Att E2 - CMS reporting requirements - Inpatient rehab

2. Inpatient Rehabilitation Facilities - CAUTI.PDF

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Att E2 - CMS reporting requirements - Inpatient rehab

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Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Notices

language interpretation or other
reasonable accommodations, should
contact Shawn Woodhead Werth,
Secretary and Clerk, at (202) 694–1040,
at least 72 hours prior to the meeting
date.
PERSON TO CONTACT FOR INFORMATION:

Judith Ingram, Press Officer, Telephone:
(202) 694–1220.

DEPARTMENT OF HEALTH AND
HUMAN SERVICES

Centers for Disease Control and
Prevention

Centers for Medicare & Medicaid
Services

Disease, Disability, and Injury
Prevention and Control Special
Emphasis Panel (SEP): Initial Review
The meeting announced below
concerns the World Trade Center Health
Program Outreach and Education Plan
RFA–OH12–1201, initial review.
In accordance with Section 10(a)(2) of
the Federal Advisory Committee Act
(Pub. L. 92–463), the Centers for Disease
Control and Prevention (CDC)
announces the aforementioned meeting:

Shawn Woodhead Werth,
Secretary and Clerk of the Commission.
[FR Doc. 2012–18686 Filed 7–26–12; 4:15 pm]
BILLING CODE 6715–01–P

FEDERAL RESERVE SYSTEM
Change in Bank Control Notices;
Acquisitions of Shares of a Bank or
Bank Holding Company
The notificants listed below have
applied under the Change in Bank
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§ 225.41 of the Board’s Regulation Y (12
CFR 225.41) to acquire shares of a bank
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notices are set forth in paragraph 7 of
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The notices are available for
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the offices of the Board of Governors.
Interested persons may express their
views in writing to the Reserve Bank
indicated for that notice or to the offices
of the Board of Governors. Comments
must be received not later than August
14, 2012.
A. Federal Reserve Bank of New York
(Ivan Hurwitz, Vice President) 33
Liberty Street, New York, New York
10045–0001:
1. Muhammad Habib, Kusnacht,
Switzerland; Hamza Habib, and
Khadijah Jumani, both of Dubai, United
Arab Emirates; and Fazilat Jumani,
London, England; to retain control of
Maham Beteiligungsgessellschaft AG,
Zurich, Switzerland, and thereby
indirectly retain control of Habib
American Bank, New York, New York.
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DEPARTMENT OF HEALTH AND
HUMAN SERVICES

Time and Date: 8:00 a.m.–5:00 p.m.,
August 28, 2012 (Closed).
Place: Embassy Suites—Old Town
Alexandria, 1900 Diagonal Road, Alexandria,
Virginia 22314, Telephone: (703) 684–5900.
Status: The meeting will be closed to the
public in accordance with provisions set
forth in Section 552b(c)(4) and (6), Title 5
U.S.C., and the Determination of the Director,
Management Analysis and Services Office,
CDC, pursuant to Public Law 92–463.
Matters to be Discussed: The meeting will
include the initial review, discussion, and
evaluation of applications received in
response to ‘‘World Trade Center Health
Program Outreach and Education Plan RFA–
OH12–1201.’’
Contact Person for More Information: Nina
Turner, Ph.D., Scientific Review Officer,
National Institute for Occupational Safety
and Health, CDC, 1095 Willowdale Road,
Mailstop G800, Morgantown, West Virginia
26505–2845, Telephone: (304) 285–5976.
The Director, Management Analysis and
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pertaining to announcements of meetings and
other committee management activities, for
both the Centers for Disease Control and
Prevention and the Agency for Toxic
Substances and Disease Registry.
Dated: July 18, 2012.
Elaine L. Baker,
Director, Management Analysis and Services
Office, Centers for Disease Control and
Prevention.
[FR Doc. 2012–18427 Filed 7–27–12; 8:45 am]
BILLING CODE 4163–18–P

Board of Governors of the Federal Reserve
System, July 25, 2012.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. 2012–18510 Filed 7–27–12; 8:45 am]
BILLING CODE 6210–01–P

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[CMS–1433–N]
RIN 0938–AR21

Medicare Program; Inpatient
Rehabilitation Facility Prospective
Payment System for Federal Fiscal
Year 2013
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Notice.
AGENCY:

This notice updates the
payment rates for inpatient
rehabilitation facilities (IRFs) for
Federal fiscal year (FY) 2013 (for
discharges occurring on or after October
1, 2012 and on or before September 30,
2013) as required under section
1886(j)(3)(C) of the Social Security Act
(the Act). Section 1886(j)(5) of the Act
requires the Secretary to publish in the
Federal Register on or before the August
1 that precedes the start of each fiscal
year, the classification and weighting
factors for the IRF prospective payment
system’s (PPS) case-mix groups and a
description of the methodology and data
used in computing the prospective
payment rates for that fiscal year.
DATES: Effective Date: The updated IRF
prospective payment rates are effective
for IRF discharges occurring on or after
October 1, 2012 and on or before
September 30, 2013 (FY 2013).
FOR FURTHER INFORMATION CONTACT:
Gwendolyn Johnson, (410) 786–6954,
for general information about the notice.
Susanne Seagrave, (410) 786–0044, for
information about the payment policies
and payment rates.
SUPPLEMENTARY INFORMATION:
SUMMARY:

Executive Summary
I. Purpose
This notice updates the payment rates
for inpatient rehabilitation facilities
(IRFs) for Federal fiscal year (FY) 2013
(for discharges occurring on or after
October 1, 2012 and on or before
September 30, 2013) as required under
section 1886(j)(3)(C) of the Social
Security Act (the Act). Section 1886(j)(5)
of the Act requires the Secretary to
publish in the Federal Register on or
before the August 1 that precedes the
start of each fiscal year, the
classification and weighting factors for
the IRF prospective payment system’s
(PPS) case-mix groups and a description
of the methodology and data used in
computing the prospective payment
rates for that fiscal year.

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Summary of Major Provisions
In this notice, we use the methods
described in the FY 2012 IRF PPS final
rule (76 FR 47836) to update the Federal

we explain the self-implementing
changes resulting from the provisions in
section 1886(j)(3)(C) and (D) of the Act.
Summary of Cost and Benefits

Provision description

Total costs

Total benefits

FY 2013 IRF PPS payment rate update ............

The overall economic impact of this notice is
an estimated $140 million in increased payments to IRFs during FY 2013.

The benefits of this notice include a net increase in payments to IRF providers. Overall, no IRFs are estimated to experience a
net decrease in payments as a result of the
updates in this notice.

In the past, the Addenda referred to
throughout the preamble of our annual
IRF PPS proposed and final rules and
notices were included in the printed
Federal Register. However, effective
with the FY 2013 IRF notice, the IRF
Addenda will no longer appear in the
Federal Register. Instead these Addenda
to the annual proposed and final rules
and notices will be available through
the Internet. The IRF PPS Addenda
along with other supporting documents
and tables referenced in this notice are
available through the Internet on the
CMS Web site at http://www.cms.hhs.
gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/.
To assist readers in referencing
sections contained in this document, we
are providing the following Table of
Contents.
Table of Contents

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prospective payment rates for FY 2013
using updated FY 2011 IRF claims and
the most recent available IRF cost report
data. No policy changes are being
proposed in this notice. Furthermore,

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I. Background
A. Historical Overview of the Inpatient
Rehabilitation Facility Prospective
Payment System (IRF PPS)
B. Provisions of the Affordable Care Act
Affecting the IRF PPS in FY 2012 and
Beyond
C. Operational Overview of the Current IRF
PPS
II. Summary of Provisions of the Notice
III. Update to the Case-Mix Group (CMG)
Relative Weights and Average Length of
Stay Values for FY 2013
IV. Updates to the Facility-Level Adjustment
Factors
V. FY 2013 IRF PPS Federal Prospective
Payment Rates
A. Market Basket Increase Factor,
Productivity Adjustment, Other
Adjustment, and Secretary’s
Recommendation for FY 2013
B. Labor-Related Share for FY 2013
C. Area Wage Adjustment
D. Description of the IRF Standard
Conversion Factor and Payment Rates for
FY 2013
E. Example of the Methodology for
Adjusting the Federal Prospective
Payment Rates
VI. Update to Payments for High-Cost
Outliers Under the IRF PPS
A. Update to the Outlier Threshold
Amount for FY 2013
B. Update to the IRF Cost-to-Charge Ratio
Ceilings

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VII. Collection of Information Requirements
VIII. Waiver of Proposed Rulemaking
IX. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impacts
C. Anticipated Effects of the Notice
D. Alternatives Considered
E. Accounting Statement
F. Conclusion

I. Background
A. Historical Overview of the Inpatient
Rehabilitation Facility Prospective
Payment System (IRF PPS)
Section 1886(j) of the Social Security
Act (the Act) provides for the
implementation of a per discharge
prospective payment system (PPS) for
inpatient rehabilitation hospitals and
inpatient rehabilitation units of a
hospital (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. Although 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), we are providing below a
general description of the IRF PPS for
fiscal years (FYs) 2002 through 2012.
Under the IRF PPS from FY 2002
through FY 2005, as described in the FY
2002 IRF PPS final rule (66 FR 41316),
the Federal prospective payment rates
were computed across 100 distinct CaseMix Groups (CMGs). 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 5 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

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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 Federal 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 IRF’s unadjusted
Federal 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 IRF 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

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beginning on or after October 1, 2002
(FY 2003), and payments for all IRFs
now consist of 100 percent of the
Federal IRF PPS rate.
We established a CMS Web site as a
primary information resource for the
IRF PPS. The Web site URL is http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/
InpatientRehabFacPPS/ and may be
accessed to download or view
publications, software, data
specifications, educational materials,
and other information pertinent to the
IRF PPS.
Section 1886(j) of the Act confers
broad statutory authority upon the
Secretary to propose refinements to the
IRF PPS. In the FY 2006 IRF PPS final
rule (70 FR 47880) and in correcting
amendments to the FY 2006 IRF PPS
final rule (70 FR 57166) that we
published on September 30, 2005, we
finalized a number of refinements to the
IRF PPS case-mix classification system
(the CMGs and the corresponding
relative weights) and the case-level and
facility-level adjustments. These
refinements included the adoption of
the Office of Management and Budget’s
(OMB) Core-Based Statistical Area
(CBSA) market definitions,
modifications to the CMGs, tier
comorbidities, and CMG relative
weights, implementation of a new
teaching status adjustment for IRFs,
revision and rebasing of the market
basket index used to update IRF
payments, and updates to the rural, lowincome percentage (LIP), and high-cost
outlier adjustments. Beginning with the
FY 2006 IRF PPS final rule (70 FR 47908
through 47917) until it was rebased and
revised in the FY 2012 IRF PPS final
rule (76 FR 47838), the IRF PPS used the
2002-based market basket as the market
basket index to reflect the operating and
capital cost structures for freestanding
IRFs, freestanding inpatient psychiatric
facilities (IPFs), and long-term care
hospitals (LTCHs) (hereafter referred to
as the rehabilitation, psychiatric, and
long-term care (RPL) market basket).
Any reference to the FY 2006 IRF PPS
final rule in this notice also includes the
provisions effective in the correcting
amendments. For a detailed discussion
of the final key policy changes for FY
2006, please refer to the FY 2006 IRF
PPS final rule (70 FR 47880 and 70 FR
57166).
In the FY 2007 IRF PPS final rule (71
FR 48354), we further refined the IRF
PPS case-mix classification system (the
CMG relative weights) and the caselevel adjustments, to ensure that IRF
PPS payments would continue to reflect
as accurately as possible the costs of
care. For a detailed discussion of the FY

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2007 policy revisions, please refer to the
FY 2007 IRF PPS final rule (71 FR
48354).
In the FY 2008 IRF PPS final rule (72
FR 44284), we updated the Federal
prospective payment rates and the
outlier threshold, revised the IRF wage
index policy, and clarified how we
determine high-cost outlier payments
for transfer cases. For more information
on the policy changes implemented for
FY 2008, please refer to the FY 2008 IRF
PPS final rule (72 FR 44284), in which
we published the final FY 2008 IRF
Federal prospective payment rates.
After publication of the FY 2008 IRF
PPS final rule (72 FR 44284), section
115 of the Medicare, Medicaid, and
SCHIP Extension Act of 2007 (MMSEA,
Pub. L. 110–173, enacted December 29,
2007), amended section 1886(j)(3)(C) of
the Act to apply a zero percent increase
factor for FYs 2008 and 2009, effective
for IRF discharges occurring on or after
April 1, 2008. Section 1886(j)(3)(C) of
the Act requires the Secretary to
develop an increase factor to update the
IRF Federal prospective payment rates
for each FY. Based on the legislative
change to the increase factor, we revised
the FY 2008 Federal prospective
payment rates for IRF discharges
occurring on or after April 1, 2008.
Thus, the final FY 2008 IRF Federal
prospective payment rates that were
published in the FY 2008 IRF PPS final
rule (72 FR 44284) were effective for
discharges occurring on or after October
1, 2007 and on or before March 31,
2008; and the revised FY 2008 IRF
Federal prospective payment rates were
effective for discharges occurring on or
after April 1, 2008 and on or before
September 30, 2008. The revised FY
2008 Federal prospective payment rates
are available on the CMS Web site at
http://www.cms.hhs.gov/Medicare/
Medicare-Fee-for-Service-Payment/
InpatientRehabFacPPS/Data-Files.html.
In the FY 2009 IRF PPS final rule (73
FR 46370), we updated the CMG relative
weights, the average length of stay
values, and the outlier threshold;
clarified IRF wage index policies
regarding the treatment of ‘‘New
England deemed’’ counties and multicampus hospitals; and revised the
regulation text in response to section
115 of the MMSEA to set the IRF
compliance percentage at 60 percent
(‘‘the 60 percent rule’’) and continue the
practice of including comorbidities in
the calculation of compliance
percentages. We also applied a zero
percent market basket increase factor for
FY 2009 in accordance with section 115
of the MMSEA. For more information on
the policy changes implemented for FY
2009, please refer to the FY 2009 IRF

