees: Labor-Related \3\.... 5.5 5.5
Administrative and Facilities Support 0.7 0.7
Services...............................
Installation, Maintenance, and Repair 1.5 1.5
Services...............................
All Other: Labor-Related Services....... 1.8 1.8
-------------------------------
Subtotal............................ 70.7 70.7
Labor-related portion of Capital-Related 3.7 3.7
(46%)..................................
-------------------------------
Total Labor-Related Share........... 74.4 74.4
------------------------------------------------------------------------
\1\ Based on the 2021-based IRF market basket relative importance, IGI's
2nd quarter 2025 forecast.
\2\ Based on the 2021-based IRF market basket relative importance as
published in the Federal Register (89 FR 64276).
\3\ Includes all contract advertising and marketing costs and a portion
of accounting, architectural, engineering, legal, management
consulting, and home office contract labor costs.
[[Page 37693]]
D. Wage Adjustment for FY 2026
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
adjustments or updates made under section 1886(j)(6) of the Act for a
FY are made in a budget-neutral manner.
In the FY 2023 IRF PPS final rule (87 FR 47054 through 47056) we
finalized a policy 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. We amended IRF PPS
regulations at Sec. 412.624(e)(1)(ii) to reflect this permanent cap on
wage index decreases. Additionally, we finalized a policy 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.
A full discussion of the adoption of this policy is found in the FY
2023 IRF PPS final rule.
For FY 2026, we proposed to maintain the policies and methodologies
described in the FY 2025 IRF PPS final rule (89 FR 64276) related to
the labor market area definitions and the wage index methodology for
areas with wage data. Thus, we use the core based statistical areas
(CBSAs) labor market area definitions and the FY 2026 pre-
reclassification and pre-floor hospital wage index data. In accordance
with section 1886(d)(3)(E) of the Act, the FY 2026 pre-reclassification
and pre-floor hospital wage index is based on data submitted for
hospital cost reporting periods beginning on or after October 1, 2021,
and before October 1, 2022 (that is, FY 2022 cost report data).
In addition, we will continue to use the same methodology discussed
in the FY 2008 IRF PPS final rule (72 FR 44299) to address those
geographic areas in which there are no hospitals and, thus, no hospital
wage index data on which to base the calculation for the FY 2026 IRF
PPS wage index. For FY 2026, the only rural area without wage index
data available is in North Dakota. For urban areas without specific
hospital wage index data, we will continue using the average wage
indexes of all urban areas within the State to serve as a reasonable
proxy for the wage index of that urban CBSA as proposed and finalized
in FY 2006 (70 FR 47927). For FY 2026, the only urban area without wage
index data available is CBSA 25980, Hinesville Fort Stewart, Georgia.
We invited public comments on our proposals regarding the Wage
Adjustment for FY 2026.
The following is a summary of the public comments received and our
responses on the proposed revisions to the Wage Adjustment for FY 2026.
Comment: Many commenters supported the existing 5 percent wage
index cap and expressed appreciation of having a policy to cap and
phase in the wage index changes that a provider can experience in a
given year. One commenter expressed frustration that the wage index
values of the hospitals subject to the cap differ from the currently
published tables and urged CMS to release wage index tables in the
final rule that incorporates the cap on Core Based Statistical Areas
(CBSAs) that meet the 5 percent decrease criteria.
Response: We appreciate the commenters' support of the permanent
cap on wage index decreases. We realize that the 5-percent cap on
annual decreases in the wage index values does not entirely eliminate
the effects of annual changes in the wage index, but we believe that it
does substantially reduce the financial impact on IRFs of these annual
changes. The wage index tables for IRF PPS are provided at the CBSA
level. The 5-percent cap policy is applied at the provider level.
Hence, when the 5-percent cap is applicable, each IRF should work
directly with its Medicare Administrative Contractor (MAC) to
understand how the 5-percent cap is applied. MACs have more detailed
information about the location of each IRF and the applicability of the
5-percent cap to each IRFs situation, and CMS has provided careful
instructions to the MACs on applying the 5-percent cap policy (see
publication 100-04 Medicare Claims Processing Manual, Chapter 3).
Comment: Multiple commenters urged CMS to refine the wage index
calculations to create parity across provider types in the same market
areas. They expressed concern over the use of the pre-classification
and pre-floor IPPS wage index. They noted that since IPPS hospitals can
reclassify their wage indices, acute care hospitals across the country
are receiving wage index increases higher than would be assigned their
Core Based Statistical Areas (CBSAs). One commenter also voiced
concerns that IPPS hospitals that have benefited from IPPS-specific
geographic reclassification or other wage adjustments no longer put the
same resources into the completion of Occupational Mix Surveys. One
commenter highlighted rural and low- wage index IRFs are particularly
disadvantaged by the use of the pre-floor IPPS wage index.
Another commenter noted IRF distinct part units (DPUs) are
particularly impacted by this and urged CMS to leverage existing data
to evaluate the policy change using the CMS Form 2552-96, Worksheet S-
3, which captures ``excluded area'' salaries and wage-related costs.
They urged CMS to also reconsider its policy on the out-migration
adjustment application to IRF DPUs as they noted they face the same
challenges in the marketplace as IPPS hospitals. Another commenter
suggested that CMS utilize more up to date cost reports to calculate
the IRF PPS wage index.
Response: We appreciate the commenters' suggestion to adopt the
IPPS post-classification and post-floor hospital IPPS wage index and
other IPPS wage index adjustments for the IRF wage index. We also
acknowledge and appreciate the commenters' concerns regarding
competition for labor resulting from different applicable wage index
policies across different settings of care. While we and other
interested parties have explored potential alternatives to the current
wage index system in the past, we are not considering a replacement
system at this time. These concerns will be taken into consideration
while we continue to explore future potential wage index reforms and
monitor IRF wage index policies using the most up to date information.
As most recently discussed in the FY 2025 IRF PPS final rule (89 FR
64276), we would like to note that the IRF wage index is derived from
IPPS wage data, that is, the pre-reclassification and pre-floor
hospital wage index discussed in section VI. of this final rule. As
such, any effects of this policy on the wage data of IPPS hospitals
would be extended to the IRF setting, as this data would be used to
establish the wage index for IRFs in the future. We note that IPPS wage
index values are based on historical data and typically lag by 4 years.
As stated in prior years, as we do not have an IRF-specific wage
index, we are unable to determine the degree, if any, to which these
IPPS policies under the IRF PPS would be appropriate. However, we
acknowledge that
[[Page 37694]]
commenters have suggested that such data may be available in CMS Form
2552-96, Worksheet S-3 and will take this into consideration. Data
pertaining to any IPPS policies that are applied to the pre-
reclassification/pre-floor wage index is available in the FY 2025 IRF
PPS FR (89 FR 64276). A full history of the IRF PPS rules is available
on the CMS website at <a href="https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf">https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf</a>.
After consideration of the comments we received, we are finalizing
our proposals regarding the wage adjustment for FY 2026.
2. Core-Based Statistical Areas (CBSAs) for the FY 2026 IRF Wage Index
The wage index used for the IRF PPS is calculated using the pre-
reclassification and pre-floor hospital 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 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 <a href="https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf">https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf</a>.
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.
1804 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf">https://www.whitehouse.gov/wp-content/uploads/2018/09/Bulletin-18-04.pdf</a>) 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
<a href="https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf</a>). 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, we did not propose to adopt the revised
OMB delineations identified in OMB Bulletin No. 20-01 for FY 2022
through FY 2024.
