Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2026 and Updates to the IRF Quality Reporting Program

<RULE> DEPARTMENT OF HEALTH AND HUMAN SERVICES <SUBAGY>Centers for Medicare & Medicaid Services</SUBAGY> <CFR>42 CFR Part 412</CFR> <DEPDOC>[CMS-1829-F]</DEPDOC> <RIN>RIN 0938-AV48</RIN> <SUBJECT>Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2026 and Updates to the IRF Quality Reporting Program</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Centers for Medicare & Medicaid Services (CMS), Department of Health and Human Services (HHS). <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This final rule updates the prospective payment rates for inpatient rehabilitation facilities (IRFs) for Federal fiscal year (FY) 2026. As required by statute, this final rule includes the classification and weighting factors for the IRF prospective payment system's case-mix groups and a description of the methodologies and data used in computing the prospective payment rates for FY 2026. It also continues the second year of the 3-year phaseout of the rural adjustment, which began in FY 2025. Additionally, the final rule includes updates to the IRF Quality Reporting Program. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> These regulations are effective on October 1, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> <E T="03">IRFcoverage@cms.hhs.gov,</E> for general information. Kimberly Schwartz, (410) 786-2571, for information about the IRF payment policies, payment rates and coverage policies. Ariel Cress, (410) 786-8571, for information about the IRF quality reporting program. <HD SOURCE="HD1">Availability of Certain Information Through the Internet on the CMS Website</HD> The IRF prospective payment system (IRF PPS) Addenda along with other supporting documents and tables referenced in this final rule are available on the CMS website at <E T="03">https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/InpatientRehabFacPPS.</E> We note that prior to 2020, each rule or notice issued under the IRF PPS included a detailed reiteration of the various regulatory provisions that have affected the IRF PPS over the years. That discussion, which has been updated to reflect subsequent years, along with detailed background information for various other aspects of the IRF PPS, is now available on the CMS website at <E T="03">https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf.</E> Readers who experience any problems accessing any of these online IRF PPS documents should contact <E T="03">Patricia.Taft@cms.hhs.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Executive Summary</HD> <HD SOURCE="HD2">A. Purpose</HD> This final rule updates the prospective payment rates for inpatient rehabilitation facilities (IRFs) for Fiscal Year (FY) 2026 (that is, for discharges occurring on or after October 1, 2025, and on or before September 30, 2026) under section 1886(j)(3)(C) of the Social Security Act (the Act). As required by section 1886(j)(5) of the Act, this final rule includes the classification and weighting factors for the IRF prospective payment system (PPS) case-mix groups (CMGs), and a description of the methodologies and data used in computing the prospective payment rates for FY 2026. For the IRF Quality Reporting Program (QRP), this rule finalizes our proposals to remove two quality measures: (1) the COVID-19 Vaccination Coverage among Healthcare Personnel (HCP) measure, beginning with the FY 2026 IRF QRP, and (2) the COVID-19 Vaccine: Percent of Patients/Residents Who Are Up to Date measure, beginning with the FY 2028 IRF QRP. Next, we are finalizing proposals to remove four Standardized Patient Assessment Data Elements under the Social Determinant of Health (SDOH) category from the IRF Patient Assessment Instrument (IRF-PAI) beginning with the FY 2028 IRF QRP. We are also finalizing proposals amending our reconsideration policy. Finally, we provide summaries of the comments received in response to a Request for Information (RFI) on four separate considerations: (1) future measure concepts for the IRF QRP; (2) potential revisions to the IRF-Patient Assessment Instrument (PAI); (3) potential revisions to the data submission deadlines for assessment data collected for the IRF QRP; and (4) advancing digital quality measurement in IRFs. <HD SOURCE="HD2">B. Summary of Major Provisions</HD> In this final rule, we use the methods described in the FY 2025 IRF PPS final rule (89 FR 64276) to update the prospective payment rates for FY 2026 using the most current and complete data available at this time, which is FY 2024 IRF claims and FY 2023 IRF cost report data, as discussed in section VI, of this final rule. For the IRF QRP, this rule will remove two quality measures, remove four SDOH standardized patient assessment data elements, and amend our reconsideration policy. We also include summaries of comments received in response to Requests for Information (RFIs) on four separate considerations. <HD SOURCE="HD2">C. Summary of Impact</HD> <GPOTABLE COLS="2" OPTS="L2,i1" CDEF="s100,r200"> <TTITLE>Table 1—Cost and Transfers</TTITLE> <CHED H="1">Provision description</CHED> <CHED H="1">Transfers/costs</CHED> <ROW> <ENT I="01">FY 2026 IRF PPS payment rate update</ENT> <ENT>The overall economic impact of this final rule is an estimated $340 million increase in payments from the Federal Government to IRFs during FY 2026.