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PPS final rule (73 FR 46370), in which
we published the final FY 2009 IRF
Federal prospective payment rates.
In the FY 2010 IRF PPS final rule (74
FR 39762) and in correcting
amendments to the FY 2010 IRF PPS
final rule (74 FR 50712) that we
published on October 1, 2009, we
updated the Federal prospective
payment rates, the CMG relative
weights, the average length of stay
values, the rural, LIP, and teaching
status adjustment factors, and the
outlier threshold; implemented new IRF
coverage requirements for determining
whether an IRF claim is reasonable and
necessary; and revised the regulation
text to require IRFs to submit patient
assessments on Medicare Advantage
(Medicare Part C) patients for use in the
60 percent rule calculations. Any
reference to the FY 2010 IRF PPS final
rule in this notice also includes the
provisions effective in the correcting
amendments. For more information on
the policy changes implemented for FY
2010, please refer to the FY 2010 IRF
PPS final rule (74 FR 39762 and 74 FR
50712), in which we published the final
FY 2010 IRF Federal prospective
payment rates.
After publication of the FY 2010 IRF
PPS final rule (74 FR 39762), section
3401(d) of the Patient Protection and
Affordable Care Act (Pub. L. 111–148,
enacted on March 23, 2010) (Affordable
Care Act), as amended by section 10319
of the same act and by section 1105 of
the Health Care and Education
Reconciliation Act of 2010 (Pub. L. 111–
152, enacted on March 30, 2010)
(collectively, hereafter referred to as
‘‘The Affordable Care Act’’), amended
section 1886(j)(3)(C) of the Act and
added section 1886(j)(3)(D) of the Act.
Section 1886(j)(3)(C)(ii)(I) of the Act
requires the Secretary to estimate a
multi-factor productivity adjustment to
the market basket increase factor, and to
apply other adjustments as defined by
the Act. The productivity adjustment
applies to FYs from 2012 forward. The
other adjustments apply to FYs 2010–
2019.
Sections 1886(j)(3)(C)(ii)(II) and
1886(j)(3)(D)(i) of the Act defined the
adjustments that were to be applied to
the market basket increase factors in
FYs 2010 and 2011. Under these
provisions, the Secretary was required
to reduce the market basket increase
factor in FY 2010 by a 0.25 percentage
point adjustment. Notwithstanding this
provision, in accordance with section
3401(p) of the Affordable Care Act, the
adjusted FY 2010 rate was only to be
applied to discharges occurring on or
after April 1, 2010. Based on the selfimplementing legislative changes to

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section 1886(j)(3) of the Act, we
adjusted the FY 2010 Federal
prospective payment rates as required,
and applied these rates to IRF
discharges occurring on or after April 1,
2010 and on or before September 30,
2010. Thus, the final FY 2010 IRF
Federal prospective payment rates that
were published in the FY 2010 IRF PPS
final rule (74 FR 39762) were used for
discharges occurring on or after October
1, 2009 and on or before March 31,
2010; and the adjusted FY 2010 IRF
Federal prospective payment rates
applied to discharges occurring on or
after April 1, 2010 and on or before
September 30, 2010. The adjusted FY
2010 Federal prospective payment rates
are available on the CMS Web site at
http://www.cms.hhs.gov/Medicare/
Medicare-Fee-for-Service-Payment/
InpatientRehabFacPPS/Data-Files.html.
In addition, sections 1886(j)(3)(C) and
(D) of the Act also affected the FY 2010
IRF outlier threshold amount because
they required an adjustment to the FY
2010 RPL market basket increase factor,
which changed the standard payment
conversion factor for FY 2010.
Specifically, the original FY 2010 IRF
outlier threshold amount was
determined based on the original
estimated FY 2010 RPL market basket
increase factor of 2.5 percent and the
standard payment conversion factor of
$13,661. However, as adjusted, the IRF
prospective payments are based on the
adjusted RPL market basket increase
factor of 2.25 percent and the revised
standard payment conversion factor of
$13,627. In order to maintain estimated
outlier payments for FY 2010 equal to
the established standard of 3 percent of
total estimated IRF PPS payments for FY
2010, we revised the IRF outlier
threshold amount for FY 2010 for
discharges occurring on or after April 1,
2010. The revised IRF outlier threshold
amount for FY 2010 was $10,721.
Sections 1886(j)(3)(ii)(II) and
1886(j)(3)(D)(i) also required the
Secretary to reduce the market basket
increase factor in FY 2011 by a 0.25
percentage point adjustment. The FY
2011 IRF PPS notice (75 FR 42836) and
the correcting amendments to the FY
2011 IRF PPS notice (75 FR 70013,
November 16, 2010) described the
required adjustments to the FY 2011
and FY 2010 IRF PPS Federal
prospective payment rates and outlier
threshold amount for IRF discharges
occurring on or after April 1, 2010 and
on or before September 30, 2011. It also
updated the FY 2011 Federal
prospective payment rates, the CMG
relative weights, and the average length
of stay values. Any reference to the FY
2011 IRF PPS notice in this proposed

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rule also includes the provisions
effective in the correcting amendments.
For more information on the FY 2010
and FY 2011 adjustments or the updates
for FY 2011, please refer to the FY 2011
IRF PPS notice (75 FR 42836 and 75 FR
70013).
In the FY 2012 IRF PPS final rule (76
FR 47836), we updated the IRF Federal
prospective payment rates, rebased and
revised the RPL market basket, and
established a new quality reporting
program for IRFs in accordance with
section 1886(j)(7) of the Act. We also
revised regulations text for the purpose
of updating and providing greater
clarity. For more information on the
policy changes implemented for FY
2012, please refer to the FY 2012 IRF
PPS final rule (76 FR 47836), in which
we published the final FY 2012 IRF
Federal prospective payment rates.
B. Provisions of the Affordable Care Act
Affecting the IRF PPS in FY 2012 and
Beyond
The Affordable Care Act included
several provisions that affect the IRF
PPS in FYs 2012 and beyond. Section
3401(d) of the Affordable Care Act also
added section 1886(j)(3)(C)(ii)(I) of the
Act (providing for a ‘‘productivity
adjustment’’ for fiscal year 2012 and
each subsequent fiscal year). The
productivity adjustment and the 0.1
percentage point reduction are both
discussed in section V.A. of this notice.
Section 1886(j)(3)(C)(ii)(II) of the Act
notes that the application of these
adjustments to the market basket update
may result in an update that is less than
0.0 for a fiscal year and in payment rates
for a fiscal year being less than payment
rates for the preceding fiscal year.
Section 3004(b) of the Affordable Care
Act also addressed the IRF PPS
program. It reassigned the previouslydesignated section 1886(j)(7) of the Act
to section 1886(j)(8) and inserted a new
section 1886(j)(7), which contains new
requirements for the Secretary to
establish a quality reporting program for
IRFs. Under that program, data must be
submitted in a form and manner, and at
a time specified by the Secretary.
Beginning in FY 2014, section
1886(j)(7)(A)(i) will require application
of a 2 percentage point reduction of the
applicable market basket increase factor
for IRFs that fail to comply with the
quality data submission requirements.
Application of the 2 percentage point
reduction may result in an update that
is less than 0.0 for a fiscal year and in
payment rates for a fiscal year being less
than such payment rates for the
preceding fiscal year. Reporting-based
reductions to the market basket increase

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factor will not be cumulative; they will
only apply for the FY involved.
Under section 1886(j)(7)(D)(i) and (ii)
of the Act, the Secretary is generally
required to select quality measures for
the IRF quality reporting program from
those that have been endorsed by the
consensus-based entity which holds a
performance measurement contract
under section 1890(a) of the Act. This
contract is currently held by the
National Quality Forum (NQF). So long
as due consideration is given to
measures that have been endorsed or
adopted by a consensus-based
organization, section 1886(j)(7)(D)(ii) of
the Act authorizes the Secretary to
select non-endorsed measures for
specified areas or medical topics when
there are no feasible or practical
endorsed measure(s). Under section
1886(j)(7)(D)(iii) of the Act, the
Secretary is required to publish the
measures that will be used in FY 2014
no later than October 1, 2012.
Section 1886(j)(7)(E) of the Act
requires the Secretary to establish
procedures for making the IRF PPS
quality reporting data available to the
public. In so doing, the Secretary must
ensure that IRFs have the opportunity to
review any such data prior to its release
to the public. Future rulemaking will
address these public reporting
obligations.
C. Operational Overview of the Current
IRF PPS
As described in the FY 2002 IRF PPS
final rule, upon the admission and
discharge of a Medicare Part A fee-forservice patient, the IRF is required to
complete the appropriate sections of a
patient assessment instrument (PAI),
designated as the Inpatient
Rehabilitation Facility-Patient
Assessment Instrument (IRF–PAI). In
addition, beginning with IRF discharges
occurring on or after October 1, 2009,
the IRF is also required to complete the
appropriate sections of the IRF–PAI
upon the admission and discharge of
each Medicare Part C (Medicare
Advantage) patient, as described in the
FY 2010 IRF PPS final rule. All required
data must be electronically encoded into
the IRF–PAI software product.
Generally, the software product
includes patient classification
programming called the GROUPER
software. The GROUPER software uses
specific IRF–PAI data elements to
classify (or group) patients into distinct
CMGs and account for the existence of
any relevant comorbidities.
The GROUPER software produces a
five-digit CMG number. The first digit is
an alpha-character that indicates the
comorbidity tier. The last four digits

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represent the distinct CMG number.
Free downloads of the Inpatient
Rehabilitation Validation and Entry
(IRVEN) software product, including the
GROUPER software, are available on the
CMS Web site at http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/
InpatientRehabFacPPS/Software.html.
Once a patient is discharged, the IRF
submits a Medicare claim as a Health
Insurance Portability and
Accountability Act of 1996 (Pub. L.
104–191, enacted August 21,
1996)(HIPAA), compliant electronic
claim or, if the Administrative
Simplification Compliance Act of 2002
(Pub. L. 107–105, enacted December 27,
2002)(ASCA) permits, a paper claim (a
UB–04 or a CMS–1450 as appropriate)
using the five-digit CMG number and
sends it to the appropriate Medicare
fiscal intermediary (FI) or Medicare
Administrative Contractor (MAC).
Claims submitted to Medicare must
comply with both ASCA and HIPAA.
Section 3 of the ASCA amends section
1862(a) of the Act by adding paragraph
(22) which requires the Medicare
program, subject to section 1862(h) of
the Act, to deny payment under Part A
or Part B for any expenses for items or
services ‘‘for which a claim is submitted
other than in an electronic form
specified by the Secretary.’’ Section
1862(h) of the Act, in turn, provides that
the Secretary shall waive such denial in
situations in which there is no method
available for the submission of claims in
an electronic form or the entity
submitting the claim is a small provider.
In addition, the Secretary also has the
authority to waive such denial ‘‘in such
unusual cases as the Secretary finds
appropriate.’’ For more information we
refer the reader to the final rule,
‘‘Medicare Program; Electronic
Submission of Medicare Claims’’ (70 FR
71008, November 25, 2005). CMS
instructions for the limited number of
Medicare claims submitted on paper are
available at: http://www.cms.gov/
Regulations-and-Guidance/Guidance/
Manuals/downloads//clm104c25.pdf.)
Section 3 of the ASCA operates in the
context of the administrative
simplification provisions of HIPAA,
which include, among others, the
requirements for transaction standards
and code sets codified in 45 CFR, parts
160 and 162, subparts A and I through
R (generally known as the Transactions
Rule). The Transactions Rule requires
covered entities, including covered
healthcare providers, to conduct
covered electronic transactions
according to the applicable transaction
standards. (See the program claim
memoranda issued and published by

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17:34 Jul 27, 2012

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CMS at: http://www.cms.gov/Medicare/
Billing/ElectronicBillingEDITrans/
index.html?redirect=/
ElectronicBillingEDITrans/ and listed in
the addenda to the Medicare
Intermediary Manual, Part 3, section
3600).
The Medicare FI or MAC processes
the claim through its software system.
This software system includes pricing
programming called the ‘‘PRICER’’
software. The PRICER software uses the
CMG number, along with other specific
claim data elements and providerspecific data, to adjust the IRF’s
prospective payment for interrupted
stays, transfers, short stays, and deaths,
and then applies the applicable
adjustments to account for the IRF’s
wage index, percentage of low-income
patients, rural location, and outlier
payments. For discharges occurring on
or after October 1, 2005, the IRF PPS
payment also reflects the teaching status
adjustment that became effective as of
FY 2006, as discussed in the FY 2006
IRF PPS final rule (70 FR 47880).
II. Summary of Provisions of the Notice
In this notice, we use the methods
described in the FY 2012 IRF PPS final
rule (76 FR 47836) to update the Federal
prospective payment rates for FY 2013
using updated FY 2011 IRF claims and
the most recent available IRF cost report
data. No policy changes are being
proposed in this notice. Furthermore,
we explain the self-implementing
changes resulting from the provisions in
section 1886(j)(3)(C) and (D) of the Act,
as described above and in section V.A.
of this notice.
In summary, this notice will:
• Update the FY 2013 IRF PPS
relative weights and average length of
stay values using the most current and
complete Medicare claims and cost
report data in a budget neutral manner,
as discussed in section III of this notice.
• Update the FY 2013 IRF PPS
payments rates by a market basket
increase factor, based upon the most
current data available, with a 0.1
percentage point reduction as required
by sections 1886(j)(3)(C)(ii)(II) and
1886(j)(3)(D)(ii) of the Act and a 0.8
percent productivity adjustment
required by section 1886(j)(3)(C)(ii)(I) of
the Act, as described in section V.A. of
this notice.
• Discuss the Secretary’s
Recommendation for updating IRF PPS
payments for FY 2013, in accordance
with the statutory requirements, as
described in section V.A. of this notice.
• Update the FY 2013 IRF PPS
payment rates by the FY 2013 wage
index and the labor-related share in a