On July 21, 2023, OMB issued OMB Bulletin No. 23-01 (available at
<a href="https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf">https://www.whitehouse.gov/wp-content/uploads/2023/07/OMB-Bulletin-23-01.pdf</a>) which updates and supersedes OMB Bulletin No. 20-01 based upon
the 2020 Standards for Delineating Core Based Statistical Areas (``the
2020 Standards'') published by OMB on July 16, 2021 (86 FR 37770). OMB
Bulletin No. 23-01 revised CBSA delineations that are comprised of
counties and equivalent entities (for example, boroughs; a city and
borough; and a municipality in Alaska; planning regions in Connecticut;
parishes in Louisiana; municipios in Puerto Rico; and independent
cities in Maryland, Missouri, Nevada, and Virginia). As discussed in
the FY 2025 IRF PPS final rule (89 FR 64291 through 64304), we adopted
the revised OMB delineations identified in OMB Bulletin No. 23-01.
3. Second Year of the 3-Year Phase Out of the Rural Adjustment
For FY 2026, CMS is continuing the 3-year budget-neutral phase-out
of the rural adjustment for FY 2024 IRFs transitioning from rural to
urban status in FY 2025 under the revised CBSA delineations. As stated
in the FY 2025 IRF PPS final rule (89 FR 64276), the purpose of this
gradual phase-out of the rural adjustment for these facilities is to
reduce the potential negative financial impacts associated with this
reclassification. In FY 2026, the second year of this phase-out,
affected IRFs will receive the full FY 2026 wage index along with one-
third of the FY 2024 rural adjustment. This step is part of a gradual
reduction of the 14.9 percent rural adjustment over three fiscal years
[[Page 37695]]
-FYs 2025, 2026, and 2027. Furthermore, this policy does not apply to
urban IRFs transitioning to rural status, as they will receive the full
rural adjustment.
The following is a summary of the public comments received and our
responses on the proposal regarding the second year of the 3-year phase
out of the rural adjustment.
Comment: Public comments supported the phase-out policy for IRFs
being reclassified from rural to urban CBSAs. Commenters expressed that
this phase-out policy for loss of the rural adjustment is a reasonable
way to ensure that no IRF faces a dramatic cut to its reimbursement as
a result of the new CBSA delineation. One commenter urged CMS to
evaluate whether the policy disproportionately impacts rural IRFs with
more low-income patients.
Response: We appreciate the commenters' feedback on the continued
phase out policy for IRFs reclassification from rural to urban CBSAs.
We will continue to monitor whether CBSA delineation changes
disproportionately impact certain provider populations, such as low-
income patients. Separately, the low-income patient (LIP) adjustment
will continue to be applied because we did not propose to change the
low-income patient adjustment (LIP) policy at Sec. 412.624(e)(2).
After consideration of the comments we received, we are finalizing
our proposal to continue the 3-year budget-neutral phase-out of the
rural adjustment for FY 2024 IRFs transitioning from rural to urban
status in FY 2026 under the revised CBSA delineations.
4. IRF Budget-Neutral Wage Adjustment Factor Methodology
To calculate the wage-adjusted facility payment for the payment
rates set forth in this rule, we multiply the unadjusted Federal
payment rate for IRFs by the FY 2026 labor-related share based on the
2021-based IRF market basket relative importance (74.4 percent) to
determine the labor-related portion of the standard payment amount. (A
full discussion of the calculation of the labor-related share appears
in section VI 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 <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRF-Rules-and-Related-Files.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRF-Rules-and-Related-Files.html</a>.
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
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 use the listed steps
to ensure that the FY 2026 IRF standard payment conversion factor
reflects the update to the wage indexes (based on the FY 2022 hospital
cost report data) and the 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 2025 (as
published in the FY 2025 IRF PPS final rule (89 FR 64276)).
Step 2. Calculate the total amount of estimated IRF PPS payments
using the FY 2026 wage index values (based on updated hospital wage
data and taking into account the permanent 5-percent cap on wage index
decreases when applicable) and the FY 2026 labor-related share of 74.4
percent.
Step 3. Divide the amount calculated in Step 1 by the amount
calculated in Step 2. The resulting quotient is the proposed FY 2026
budget-neutral wage adjustment factor of 1.0001.
Step 4. Apply the budget neutrality factor from Step 3 to the FY
2026 IRF PPS standard payment amount after the application of the
market basket percentage increase to determine the FY 2026 standard
payment conversion factor.
We discuss the calculation of the standard payment conversion
factor for FY 2026 in section VI.E. of this final rule.
We invited public comments on our proposals regarding the Wage
Adjustment for FY 2026.
The following is a summary of the public comments received and our
responses to the proposed revisions to the Wage Adjustment for FY 2026:
Comment: Several commenters specified that the wage index cap
policy should be implemented without applying a budget neutrality
adjustment.
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. The statute at section 1886(j)(6) of the Act requires that
adjustments for geographic variations in labor costs for a FY be made
in a budget-neutral manner. We refer readers to the FY 2023 IRF PPS
final rule (87 FR 47054 through 47056) for a detailed discussion on the
wage index cap policy.
After consideration of the comments we received, we are finalizing
our proposals regarding the IRF budget neutral wage adjustment factor
methodology for FY 2026 without modification.
E. Description of the IRF Standard Payment Conversion Factor
Methodology and Payment Rates for FY 2026
To calculate the IRF standard payment conversion factor for FY
2026, as illustrated in Table 5, we begin by applying the IRF market
basket update for FY 2026, as adjusted in accordance with sections
1886(j)(3)(C) of the Act, to the standard payment conversion factor for
FY 2025 ($18,907). Applying the 2.6 percent IRF market basket update
for FY 2026 to the standard payment conversion factor for FY 2025 of
$18,907 yields a FY 2026 standard payment amount of $19,399. Then, we
apply the budget neutrality factor for the FY 2026 wage index (taking
into account the policy placing a permanent 5-percent cap on decreases
to a provider's wage index), and labor-related share of 1.0001, which
results in an IRF standard payment amount of $19,401. We next apply the
budget neutrality factor for the CMG relative weights of 0.9985, which
results in the IRF standard payment conversion factor of $19,371 for FY
2026.
We received no comments on the proposed FY 2026 IRF standard
payment conversion factor methodology and are finalizing the FY 2026
IRF standard payment conversion factor methodology as proposed.
Table 5--Calculations To Determine the FY 2026 IRF Standard Payment
Conversion Factor
------------------------------------------------------------------------
Explanation for adjustment Calculations
------------------------------------------------------------------------
FY 2025 IRF Standard Payment Conversion Factor. $18,907
Market Basket Update for FY 2026 of 2.6 percent x 1.026
*.............................................
Budget Neutrality Factor for the Updates to the x 1.0001
Wage Index and Labor-Related Share............
Budget Neutrality Factor for the Revisions to x 0.9985
the CMG Relative Weights......................
[[Page 37696]]
FY 2026 Standard Payment Conversion Factor..... = $19,371
------------------------------------------------------------------------
* Reflects a FY 2026 3.3 percent IRF market basket percentage increase
reduced by 0.7 percentage point for the productivity adjustment as
required by section 1886(j)(3)(C)(ii)(I) of the Act.
We then apply the CMG relative weights described in section V.E of
this rule to the FY 2026 standard payment conversion factor ($19,371),
to determine the unadjusted IRF prospective payment rates for FY 2026.
The unadjusted IRF prospective payment rates for FY 2026 are shown in
Table 6.
