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Analysis of FY 2017 IRF Final Rule Payment Data

Assessing gains and losses for FY 2017 IRF payments

On August 5, 2016, CMS published the Inpatient Rehabilitation Facility (IRF) Prospective Payment System (PPS) for federal fiscal year 2017 to the Federal Register. This rule establishes the governing policy for all IRF PPS activity for the fiscal year beginning on October 1, 2016. In conjunction with the final rule, CMS released the FY 2017 data files on the CMS website.

The final rule reveals that for FY 2017, the IRF PPS standard payment will increase from $15,478 to $15,708, a total of $230. This represents an increase of 1.486%. This increase is calculated as a combination of the market basket increase and two separate budget neutrality factors.

In addition to setting a new standard payment rate, CMS also published the CMG relative weight and average length of stay for FY 2017. The CMG relative weight is a factor assigned to every CMG and tier combination and can be understood as a percentage of the standard payment, which will be paid for a patient who is categorized into that CMG/tier during the first three days of the IRF stay. For example:

$15,708 (standard rate) x 0.7992 (stroke 0101 tier 1 relative weight)
= $12,553.83 stroke 0101 tier 1 payment rate

CMS annually adjusts the relative weights for the 353 valid CMG and tier combinations to reflect an adjusted level of effort required to treat corresponding patients. This has the effect of changing the reimbursement amounts for each CMG/tier combination.  While, in total, the aggregate relative weights went up slightly, CMS applies a budget neutrality factor to the standard rate, which results in a budget neutral adjustment. CMS would have paid out the same amount of money under the FY 2017 rates as under prior year’s rates.

While the overall effect of the FY 2017 changes is budget neutral, the shifting of dollars across different CMG categories may have an effect on the reimbursement received by a given IRF with a given distribution of patient diagnoses. Mediware has performed a comparative analysis of each of the 23 rehabilitation impairment categories (RIC) and identified trends in the shift of relative weights that may impact the reimbursement levels of any given IRF.

RIC Relative Weight Change Analysis
RW Change Net % Up RIC
0.2127 20% 01 Stroke
0.1458 29% 02 Traumatic brain injury
-0.0362 25% 03 Non-traumatic brain injury
0.0228 30% 04 Traumatic spinal cord injury
0.2717 33% 05 Non-traumatic spinal cord injury
-0.0576 -38% 06 Neurological
0.1373 38% 07 Fracture of lower extremity
-0.2371 8% 08 Replacement of lower extremity joint
0.1358 38% 09 Other orthopedic
0.2514 67% 10 Amputation, lower extremity
-0.6930 -75% 11 Amputation, non-lower extremity
0.3197 50% 12 Osteoarthritis
0.1174 0% 13 Rheumatoid, other arthritis
-0.1281 -13% 14 Cardiac
-0.1583 0% 15 Pulmonary
-0.4685 17% 16 Pain syndrome
0.3625 38% 17 Major multiple trauma without brain or spinal cord injury
-0.1980 17% 18 Major multiple trauma with brain or spinal cord injury
-0.8508 -33% 19 Guillain Barré
0.0672 50% 20 Miscellaneous
0.2142 0% 21 Burns
0.0029 100% 50 Short stay
0.2031 50% 51 Expired


This analysis focuses primarily on two factors intended to provide a high-level summary of the shift of relative values and corresponding dollars.

Relative Weight (RW) Change:  This column represents net gains or losses (-) in the weights assigned to the CMG/tiers combinations for the RIC. A positive number indicates that the combined weight went up by the indicated amount, and that, relative to FY 2016, CMS will reimburse at a relatively higher rate for that RIC.

In the case of the RIC 01 stroke, the relative weight gain of +0.2127 indicates a shift toward the stroke category. A facility who treated a patient in each one of each of 40 CMG/tier combinations in the stroke RIC would see the effect of this as an increase of $3,341.09 in increased revenue over the FY 2016 reimbursement levels.

Net % Up:  This column represents the net percent of relative weights that went up in comparison to FY 2016. A positive number indicates that more CMG/tier relative values were adjusted up versus adjusted down.

In the case of the RIC 06 neurological, 11 of the 16 relative weights were adjusted down while only five were adjusted up. This yields a net up value of -6 (adjusted down), which is 38% of the CMG combinations.

A quick review of the table indicates that the RICs most favorably impacted by the changes are:

  • 01 Stroke
  • 02 Traumatic brain injury
  • 05 Non-traumatic spinal cord injury
  • 10 Amputation, lower extremity
  • 12 Osteoarthritis
  • 17 Major multiple trauma without brain or spinal cord injury

By the same token, the RICs most negatively impacted by the changes are:

  • 6 Neurological
  • 11 Amputation, non-lower extremity
  • 14 Cardiac
  • 19 Guillain Barré




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What vendor participation in IRF-PAI 2017 should look like

For most of this year, we have been commenting on the changes coming to IRFs on October 1. There is no doubt that this is the biggest and most pervasive change since the IRF PPS was introduced in 2001. Given the modern reliance on software for electronic documentation, this means that software vendors have a critical role to play in the successful transition.

Since 2012, Medicare has increased the amount of change in the October 1 updates. In response, Mediware developed an annual program that guides our customers through the change process. This year, even we had to up our game to make sure we were clear on the change management process. What follows is a brief summary of how we’ve responded to ensure our clients’ success.


Mediware’s plan for managing the largest IRF-PAI change in the history of the IRF-PAI began eight months before the changes take effect. Our clients wanted to know early, so they could develop their own implementation plans. We published our plan on March 9 and have been executing according to plan ever since.

Our first step was to build out the required content for the new IRF-PAI data. We created 147 new observations to track the new quality reporting items. Not only did we provide this content to our clients, we installed the configuration into every environment, so customers would have our certified and validated content. It doesn’t matter what version of the software clients have; they all got the information.

The second step was to update our software. We released the first version of this software the second week of August. We want our clients to be able to test their workflows and make sure that everything flows as they expect. Since the IRF PPS Final Rule was just published, we expect to deliver an update in early September to reflect any last-minute changes.

Along the way, we planned nine webinars to facilitate communication with our clients. These webinars ranged from discussions of our plan to explanations of the content and how it will shape workflows to training on the new software. All of our clients were invited, and the attendance was very high.

All along, our goal has been to ensure that our clients could start capturing the new IRF-PAI items by September 1 at the latest. Twenty-five percent of our clients have already told us that they have plans to start capturing the new data in August or sooner, and an additional 40% have already confirmed that they’ll be ready in September. Most of the remainder have said that they are working on their plan for transition.

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