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budget neutral manner, as discussed in
sections V.B and V.C of this notice.
• Describe the calculation of the IRF
Standard Payment Conversion Factor for
FY 2013, as discussed in section V.D of
this notice.
• Update the outlier threshold
amount for FY 2013, as discussed in
section VI.A. of this notice.
• Update the cost-to-charge ratio
(CCR) ceilings and urban/rural average
CCRs for FY 2013, as discussed in
section VI.B. of this notice.
This notice does not contain any
revisions to existing regulation text.
III. Update to the Case-Mix Group
(CMG) Relative Weights and Average
Length of Stay Values for FY 2013
As specified in 42 CFR 412.620(b)(1),
we calculate a relative weight for each
CMG that is proportional to the
resources needed by an average
inpatient rehabilitation case in that
CMG. For example, cases in a CMG with
a relative weight of 2, on average, will
cost twice as much as cases in a CMG
with a relative weight of 1. Relative
weights account for the variance in cost
per discharge due to the variance in
resource utilization among the payment
groups, and their use helps to ensure
that IRF PPS payments support
beneficiary access to care as well as
provider efficiency.
As required by statute, we always use
the most recent available data to update
the CMG relative weights and average
lengths of stay. For FY 2013, we used
FY 2011 IRF claims and the most recent
available IRF cost report data. These
data are the most current and most
complete data available at this time.
Currently, only a small portion of the
FY 2011 IRF cost report data are
available for analysis, but the majority
of the FY 2011 IRF claims data are
available for analysis.
We will apply these data using the
methodologies that we have used to
update the CMG relative weights and
average length of stay values in the FY
2010 IRF PPS final rule (74 FR 39762),
the FY 2011 notice (75 FR 42836), and
the FY 2012 final rule (76 FR 47836). In
calculating the CMG relative weights,
we use a hospital-specific relative value
method to estimate operating (routine
and ancillary services) and capital costs
of IRFs. The process used to calculate
the CMG relative weights for this notice
is as follows:
Step 1. We calculate the CMG relative
weights by estimating the effects that
comorbidities have on costs.
Step 2. We adjust the cost of each
Medicare discharge (case) to reflect the
effects found in the first step.

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Step 3. We use the adjusted costs from
the second step to calculate CMG
relative weights, using the hospitalspecific relative value method.
Step 4. We normalize the FY 2013
CMG relative weights to the same
average CMG relative weight from the
CMG relative weights implemented in
the FY 2012 IRF PPS final rule (76 FR
47836).
Consistent with the methodology that
we have used to update the IRF
classification system in each instance in
the past, we are updating the CMG
relative weights for FY 2013 in such a
way that total estimated aggregate
payments to IRFs for FY 2013 are the
same with or without the changes (that
is, in a budget neutral manner) by

applying a budget neutrality factor to
the standard payment amount. To
calculate the appropriate budget
neutrality factor for use in updating the
FY 2013 CMG relative weights, we use
the following steps:
Step 1. Calculate the estimated total
amount of IRF PPS payments for FY
2013 (with no changes to the CMG
relative weights).
Step 2. Calculate the estimated total
amount of IRF PPS payments for FY
2013 by applying the changes to the
CMG relative weights (as discussed
above).
Step 3. Divide the amount calculated
in step 1 by the amount calculated in
step 2 to determine the budget
neutrality factor (1.0000) that maintains
the same total estimated aggregate

payments in FY 2013 with and without
the updates to the CMG relative weights.
Step 4. Apply the budget neutrality
factor (1.0000) to the FY 2012 IRF PPS
standard payment amount after the
application of the budget-neutral wage
adjustment factor.
In section V.D of this notice, we
discuss the use of the existing
methodology to calculate the standard
payment conversion factor for FY 2013.
The CMG relative weights and average
length of stay values for FY 2013 are
presented in Table 1. The average length
of stay for each CMG is used to
determine when an IRF discharge meets
the definition of a short-stay transfer,
which results in a per diem case level
adjustment.

TABLE 1—RELATIVE WEIGHTS AND AVERAGE LENGTH OF STAY VALUES FOR CASE-MIX GROUPS
CMG
0101 ...........
0102 ...........
0103 ...........
0104
0105
0106
0107
0108
0109

...........
...........
...........
...........
...........
...........

0110 ...........
0201 ...........
0202 ...........
0203 ...........
0204 ...........
0205 ...........
0206 ...........
0207 ...........
0301 ...........
0302 ...........
0303 ...........
0304 ...........
0401 ...........
0402 ...........

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0403 ...........
0404 ...........
0405 ...........
0501 ...........
0502 ...........
0503 ...........

VerDate Mar<15>2010

Relative weight

CMG Description (M = motor,
C = cognitive, A = age)

Tier 1

Stroke M>51.05 ........................................
Stroke M>44.45 and M<51.05 and
C>18.5.
Stroke M>44.45 and M<51.05 and
C<18.5.
Stroke M>38.85 and M<44.45 .................
Stroke M>34.25 and M<38.85 .................
Stroke M>30.05 and M<34.25 .................
Stroke M>26.15 and M<30.05 .................
Stroke M<26.15 and A>84.5 ....................
Stroke M>22.35 and M<26.15 and
A<84.5.
Stroke M<22.35 and A<84.5 ....................
Traumatic brain injury M>53.35 and
C>23.5.
Traumatic brain injury M>44.25 and
M<53.35 and C>23.5.
Traumatic brain injury M>44.25 and
C<23.5.
Traumatic brain injury M>40.65 and
M<44.25.
Traumatic brain injury M>28.75 and
M<40.65.
Traumatic brain injury M>22.05 and
M<28.75.
Traumatic brain injury M<22.05 ...............
Non-traumatic brain injury M>41.05 ........
Non-traumatic brain injury M>35.05 and
M<41.05.
Non-traumatic brain injury M>26.15 and
M<35.05.
Non-traumatic brain injury M<26.15 ........
Traumatic spinal cord injury M>48.45 .....
Traumatic spinal cord injury M>30.35
and M<48.45.
Traumatic spinal cord injury M>16.05
and M<30.35.
Traumatic spinal cord injury M<16.05
and A>63.5.
Traumatic spinal cord injury M<16.05
and A<63.5.
Non-traumatic spinal cord injury M>51.35
Non-traumatic spinal cord injury M>40.15
and M<51.35.
Non-traumatic spinal cord injury M>31.25
and M<40.15.

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Tier 2

Tier 3

Average length of stay
None

Tier 1

Tier 2

Tier 3

None

0.8027
0.9980

0.7192
0.8942

0.6541
0.8132

0.6254
0.7776

10
12

10
10

9
10

8
10

1.1622

1.0414

0.9471

0.9056

1.2323
1.4378
1.6373
1.8381
2.2975
2.1226

1.1041
1.2883
1.4670
1.6469
2.0585
1.9018

1.0041
1.1716
1.3342
1.4978
1.8721
1.7296

0.9602
1.1203
1.2758
1.4322
1.7901
1.6539

13
15
17
18
23
20

12
16
18
19
23
22

12
14
16
17
22
20

12
14
16
18
21
20

2.7303
0.8313

2.4463
0.6948

2.2248
0.6199

2.1274
0.5869

30
10

29
10

25
8

1.0169

0.8499

0.7583

0.7179

1.1804

0.9865

0.8803

0.8334

1.2938

1.0813

0.9648

0.9134

1.5550

1.2996

1.1596

1.0978

1.9383

1.6200

1.4455

1.3684

2.5535
1.1218
1.4026

2.1341
0.9563
1.1957

1.9042
0.8462
1.0579

1.8027
0.7852
0.9816

33
11
14

25
12
14

22
11
13

21
10
12

1.6605

1.4155

1.2525

1.1621

2.2065
1.0393
1.4824

1.8810
0.8778
1.2521

1.6643
0.7864
1.1218

1.5443
0.7109
1.0141

25
13
17

22
12
15

19
11
14

18
10
13

2.3870

2.0161

1.8063

1.6329

4.3665

3.6881

3.3043

2.9870

3.3893

2.8627

2.5648

2.3186

0.8436
1.1283

0.6828
0.9132

0.6306
0.8434

0.5624
0.7521

9
11

8
11

8
10

1.4284

1.1561

1.0677

0.9522

Fmt 4703

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TABLE 1—RELATIVE WEIGHTS AND AVERAGE LENGTH OF STAY VALUES FOR CASE-MIX GROUPS—Continued
CMG
0504 ...........
0505 ...........
0506
0601
0602
0603
0604
0701
0702

...........
...........
...........
...........
...........
...........
...........

0703 ...........
0704 ...........
0801 ...........
0802 ...........
0803 ...........
0804 ...........
0805 ...........
0806 ...........
0901
0902
0903
0904
1001
1002

...........
...........
...........
...........
...........
...........

1003 ...........
1101 ...........
1102 ...........
1201
1202
1203
1301
1302

...........
...........
...........
...........
...........

1303
1401
1402
1403
1404
1501
1502
1503
1504
1601
1602
1603
1701

...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........
...........

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1702 ...........
1703 ...........
1704 ...........
1801 ...........

VerDate Mar<15>2010

CMG Description (M = motor, C = cognitive, A = age)

Relative weight
Tier 1

Non-traumatic spinal cord injury M>29.25
and M<31.25.
Non-traumatic spinal cord injury M>23.75
and M<29.25.
Non-traumatic spinal cord injury M<23.75
Neurological M>47.75 ..............................
Neurological M>37.35 and M<47.75 ........
Neurological M>25.85 and M<37.35 ........
Neurological M<25.85 ..............................
Fracture of lower extremity M>42.15 .......
Fracture of lower extremity M>34.15 and
M<42.15.
Fracture of lower extremity M>28.15 and
M<34.15.
Fracture of lower extremity M<28.15 .......
Replacement of lower extremity joint
M>49.55.
Replacement of lower extremity joint
M>37.05 and M<49.55.
Replacement of lower extremity joint
M>28.65 and M<37.05 and A>83.5.
Replacement of lower extremity joint
M>28.65 and M<37.05 and A<83.5.
Replacement of lower extremity joint
M>22.05 and M<28.65.
Replacement of lower extremity joint
M<22.05.
Other orthopedic M>44.75 .......................
Other orthopedic M>34.35 and M<44.75
Other orthopedic M>24.15 and M<34.35
Other orthopedic M<24.15 .......................
Amputation, lower extremity M>47.65 .....
Amputation, lower extremity M>36.25
and M<47.65.
Amputation, lower extremity M<36.25 .....
Amputation,
non-lower
extremity
M>36.35.
Amputation,
non-lower
extremity
M<36.35.
Osteoarthritis M>37.65 .............................
Osteoarthritis M>30.75 and M<37.65 ......
Osteoarthritis M<30.75 .............................
Rheumatoid, other arthritis M>36.35 .......
Rheumatoid, other arthritis M>26.15 and
M<36.35.
Rheumatoid, other arthritis M<26.15 .......
Cardiac M>48.85 ......................................
Cardiac M>38.55 and M<48.85 ...............
Cardiac M>31.15 and M<38.55 ...............
Cardiac M<31.15 ......................................
Pulmonary M>49.25 .................................
Pulmonary M>39.05 and M<49.25 ..........
Pulmonary M>29.15 and M<39.05 ..........
Pulmonary M<29.15 .................................
Pain syndrome M>37.15 ..........................
Pain syndrome M>26.75 and M<37.15 ...
Pain syndrome M<26.75 ..........................
Major multiple trauma without brain or
spinal cord injury M>39.25.
Major multiple trauma without brain or
spinal cord injury M>31.05 and
M<39.25.
Major multiple trauma without brain or
spinal cord injury M>25.55 and
M<31.05.
Major multiple trauma without brain or
spinal cord injury M<25.55.
Major multiple trauma with brain or spinal
cord injury M>40.85.

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Tier 2

Tier 3

Average length of stay
None

Tier 1

Tier 2

Tier 3

None

1.7220

1.3937

1.2872

1.1479

1.9656

1.5909

1.4693

1.3103

2.7707
0.9703
1.2695
1.6243
2.1537
0.9343
1.2477

2.2425
0.7915
1.0356
1.3250
1.7568
0.7841
1.0471

2.0711
0.7304
0.9557
1.2228
1.6213
0.7481
0.9990

1.8470
0.6647
0.8697
1.1128
1.4755
0.6772
0.9044

30
10
13
16
22
11
13

26
10
12
15
20
10
13

24
9
11
14
18
10
12

22
9
11
14
17
9
12

1.4984

1.2575

1.1996

1.0860

1.8994
0.7445

1.5940
0.6142

1.5207
0.5608

1.3767
0.5156

19
8

18
8

17
7

0.9839

0.8117

0.7412

0.6814

1.3381

1.1039

1.0080

0.9266

1.1889

0.9807

0.8955

0.8233

1.4728

1.2150

1.1094

1.0199

1.7966

1.4821

1.3533

1.2441

0.9086
1.1916
1.5421
1.9596
1.0168
1.2813

0.7488
0.9820
1.2709
1.6149
0.9097
1.1464

0.6954
0.9120
1.1803
1.4998
0.8224
1.0364

0.6289
0.8248
1.0674
1.3564
0.7491
0.9440

11
12
16
20
11
14

10
12
15
19
11
14

9
11
14
17
10
13

8
11
13
16
10
12

1.8523
1.1553

1.6572
1.1084

1.4983
1.1084

1.3647
0.9005

18
13

19
18

17
12

16
11

1.6083

1.5429

1.2536

0.9031
1.0652
1.3740
1.2084
1.5720

0.9031
1.0652
1.3740
1.0270
1.3360

0.8675
1.0232
1.3199
0.9058
1.1783

0.8070
0.9518
1.2278
0.8066
1.0492

9
10
12
13
16

12
13
17
12
15

11
12
15
11
14

10
12
15
10
13

2.0006
0.8930
1.1528
1.3890
1.7811
0.9698
1.2118
1.4875
1.8834
1.0499
1.3826
1.7346
1.0736

1.7003
0.7627
0.9847
1.1864
1.5213
0.8491
1.0610
1.3025
1.6491
0.9155
1.2056
1.5124
0.9323

1.4996
0.6877
0.8877
1.0696
1.3716
0.7773
0.9712
1.1922
1.5095
0.8350
1.0997
1.3796
0.8505

1.3354
0.6266
0.8089
0.9747
1.2498
0.7364
0.9201
1.1295
1.4301
0.7581
0.9984
1.2525
0.7574

19
9
12
14
19
10
12
16
19
10
15
14
11

20
9
12
14
18
10
12
14
18
11
14
18
12

17
9
11
13
16
9
11
13
16
10
13
16
11

16
8
10
12
15
9
11
13
16
10
12
15
10

1.4056

1.2206

1.1136

0.9916

1.6353

1.4201

1.2956

1.1537

2.0887

1.8138

1.6547

1.4735

1.2365

0.9356

0.8675

0.7592

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TABLE 1—RELATIVE WEIGHTS AND AVERAGE LENGTH OF STAY VALUES FOR CASE-MIX GROUPS—Continued
CMG
1802 ...........
1803 ...........
1901
1902
1903
2001
2002
2003
2004
2101
5001

...........
...........
...........
...........
...........
...........
...........
...........
...........