Table 6--FY 2026 IRF PPS Payment Rates
----------------------------------------------------------------------------------------------------------------
Payment rate Tier Payment rate Tier Payment rate Tier Payment rate no
CMG 1 2 3 comorbidity
----------------------------------------------------------------------------------------------------------------
0101................................ $18,729.82 $16,631.94 $15,068.70 $14,293.86
0102................................ 23,837.95 21,168.63 19,179.23 18,193.24
0103................................ 30,602.31 27,175.58 24,620.54 23,353.68
0104................................ 39,084.87 34,708.96 31,446.88 29,827.47
0105................................ 48,710.32 43,255.44 39,189.47 37,172.95
0106................................ 54,868.36 48,723.88 44,144.57 41,872.35
0201................................ 20,560.38 16,349.12 14,935.04 14,032.35
0202................................ 26,850.14 21,348.78 19,504.66 18,324.97
0203................................ 33,382.04 26,542.14 24,248.62 22,782.23
0204................................ 41,142.07 32,711.81 29,885.58 28,078.26
0205................................ 52,782.10 41,967.27 38,341.02 36,022.31
0301................................ 23,127.04 18,328.84 17,089.10 15,998.51
0302................................ 29,918.51 23,712.04 22,106.19 20,694.04
0303................................ 35,375.32 28,037.59 26,139.23 24,471.38
0304................................ 41,909.16 33,215.45 30,964.54 28,988.70
0305................................ 45,907.33 36,384.55 33,920.56 31,754.88
0401................................ 26,243.83 21,451.45 20,887.75 18,900.28
0402................................ 32,901.64 26,892.76 26,185.72 23,694.61
0403................................ 37,974.91 31,040.09 30,222.63 27,347.98
0404................................ 61,531.98 50,294.86 48,971.83 44,315.04
0405................................ 48,739.37 39,838.40 38,790.43 35,102.19
0406................................ 64,118.01 52,408.24 51,029.03 46,176.59
0407................................ 87,804.87 71,769.56 69,880.88 63,234.69
0501................................ 25,356.64 19,487.23 18,129.32 16,707.49
0502................................ 31,479.81 24,192.44 22,505.23 20,740.53
0503................................ 35,646.51 27,394.47 25,484.49 23,485.40
0504................................ 42,594.89 32,733.12 30,451.21 28,062.77
0505................................ 60,518.88 46,507.83 43,267.07 39,873.27
0601................................ 25,366.32 19,212.16 18,094.45 16,252.27
0602................................ 31,553.42 23,898.00 22,507.16 20,217.51
0603................................ 37,521.63 28,417.26 26,764.91 24,041.35
0604................................ 47,455.08 35,939.02 33,850.82 30,404.72
0701................................ 23,766.28 19,001.01 18,046.02 16,490.53
0702................................ 29,376.12 23,487.34 22,305.71 20,384.10
0703................................ 35,987.44 28,773.68 27,328.61 24,973.09
0704................................ 44,437.07 35,530.29 33,744.28 30,834.76
0801................................ 22,820.98 19,219.91 17,180.14 16,097.30
0802................................ 26,011.38 21,908.60 19,582.14 18,348.21
0803................................ 28,626.46 24,111.08 21,552.17 20,192.33
0804................................ 32,520.03 27,390.59 24,483.01 22,939.14
0805................................ 40,504.76 34,114.27 30,493.83 28,570.29
0901................................ 23,990.98 18,171.94 17,166.58 15,659.52
0902................................ 30,476.39 23,084.42 21,805.93 19,894.02
0903................................ 36,165.66 27,392.53 25,875.78 23,607.44
0904................................ 43,549.88 32,986.88 31,160.19 28,426.94
1001................................ 23,805.02 19,779.73 17,953.04 16,668.75
1002................................ 28,918.97 24,029.73 21,809.81 20,250.44
1003................................ 34,418.39 28,599.34 25,957.14 24,101.40
1004................................ 45,781.42 38,040.77 34,526.87 32,059.01
1101................................ 26,197.34 24,802.63 21,344.90 18,675.58
1102................................ 29,916.57 28,322.34 24,372.59 21,325.53
1103................................ 37,471.26 35,474.11 30,528.70 26,710.67
1201................................ 25,660.76 20,366.67 18,200.99 16,856.64
1202................................ 30,172.27 23,946.43 21,399.14 19,818.47
1203................................ 40,388.54 32,055.13 28,645.83 26,530.52
1204................................ 41,579.85 33,002.37 29,492.35 27,313.11
1301................................ 24,266.05 19,400.06 17,774.83 16,147.67
[[Page 37697]]
1302................................ 29,753.86 23,787.59 21,796.25 19,799.10
1303................................ 34,387.40 27,491.32 25,190.05 22,881.03
1304................................ 44,382.84 35,483.80 32,512.29 29,533.03
1305................................ 44,295.67 35,412.13 32,446.43 29,474.91
1401................................ 21,647.09 17,437.77 16,122.48 14,826.56
1402................................ 27,576.56 22,214.66 20,539.07 18,888.66
1403................................ 33,331.68 26,850.14 24,825.87 22,830.66
1404................................ 41,585.66 33,500.21 30,976.17 28,485.06
1501................................ 25,381.82 20,409.29 19,113.37 18,270.73
1502................................ 31,036.22 24,955.66 23,371.11 22,342.51
1503................................ 36,185.03 29,095.24 27,247.25 26,046.25
1504................................ 45,376.57 36,485.28 34,168.51 32,663.38
1601................................ 20,362.80 18,247.48 16,691.99 15,130.69
1602................................ 24,500.44 21,957.03 20,083.85 18,206.80
1603................................ 29,670.56 26,590.57 24,324.16 22,048.07
1604................................ 38,836.92 34,805.81 31,838.18 28,858.92
1701................................ 25,552.29 20,242.70 18,793.74 17,302.18
1702................................ 31,497.25 24,951.79 23,167.72 21,327.47
1703................................ 36,955.99 29,277.33 27,183.32 25,025.39
1704................................ 42,525.16 33,690.04 31,280.29 28,796.93
1705................................ 49,506.46 39,220.46 36,415.54 33,523.45
1801................................ 21,674.21 17,732.21 16,312.32 15,310.84
1802................................ 27,551.37 22,540.10 20,734.72 19,462.04
1803................................ 34,275.05 28,039.52 25,794.42 24,209.88
1804................................ 40,030.17 32,748.61 30,125.78 28,275.85
1805................................ 48,024.58 39,288.26 36,142.41 33,922.50
1806................................ 69,578.69 56,921.68 52,363.69 49,148.10
1901................................ 25,970.70 18,354.02 15,955.89 15,961.70
1902................................ 37,783.14 26,702.92 23,214.21 23,220.02
1903................................ 53,458.15 37,781.20 32,845.47 32,853.22
1904................................ 82,202.78 58,095.57 50,504.07 50,519.57
2001................................ 23,020.50 18,462.50 17,170.45 15,717.63
2002................................ 28,581.91 22,921.70 21,315.85 19,514.35
2003................................ 33,562.19 26,916.00 25,031.21 22,915.89
2004................................ 40,932.86 32,826.10 30,528.70 27,946.54
2005................................ 42,844.78 34,360.28 31,954.40 29,252.15
2101................................ 31,111.76 26,156.66 19,725.49 18,915.78
2102................................ 49,301.13 41,448.13 31,257.05 29,974.69
5001................................ ................. ................. ................. 3,399.61
5101................................ ................. ................. ................. 16,540.90
5102................................ ................. ................. ................. 39,681.49
5103................................ ................. ................. ................. 17,662.48
5104................................ ................. ................. ................. 42,385.69
----------------------------------------------------------------------------------------------------------------
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 V of this final rule). The following
examples are based on two hypothetical Medicare beneficiaries, both
classified as CMG 0104 (without comorbidities). The unadjusted
prospective payment rate for CMG 0104 (without comorbidities) appears
in Table 6.
