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In the Balanced Budget Act of 1997, Congress mandated that Health Care Financing Administration (HCFA) implement a Prospective Payment System (PPS) for inpatient rehabilitation. The Centers for Medicare and Medicaid Services (CMS, the successor agency to HCFA) issued the final rule governing such a PPS on August 7, 2001 and the system went into effect on January 1, 2002. This report details the analyses that RAND performed to support HCFA's efforts to design, develop, and implement the PPS. It describes RAND's research on new function-related groups, comorbidities, unusual cases, facility-level adjustments, outlier payments, facility-level adjustments, and assessment instruments. In addition, it presents RAND's recommendations concerning the payment system and discusses the researchers' plans for further research on the monitoring and refinement of the PPS.

Table of Contents

  • Chapter One


  • Chapter Two

    Data and Methods

  • Chapter Three

    Case Classification System

  • Chapter Four


  • Chapter Five

    Unusual Cases

  • Chapter Six

    Relative Case Weights

  • Chapter Seven

    Facility-Level Adjustments

  • Chapter Eight


  • Chapter Nine

    Conversion Factor

  • Chapter Ten

    Developing a Monitoring Plan and System for the IRF PPS

The research described in this report was sponsored by the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration). The research was conducted within RAND Health.

This report is part of the RAND Corporation Monograph report series. The monograph/report was a product of the RAND Corporation from 1993 to 2003. RAND monograph/reports presented major research findings that addressed the challenges facing the public and private sectors. They included executive summaries, technical documentation, and synthesis pieces.

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