CMS recently released the Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) for fiscal year (FY) 2025. The rule includes several changes that will impact IRFs and acute rehabilitation units (ARUs) and is set to go into effect October 1, 2024.
Key findings include:1
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- Payment Rate Increases: CMS is increasing IRF PPS payment rates by 3% – or $280 million – for 2025. The increase is a result of several factors, including changes in the IRF market basket as well as labor/wage shifts. The payment rate increase will continue to help IRFs provide high-quality care to patients experiencing medically complex conditions.
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- Wage Index Revisions: CMS will update wage index calculations based on new Core-Based Statistical Area (CBSA) delineations determined by the Office of Management and Budget. These changes will reclassify some counties as urban or rural, and others will be assigned to different CBSAs. As a result, CMS estimates that roughly 10% of providers will see an increase in their wage index, while 16% will experience a decrease.
To ease the impact of wage index changes, CMS has implemented a phase-out period for IRFs losing their rural adjustment. These IRFs will retain two-thirds of the adjustment in FY 2025, one-third in FY 2026, and none in FY 2027. Any IRFs transitioning from urban to rural areas will receive the total rural payment adjustment (14.9%) beginning October 1, 2024.
- Wage Index Revisions: CMS will update wage index calculations based on new Core-Based Statistical Area (CBSA) delineations determined by the Office of Management and Budget. These changes will reclassify some counties as urban or rural, and others will be assigned to different CBSAs. As a result, CMS estimates that roughly 10% of providers will see an increase in their wage index, while 16% will experience a decrease.
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- New Quality Measures: CMS is adding several new quality measures to the IRF Quality Reporting Program (QRP). Two of these measures include:
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- New Standardized Patient Assessment Data Elements: Beginning with the FY 2028 IRF QRP (October 1, 2026, implementation), CMS is finalizing the adoption of four new items in the IRF Patient Assessment Instrument (PAI) as standardized patient assessment data elements under the Social Determinants of Health category.
These include: living situation (one item), food (two items) and utilities (one item).
Through this process, IRFs will be better able to address the needs of patients, caregivers and community partners during the discharge planning process.
- New Standardized Patient Assessment Data Elements: Beginning with the FY 2028 IRF QRP (October 1, 2026, implementation), CMS is finalizing the adoption of four new items in the IRF Patient Assessment Instrument (PAI) as standardized patient assessment data elements under the Social Determinants of Health category.
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- Future IRF Star Rating System: CMS plans to create a five-star methodology for IRFs to better differentiate between provider quality. CMS notes it plans to engage with the IRF community and provide multiple opportunities for IRFs and other interested parties to give input on the development of a star rating system for IRFs. Specific details and a timeline for implementation have not been provided.
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*Note: The final rule did not address anything related to the IRF transfer policy or the IRF Review Choice Demonstration (RCD). Lifepoint will be sharing an RCD update in the coming weeks.
In summary, the 2025 final payment rule is expected to be beneficial for rehabilitation hospitals and acute rehabilitation units.
Stay ahead of post-acute trends and successfully navigate regulatory shifts with the help of a trusted rehabilitation expert. Contact us today to learn more.
References:
- https://www.cms.gov/newsroom/fact-sheets/fiscal-year-2025-inpatient-rehabilitation-facility-prospective-payment-system-final-rule-cms-1804-f