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 0.8565, 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), a
wage index of 0.9145, 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 FY 2026 unadjusted
prospective payment rate for CMG 0104 (without comorbidities) from
Table 6. Then, we multiply the labor-related share for FY 2026 (74.4
percent) described in section VI 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 <a href="https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRF-Rules-and-Related-Files.html">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS/IRF-Rules-and-Related-Files.html</a>.
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
[[Page 37698]]
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.
Table 7--Example of Computing the FY 2026 IRF Prospective Payment
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Steps Rural facility A
(Spencer Co., IN)
Urban facility B
(Harrison Co., IN)
----------------------------------------------------------------------------------------------------------------
1. Unadjusted Payment........................................... $29,827.47 $29,827.47
2. Labor-Related Share.......................................... x 0.744 x 0.744
3. Labor Portion of Payment..................................... = $22,191.64 = $22,191.64
4. CBSA-Based Wage Index........................................ x 0.8565 x 0.9145
5. Wage-Adjusted Amount......................................... = $19,007.14 = $20,294.25
6. Non-Labor Amount............................................. + $7,635.83 + $7,635.83
7. Wage-Adjusted Payment........................................ = $26,642.97 = $27,930.08
8. Rural Adjustment............................................. x 1.149 x 1.000
9. Wage- and Rural-Adjusted Payment............................. = $30,612.77 = $27,930.08
10. LIP Adjustment.............................................. x 1.0156 x 1.0454
11. Wage-, Rural- and LIP-Adjusted Payment...................... = $31,090.33 = $29,198.11
12. Wage- and Rural-Adjusted Payment............................ $30,612.77 $27,930.08
13. Teaching Status Adjustment.................................. x 0 x 0.0784
14. Teaching Status Adjustment Amount........................... = $0.00 = $2,189.72
15. Wage-, Rural-, and LIP-Adjusted Payment..................... + $31,090.33 + $29,198.11
16. Total Adjusted Payment...................................... = $31,090.33 = $31,387.83
----------------------------------------------------------------------------------------------------------------
Thus, the adjusted payment for Facility A would be $31,090.33 and
the adjusted payment for Facility B would be $31,387.83.
VII. Update to Payments for High-Cost Outliers Under the IRF PPS for FY
2026
A. Update to the Outlier Threshold Amount for FY 2026
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 Cost-to-
Charge Ratio (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 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 2025 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, 86 FR 42362, 87 FR 47038, 88 FR 50956, and 89 FR
64276 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 through 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 2026, we proposed
to use FY 2024 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 2025.
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 2026, we
estimated the amount of FY 2026 IRF PPS aggregate and outlier payments
using the most recent claims available (FY 2024) and the proposed FY
2026 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 2.8
percent in FY 2025. Therefore, we proposed to update the outlier
threshold amount from $12,043 for FY 2025 to $11,971 for FY 2026 to
maintain estimated outlier payments at approximately 3 percent of total
estimated aggregate IRF payments for FY 2026.
We note that, with our longstanding practice when developing
previous IRF PPS fiscal year rules, we update our data between the FY
2026 IRF PPS proposed and final rules to ensure that we use the most
recent available data in calculating IRF PPS payments. We are
finalizing the outlier threshold amount of $10,062 to maintain
estimated outlier
[[Page 37699]]
payments at approximately 3 percent of total estimated aggregate IRF
payments for FY 2026.
We invited public comment on the proposed update to the IRF outlier
threshold for FY 2026.
The following is a summary of the public comments received on our
proposed update to the FY 2026 IRF outlier threshold.
Comment: Commenters were supportive of the update to the outlier
threshold for FY 2026 and setting outlier payments at 3 percent of
total payments. Several commenters advised CMS to continue to monitor
its approach due to the ongoing impacts of the PHE and total cost of
care. We received one comment urging CMS to consider a 10 percent cap
on IRF's outlier payments (as a percentage of total IRF PPS revenues)
due to a concern that a small number of IRF providers are receiving
large outlier payments despite their case-mix index being similar to
average IRFs. The commenter believed that factors other than patient
complexity and case-mix may be driving these payments and presented
analysis to support their claim that inefficient cost structures,
rather than highly complex patients, appear to be driving the
distribution of overall IRF outlier payments, potentially resulting in
patients at IRFs that warrant an outlier payment not receiving one.
Response: 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 non-outlier cases. We
continue to monitor our approach to assess whether IRFs who treat
medically complex patients are adequately compensated.
We acknowledge commenters' concerns that outlier payments may be
concentrated among a small subset of providers and may not be
consistently targeted towards patients with intensive or complex needs.
As most recently discussed in the FY 2025 IRF PPS Final Rule (89 FR
64276), our outlier policy is intended to reimburse IRFs for treating
extraordinarily costly cases. We appreciate the commenters' suggestions
for additional analysis on our methodology and will take them into
consideration as we continue to assess our outlier threshold.
Comment: We received multiple comments that recommended that CMS
implement a new methodology to set the outlier fixed loss amount using
a 3-year average approach to promote stability in the outlier threshold
value and to account for the true cost of care for medically complex
patients. One commenter noted this method would be consistent with
facility specific adjustments, including teaching, rural, and Low-
Income Percentage (LIP). Multiple commenters also suggested that CMS
include historical reconciliation dollars in the outlier projection to
increase accuracy. Moreover, many commenters expressed concern that
outlier payments are being concentrated among an increasingly small
number of providers. One commenter suggested that CMS evaluate the
variation in outlier spending by provider.
Response: We thank the commenters for their suggestions regarding
the outlier threshold. We appreciate the suggestion to modify the
outlier threshold methodology to use a 3-year average; however, it has
been our long-standing practice to utilize the most recent full fiscal
year of data to update the prospective payment rates and determine the
outlier threshold amount as this data is generally considered to be the
best overall predictor of experience in the upcoming fiscal year. Any
future consideration given to imposing a limit on outlier payments or
adjusting the outlier threshold to account for historical outlier
reconciliation would need to be carefully assessed and take into
consideration the effect on access to IRF care for certain high-cost
populations. We continue to believe 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 other cases. We appreciate
the commenters' suggestions for refinements to the outlier methodology
as well as the suggested areas of analysis and will take them into
consideration as we continue to assess our outlier methodology.
Comment: Multiple commenters suggested CMS reduce the 3 percent
outlier pool threshold to a lower percentage which would increase the
number of complex patients that qualify for the outlier threshold and
provide appropriate compensation to IRFs.
Response: We appreciate the suggestion regarding the outlier
threshold methodology. As most recently discussed in the FY 2025 IRF
PPS Final Rule (89 FR 64276) our outlier policy is intended to
reimburse IRFs for treating extraordinarily costly cases. 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
adequate payments for all other cases. We will continue to examine ways
of enhancing the stability and predictability of the outlier threshold
from year to year. We appreciate the commenters' suggestion for
refinements to the outlier methodology as well as the suggested areas
of analysis and will take them into consideration, as we continue to
assess our outlier threshold policy to ensure it continues to
compensate IRFs' appropriately.