5101 ...........
5102 ...........
5103 ...........
5104 ...........

CMG Description (M = motor, C = cognitive, A = age)
Major multiple trauma with brain or spinal
cord injury M>23.05 and M<40.85.
Major multiple trauma with brain or spinal
cord injury M<23.05.
Guillain Barre M>35.95 ............................
Guillain Barre M>18.05 and M<35.95 ......
Guillain Barre M<18.05 ............................
Miscellaneous M>49.15 ...........................
Miscellaneous M>38.75 and M<49.15 .....
Miscellaneous M>27.85 and M<38.75 .....
Miscellaneous M<27.85 ...........................
Burns M>0 ................................................
Short-stay cases, length of stay is 3 days
or fewer.
Expired, orthopedic, length of stay is 13
days or fewer.
Expired, orthopedic, length of stay is 14
days or more.
Expired, not orthopedic, length of stay is
15 days or fewer.
Expired, not orthopedic, length of stay is
16 days or more.

Generally, updates to the CMG
relative weights result in some increases
and some decreases to the CMG relative
weight values. Table 2 shows how the
application of the revisions for FY 2013
will affect particular CMG relative

Relative weight
Tier 1

Tier 2

Tier 3

Average length of stay
None

Tier 1

Tier 2

Tier 3

None

1.8710

1.4158

1.3127

1.1488

3.3167

2.5096

2.3269

2.0364

1.0467
1.9189
3.3119
0.8744
1.1796
1.4817
1.9594
2.1947
................

0.9509
1.7433
3.0088
0.7276
0.9815
1.2329
1.6304
1.9009
................

0.9185
1.6839
2.9062
0.6680
0.9012
1.1320
1.4970
1.9009
................

0.8749
1.6041
2.7685
0.6095
0.8222
1.0328
1.3659
1.6414
0.1494

13
23
41
9
12
15
21
24
............

12
20
33
9
12
14
19
22
............

12
18
33
9
11
13
17
17
............

11
19
34
8
10
13
16
17
3

................

0.5866

............

................

1.5325

............

................

0.7091

............

................

1.9053

............

weight values, which affect the overall
distribution of payments within CMGs
and tiers. Note that, because we are
implementing the CMG relative weight
revisions in a budget neutral manner (as
described above), total estimated

aggregate payments to IRFs for FY 2013
will not be affected as a result of the
CMG relative weight revisions.
However, the revisions will affect the
distribution of payments within CMGs
and tiers.

TABLE 2—DISTRIBUTIONAL EFFECTS OF THE CHANGES TO THE CMG RELATIVE WEIGHTS
[FY 2012 values compared with FY 2013 values]
Percentage change
Increased by 15% or more ......................................................................................................................................
Increased by between 5% and 15% .......................................................................................................................
Changed by less than 5% .......................................................................................................................................
Decreased by between 5% and 15% ......................................................................................................................
Decreased by 15% or more ....................................................................................................................................

Number of
cases affected

Percentage of
cases affected

1,894
3,932
359,907
11,307
0

0.5
1.0
95.5
3.0
0.0

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Note: Percentages may not sum to 100% due to rounding.

As Table 2 shows, over 95 percent of
all IRF cases are in CMGs and tiers that
will experience less than a 5 percent
change (either increase or decrease) in
the CMG relative weight value as a
result of the revisions for FY 2013. The
largest increase in the CMG relative
weight values affecting the most cases is
a 2.8 percent increase in the CMG
relative weight value for CMG 0802—
Replacement of Lower Extremity Joint,
with a motor score between 37.05 and
49.55—in the ‘‘no comorbidity’’ tier. In
the FY 2011 data, 9,851 IRF discharges
were classified into this CMG and tier.
We believe that the higher costs
reported by IRFs for this CMG and tier
in FY 2011, compared with the costs
reported in FY 2010, may continue to
reflect the IRF trend away from

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admitting lower-severity joint
replacement cases in favor of higherseverity joint replacement cases. We
believe that this may be evidence of a
response, at least in part, to Medicare’s
‘‘60 percent’’ rule, and the increased
focus on the medical review of IRF
cases. These policies likely increase the
complexity of patients being admitted to
IRFs, especially among the lowerextremity joint replacement cases with
no comorbidities, which often do not
meet the 60 percent rule criteria and
have been the focus of a lot of the
medical review activities.
The largest decrease in a CMG relative
weight value affecting the most cases is
a 2.3 percent decrease in the CMG
relative weight for CMG D2004—
Miscellaneous, with motor score less

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than 27.85. In the FY 2011 IRF claims
data, this change affects 6,967 cases.
The changes in the average length of
stay values for FY 2013, compared with
the FY 2012 average length of stay
values, are small and do not show any
particular trends in IRF length of stay
patterns.
IV. Updates to the Facility-Level
Adjustment Factors
Section 1886(j)(3)(A)(v) of the Act
confers broad authority upon the
Secretary to adjust the per unit payment
rate ‘‘by such * * * factors as the
Secretary determines are necessary to
properly reflect variations in necessary
costs of treatment among rehabilitation
facilities.’’ For example, we adjust the
Federal prospective payment amount

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associated with a CMG to account for
facility-level characteristics such as an
IRF’s LIP percentage, teaching status,
and location in a rural area, if
applicable, as described in § 412.624(e).
In the FY 2010 IRF PPS final rule (74
FR 39762), we updated the adjustment
factors for calculating the rural, LIP, and
teaching status adjustments based on
the most recent three consecutive years
worth of IRF claims data (at that time,
FY 2006, FY 2007, and FY 2008) and the
most recent available corresponding IRF
cost report data. As discussed in the FY
2010 IRF PPS proposed rule (74 FR
21060 through 21061), we observed
relatively large year-to-year fluctuations
in the underlying data used to compute
the adjustment factors, especially the
teaching status adjustment factor.
Therefore, we implemented a 3-year
moving average approach to updating
the facility-level adjustment factors in
the FY 2010 IRF PPS final rule (74 FR
39762) to provide greater stability and
predictability of Medicare payments for
IRFs.
Each year, we review the major
components of the IRF PPS to maintain
and enhance the accuracy of the
payment system. For FY 2010, we
implemented a change to our
methodology that was designed to
decrease the IRF PPS volatility by using
a 3-year moving average to calculate the
facility-level adjustment factors. For FY
2011, we issued a notice to update the
payment rates, which did not include
any policy changes or changes to the
IRF facility-level adjustments. However,
in the FY 2012 IRF PPS proposed rule
(76 FR 24214 at 24225 through 24226),
we analyzed the use of a weighting
methodology, which assigns greater
weight to some facilities than to others,
in the regression analysis used to
estimate the facility-level adjustment
factors. As we found that this weighting
methodology inappropriately
exaggerated the cost differences among
different types of IRF facilities, we
proposed to remove the weighting factor
from our analysis and update the IRF
facility-level adjustment factors for FY
2012 using an un-weighted regression
analysis. However, after carefully
considering all of the comments that we
received on the proposed FY 2012
updates to the facility-level adjustment
factors, we decided to hold the facilitylevel adjustment factors at FY 2011
levels for FY 2012 in order to conduct
further research on the underlying data
and the best methodology for
calculating the facility-level adjustment
factors. We based this decision, in part,
on comments we received about the
financial hardships that the proposed
updates would create for facilities with

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teaching programs and a higher
disproportionate share of low-income
patients. Thus, in the FY 2012 final rule
(76 FR 47836 at 47845), we held the FY
2012 facility-level adjustment factors at
FY 2011 levels. We also stated in the FY
2012 final rule that we would conduct
further research on the underlying data
and the best methodology for
calculating the facility level adjustment
factors. Our research efforts are still
ongoing, as we continue to consider the
best methodology for calculating the
facility level adjustment factors. As a
result, we are not making changes to the
facility-level adjustments for FY 2013.
V. FY 2013 IRF PPS Federal
Prospective Payment Rates
A. Market Basket Increase Factor,
Productivity Adjustment, Other
Adjustment, and Secretary’s
Recommendation for FY 2013
Section 1886(j)(3)(C) of the Act
requires the Secretary to establish an
increase factor that reflects changes over
time in the prices of an appropriate mix
of goods and services included in the
covered IRF services, which is referred
to as a market basket index. According
to section 1886(j)(3)(A)(i) of the Act, the
increase factor shall be used to update
the IRF Federal prospective payment
rates for each FY. Sections
1886(j)(3)(C)(ii)(II) and (D)(ii) of the Act
require the application of a 0.1
percentage point reduction to the
market basket increase factor for FYs
2012 and 2013. In addition, section
1886(j)(3)(C)(ii)(I) of the Act requires the
application of a productivity
adjustment, as described below. Thus,
in this notice, we are updating the IRF
PPS payments for FY 2013 by a market
basket increase factor based upon the
most current data available, with a
productivity adjustment as required by
section 1886(j)(3)(C)(ii)(I) of the Act, as
described below, and a 0.1 percentage
point reduction as required by sections
1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(ii)
of the Act.
For this notice, we have used the
same methodology described in the FY
2012 IRF PPS final rule (76 FR 47836 at
47848 through 47863) to compute the
FY 2013 market basket increase factor
and labor-related share. In that final
rule, we rebased the RPL market basket
from a 2002 base year to a 2008 base
year. Using this method and the IHS
Global Insight, Inc. forecast for the
second quarter of 2012 of the 2008based RPL market basket, the FY 2013
RPL market basket increase factor is 2.7
percent. IHS Global Insight (IGI) is an
economic and financial forecasting firm
that contracts with CMS to forecast the

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components of providers’ market
baskets.
In accordance with section
1886(j)(3)(C)(ii)(I) of the Act, and using
the methodology described in the FY
2012 IRF PPS final rule (76 FR 47836,
47858 through 47859), we apply a
productivity adjustment to the FY 2013
RPL market basket increase factor. The
statute defines the productivity
adjustment to be equal to the 10-year
moving average of changes in annual
economy-wide private nonfarm business
multifactor productivity (MFP) (as
projected by the Secretary for the 10year period ending with the applicable
FY cost reporting period, or other
annual period)(the ‘‘MFP adjustment’’).
The Bureau of Labor Statistics (BLS) is
the agency that publishes the official
measure of private nonfarm business
MFP. We refer readers to the BLS Web
site at http://www.bls.gov/mfp to obtain
the historical BLS-published MFP data.
The projection of MFP is currently
produced by IGI, using the methodology
described in the FY 2012 IRF PPS final
rule (76 FR 47836, 47859). The MFP
adjustment (the 10-year moving average
of MFP for the period ending FY 2013)
that we apply to the market basket
increase factor for FY 2013 is 0.7
percent, which was calculated using the
methodology described in the FY 2012
IRF PPS final rule (76 FR 47836, 47858
through 47859) and is based on IGI’s
second quarter 2012 forecast.
Thus, in accordance with section
1886(j)(3)(C) of the Act, we will base the
FY 2013 market basket update, which is
used to determine the applicable
percentage increase for the IRF
payments, on the second quarter 2012
forecast of the FY 2008-based RPL
market basket (estimated to be 2.7
percent). This percentage increase is
then reduced by the MFP adjustment
(the 10-year moving average of MFP for
the period ending FY 2013) of 0.7
percent, which was calculated as
described in the FY 2012 IRF PPS final
rule (76 FR 47836, 47859) and based on
IGI’s second quarter 2012 forecast.
Following application of the
productivity adjustment, the applicable
percentage increase is further reduced
by 0.1 percentage point, as required by
sections 1886(j)(3)(C)(ii)(II) and
1886(j)(3)(D)(ii) of the Act. Therefore,
the final FY 2013 IRF update is 1.9
percent (2.7 percent market basket
update less 0.7 percentage point MFP
adjustment less 0.1 percentage point
legislative adjustment).
Secretary’s Final Recommendation
For FY 2013, the Medicare Payment
Advisory Commission (MedPAC)
recommends that a 0 percent update be

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applied to IRF PPS payment rates for FY
2013. As discussed above, and in
accordance with sections 1886(j)(3)(C)
and 1886(j)(3)(D) of the Act, the
Secretary is updating IRF PPS payment
rates for FY 2013 by an adjusted market
basket increase factor of 1.9 percent
because section 1886(j)(3)(C) of the Act
does not provide the Secretary with the
authority to apply a different update

factor to IRF PPS payment rates for FY
2013.
B. Labor-Related Share for FY 2013
Using the methodology described in
the FY 2012 IRF PPS final rule (76 FR
47836, 47860 through 47863), we are
updating the IRF labor-related share for
FY 2013. Using this method and the IHS
Global Insight, Inc. forecast for the

44627

second quarter of 2012 of the 2008based RPL market basket, the IRF laborrelated share for FY 2013 is the sum of
the FY 2013 relative importance of each
labor-related cost category. This figure
reflects the different rates of price
change for these cost categories between
the base year (FY 2008) and FY 2013. As
shown in Table 3, the FY 2013 laborrelated share is 69.981 percent.

