Medicare Compliance & Reimbursement

How the new rule will change the rehab industry.

Inpatient rehab facilities have been waiting with bated breath for the final version of the 75 percent rule -- and the wait is finally over. Some provisions of the rule leave facilities breathing a sigh of relief, while others are leaving them gasping for air.
 
"The proposed rule was such a shock in terms of the changes required," recalls attorney Jeffrey Micklos with Foley & Lardner in Washington. "The final rule is helpful in that it moderates some of the aggressive proposals." The rule was published in the Federal Register on May 7.

Major change: Possibly the largest departure from the proposed rule to the final rule has to do with the timetable for change. Under the original rule, which remains in effect until July 1, 75 percent of admissions of the total patient population had to meet one of the qualifying conditions for the facility to be classified an IRF. Under the proposed rule, that percentage would be lowered to 65 percent for three years and then either would be changed back to 75 percent or a new regulation would be written.

The final rule works in phases, ultimately returning to the original 75 percent threshold in 2007. Here's how it works: Between July 1, 2004 and June 30, 2005, 50 percent of admissions must meet one of the qualifying diagnoses; on July 1, 2005 that percentage raises to 60 percent; it raises again to 65 percent on July 1, 2006, and leaps to 75 percent on July 1, 2007.

The first two years of this plan represent a "major concession" on the part of CMS, since the agency was intent on keeping the percentage higher, says Micklos. "The idea is to give facilities time to change their patient mix if they need to do that to comply," notes Jason Levine, senior consultant with Murer Consultants in Joliet, IL.

Don't be fooled: This phase-in period is "a windfall in the short run," says consultant Fran Fowler with Fowler Healthcare Affiliates, Inc. in Atlanta. But facilities shouldn't be lulled into a false sense of security. "When they pull it up to 65 percent, that's when you're really going to see a hit," Fowler warns. The changing percentages creates a case management challenge that providers will need to stay on top of, says Levine. Most providers have a daily management tool, which they can use to track case mix, Micklos says.

Tip: Providers should create an Excel spreadsheet with 14 columns (one for each of the 13 qualifying diagnoses and one for patients that don't count toward the threshold), suggests consultant Ann Lambert Kremer with Baker Newman & Noyes in Portland, ME. Each time they admit a patient, they [...]