Based on our analysis using this updated data, we estimate that IRF
outlier payments as a percentage of total estimated payments are
approximately 2.4 percent in FY 2025. Therefore, we will update the
outlier threshold amount from $12,043 for FY 2025 to $10,062 for FY
2026 to account for the increases in IRF PPS payments and estimated
costs to maintain estimated outlier payments at approximately 3 percent
of total aggregate IRF payments for FY 2026. After consideration of the
comments received and considering the most recent available data, we
are finalizing the outlier threshold amount of $10,062 to maintain
estimated outlier payments at approximately 3 percent of total
estimated aggregate IRF payments for FY 2026.
B. Update to the IRF Cost-to-Charge Ratio (CCR) Ceiling and Urban/Rural
Averages for FY 2026
CCRs are used to adjust charges from Medicare claims to costs and
are computed annually from facility-specific data obtained from
Medicare Cost Reports (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
described in the FY 2004 IRF PPS final rule (68 FR 45692 through
45694), we proposed to apply a ceiling to IRFs' CCRs. Using that
methodology, we proposed to update the national urban and rural CCRs
for IRFs, as well as the national CCR ceiling for FY 2026, based on
analysis of the most recent data available. We apply the national urban
and rural CCRs to:
<bullet> New IRFs that have not yet submitted their first MCR.
<bullet> IRFs with an overall CCR that exceeds the national CCR
ceiling for FY 2026, as discussed below in this section.
<bullet> Other IRFs for which accurate data to calculate an overall
CCR are not available.
Specifically, for FY 2026, we proposed to estimate a national
average CCR of 0.467 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.
[[Page 37700]]
Similarly, we proposed to estimate a national average CCR of 0.398 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
applied 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 used the most recent available cost
report data (FY 2023). This includes all IRFs whose cost reporting
periods begin on or after October 1, 2022, and before October 1, 2023.
If, for any IRF, the FY 2023 cost report was missing or had an ``as
submitted'' status, we used the most recent FY for which a settled cost
report was available (that is, from a FY between FY 2004 and FY 2022)
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 2023 cost report data for this final rule, we estimate
a national average CCR of 0.463 for rural IRFs and a national average
CCR of 0.398 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 1.54 for FY 2026. This
means that, if an individual IRF's CCR were to exceed this ceiling of
1.54 for FY 2026, 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 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 become 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 2026 national
average rural and urban CCRs and the national CCR ceiling in the
proposed rule. Using the FY 2023 cost report data for this proposed
rule, we estimate a national average CCR ceiling of 1.54, using the
same methodology.
We invited public comments on the proposed update to the IRF CCR
ceiling and the urban/rural averages for FY 2026 and did not receive
any comments. Consistent with the methodology outlined in the proposed
rule, and using the most recent cost report data, we are finalizing a
national average urban CCR at 0.398, the national average rural CCR at
0.463, and the national average CCR ceiling at 1.54 for FY 2026.
VIII. 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. Section 1886(j)(7)(A)(i) of the Act requires the Secretary
to reduce by 2 percentage points the annual increase factor for
discharges occurring during a FY for any IRF that does not submit data
in accordance with the IRF QRP requirements set forth in subparagraphs
(C) and (F) of section 1886(j)(7) of the Act. We have codified our
program requirements in our regulations at Sec. 412.634.
In the proposed rule, we proposed to remove two quality measures:
(1) the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP)
measure, beginning with the FY 2026 IRF QRP, and (2) the COVID-19
Vaccine: Percent of Patients/Residents Who Are Up to Date measure,
beginning with the FY 2028 IRF QRP. We also proposed to remove four
items previously adopted as standardized patient assessment data
elements under the social determinants of health (SDOH) category
beginning with the FY 2028 IRF QRP: one item for Living Situation, two
items for Food, and one item for Utilities. We also proposed to amend
our reconsideration policy and process.
We also sought public comment on several Requests for Information
(RFIs), specifically on: (1) future measure concepts for the IRF QRP in
section VII.E of the proposed rule; (2) potential revisions to the IRF-
PAI as described in section VII.F of the proposed rule; (3) potential
revisions to the data submission deadlines for assessment data
collected for the IRF QRP as described in section VII.G of the proposed
rule; (4) advancing digital quality measurement in IRFs as described in
section VII.H of the proposed rule.
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 IRF QRP
The IRF QRP currently has 17 adopted measures, which are listed in
Table 8.
For a discussion of the factors, we use to evaluate whether a
measure should be removed from the IRF QRP, we refer readers to our
regulations at Sec. 412.634(b)(2). We refer readers to the CY 2013
OPPS/ASC PPS final rule (77 FR 45194 and 45195) for discussion of our
policy that allows any quality measure adopted for use in the IRF QRP
to remain in effect until the measure is removed, suspended, or
replaced, the FY 2018 IRF PPS final rule (82 FR 36276) which applied
this policy to standardized patient assessment data we adopt for the
IRF QRP, and the FY 2019 IRF PPS final rule (83 FR 38556 and 38557) for
more information on the factors we consider for removing measures and
standardized patient assessment data.
Table 8--Quality Measures Currently Adopted for the IRF QRP
------------------------------------------------------------------------
Short name Measure name & data source
------------------------------------------------------------------------
Inpatient Rehabilitation Facility--Patient Assessment Instrument (IRF-
PAI) Assessment-Based Measures
------------------------------------------------------------------------
Pressure Ulcer/Injury........ Changes in Skin Integrity Post-Acute
Care: Pressure Ulcer/Injury.
[[Page 37701]]
Application of Falls......... Application of Percent of Residents
Experiencing One or More Falls with
Major Injury (Long Stay).
Discharge Mobility Score..... IRF Functional Outcome Measure: Discharge
Mobility Score for Medical
Rehabilitation Patients.
Discharge Self-Care Score.... IRF Functional Outcome Measure: Discharge
Self-Care Score for Medical
Rehabilitation Patients.
DRR.......................... Drug Regimen Review Conducted with Follow-
Up for Identified Issues--Post Acute
Care (PAC) Inpatient Rehabilitation
Facility (IRF) Quality Reporting Program
(QRP).
TOH-Provider................. Transfer of Health Information to the
Provider--Post-Acute Care (PAC).
TOH-Patient.................. Transfer of Health Information to the
Patient--Post-Acute Care (PAC).
DC Function.................. Discharge Function Score.
Patient/Resident COVID-19 COVID-19 Vaccine: Percent of Patients/
Vaccine. Residents Who Are Up to Date.
------------------------------------------------------------------------
National Healthcare Safety Network
------------------------------------------------------------------------
CAUTI........................ National Healthcare Safety Network (NHSN)
Catheter-Associated Urinary Tract
Infection Outcome Measure.
CDI.......................... National Healthcare Safety Network (NHSN)
Facility-wide Inpatient Hospital-onset
Clostridium difficile Infection (CDI)
Outcome Measure.
HCP Influenza Vaccine........ Influenza Vaccination Coverage among
Healthcare Personnel.
HCP COVID-19 Vaccine......... COVID-19 Vaccination Coverage among
Healthcare Personnel (HCP).
------------------------------------------------------------------------
Claims-Based
------------------------------------------------------------------------
MSPB IRF..................... Medicare Spending Per Beneficiary (MSPB)--
Post Acute Care (PAC) IRF QRP.
DTC.......................... Discharge to Community--PAC IRF QRP.
PPR 30 day................... Potentially Preventable 30-Day Post-
Discharge Readmission Measure for IRF
QRP.
PPR Within Stay.............. Potentially Preventable Within Stay
Readmission Measure for IRFs.
------------------------------------------------------------------------
C. Overview of Quality Measure Proposals
In the proposed rule, we proposed to remove two measures: (1) the
COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure,
beginning with the FY 2026 IRF QRP and (2) the COVID-19 Vaccine:
Percent of Patients/Residents Who Are Up to Date measure, beginning
with the FY 2028 IRF QRP.