TABLE 3—FY 2013 IRF RPL LABOR-RELATED SHARE RELATIVE IMPORTANCE
FY 2013 IRF
labor-related share
relative importance

Cost category
Wages and Salaries ............................................................................................................................................................
Employee Benefits ...............................................................................................................................................................
Professional Fees: Labor-Related .......................................................................................................................................
Administrative and Business Support Services ...................................................................................................................
All Other: Labor-Related Services .......................................................................................................................................
SUBTOTAL ...................................................................................................................................................................
Labor-Related Share of Capital Costs (.46) ........................................................................................................................

48.796
13.021
2.070
0.417
2.077
66.381
3.600

TOTAL ...................................................................................................................................................................

69.981

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Source: IHS GLOBAL INSIGHT, INC, 2nd QTR, 2012; Historical Data through 1st QTR, 2012.

C. Area Wage Adjustment
Section 1886(j)(6) of the Act requires
the Secretary to adjust the proportion of
rehabilitation facilities’ costs
attributable to wages and wage-related
costs (as estimated by the Secretary from
time to time) by a factor (established by
the Secretary) reflecting the relative
hospital wage level in the geographic
area of the rehabilitation facility
compared to the national average wage
level for those facilities. The Secretary
is required to update the IRF PPS wage
index on the basis of information
available to the Secretary on the wages
and wage-related costs to furnish
rehabilitation services. Any adjustments
or updates made under section
1886(j)(6) of the Act for a FY are made
in a budget neutral manner.
In the FY 2009 IRF PPS final rule (73
FR 46378), we maintained the
methodology described in the FY 2006
IRF PPS final rule to determine the wage
index, labor market area definitions, and
hold harmless policy consistent with
the rationale outlined in the FY 2006
IRF PPS final rule (70 FR 47880, 47917
through 47933).
For FY 2013, we are maintaining the
policies and methodologies described in
the FY 2012 IRF PPS final rule relating
to the labor market area definitions and
the wage index methodology for areas
with wage data. Thus, we are using the
CBSA labor market area definitions and
the FY 2012 pre-reclassification and
pre-floor hospital wage index data. In
accordance with section 1886(d)(3)(E) of
the Act, the FY 2012 pre-reclassification
and pre-floor hospital wage index is

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based on data submitted for hospital
cost reporting periods beginning on or
after October 1, 2007 and before October
1, 2008 (that is, 2008 cost report data).
The labor market designations made
by the OMB include some geographic
areas where there are no hospitals and,
thus, no hospital wage index data on
which to base the calculation of the IRF
PPS wage index. We will continue to
use the same methodology discussed in
the FY 2008 IRF PPS final rule (72 FR
44299) to address those geographic areas
where there are no hospitals and, thus,
no hospital wage index data on which
to base the calculation of the FY 2013
IRF PPS wage index.
If applicable, we will continue to use
the CBSA changes published in the
most recent OMB bulletin that applies
to the hospital wage data used to
determine the current IRF PPS wage
index. The OMB bulletins are available
online at http://www.whitehouse.gov/
omb/bulletins/index.html.
To calculate the wage-adjusted facility
payment for the payment rates set forth
in this notice, we multiply the
unadjusted Federal payment rate for
IRFs by the FY 2013 labor-related share
based on the FY 2008-based RPL market
basket (69.981 percent) to determine the
labor-related portion of the standard
payment amount. We then multiply the
labor-related portion by the applicable
IRF wage index from the tables in the
addendum to this notice. These tables
are available through the Internet on the
CMS Web site at http://www.cms.hhs.
gov/Medicare/Medicare-Fee-for-ServicePayment/InpatientRehabFacPPS/. Table

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A is for urban areas and Table B is for
rural areas.
Adjustments or updates to the IRF
wage index made under section
1886(j)(6) of the Act must be made in a
budget neutral manner. We calculate a
budget neutral wage adjustment factor
as established in the FY 2004 IRF PPS
final rule (68 FR 45689), codified at
§ 412.624(e)(1), as described in the steps
below. We use the listed steps to ensure
that the FY 2013 IRF standard payment
conversion factor reflects the update to
the wage indexes (based on the FY 2008
hospital cost report data) and the laborrelated share in a budget neutral
manner:
Step 1. Determine the total amount of
the estimated FY 2012 IRF PPS rates,
using the FY 2012 standard payment
conversion factor and the labor-related
share and the wage indexes from FY
2012 (as published in the FY 2012 IRF
PPS final rule (76 FR 47836)).
Step 2. Calculate the total amount of
estimated IRF PPS payments using the
FY 2012 standard payment conversion
factor and the FY 2013 labor-related
share and CBSA urban and rural wage
indexes.
Step 3. Divide the amount calculated
in step 1 by the amount calculated in
step 2. The resulting quotient is the FY
2013 budget neutral wage adjustment
factor of 1.0000.
Step 4. Apply the FY 2013 budget
neutral wage adjustment factor from
step 3 to the FY 2012 IRF PPS standard
payment conversion factor after the
application of the adjusted market

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basket update to determine the FY 2013
standard payment conversion factor.
We discuss the calculation of the
standard payment conversion factor for
FY 2013 in section V.D. of this notice.
D. Description of the IRF Standard
Payment Conversion Factor and
Payment Rates for FY 2013
To calculate the standard payment
conversion factor for FY 2013, as

illustrated in Table 4, we begin by
applying the adjusted market basket
increase factor for FY 2013 that was
adjusted in accordance with sections
1886(j)(3)(C) and (D) of the Act, to the
standard payment conversion factor for
FY 2012 ($14,076). Applying the 1.9
percent adjusted market basket increase
factor for FY 2013 to the revised
standard payment conversion factor for
FY 2012 of $14,076 yields a standard

payment amount of $14,343. Then, we
apply the budget neutrality factor for the
FY 2013 wage index and labor related
share of 1.0000, which keeps the
standard payment amount at $14,343.
Finally, we apply the budget neutrality
factor for the revised CMG relative
weights of 1.0000, which results in a
final standard payment conversion
factor of $14,343 for FY 2013.

TABLE 4—CALCULATIONS TO DETERMINE THE FINAL FY 2013 STANDARD PAYMENT CONVERSION FACTOR
Explanation for adjustment

Calculations

Standard Payment Conversion Factor for FY 2012 ........................................................................................................................
Market Basket Increase Factor for FY 2013 (2.7 percent), reduced by 0.1 percentage point in accordance with sections
1886(j)(3)(C) and (D) of the Act and a 0.7 percent reduction for the productivity adjustment as required by section
1886(j)(3)(C)(ii)(I) of the Act .........................................................................................................................................................
Budget Neutrality Factor for the Wage Index and Labor-Related Share ........................................................................................
Budget Neutrality Factor for the Revisions to the CMG Relative Weights .....................................................................................
Final FY 2013 Standard Payment Conversion Factor ....................................................................................................................

After the application of the CMG
relative weights described in section III

of this notice, the resulting unadjusted
IRF prospective payment rates for FY

$14,076
× 1.019
× 1.0000
× 1.0000
= $14,343

2013 are shown below in Table 5, ‘‘FY
2013 Payment Rates.’’

TABLE 5—FY 2013 PAYMENT RATES
Payment rate
Tier 1

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CMG
0101
0102
0103
0104
0105
0106
0107
0108
0109
0110
0201
0202
0203
0204
0205
0206
0207
0301
0302
0303
0304
0401
0402
0403
0404
0405
0501
0502
0503
0504
0505
0506
0601
0602
0603
0604
0701
0702
0703
0704
0801

.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
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.................................................................................................................
.................................................................................................................
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.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
.................................................................................................................
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$11,513.13
14,314.31
16,669.43
17,674.88
20,622.37
23,483.79
26,363.87
32,953.04
30,444.45
39,160.69
11,923.34
14,585.40
16,930.48
18,556.97
22,303.37
27,801.04
36,624.85
16,089.98
20,117.49
23,816.55
31,647.83
14,906.68
21,262.06
34,236.74
62,628.71
48,612.73
12,099.75
16,183.21
20,487.54
24,698.65
28,192.60
39,740.15
13,917.01
18,208.44
23,297.33
30,890.52
13,400.66
17,895.76
21,491.55
27,243.09
10,678.36

Payment rate
Tier 2
$10,315.49
12,825.51
14,936.80
15,836.11
18,478.09
21,041.18
23,621.49
29,525.07
27,277.52
35,087.28
9,965.52
12,190.12
14,149.37
15,509.09
18,640.16
23,235.66
30,609.40
13,716.21
17,149.93
20,302.52
26,979.18
12,590.29
17,958.87
28,916.92
52,898.42
41,059.71
9,793.40
13,098.03
16,581.94
19,989.84
22,818.28
32,164.18
11,352.48
14,853.61
19,004.48
25,197.78
11,246.35
15,018.56
18,036.32
22,862.74
8,809.47

E:\FR\FM\30JYN1.SGM

30JYN1

Payment rate
Tier 3
$9,381.76
11,663.73
13,584.26
14,401.81
16,804.26
19,136.43
21,482.95
26,851.53
24,807.65
31,910.31
8,891.23
10,876.30
12,626.14
13,838.13
16,632.14
20,732.81
27,311.94
12,137.05
15,173.46
17,964.61
23,871.05
11,279.34
16,089.98
25,907.76
47,393.57
36,786.93
9,044.70
12,096.89
15,314.02
18,462.31
21,074.17
29,705.79
10,476.13
13,707.61
17,538.62
23,254.31
10,730.00
14,328.66
17,205.86
21,811.40
8,043.55

Payment rate
no comorbidity
$8,970.11
11,153.12
12,989.02
13,772.15
16,068.46
18,298.80
20,542.04
25,675.40
23,721.89
30,513.30
8,417.91
10,296.84
11,953.46
13,100.90
15,745.75
19,626.96
25,856.13
11,262.12
14,079.09
16,668.00
22,149.89
10,196.44
14,545.24
23,420.68
42,842.54
33,255.68
8,066.50
10,787.37
13,657.40
16,464.33
18,793.63
26,491.52
9,533.79
12,474.11
15,960.89
21,163.10
9,713.08
12,971.81
15,576.50
19,746.01
7,395.25

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44629

TABLE 5—FY 2013 PAYMENT RATES—Continued
CMG
0802
0803
0804
0805
0806
0901
0902
0903
0904
1001
1002
1003
1101
1102
1201
1202
1203
1301
1302
1303
1401
1402
1403
1404
1501
1502
1503
1504
1601
1602
1603
1701
1702
1703
1704
1801
1802
1803
1901
1902
1903
2001
2002
2003
2004
2101
5001
5101
5102
5103
5104

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E. Example of the Methodology for
Adjusting the Federal Prospective
Payment Rates
Table 6 illustrates the methodology
for adjusting the Federal prospective
payments (as described in sections V.A
through V.D of this notice). The
following examples are based on two
hypothetical Medicare beneficiaries,
both classified into CMG 0110 (without
comorbidities). The unadjusted Federal
prospective payment rate for CMG 0110
(without comorbidities) appears in
Table 5 above.

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Payment rate
Tier 1

Payment rate
Tier 2

Payment rate
Tier 3

14,112.08
19,192.37
17,052.39
21,124.37
25,768.63
13,032.05
17,091.12
22,118.34
28,106.54
14,583.96
18,377.69
26,567.54
16,570.47
23,067.85
12,953.16
15,278.16
19,707.28
17,332.08
22,547.20
28,694.61
12,808.30
16,534.61
19,922.43
25,546.32
13,909.84
17,380.85
21,335.21
27,013.61
15,058.72
19,830.63
24,879.37
15,398.64
20,160.52
23,455.11
29,958.22
17,735.12
26,835.75
47,571.43
15,012.82
27,522.78
47,502.58
12,541.52
16,919.00
21,252.02
28,103.67
31,478.58
........................
........................
........................
........................
........................

11,642.21
15,833.24
14,066.18
17,426.75
21,257.76
10,740.04
14,084.83
18,228.52
23,162.51
13,047.83
16,442.82
23,769.22
15,897.78
22,129.81
12,953.16
15,278.16
19,707.28
14,730.26
19,162.25
24,387.40
10,939.41
14,123.55
17,016.54
21,820.01
12,178.64
15,217.92
18,681.76
23,653.04
13,131.02
17,291.92
21,692.35
13,371.98
17,507.07
20,368.49
26,015.33
13,419.31
20,306.82
35,995.19
13,638.76
25,004.15
43,155.22
10,435.97
14,077.65
17,683.48
23,384.83
27,264.61
........................
........................
........................
........................
........................

10,631.03
14,457.74
12,844.16
15,912.12
19,410.38
9,974.12
13,080.82
16,929.04
21,511.63
11,795.68
14,865.09
21,490.12
15,897.78
22,129.81
12,442.55
14,675.76
18,931.33
12,991.89
16,900.36
21,508.76
9,863.68
12,732.28
15,341.27
19,672.86
11,148.81
13,929.92
17,099.72
21,650.76
11,976.41
15,773.00
19,787.60
12,198.72
15,972.36
18,582.79
23,733.36
12,442.55
18,828.06
33,374.73
13,174.05
24,152.18
41,683.63
9,581.12
12,925.91
16,236.28
21,471.47
27,264.61
........................
........................
........................
........................
........................