</ENT> </ROW> <ROW> <ENT I="01">FY 2026 IRF QRP changes</ENT> <ENT>The overall economic impact of this final rule is an estimated decrease in costs of $504,929.84 for IRFs for proposed measure removal in VII.C.1. and revisions to reconsiderations policy in VII.E. beginning with the FY 2026 IRF QRP.</ENT> </ROW> <ROW> <ENT I="01">FY 2028 IRF QRP changes</ENT> <ENT>The overall economic impact of this final rule is an estimated decrease in costs of $1,090,580.75 to IRFs for proposed measure and item removals in VII.C.2 and VII.D. beginning with the FY 2028 IRF QRP.</ENT> </ROW> </GPOTABLE> <HD SOURCE="HD1">II. Background</HD> <HD SOURCE="HD2">A. Statutory Basis and Scope for IRF PPS Provisions</HD> Section 1886(j) of the Act provides for the implementation of a per-discharge PPS for inpatient rehabilitation hospitals and inpatient rehabilitation units of a hospital (collectively, hereinafter referred to as IRFs). Payments under the IRF PPS encompass inpatient operating and capital costs of furnishing covered rehabilitation services (that is, routine, ancillary, and capital costs), but not direct graduate medical education costs, costs of approved nursing and allied health education activities, bad debts, and other services or items outside the scope of the IRF PPS. A complete discussion of the IRF PPS provisions appears in the original FY 2002 IRF PPS final rule (66 FR 41316) and the FY 2006 IRF PPS final rule (70 FR 47880) and we provided a general description of the IRF PPS for FYs 2007 through 2019 in the FY 2020 IRF PPS final rule (84 FR 39055 through 39057). A general description of the IRF PPS for FYs 2020 through 2025, along with detailed background information for various other aspects of the IRF PPS, is now available on the CMS website at <E T="03">https://www.cms.gov/files/document/irf-regulatory-and-legislative-history.pdf.</E> Under the IRF PPS from FYs 2002 through 2005, the prospective payment rates were computed across 100 distinct CMGs, as described in the FY 2002 IRF PPS final rule (66 FR 41316). We constructed 95 CMGs using rehabilitation impairment categories (RICs), functional status (both motor and cognitive), and age (in some cases, cognitive status and age may not be a factor in defining a CMG). In addition, we constructed five special CMGs to account for very short stays and for patients who expire in the IRF. For each of the CMGs, we developed relative weighting factors to account for a patient's clinical characteristics and expected resource needs. Thus, the weighting factors accounted for the relative difference in resource use across all CMGs. Within each CMG, we created tiers based on the estimated effects that certain comorbidities would have on resource use. We established the Federal PPS rates using a standardized payment conversion factor (formerly referred to as the budget-neutral conversion factor). For a detailed discussion of the budget-neutral conversion factor, please refer to our FY 2004 IRF PPS final rule (68 FR 45684 through 45685). In the FY 2006 IRF PPS final rule (70 FR 47880), we discussed in detail the methodology for determining the standard payment conversion factor. We applied the relative weighting factors to the standard payment conversion factor to compute the unadjusted prospective payment rates under the IRF PPS from FYs 2002 through 2005. Within the structure of the payment system, we then made adjustments to account for interrupted stays, transfers, short stays, and deaths. Finally, we applied the applicable adjustments to account for geographic variations in wages (wage index), the percentage of low-income patients, location in a rural area (if applicable), and outlier payments (if applicable) to the IRFs' unadjusted prospective payment rates. For cost reporting periods that began on or after January 1, 2002, and before October 1, 2002, we determined the final prospective payment amounts using the transition methodology prescribed in section 1886(j)(1) of the Act. Under this provision, IRFs transitioning into the PPS were paid a blend of the Federal IRF PPS rate and the payment that the IRFs would have received had the IRF PPS not been implemented. This provision also allowed IRFs to elect to bypass this blended payment and immediately be paid 100 percent of the Federal IRF PPS rate. The transition methodology expired as of cost reporting periods beginning on or after Oct ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 318k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━