1. Removal of the COVID-19 Vaccination Coverage Among Healthcare
Personnel (HCP) Measure Beginning With the FY 2026 IRF QRP
We refer readers to the FY 2022 IRF PPS final rule where we adopted
the COVID-19 Vaccination Coverage among HCP measure (HCP COVID-19
measure) into the IRF QRP (86 FR 42385 through 42396) and the FY 2024
IRF PPS final rule where we modified the HCP COVID-19 measure to
account for updated vaccine guidance (88 FR 50999 through 51009). To
report this measure, an IRF must report data on COVID-19 vaccination
coverage among HCP for at least one week each month. This requires IRFs
to track current vaccination status for all employees, licensed
independent practitioners, adult students/trainers and volunteers and
other contract personnel and log in to the National Healthcare Safety
Network (NHSN) to report the data monthly either manually in the NHSN
or by uploading a CSV file (86 FR 42388). The estimated burden of
collecting this information annually across all 1,166 IRFs is 13,992
hours at a cost of $503,991.84. We refer readers to section VIII.A.1.
of this final rule for more details on this estimated burden
calculation.
We proposed to remove the HCP COVID-19 measure beginning with the
FY 2026 IRF QRP under removal Factor 8, the costs associated with a
measure outweigh the benefit of its continued use in the program (Sec.
412.634(b)(2)(viii)). When we first adopted the HCP COVID-19 measure,
the United States was in the midst of a Public Health Emergency (PHE)
with millions of cases and over 550,000 COVID-19 deaths (86 FR 42385
and 42386). While preventing the spread of COVID-19 remains a public
health goal, the PHE ended on May 11, 2023.\7\ In March 2021, when this
measure was being proposed, the United States was averaging over 5,000
deaths per week. In April 2023, the last full month of the PHE, weekly
number of deaths due to COVID-19 averaged around 1,300.\8\ With the end
of the PHE and the decrease in COVID-19 deaths, we expect the continued
costs and burden to providers of tracking and monthly reporting on this
measure to outweigh the benefit of continued information collection on
COVID-19 vaccination coverage among HCP in IRFs.
---------------------------------------------------------------------------
\7\ <a href="https://www.hhs.gov/coronavirus/covid-19-public-health-emergency/index.html">https://www.hhs.gov/coronavirus/covid-19-public-health-emergency/index.html</a>.
\8\ Provisional COVID-19 Deaths, by Week, in The United States,
Reported to CDC. Accessed on March 27, 2025, via <a href="https://covid.cdc.gov/covid-data-tracker/#trends_weeklydeaths_select_00">https://covid.cdc.gov/covid-data-tracker/#trends_weeklydeaths_select_00</a>.
---------------------------------------------------------------------------
If finalized, IRFs that did not report their CY 2024 reporting
period data for the HCP COVID-19 measure would still be considered
compliant with the IRF QRP for purposes of their FY 2026 payment
determination (that is, IRFs that do not report CY 2024 HCP COVID-19
vaccination data would not be penalized for FY 2026 payments). Any HCP
COVID-19 Vaccination measure data received by CMS would not be used for
payment determination.
We invited public comment on our proposal to remove the COVID-19
Vaccination Coverage among HCP measure from the IRF QRP beginning with
the FY 2026 IRF QRP. The following is a summary of the public comments
received and our responses:
Comment: Many commenters supported the removal of the COVID-19
Vaccination Coverage among HCP measure, agreeing that the burden
required to collect this measure outweighs the benefits. Several
commenters cited the end of the Public Health Emergency and changes to
vaccination and booster recommendations in their support. A few
commenters stated that the availability of vaccines, improved
treatments, and declining rates of severe
[[Page 37702]]
illness have reduced the need for reporting of HCP vaccination rates.
A few commenters stated that confusion about the ``up to date''
definition led to inaccurate reporting and increased administrative
tracking and noted that the requirements were not consistent with
federal and state mandates. These commenters also cited concerns about
the measure's consideration of medical contraindications and religious
beliefs. Another commenter stated that the measure has been
administratively challenging, and that the inclusion of non-employees
created difficulties for providers.
Response: We thank these commenters for their support and feedback
about the measure. We agree that the costs associated with a measure
outweigh the benefit of its continued use in the program, given the end
of the PHE.
Comment: One commenter was opposed to removing the measure,
recommending that CMS retain one of the COVID-19 vaccine measures to
ensure public health surveillance for vulnerable populations.
Response: We appreciate the commenter's concerns for the IRF
population. However, we note that since the end of the PHE there has
been an increase in the availability of treatments, including antiviral
medications used to treat mild to moderate COVID-19 infections in
vulnerable populations.\9\ Since the number of COVID-19 cases and
deaths is declining, and the availability of treatments has increased,
we believe the threat to vulnerable populations, such as IRF patients,
is also reduced. On these bases, we believe the continued costs and
burden to providers of reporting this measure outweigh the benefit of
continued information collection on COVID-19 vaccination coverage among
HCP in IRFs.
---------------------------------------------------------------------------
\9\ COVID-19 Treatment Options, <a href="https://www.cdc.gov/covid/treatment/index.html">https://www.cdc.gov/covid/treatment/index.html</a>.
---------------------------------------------------------------------------
After consideration of the public comments, we are finalizing our
proposal to remove the COVID-19 Vaccination Coverage among HCP measure
from the IRF QRP beginning with the FY 2026 IRF QRP.
2. Removal of the COVID-19 Vaccine: Percent of Patients/Residents Who
Are Up to Date Measure Beginning With the FY 2028 IRF QRP
We refer readers to the FY 2024 IRF PPS final rule where we adopted
the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date
(Patient/Resident COVID-19 Vaccine) measure into the IRF QRP (88 FR
51026 through 51035). In the FY 2026 IRF PPS proposed rule (90 FR
18550), we proposed to remove the Patient/Resident COVID-19 Vaccine
measure beginning with the FY 2028 IRF QRP under removal Factor 8, the
costs associated with a measure outweigh the benefit of its continued
use in the program (Sec. 412.634(b)(2)(viii)). The estimated burden of
collecting this information annually across all 1,166 IRFs is 3,111.5
hours at a cost of $218,116.15. We refer readers to section IX.A.2. of
this final rule for more details on this estimated burden reduction.
When we adopted the Patient/Resident COVID-19 Vaccine measure,
COVID-19 continued to be a major challenge for IRFs, with older adults
at a significantly higher risk of mortality, severe disease, and death
following infection (88 FR 51026).
IRFs have expressed concerns about data collection challenges and
increased provider burden in collecting patient immunization data.\10\
This is especially true considering the shorter length of stay for IRF
patients compared to other post-acute settings. While preventing the
spread of COVID-19 remains a public health goal, the number of COVID-19
cases and deaths \11\ is declining, and we believe the continued costs
and burden to providers of reporting this measure outweigh the benefit
of continued information collection on COVID-19 vaccination coverage
among patients in IRFs.
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\10\ Standing Technical Expert Panel for the Development,
Evaluation, and Maintenance of Post-Acute Care (PAC) and Hospice
Quality Reporting Program (QRP) Measurement Sets Summary Report
December 15, 2023. <a href="https://www.cms.gov/files/document/december-2023-pac-and-hospice-cross-setting-tep-summary-report.pdf-1">https://www.cms.gov/files/document/december-2023-pac-and-hospice-cross-setting-tep-summary-report.pdf-1</a>.