Example: One beneficiary is in
Facility A, an IRF located in rural
Spencer County, Indiana, and another
beneficiary is in Facility B, an IRF
located in urban Harrison County,
Indiana. Facility A, a rural non-teaching
hospital has a disproportionate share
hospital (DSH) percentage of 5 percent
(which would result in a LIP adjustment
of 1.0228), a wage index of 0.8551, and
a rural adjustment of 18.4 percent.
Facility B, an urban teaching hospital,
has a DSH percentage of 15 percent
(which would result in a LIP adjustment

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Payment rate
no comorbidity
9,773.32
13,290.22
11,808.59
14,628.43
17,844.13
9,020.31
11,830.11
15,309.72
19,454.85
10,744.34
13,539.79
19,573.89
12,915.87
17,980.38
11,574.80
13,651.67
17,610.34
11,569.06
15,048.68
19,153.64
8,987.32
11,602.05
13,980.12
17,925.88
10,562.19
13,196.99
16,200.42
20,511.92
10,873.43
14,320.05
17,964.61
10,863.39
14,222.52
16,547.52
21,134.41
10,889.21
16,477.24
29,208.09
12,548.69
23,007.61
39,708.60
8,742.06
11,792.81
14,813.45
19,591.10
23,542.60
2,142.84
8,413.60
21,980.65
10,170.62
27,327.72

of 1.0666), a wage index of 0.8900, and
a teaching status adjustment of 0.0610.
To calculate each IRF’s labor and nonlabor portion of the Federal prospective
payment, we begin by taking the
unadjusted Federal prospective
payment rate for CMG 0110 (without
comorbidities) from Table 5 above.
Then, we multiply the labor-related
share for FY 2013 (69.981 percent)
described in section V.B of this notice
by the unadjusted Federal prospective
payment rate. To determine the nonlabor portion of the Federal prospective
payment rate, we subtract the labor

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portion of the Federal payment from the
unadjusted Federal prospective
payment.
To compute the wage-adjusted
Federal prospective payment, we
multiply the labor portion of the Federal
payment by the appropriate wage index
found in Table A and Table B. These
tables are available through the Internet
on the CMS Web site at http://
www.cms.hhs.gov/Medicare/MedicareFee-for-Service-Payment/
InpatientRehabFacPPS/. The resulting

figure is the wage-adjusted labor
amount. Next, we compute the wageadjusted Federal payment by adding the
wage-adjusted labor amount to the nonlabor portion.
Adjusting the wage-adjusted Federal
payment by the facility-level
adjustments involves several steps.
First, we take the wage-adjusted Federal
prospective payment and multiply it by
the appropriate rural and LIP
adjustments (if applicable). Second, to
determine the appropriate amount of

additional payment for the teaching
status adjustment (if applicable), we
multiply the teaching status adjustment
(0.0610, in this example) by the wageadjusted and rural-adjusted amount (if
applicable). Finally, we add the
additional teaching status payments (if
applicable) to the wage, rural, and LIPadjusted Federal prospective payment
rates. Table 6 illustrates the components
of the adjusted payment calculation.

TABLE 6—EXAMPLE OF COMPUTING THE IRF FY 2013 FEDERAL PROSPECTIVE PAYMENT
Rural Facility A
(Spencer Co., IN)

Steps
1 .............................
2 .............................
3 .............................
4 .............................
5 .............................
6 .............................
7 .............................
8 .............................
9 .............................
10 ...........................
11 ...........................
12 ...........................
13 ...........................
14 ...........................
15 ...........................
16 ...........................

Unadjusted Federal Prospective Payment .........................................................
Labor Share ........................................................................................................
Labor Portion of Federal Payment ......................................................................
CBSA Based Wage Index (shown in the Addendum, Tables 1 and 2) .............
Wage-Adjusted Amount ......................................................................................
Nonlabor Amount ................................................................................................
Wage-Adjusted Federal Payment .......................................................................
Rural Adjustment .................................................................................................
Wage- and Rural-Adjusted Federal Payment .....................................................
LIP Adjustment ....................................................................................................
FY 2013 Wage-, Rural- and LIP-Adjusted Federal Prospective Payment Rate
FY 2013 Wage- and Rural-Adjusted Federal Prospective Payment ..................
Teaching Status Adjustment ...............................................................................
Teaching Status Adjustment Amount .................................................................
FY 2013 Wage-, Rural-, and LIP-Adjusted Federal Prospective Payment Rate
Total FY 2013 Adjusted Federal Prospective Payment .....................................

Thus, the adjusted payment for
Facility A would be $33,204.49 and the
adjusted payment for Facility B would
be $31,758.19.

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VI. Update to Payments for High-Cost
Outliers Under the IRF PPS
A. Update to the Outlier Threshold
Amount for FY 2013
Section 1886(j)(4) of the Act provides
the Secretary with the authority to make
payments in addition to the basic IRF
prospective payments for cases
incurring extraordinarily high costs. A
case qualifies for an outlier payment if
the estimated cost of the case exceeds
the adjusted outlier threshold. We
calculate the adjusted outlier threshold
by adding the IRF PPS payment for the
case (that is, the CMG payment adjusted
by all of the relevant facility-level
adjustments) and the adjusted threshold
amount (also, adjusted by all of the
relevant facility-level adjustments).
Then, we calculate the estimated cost of
a case by multiplying the IRF’s overall
CCR by the Medicare allowable covered
charge. If the estimated cost of the case
is higher than the adjusted outlier
threshold, we make an outlier payment
for the case equal to 80 percent of the
difference between the estimated cost of
the case and the outlier threshold.

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In the FY 2002 IRF PPS final rule (66
FR 41362 through 41363), we discussed
our rationale for setting the outlier
threshold amount for the IRF PPS so
that estimated outlier payments would
equal 3 percent of total estimated
payments. For the 2002 IRF PPS final
rule, we analyzed various outlier
policies using 3, 4, and 5 percent of the
total estimated payments, and we
concluded that an outlier policy set at
3 percent of total estimated payments
would optimize the extent to which we
could reduce the financial risk to IRFs
of caring for high-cost patients, while
still providing for adequate payments
for all other (non-high cost outlier)
cases.
Subsequently, we updated the IRF
outlier threshold amount in the FYs
2006 through 2012 IRF PPS final rules
(70 FR 47880, 70 FR 57166, 71 FR
48354, 72 FR 44284, 73 FR 46370, 74 FR
39762, 75 FR 42836, 75 FR 42836, and
76 FR 47836, respectively) to maintain
estimated outlier payments at 3 percent
of total estimated payments. We also
stated in the FY 2009 final rule (73 FR
46370 at 46385) that we would continue
to analyze the estimated outlier
payments for subsequent years and
adjust the outlier threshold amount as

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$30,513.30
× 0.69981
= $21,353.51
× 0.8551
= $18,259.39
+ $9,159.79
= $27,419.18
× 1.184
= $32,464.30
× 1.0228
= $33,204.49
$32,464.30
× 0
= $0.00
+ $33,204.49
= $33,204.49

Urban Facility B
(Harrison Co., IN)
$30,513.30
× 0.69981
= $21,353.51
× 0.8900
= $19,004.63
+ $9,159.79
= $28,164.41
× 1.000
= $28,164.41
× 1.0666
= $30,040.16
$28,164.41
× 0.0610
= $1,718.03
+ $30,040.16
= $31,758.19

appropriate to maintain the 3 percent
target.
To update the IRF outlier threshold
amount for FY 2013, we use FY 2011
claims data and the same methodology
that we used to set the initial outlier
threshold amount in the FY 2002 IRF
PPS final rule (66 FR 41316 and 41362
through 41363), which is also the same
methodology that we used to update the
outlier threshold amounts for FYs 2006
through 2012. Based on an analysis of
this updated data, we estimate that IRF
outlier payments as a percentage of total
estimated payments are approximately
2.8 percent in FY 2012. Therefore, we
will update the outlier threshold
amount to $10,466 to maintain
estimated outlier payments at
approximately 3 percent of total
estimated aggregate IRF payments for
FY 2013.
B. Update to the IRF Cost-to-Charge
Ratio Ceilings
In accordance with the methodology
stated in the FY 2004 IRF PPS final rule
(68 FR 45674, 45692 through 45694), we
apply a ceiling to IRFs’ CCRs. Using the
methodology described in that final
rule, we update the national urban and
rural CCRs for IRFs, as well as the
national CCR ceiling for FY 2013, based

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on analysis of the most recent data that
is available. We apply the national
urban and rural CCRs in the following
situations:
• New IRFs that have not yet
submitted their first Medicare cost
report.
• IRFs whose overall CCR is in excess
of the national CCR ceiling for FY 2013,
as discussed below.
• Other IRFs for which accurate data
to calculate an overall CCR are not
available.
Specifically, for FY 2013, we estimate
a national average CCR of 0.659 for rural
IRFs, which we calculated by taking an
average of the CCRs for all rural IRFs
using their most recently submitted cost
report data. Similarly, we estimate a
national average CCR of 0.514 for urban
IRFs, which we calculated by taking an
average of the CCRs for all urban IRFs
using their most recently submitted cost
report data. We apply weights to both of
these averages using the IRFs’ estimated
costs, meaning that the CCRs of IRFs
with higher costs factor more heavily
into the averages than the CCRs of IRFs
with lower costs. For this notice, we
have used the most recent available cost
report data (FY 2010). This includes all
IRFs whose cost reporting periods began
on or after October 1, 2009, and before
October 1, 2010. If, for any IRF, the FY
2010 cost report was missing or had an
‘‘as submitted’’ status, we used data
from the latest settled cost report for FY
2004 through FY 2009. We do not use
cost report data from before FY 2004 for
any IRF because changes in IRF
utilization since FY 2004 resulting from
the 60 percent rule and IRF medical
review activities suggest that these older
data do not adequately reflect the
current cost of care.
In accordance with past practice, we
set the national CCR ceiling at 3
standard deviations above the mean
CCR. Using this method, the national
CCR ceiling is set at 1.57 for FY 2013.
This means that, if an individual IRF’s
CCR exceeds this ceiling of 1.57 for FY
2013, we would replace the IRF’s CCR
with the appropriate national average
CCR (either rural or urban, depending
on the geographic location of the IRF).
We calculate the national CCR ceiling
by:
Step 1. Taking the national average
CCR (weighted by each IRF’s total costs,
as discussed above) of all IRFs for which
we have sufficient cost report data (both
rural and urban IRFs combined).
Step 2. Estimating the standard
deviation of the national average CCR
computed in step 1.
Step 3. Multiplying the standard
deviation of the national average CCR
computed in step 2 by a factor of 3 to

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compute a statistically significant
reliable ceiling.
Step 4. Adding the result from step 3
to the national average CCR of all IRFs
for which we have sufficient cost report
data, from step 1.
VII. Collection of Information
Requirements
This document does not impose any
new information collection
requirements. However, it does provide
detailed information about a currently
approved information collection request
pertaining to the IRF PPS. Specifically,
section I.C. of this notice references the
Inpatient Rehabilitation Facility-Patient
Assessment Instrument (IRF–PAI). As
stated in section I.C of this notice, IRFs
are required to complete the IRF–PAI
upon the admission and discharge of a
Medicare Part A fee-for-service patients
and upon admission and discharge of
each Medicare Part C (Medicare
Advantage) patient. The IRF–PAI is
currently approved under OMB control
number: 0938–0842.
VIII. Waiver of Notice and Comment
We ordinarily publish a notice of
proposed rulemaking in the Federal
Register to provide a period for public
comment before the provisions of a rule
take effect. We can waive this
procedure, however, if we find good
cause that notice and comment
procedures are impracticable,
unnecessary, or contrary to the public
interest and we incorporate a statement
of finding and its reasons in the notice.
We find that it is unnecessary to
undertake notice and comment
rulemaking for the updates in this
notice because the updates contained in
this Notice do not make any substantive
changes in policy, but merely reflect the
application of previously established
methodologies. In addition, we applied
the statutorily-required adjustments to
the update to the IRF–PPS increase
factor in sections 1886(j)(3)(C) and (D) of
the Act in this notice. We find that
notice and comment rulemaking is
unnecessary to implement these
statutory provisions because they are
self-implementing provisions of law, not
requiring the exercise of any discretion
on the part of the Secretary. Finally, in
accordance with 1886(e)(5)(B), we noted
MEDPAC’s recommendations regarding
an appropriate update for the FY 2013
IRF PPS, and the Secretary’s inability to
implement those recommendations due
to the requirements in 1886(j) regarding
the establishment of an update factor.
As such, the Secretary’s
recommendation (to follow the statutory
requirements thereby applying a 1.9
percent update rather than MEDPAC’s

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44631

recommended 0 percent update) need
not be published in a proposed and final
rule as such publication is unnecessary
in the absence of any discretion
regarding the establishment of the
update factor. Therefore, under 5 U.S.C.
553(b)(3)(B), for good cause, we waive
notice and comment procedures.
IX. Regulatory Impact Analysis
A. Statement of Need
This notice updates the IRF
prospective payment rates for FY 2013
as required under section 1886(j)(3)(C)
of the Act. It responds to Section
1886(j)(5) of the Act, which requires the
Secretary to publish in the Federal
Register on or before the August 1 that
precedes the start of each fiscal year, the
classification and weighting factors for
the IRF PPS’s case-mix groups and a
description of the methodology and data
used in computing the prospective
payment rates for that fiscal year.
This notice also implements sections
1886(j)(3)(C) and (D) of the Act. Section
1886(j)(3)(C)(ii)(I) of the Act requires the
Secretary to apply a multi-factor
productivity adjustment to the market
basket increase factor, and to apply
other adjustments as defined by the Act.
The productivity adjustment applies to
FYs from 2012 forward. The other
adjustments apply to FYs 2010 through
2019.
B. Overall Impact
We have examined the impacts of this
notice as required by Executive Order
12866 (September 30, 1993, Regulatory
Planning and Review), Executive Order
13563 (January 18, 2011, Improving
Regulation and Regulatory Review), the
Regulatory Flexibility Act (RFA,
September 19, 1980, Pub. L. 96–354),
section 1102(b) of the Social Security
Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (Pub. L.
104–4), Executive Order 13132 on
Federalism (August 4, 1999), and the
Congressional Review Act (5 U.S.C.
804(2)).
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. A
regulatory impact analysis (RIA) must
be prepared for a major notice with

