On April 25, the Centers for Medicare & Medicaid Services (CMS) published its proposed rule for the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) for fiscal year 2009, which begins October 1, 2008. Notably, the proposed rule implements the provisions in the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) pertaining to the “75% rule.” The 75% rule requires that a certain percentage of an IRF’s admissions have a primary diagnosis that falls within 13 conditions or diagnoses. The MMSEA required CMS to set the compliance percentage for the 75% rule at no higher than 60% for cost reporting periods beginning July 1, 2006. In addition, the proposed rule would implement the provision in the MMSEA that provided a zero update factor for rehabilitation services for FY 2008 and FY 2009. With respect to the payment features of the IRF PPS, CMS would update the data utilized to calculate the case-mix group weights to FY 2006 data and update the cost outlier threshold to $9,191 so that estimated outlier payments would equal 3.0% of total payments. CMS did not propose any changes to the teaching hospital, disproportionate share hospital, and rural hospital payment adjustments. Comments on the proposed rule are due to CMS by June 20, 2008.     

The following week, CMS issued an update of the Inpatient Psychiatric Facility PPS (IPF PPS) for rate year (RY) 2009, which covers the period July 1, 2008, through June 30, 2009. Since CMS made no changes to the payment parameters or payment policy, the update was a final rule. The wage-adjusted rates will increase by 3.2% for hospitals located in the New York City wage index area and by 3.5% for hospitals located in the Long Island wage index area. RY 2009 represents the first year in which psychiatric facilities will be reimbursed solely based upon the PPS. For the past three years, facilities have received a blend of cost-based and PPS payments. For RY 2010, CMS expects to issue a proposed rule that will make a one-time adjustment to the Federal per diem rate to ensure budget neutrality with the former payment system and will not update the regression model upon which the system parameters were based (but will wait for a subsequent year). Having developed the original regression model for the IPF PPS, GNYHA will begin conducting research on an updated model to prepare for CMS’s eventual update. This process will complement GNYHA’s work with the New York State Office of Mental Health on an inpatient psychiatric reimbursement model for the New York State Medicaid program.