\11\ Provisional COVID-19 Deaths, by Week, in The United States,
Reported to CDC. Accessed on March 18, 2025, via <a href="https://covid.cdc.gov/covid-data-tracker/#trends_weeklydeaths_select_00">https://covid.cdc.gov/covid-data-tracker/#trends_weeklydeaths_select_00</a>.
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We proposed that, beginning with patients discharged on or after
October 1, 2025, IRFs would not be required to collect and submit the
Patient/Resident COVID-19 Vaccine measure data to CMS. We proposed to
remove the Patient/Resident COVID-19 Vaccine data item (O0350) from the
IRF-PAI effective October 1, 2026, since it is not technically feasible
to remove this item earlier. However, under our proposal, this item
will become voluntary and IRFs would not be required to collect and
submit Patient/Resident COVID-19 Vaccine data beginning with patients
discharged on or after October 1, 2025.
We invited public comment on our proposal to remove the COVID-19
Vaccine: Percent of Patients/Residents Who Are Up to Date measure from
the IRF QRP beginning with the FY 2028 IRF QRP.
The following is a summary of the public comments received on our
proposed update to remove the COVID-19 Vaccine:
Comment: We received many comments in support of the proposal to
remove the Patient/Resident COVID-19 Vaccine measure, agreeing that the
administrative burden required to collect this measure outweighs the
benefits. Several commenters noted the end of the Public Health
Emergency and changes to vaccination and booster recommendations in
their support for removing the measure. A few commenters noted that IRF
patients are medically complex and appreciated the flexibility to
determine how to support infection control among their patients. A few
commenters stated that COVID-19 vaccination is driven by primary and
acute care providers and was not appropriate for the IRF setting. One
commenter asserted that this measure did not have any benefit to the
public or Medicare program. A few commenters noted the difficulty of
collecting accurate patient vaccination status. A few commenters
supported removal, citing issues with the measure response options,
including the definition of ``up to date'' and the lack of an option to
indicate patient refusal or exclusion for medical contraindications or
religious beliefs. These commenters also noted that some IRFs are not
able to provide the vaccine to patients and also noted that vaccine
side effects may impede patients from participating in therapy.
Response: We thank commenters for their support. We acknowledge
commenters' difficulty with assessing patient's vaccination status in
the IRF, given that the IRF length of stay is shorter compared to other
post-acute care settings. We agree that the costs associated with this
measure, including the resources spent by IRF staff in trying to
ascertain patients' vaccination status, outweigh the benefit of its
continued use in the program, given the end of the PHE, the decrease in
COVID cases as well as the availability of treatments.
Comment: We received a few comments that were supportive of the
measure removal, but requested an earlier timeframe, citing data
collection burden. These commenters requested that CMS not penalize
IRFs for failing to report data for the Patient/Resident COVID-19
Vaccine measure for CY 2024 and January through September 2025. Another
commenter requested that the Patient/Resident Vaccine item be removed
from the IRF-PAI on October
[[Page 37703]]
1, 2025, to avoid confusion and workflow delays.
Response: IRFs have been required to report this measure on the
IRF-PAI since October 1, 2024. According to internal CMS analysis of
IRF-PAI data, IRFs have a data submission rate of approximately 99
percent with regard to the required IRF QRP data elements on the IRF
PAI. We do not anticipate a substantial number of IRFs to be non-
compliant with FY 2026 IRF QRP due to non-submission of this measure
for CY 2024 quarter 4. We are consistently monitoring these data as
they are submitted for trends that may indicate barriers to data
submission and will continue to do so as we conclude the FY 2026 IRF
QRP program year.
Regarding the suggestion to remove the item from the IRF-PAI on
October 1, 2025, it is not operationally feasible to remove this
measure from the IRF-PAI, since CMS, IRFs and vendors need more time to
prepare for an update to the item set and data specifications. Instead,
we proposed, and are finalizing, that reporting the data on this
measure using the IRF-PAI will be optional beginning October 1, 2025.
Because data collected in Q4 of 2025 (October 1, 2025-December 31,
2025) are used in determining the minimum data completion threshold for
the FY 2027 IRF QRP determination, we intend to provide updates to the
website to indicate that the Patient/Resident COVID-19 Vaccine data
item (O0350) is optional for the final quarter of the data collection
period for the FY 2027 Annual Increase Factor Determination (that is,
Q4 of 2025) and we will not penalize IRFs who select not complete this
item during Q4 of 2025. The item will be optional until it can be
removed from the IRF-PAI with the next iteration of the IRF-PAI
scheduled for release October 1, 2026.
Comment: One commenter was opposed to removing the measure,
recommending that CMS retain one of the COVID-19 vaccine measures to
ensure public health surveillance for vulnerable populations.
Response: We appreciate the commenter's concerns for the IRF
population. However, we wish to clarify that this measure did not
provide surveillance data about COVID-19 cases among IRF patients;
rather it assessed whether patients in submitting IRFs were up to date
in their COVID-19 vaccinations. Removing this measure will not impact
the public health surveillance of COVID-19. We also note that since the
end of the PHE, there has been an increase in the availability of
treatments, including antiviral medications used to treat mild to
moderate COVID-19 in vulnerable populations.\12\ As we stated in the
proposed rule, because the number of COVID-19 cases and deaths is
declining and the availability of treatments has increased, we believe
the threat to vulnerable populations, such as IRF patients, is also
reduced. On these bases, we believe the continued costs and burden to
providers of reporting this measure outweigh the benefit of continued
information collection on COVID-19 vaccination coverage among patients
in IRFs.
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\12\ COVID-19 Treatment Options, <a href="https://www.cdc.gov/covid/treatment/index.html">https://www.cdc.gov/covid/treatment/index.html</a>.
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After consideration of the public comments, we are finalizing our
proposal to remove the COVID-19 Vaccine: Percent of Patients/Residents
Who Are Up to Date measure from the IRF QRP beginning with the FY 2028
IRF QRP. Beginning with patients discharged on or after October 1,
2025, IRFs would not be required to collect and submit the Patient/
Resident COVID-19 Vaccine measure data to CMS, and IRFs who do not
report this data for Q4 of 2025 will not be penalized for the FY 2027
Annual Increase Factor Determination.
D. Removal of Four Standardized Patient Assessment Data Elements
Beginning With the FY 2028 IRF QRP
We refer readers to the FY 2025 IRF PPS final rule (89 FR 64310
through 64322) where we finalized the adoption of four items as
standardized patient assessment data elements under the SDOH category
from the IRF-PAI: one item for Living Situation (R0310); two items for
Food (R0320A and R0320B); and one item for Utilities (R0330). As
finalized in the FY 2025 IRF PPS final rule, IRFs would be required to
report these data elements using the IRF-PAI beginning with patients
discharged on or after October 1, 2026 through December 31, 2026 for
purposes of the FY 2028 IRF QRP and each program year after (89 FR
64326 through 64327).
In the proposed rule, we proposed to remove these four standardized
patient assessment data elements under the SDOH category from the IRF-
PAI as we acknowledge the burden associated with these items at this
time. We continuously look for ways to balance the need for data
collections regarding quality care and the burden that such data
collections may have on healthcare providers. One goal we have is to
facilitate improved healthcare delivery by requiring different systems
and software applications to communicate and exchange data. Therefore,
we would like to work towards the workflow for these specific data
elements being part of a low burden interoperable electronic system.