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economically significant effects ($100
million or more in any one year). We
estimate the total impact of the updates
described in this notice by comparing
the estimated payments in FY 2013 with
those in FY 2012. This analysis results
in an estimated $140 million increase
for FY 2013 IRF PPS payments. As a
result, this notice is designated as
economically ‘‘significant’’ under
section 3(f)(1) of Executive Order 12866,
and hence a major notice under the
Congressional Review Act.
The Regulatory Flexibility Act (RFA)
requires agencies to analyze options for
regulatory relief of small entities, if a
rule has a significant impact on a
substantial number of small entities. For
purposes of the RFA, small entities
include small businesses, nonprofit
organizations, and small governmental
jurisdictions. Most IRFs and most other
providers and suppliers are small
entities, either by having revenues of $7
million to $34.5 million in any 1 year,
or by being nonprofit organizations that
are not dominant in their markets. (For
details, see the Small Business
Administration’s final rule that set forth
size standards for health care industries,
at 65 FR 69432 at http://www.sba.gov/
sites/default/files/files/Size_Standards_
Table.pdf, effective March 26, 2012.)
Because we lack data on individual
hospital receipts, we cannot determine
the number of small proprietary IRFs or
the proportion of IRFs’ revenue that is
derived from Medicare payments.
Therefore, we assume that all IRFs (an
approximate total of 1,200 IRFs, of
which approximately 60 percent are
nonprofit facilities) are considered small
entities and that Medicare payment
constitutes the majority of their
revenues. The Department of Health and
Human Services generally uses a
revenue impact of 3 to 5 percent as a
significance threshold under the RFA.
As shown in Table 7, we estimate that
the net revenue impact of this notice on
all IRFs is to increase estimated
payments by approximately 2.1 percent,
with three categories of IRFs (6 rural
IRFs in the New England region, 29
rural IRFs in the West North Central
region, and 8 rural IRFs in the Mountain
region) estimated to receive an increase
in estimated payments of 3 percent or
more (3.2 percent, 3.0 percent, and 3.1,
respectively). As a result, we anticipate
this notice would have a positive impact
on a substantial number of small
entities. Medicare fiscal intermediaries,
Medicare Administrative Contractors,
and carriers are not considered to be
small entities. Individuals and States are
not included in the definition of a small
entity.

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In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis if a rule may have a
significant impact on the operations of
a substantial number of small rural
hospitals. This analysis must conform to
the provisions of section 604 of the
RFA. For purposes of section 1102(b) of
the Act, we define a small rural hospital
as a hospital that is located outside of
a Metropolitan Statistical Area and has
fewer than 100 beds. As discussed in
detail below, the rates and policies set
forth in this notice will not have an
adverse impact on rural hospitals based
on the data of the 169 rural units and
20 rural hospitals in our database of
1,139 IRFs for which data were
available.
Section 202 of the Unfunded
Mandates Reform Act of 1995 (Pub. L.
104–04, enacted on March 22, 1995)
also requires that agencies assess
anticipated costs and benefits before
issuing any rule whose mandates
require spending in any one year of
$100 million in 1995 dollars, updated
annually for inflation. In 2012, that
threshold level is approximately $139
million. This notice will not impose
spending costs on State, local, or tribal
governments, in the aggregate, or by the
private sector, of greater than $139
million.
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a final
rule that imposes substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
As stated above, this notice will not
have a substantial effect on State and
local governments, preempt State law,
or otherwise have a Federalism
implication.
C. Anticipated Effects of the Notice
1. Basis and Methodology of Estimates
This notice sets forth updates to the
IRF PPS rates contained in the FY 2012
final rule (76 FR 47836). Specifically,
this notice sets forth updates to the
CMG relative weights and average
length of stay values, the wage index,
and the outlier threshold for high-cost
cases. This notice also applies a
productivity adjustment to the FY 2013
RPL market basket increase factor in
accordance with section
1886(j)(3)(C)(ii)(I) of the Act, and a 0.1
percentage point reduction to the FY
2013 RPL market basket increase factor
in accordance with sections
1886(j)(3)(C)(ii)(II) and (D)(ii) of the Act.
We estimate that the FY 2013 impact
will be a net increase of $140 million in
payments to IRF providers. The impact

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analysis in Table 7 of this notice
represents the projected effects of the
updates to IRF PPS payments for FY
2013 compared with the estimated IRF
PPS payments in FY 2012. We
determine the effects by estimating
payments while holding all other
payment variables constant. We use the
best data available, but we do not
attempt to predict behavioral responses
to these changes, and we do not make
adjustments for future changes in such
variables as number of discharges or
case-mix.
We note that certain events may
combine to limit the scope or accuracy
of our impact analysis, because such an
analysis is future-oriented and, thus,
susceptible to forecasting errors because
of other changes in the forecasted
impact time period. Some examples
could be legislative changes made by
the Congress to the Medicare program
that would impact program funding, or
changes specifically related to IRFs.
Although some of these changes may
not necessarily be specific to the IRF
PPS, the nature of the Medicare program
is such that the changes may interact,
and the complexity of the interaction of
these changes could make it difficult to
predict accurately the full scope of the
impact upon IRFs.
In updating the rates for FY 2013, we
are implementing standard annual
revisions described in this notice (for
example, the update to the wage and
market basket indexes used to adjust the
Federal rates). We are also
implementing a productivity adjustment
to the FY 2013 RPL market basket
increase factor in accordance with
section 1886(j)(3)(C)(ii)(I) of the Act, and
a 0.1 percentage point reduction to the
FY 2013 RPL market basket increase
factor in accordance with sections
1886(j)(3)(C)(ii)(II) and (D)(ii) of the Act.
We estimate the total increase in
payments to IRFs in FY 2013, relative to
FY 2012, will be approximately $140
million.
This estimate is derived from the
application of the FY 2013 RPL market
basket increase factor, as reduced by a
productivity adjustment in accordance
with section 1886(j)(3)(C)(ii)(I) of the
Act, and a 0.1 percentage point
reduction in accordance with sections
1886(j)(3)(C)(ii)(II) and (D)(ii) of the Act,
which yields an increase of aggregate
payments to IRFs of $130 million.
Furthermore, there is an additional
estimated $10 million increase in
aggregate payments to IRFs due to the
update in the outlier threshold amount.
Outlier payments are estimated to
increase from approximately 2.8 percent
in FY 2012 to 3.0 percent in FY 2013.
Therefore, summed together, these

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updates will result in a net increase in
estimated payments of $140 million
from FY 2012 to FY 2013.
The effects of the updates that impact
IRF PPS payment rates are shown in
Table 7. The following updates that
affect the IRF PPS payment rates are
discussed separately below:
• The effects of the update to the
outlier threshold amount, from
approximately 2.8 percent to 3.0 percent
of total estimated payments for FY 2013,
consistent with section 1886(j)(4) of the
Act.
• The effects of the annual market
basket update (using the RPL market
basket) to IRF PPS payment rates, as
required by section 1886(j)(3)(A)(i) and
sections 1886(j)(3)(C) and (D) of the Act,
including a productivity adjustment in
accordance with section
1886(j)(3)(C)(i)(I) of the Act, and a 0.1
percentage point reduction in
accordance with sections 1886(j)(3)(C)
and (D) of the Act.
• The effects of applying the budgetneutral labor-related share and wage
index adjustment, as required under
section 1886(j)(6) of the Act.
• The effects of the budget-neutral
changes to the CMG relative weights
and average length of stay values, under
the authority of section 1886(j)(2)(C)(i)
of the Act.
• The total change in estimated
payments based on the FY 2013
payment updates relative to the
estimated FY 2012 payments.

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2. Description of Table 7
The table below categorizes IRFs by
geographic location, including urban or
rural location, and location with respect
to CMS’s nine census divisions (as
defined on the cost report) of the
country. In addition, the table divides
IRFs into those that are separate
rehabilitation hospitals (otherwise
called freestanding hospitals in this
section), those that are rehabilitation
units of a hospital (otherwise called
hospital units in this section), rural or
urban facilities, ownership (otherwise
called for-profit, non-profit, and
government), by teaching status, and by
disproportionate share patient
percentage (DSH PP). The top row of the
table shows the overall impact on the
1,139 IRFs included in the analysis.
The next 12 rows of Table 7 contain
IRFs categorized according to their
geographic location, designation as

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either a freestanding hospital or a unit
of a hospital, and by type of ownership;
all urban, which is further divided into
urban units of a hospital, urban
freestanding hospitals, and by type of
ownership; and all rural, which is
further divided into rural units of a
hospital, rural freestanding hospitals,
and by type of ownership. There are 950
IRFs located in urban areas included in
our analysis. Among these, there are 739
IRF units of hospitals located in urban
areas and 211 freestanding IRF hospitals
located in urban areas. There are 189
IRFs located in rural areas included in
our analysis. Among these, there are 169
IRF units of hospitals located in rural
areas and 20 freestanding IRF hospitals
located in rural areas. There are 383 forprofit IRFs. Among these, there are 324
IRFs in urban areas and 59 IRFs in rural
areas. There are 697 non-profit IRFs.
Among these, there are 579 urban IRFs
and 118 rural IRFs. There are 59
government-owned IRFs. Among these,
there are 47 urban IRFs and 12 rural
IRFs.
The remaining four parts of Table 7
show IRFs grouped by their geographic
location within a region, by teaching
status, and by DSH PP. First, IRFs
located in urban areas are categorized
with respect to their location within a
particular one of the nine Census
geographic regions. Second, IRFs
located in rural areas are categorized
with respect to their location within a
particular one of the nine Census
geographic regions. In some cases,
especially for rural IRFs located in the
New England, Mountain, and Pacific
regions, the number of IRFs represented
is small. IRFs are then grouped by
teaching status, including non-teaching
IRFs, IRFs with an intern and resident
to average daily census (ADC) ratio less
than 10 percent, IRFs with an intern and
resident to ADC ratio greater than or
equal to 10 percent and less than or
equal to 19 percent, and IRFs with an
intern and resident to ADC ratio greater
than 19 percent. Finally, IRFs are
grouped by DSH PP, including IRFs
with zero DSH PP, IRFs with a DSH PP
less than 5 percent, IRFs with a DSH PP
between 5 and less than 10 percent,
IRFs with a DSH PP between 10 and 20
percent, and IRFs with a DSH PP greater
than 20 percent.
The estimated impacts of each
payment update described in this notice
to the facility categories listed above are

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44633

shown in the columns of Table 7. The
description of each column is as
follows:
• Column (1) shows the facility
classification categories described
above.
• Column (2) shows the number of
IRFs in each category in our FY 2011
analysis file.
• Column (3) shows the number of
cases in each category in our FY 2011
analysis file.
• Column (4) shows the estimated
effect of the adjustment to the outlier
threshold amount.
• Column (5) shows the estimated
effect of the update to the IRF PPS
payment rates, which includes a
productivity adjustment in accordance
with section 1886(j)(3)(C)(ii)(I) of the
Act, and a 0.1 percentage point
reduction in accordance with sections
1886(j)(3)(C)(ii)(II) and (D)(ii) of the Act.
• Column (6) shows the estimated
effect of the update to the IRF laborrelated share and wage index, in a
budget neutral manner.
• Column (7) shows the estimated
effect of the update to the CMG relative
weights and average length of stay
values, in a budget neutral manner.
• Column (8) compares our estimates
of the payments per discharge,
incorporating all of the payment
updates reflected in this notice for FY
2013 to our estimates of payments per
discharge in FY 2012.
The average estimated increase for all
IRFs is approximately 2.1 percent. This
estimated net increase includes the
effects of the RPL market basket increase
factor for FY 2013 of 2.7 percent,
reduced by a productivity adjustment of
0.7 percent in accordance with section
1886(j)(3)(C)(ii)(I) of the Act, and further
reduced by 0.1 percentage point in
accordance with sections
1886(j)(3)(C)(ii)(II) and (D)(ii) of the Act.
It also includes the approximate 0.2
percent overall estimated increase in
estimated IRF outlier payments from the
update to the outlier threshold amount.
Since we are making the updates to the
IRF wage index and the CMG relative
weights in a budget-neutral manner,
they will not affect total estimated IRF
payments in the aggregate. However, as
described in more detail in each section,
they will affect the estimated
distribution of payments among
providers.

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Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Notices
TABLE 7—IRF IMPACT TABLE FOR FY 2013
[Columns 4–8 in %]

Facility classification

Number of
IRFs

Number of
cases

(1)

(2)

(3)

Total .............................
Urban unit ....................
Rural unit ......................
Urban hospital ..............
Rural hospital ...............
Urban For-Profit ...........
Rural For-Profit ............
Urban Non-Profit ..........
Rural Non-Profit ...........
Urban Government ......
Rural Government ........
Urban ...........................
Rural .............................

1,139
739
169
211
20
324
59
579
118
47
12
950
189

Outlier

Adjusted
market basket
increase
factor for
FY 2013 1

FY 2013
CBSA wage
index and
labor-share

CMG

Total
percent
change

(4)

(5)

(6)

(7)

(8)

377,040
182,873
27,487
160,712
5,968
150,510
10,972
180,668
20,321
12,407
2,162
343,585
33,455

0.2
0.2
0.2
0.1
0.1
0.1
0.2
0.2
0.2
0.3
0.2
0.2
0.2

1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9
1.9

0.0
¥0.1
¥0.1
0.1
¥0.1
0.1
¥0.3
0.0
0.0
¥0.2
0.3
0.0
¥0.1

0.0
0.1
0.2
¥0.2
¥0.1
¥0.1
0.1
0.1
0.2
0.0
0.4
0.0
0.2

2.1
2.2
2.3
1.9
1.7
1.9
1.8
2.1
2.3
1.9
2.8
2.0
2.2

Urban by region 2
Urban New England .....
Urban Middle Atlantic ...
Urban South Atlantic ....
Urban East North Central .............................
Urban East South Central .............................
Urban West North Central .............................
Urban West South Central .............................
Urban Mountain ...........
Urban Pacific ................

