Possible Refinements to the Facility-Level Payment Adjustments for the Inpatient Rehabilitation Facility Prospective Payment System

by Susan M. Paddock, Grace M. Carter, Barbara O. Wynn, Annie Jie Zhou

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The Centers for Medicare and Medicaid Services (CMS) implemented the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) beginning on January 1, 2002. This report describes potential refinements to the facility-level payment adjustments for the IRF PPS. These refinements improve upon current adjustments by utilizing more recent data from CY 2002, more accurate case mix groups (CMGs), and improved statistical methods. Standard linear regression is used to derive the facility payment adjustments. We tested the sensitivity of the potential payment adjustments to the presence of statistical outlier facilities. The results are that payment adjustments for rural facilities and for low-income patients are still appropriate; there is support in the data for an indirect teaching adjustment; and potential payment adjustments are not unduly influenced by statistical outlier facilities.

The research described in this report was supported by the Centers for Medicare and Medicaid Services and conducted by RAND Health.

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