The focus will turn towards how these data and associated
recommendations can improve care coordination, efficiency, reduction in
errors and patient experience. As health information technology (IT)
advances and interoperability of data becomes more standardized, the
burden to collect and share clinical data on these and other relevant
patient information will become less burdensome, allowing for better
outcomes for IRF patients and their families. The objectives of the IRF
QRP continue to be the improvement of care, quality and health outcomes
for all patients through transparency and quality measurement, while
not imposing undue burden on essential health providers. We proposed
that IRFs would not be required to collect and submit Living Situation
(R0310), Food (R0320A and R0320B), and Utilities (R0330) items using
the IRF-PAI beginning with the patients discharged on or after October
1, 2026, removing the required collection and reporting of these items
that we previously finalized. We also proposed that collecting these
items would not be required to meet the IRF QRP requirements to avoid a
2 percent payment reduction beginning with the FY 2028 IRF QRP.
In the proposed rule, we calculated that removing these items from
the data collection for the FY 2028 IRF QRP would keep the 1,166 IRFs
from incurring 12,446 hours of administrative burden at a cost of
$872,464.60 (or $748.25 per IRF) at this time (90 FR 18557 and 18558).
We refer readers to section IX.A.3. of this final rule for more details
on this estimated burden reduction.
We invited public comments on our proposal to remove four
standardized patient assessment data elements collected under the SDOH
category from the IRF QRP beginning with the FY 2028 IRF QRP.
The following is a summary of the public comments received on our
proposal to remove these four standardized patient assessment data
elements.
Comment: Many commenters supported the proposed removal of the four
SDOH assessment data elements, citing that these added complexity and
administrative burden to the patient assessment process. A few
commenters expressed concerns about how these data elements can be
time-consuming to collect and detract from direct patient care. Several
commenters acknowledged that CMS must work towards a balance of
provider burden and data collection efforts for quality, ensuring data
adds
[[Page 37704]]
value to its program and advances health care.
Many commenters in support of removing the four SDOH data elements
noted that these SDOH data are important to patient outcomes and
continue to be a priority among IRFs. They stated, however, this
information is already part of the best practices for discharge
planning, used for uncovering barriers to a safe transition and
preventing readmissions. Several of these commenters believed that most
IRFs already collect these elements and signaled they will continue to
do so as they find it beneficial to their patient population, if they
need it to meet accreditation standards, such as The Joint Commission,
and for internal quality improvement efforts and population health
initiatives. By removing the four SDOH data elements from the IRF QRP,
this commenter asserted that we are preserving flexibility in IRFs
addressing risk factors in ways that are more clinically relevant.
Response: We thank commenters for their support. We continue to
monitor the IRF QRP data collection requirements to look for ways to
reduce the administrative burden where appropriate while maintaining a
high standard of quality care. We agree that removing these particular
items at this time will alleviate some of the burden on providers
associated with IRF QRP data collection and submission. We intend to
align the IRF QRP more closely with CMS's overarching goal for improved
healthcare delivery through health IT advances and less burdensome
interoperable electronic systems. As we stated in the proposed rule (90
FR 18534), we plan to refocus efforts on how data elements can improve
care coordination, efficiency, reduction in errors, and patient
experience.
Additionally, we acknowledge that many IRF providers have already
been tracking SDOH. We agree that collecting this information is
beneficial for IRFs regardless of the requirements of the IRF QRP, as
it facilitates discharge planning and contributes to quality
improvement as well as accreditation efforts.
Comment: A few commenters support removal of the four SDOH data
elements from the IRF-PAI because they are not currently used in any
quality measures or risk adjustment models, or being utilized by CMS in
an actionable way, and their collection is therefore an unnecessary
burden on IRFs participating in the QRP. A few other commenters stated
there was no clear evidence that collecting these items has led to
measurable improvements in care transitions or outcomes in the IRF
setting.
Response: Regarding the comments stating that the data elements
have not been utilized by CMS in an actionable way, we wish to clarify
that IRFs have not begun any data collection on the SDOH data elements
for the IRF QRP. While we finalized the adoption of the four SDOH data
elements in the FY 2025 IRF PPS final rule, IRFs would have been
required to report these data elements using the IRF-PAI beginning with
patients discharged on or after October 1, 2026 (89 FR 64326 through
64327).
Regarding comments about evidence for measurable improvements in
case transitions or outcomes in the IRF setting, while we are not aware
of evidence in the IRF setting at this time, we will continue to
monitor this topic as we consider future data elements in the IRF QRP.
In response to the comments about the SDOH data elements not being used
in quality measures or for risk adjustment, we note that the IRF QRP
requires data collections that are not strictly limited to quality
measures or risk adjustment. Section 1886(j)(7)(F)(ii) of the Act
requires IRFs to submit standardized patient assessment data required
under section 1899B(b)(1) of the Act.
Comment: Many commenters were opposed to CMS's proposal to remove
the four SDOH data elements from the IRF-PAI and urged CMS to
reconsider the proposal. These commenters believe that this data adds
value to IRFs, citing existing literature on how SDOH improves health
outcomes and how this information facilitates discharge planning by
providing a proactive approach to risks and earlier intervention. The
commenters felt that clinical care provided by the IRF can be
undermined when basic needs are not met. A few commenters noted that
these items can help reduce healthcare costs by allowing IRFs to
address these factors as part of a comprehensive and preventative
approach to care. Other commenters stated the SDOH data elements were
particularly important in caring for patients with complex or chronic
conditions and geriatric patients, and that the data can help reduce
hospital readmissions, emergency department visits and hospitalizations
when paired with interventions and community support services. Two
commenters further stated that understanding SDOH factors can
illuminate drivers behind poor patient outcomes and supports efforts
towards finding evidence-based, measurable solutions to differences in
health care among certain populations.
Response: We appreciate commenters' concerns and feedback regarding
the importance of collecting these SDOH data elements from IRF patients
to capture and address unmet needs and particularly highlighting their
importance for complex patient populations such as those with chronic
conditions and geriatric patients. We acknowledge commenters'
experiences using SDOH data to monitor and improve health care outcomes
may be different for those experiencing unstable housing, food
insecurity or challenges paying utilities, and recognize feedback from
some commenters stating that they currently collect and will continue
to collect this information.
However, in reviewing the data collection and reporting
requirements for the FY 2028 IRF QRP, we determined that these SDOH
items should be removed from the IRF-PAI prior to the start of data
collection and submission. We have re-evaluated the value of adding
these SDOH items for the purposes of the IRF QRP against their burden
at this time. Collecting these SDOH items is not a one-time task but an
ongoing requirement for every IRF patient admitted to the facility if
the items became part of the IRF QRP.
We considered that IRFs have not yet begun to report these data,
that we do not currently use these items in the IRF QRP for measures or
risk adjustment, and that these SDOH items are not clinical items
related to direct patient care while a patient is admitted to an IRF.
We also have refocused our efforts on modernization of health care and
health care systems which may support a less burdensome way of
collecting SDOH items in the future. We continuously review and
reassess the balance of data collection and IRF provider burden for the
IRF QRP, and at this time determined these SDOH items should be removed
prior to implementation.
The objectives of the IRF QRP continue to be the improvement of
care, quality and health outcomes for all patients through transparency
and quality measurement, while balancing burden for IRF providers. As
outlined in our request for information in the FY 2026 IRF PPS proposed
rule (90 FR 18554), we are refocusing our efforts to include ways for
data elements, such as those related to SDOH, being part of a less
burdensome, more streamlined, and interoperable electronic system.
Given these administrative goals and efforts to reduce burden for IRFs,
we do not believe that the value of collecting SDOH data elements via
the IRF-PAI outweighs the cost and burden of collecting them at this
time.
[[Page 37705]]
At this time,
[…truncated; see source link]Indexed from Federal Register on August 5, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.