inpatient rehabilitation facilities - MHA | Michigan Health & Hospital Association

The Centers for Medicare & Medicaid Services (CMS) recently released a proposed rule to update the Medicare fee-for-service (FFS) prospective payment system for inpatient rehabilitation facilities (IRF) for fiscal year (FY) 2027.

Key provisions of the proposed rule include:

Increasing the inpatient rehabilitation facilities’ prospective payment system payment rate by a net 2.6% after all adjustments, from $19,371 to $19,881. Facilities that fail to comply with CMS quality reporting requirements are subject to a two-percentage-point reduction.
Using fiscal year 2025 claims and fiscal year 2024 cost report data to update case mix group weights and average lengths of stay.
Increasing the labor-related share from 74.4% to 74.5%.
Continuing to use pre-reclassification and pre-floor hospital inpatient prospective payment system wage indexes while soliciting input on alternative data sources, such as Bureau of Labor Statistics data, for the wage index.
Decreasing the cost outlier threshold by 14.3%, from $10,141 to $8,689, to achieve the 3% target for outlier payments compared with aggregate payments.
Updating and clarifying coverage rules, including:
- Requiring all therapies to be initiated within 36 hours of admission, with therapy evaluations qualifying as initiation under this clarification.
- Requiring preadmission screening documentation to include the patient’s current functional status upon admission.
- Requiring the initial interdisciplinary team meeting to occur within four days of admission, with subsequent meetings held weekly.
Shortening the timeframe to submit quality reporting data following the end of each quarter from 4.5 months to 45 days, beginning with fiscal year 2029. For example, data from the quarter ending March 31, 2027, would be due to CMS by May 17, 2027.
Requesting information on modernizing the prospective payment system, including replacing the current system with new clinical categories and comorbidity score groupings.

The MHA will provide facilities with a facility-specific impact analysis and additional details on the proposed rule in the near future. Members are encouraged to submit comments to CMS by June 1 and notify Vickie Kunz of any issues identified by May 22.

The Centers for Medicare & Medicaid Services (CMS) recently released a final rule to update the Medicare fee-for-service prospective payment system (PPS) for inpatient rehabilitation facilities (IRFs) for fiscal year (FY) 2026.

Key provisions include:

Increasing the IRF PPS payment rate by a net 2.45% after all adjustments, from $18,907 to $19,371. IRFs that fail to comply with the CMS IRF Quality Reporting Program (QRP) requirements are subject to a two-percentage point reduction.
Using FY 2024 IRF claims and FY 2023 IRF cost report data to update case mix group weights and average lengths of stay.
Maintaining the labor-related share at the current 74.4%.
Decreasing the cost outlier threshold by 16.4% from the current $12,043 to $10,062 to achieve the 3% target for outlier payments as compared to aggregate IRF payments, decreasing the number of cases that qualify for outlier payments.
Changes to the IRF QRP to:
- Remove the COVID-19 Vaccination Coverage Among Healthcare Personnel measure beginning with the FY 2026 payment year.
- Remove the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure by making data reporting optional beginning Oct. 1, 2025, and removing it from the IRG patient assessment instrument effective Oct. 1, 2026, the earliest feasible date.
- Remove four standardized patient assessment data elements related to social drivers of health, including one item on living situation, two items on food security and one item on utilities.

The MHA will provide IRFs with a facility-specific impact analysis and additional details on the final rule in the coming weeks. Members with questions should contact Vickie Kunz at the MHA.