32
142
132

15,790
58,285
62,379

0.1
0.1
0.1

1.9
1.9
1.9

0.2
0.1
¥0.1

¥0.1
0.1
¥0.1

2.2
2.2
1.8

184

53,412

0.2

1.9

¥0.3

0.0

1.7

24,111

0.1

1.9

¥0.4

¥0.1

1.5

17,926

0.2

1.9

¥0.1

0.1

2.1

170
68
100

65,263
22,572
23,847

0.1
0.2
0.3

1.9
1.9
1.9

0.5
0.0
0.1

0.1
¥0.1
0.0

2.6
2.0
2.2

Rural by region 2
Rural
Rural
Rural
Rural
tral
Rural
tral
Rural
tral
Rural
tral
Rural
Rural

New England ......
Middle Atlantic ....
South Atlantic .....
East North Cen.............................
East South Cen.............................
West North Cen.............................
West South Cen.............................
Mountain .............
Pacific .................

6
15
23

1,279
2,807
5,699

0.3
0.1
0.1

1.9
1.9
1.9

0.9
¥0.2
¥0.7

0.1
0.1
0.0

3.2
1.9
1.4

5,498

0.1

1.9

¥0.3

0.2

1.9

3,944

0.1

1.9

¥0.5

0.2

1.7

3,857

0.3

1.9

0.5

0.3

3.0

50
8
4

9,336
656
379

0.2
0.3
0.6

1.9
1.9
1.9

0.2
0.3
0.3

0.2
0.5
0.1

2.5
3.1
2.9

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Teaching Status
Non-teaching ................
Resident to ADC less
than 10% ..................
Resident to ADC 10%–
19% ..........................
Resident to ADC greater than 19% ..............

1,024

330,504

0.1

1.9

0.0

2.1

30,956

0.2

1.9

¥0.2

0.1

2.0

13,961

0.2

1.9

0.2

¥0.1

2.3

1,619

0.2

1.9

0.2

2.5

0.2
0.0
0.0
¥0.1

0.0
0.1
0.0
0.0

2.3
2.1
2.0
2.0

Disproportionate Share Patient Percentage (DSH PP)
DSH
DSH
DSH
DSH

PP
PP
PP
PP

= 0% ..............
less than 5%
5%–10% ........
10%–20% ......

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175
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339

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13,420
51,699
129,038
121,832

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0.2
0.1
0.2

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1.9
1.9
1.9
1.9

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44635

Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Notices
TABLE 7—IRF IMPACT TABLE FOR FY 2013—Continued
[Columns 4–8 in %]

Facility classification

Number of
IRFs

Number of
cases

(1)

(2)

(3)

DSH PP greater than
20% ..........................

229

Outlier

Adjusted
market basket
increase
factor for
FY 2013 1

FY 2013
CBSA wage
index and
labor-share

CMG

Total
percent
change

(4)

(5)

(6)

(7)

(8)

61,051

0.2

1.9

0.0

¥0.1

2.0

1 This

column reflects the impact of the RPL market basket increase factor for FY 2013 of 1.9 percent, which includes a market basket update
of 2.7 percent, a 0.1 percentage point reduction in accordance with sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(ii) of the Act and a 0.7 percent
reduction for the productivity adjustment as required by section 1886(j)(3)(C)(ii)(I) of the Act.
2 A map of states that comprise the 9 geographic regions can be found at: http://www.census.gov/geo/www/us_regdiv.pdf.

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3. Impact of the Update to the Outlier
Threshold Amount
The outlier threshold adjustment is
presented in column 4 of Table 7. In the
FY 2012 IRF PPS final rule (76 FR 47867
through 47868), we used FY 2010 IRF
claims data (the best, most complete
data available at that time) to set the
outlier threshold amount for FY 2012 so
that estimated outlier payments would
equal 3 percent of total estimated
payments for FY 2012.
For this notice, we are updating our
analysis using FY 2011 IRF claims data
and, based on this updated analysis, we
estimate that IRF outlier payments as a
percentage of total estimated IRF
payments are 2.8 percent in FY 2012.
Thus, we are adjusting the outlier
threshold amount in this notice to set
total estimated outlier payments equal
to 3 percent of total estimated payments
in FY 2013. The estimated change in
total IRF payments for FY 2013,
therefore, includes an approximate 0.2
percent increase in payments because
the estimated outlier portion of total
payments is estimated to increase from
approximately 2.8 percent to 3 percent.
The impact of this outlier adjustment
update (as shown in column 4 of Table
7) is to increase estimated overall
payments to IRFs by about 0.2 percent.
We estimate the largest increase in
payments from the update to the outlier
threshold amount to be 0.6 percent for
rural IRFs in the Pacific region. We do
not estimate that any group of IRFs will
experience a decrease in payments from
this update.
4. Impact of the Market Basket Update
to the IRF PPS Payment Rates
The adjusted market basket update to
the IRF PPS payment rates is presented
in column 5 of Table 7. In the aggregate
the update would result in a net 1.9
percent increase in overall estimated
payments to IRFs. This net increase
reflects the estimated RPL market basket
increase factor for FY 2013 of 2.7

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percent, reduced by the 0.1 percentage
point in accordance with sections
1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(ii)
of the Act, and further reduced by a 0.7
percent productivity adjustment as
required by section 1886(j)(3)(C)(ii)(I) of
the Act.
5. Impact of the CBSA Wage Index
and Labor-Related Share
In column 6 of Table 7, we present the
effects of the budget neutral update of
the wage index and labor-related share.
The changes to the wage index and the
labor-related share are discussed
together because the wage index is
applied to the labor-related share
portion of payments, so the changes in
the two have a combined effect on
payments to providers. As discussed in
section V.B of this notice, the laborrelated share decreased from 70.199
percent in FY 2012 to 69.981 percent in
FY 2013.
In the aggregate, since these updates
to the wage index and the labor-related
share are applied in a budget-neutral
manner as required under section
1886(j)(6) of the Act, we do not estimate
that these updates will affect overall
estimated payments to IRFs. However,
we estimate that these updates will have
small distributional effects. For
example, we estimate the largest
increase in payments from the update to
the CBSA wage index and labor-related
share of 0.9 percent for rural IRFs in the
New England region. We estimate the
largest decrease in payments from the
update to the CBSA wage index and
labor-related share to be a 0.7 percent
decrease for rural IRFs in the South
Atlantic region.
6. Impact of the Update to the CMG
Relative Weights and Average Length of
Stay Values
In column 7 of Table 7, we present the
effects of the budget neutral update of
the CMG relative weights and average
length of stay values. In the aggregate
we do not estimate that these updates

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will affect overall estimated payments to
IRFs. However, we estimate that these
updates will have small distributional
effects. The largest estimated decrease
in payments as a result of these updates
is a 0.2 percent decrease to urban
freestanding IRFs. The largest estimated
increase in payments as a result of these
updates is a 0.5 percent increase to rural
IRFs in the Mountain region.
D. Alternatives Considered
As stated in section 1X. B of this
notice, the notice results in a positive
economic impact on IRFs. The overall
impact on all IRFs is an estimated
increase in FY 2013 payments of 2.1
percent, relative to FY 2012, with three
categories of IRFs (6 rural IRFs in the
New England region, 29 rural IRFs in
the West North Central region, and 8
rural IRFs in the Mountain region)
estimated to receive an increase in
estimated payments of 3 percent or
more (3.2 percent, 3.0 percent, 3.1
percent, respectively). The following is
a discussion of the alternatives
considered to the IRF PPS updates
contained in this notice.
Section 1886(j)(3)(C) of the Act
requires the Secretary to update the IRF
PPS payment rates by an increase factor
that reflects changes over time in the
prices of an appropriate mix of goods
and services included in the covered
IRF services. Thus, we did not consider
alternatives to updating payments using
the estimated RPL market basket
increase factor for FY 2013. However, as
noted previously in this notice, section
1886(j)(3)(C)(ii)(I) requires the Secretary
to apply a productivity adjustment to
the market basket increase factor for FY
2013 and sections 1886(j)(3)(C)(ii)(II)
and 1886(j)(3)(D)(ii) of the Act require
the Secretary to apply a 0.1 percentage
point reduction to the market basket
increase factor for FY 2013. Thus, in
accordance with section 1886(j)(3)(C) of
the Act, we are updating IRF Federal
prospective payments in this notice by

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1.9 percent (which equals the 2.7
percent estimated RPL market basket
increase factor for FY 2013 reduced by
0.1 percentage points, and further
reduced by a 0.7 percent productivity
adjustment as required by section
1886(j)(3)(C)(ii)(I) of the Act).
We considered maintaining the
existing CMG relative weights and
average length of stay values for FY
2013. However, in light of recently
available data and our desire to ensure
that the CMG relative weights and
average length of stay values are as
reflective as possible of recent changes
in IRF utilization and case mix, we
believe that it is appropriate to update
the CMG relative weights and average

length of stay values at this time to
ensure that IRF PPS payments continue
to reflect as accurately as possible the
current costs of care in IRFs.
We considered maintaining the
existing outlier threshold amount for FY
2013. However, analysis of updated FY
2011 data indicates that estimated
outlier payments would be lower than 3
percent of total estimated payments for
FY 2012, by approximately 0.2 percent,
unless we updated the outlier threshold
amount. Consequently, we are adjusting
the outlier threshold amount in this
notice to reflect a 0.2 percent increase
thereby setting the total outlier
payments equal to 3 percent, instead of

2.8 percent, of aggregate estimated
payments in FY 2013.
E. Accounting Statement
As required by OMB Circular A–4
(available at http://www.whitehouse.
gov/sites/default/files/omb/assets/omb/
circulars/a004/a-4.pdf), in Table 8
below, we have prepared an accounting
statement showing the classification of
the expenditures associated with the
provisions of this notice. This table
provides our best estimate of the
increase in Medicare payments under
the IRF PPS as a result of the updates
presented in this notice based on the
data for 1,139 IRFs in our database.

TABLE 8—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2012 IRF PPS FISCAL
YEAR TO THE 2013 IRF PPS FISCAL YEAR
Category

Transfers

Annualized Monetized Transfers ..............................................................
From Whom to Whom? ............................................................................

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F. Conclusion
Overall, the estimated payments per
discharge for IRFs in FY 2013 are
projected to increase by 2.1 percent,
compared with the estimated payments
in FY 2012, as reflected in column 8 of
Table 7. IRF payments per discharge are
estimated to increase 2.0 percent in
urban areas and 2.2 percent in rural
areas, compared with estimated FY 2012
payments. Payments per discharge to
rehabilitation units are estimated to
increase 2.2 percent in urban areas and
2.3 percent in rural areas. Payments per
discharge to freestanding rehabilitation
hospitals are estimated to increase 1.9
percent in urban areas and 1.7 percent
in rural areas.
Overall, no IRFs are estimated to
experience a net decrease in payments
as a result of the updates in this notice.
The largest payment increase is
estimated to be a 3.2 percent increase
for rural IRFs located in the New
England region. This is due to the larger
than average positive effect of the FY
2013 CBSA wage index and laborrelated share updates for rural IRFs in
this region.
In accordance with the provisions of
Executive Order 12866, this notice was
reviewed by the Office of Management
and Budget.
Authority: (Catalog of Federal Domestic
Assistance Program No. 93.773, Medicare—
Hospital Insurance; and Program No. 93.774,
Medicare—Supplementary Medical
Insurance Program).

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$140 million.
Federal Government to IRF Medicare Providers.

Dated: May 10, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Approved: July 16, 2012.
Kathleen Sebelius,
Secretary.
[FR Doc. 2012–18433 Filed 7–25–12; 4:15 pm]
BILLING CODE 4120–01–P

DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
[Docket No. FDA–2012–D–0049]

Agency Information Collection
Activities; Submission for Office of
Management and Budget Review;
Comment Request; Reporting Harmful
and Potentially Harmful Constituents
in Tobacco Products and Tobacco
Smoke Under the Federal Food, Drug,
and Cosmetic Act
AGENCY:

Food and Drug Administration,

HHS.
ACTION:

Notice.

The Food and Drug
Administration (FDA) is announcing
that a proposed collection of
information has been submitted to the
Office of Management and Budget
(OMB) for review and clearance under
Paperwork Reduction Act of 1995.
DATES: Fax written comments on the
collection of information by August 29,
2012.
SUMMARY:

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To ensure that comments on
the information collection are received,
OMB recommends that written
comments be faxed to the Office of
Information and Regulatory Affairs,
OMB, Attn: FDA Desk Officer, FAX:
202–395–7285, or emailed to
[email protected]. All
comments should be identified with the
OMB control number 0910–NEW and
title ‘‘Reporting Harmful and Potentially
Harmful Constituents in Tobacco
Products and Tobacco Smoke Under the
Federal Food, Drug, and Cosmetic Act.’’
Also include the FDA docket number
found in brackets in the heading of this
document.
FOR FURTHER INFORMATION CONTACT:
Daniel Gittleson, Office of Information
Management, Food and Drug
Administration, 1350 Piccard Dr., PI50–
400B, Rockville, MD 20850, 301–796–
5156, [email protected].
SUPPLEMENTARY INFORMATION: In
compliance with 44 U.S.C. 3507, FDA
has submitted the following proposed
collection of information to OMB for
review and clearance.
ADDRESSES:

Reporting Harmful and Potentially
Harmful Constituents in Tobacco
Products and Tobacco Smoke Under
the Federal Food, Drug, and Cosmetic
Act—(OMB Control Number 0910–
NEW)
On June 22, 2009, the President
signed the Family Smoking Prevention
and Tobacco Control Act (Public Law
111–31) into law. This law amends the
Federal Food, Drug, and Cosmetic Act
(FD&C Act) and grants FDA authority to

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