Inpatient Rehabilitation Facility


An Inpatient Rehabilitation Facility (IRF) is designed to provide intensive rehabilitation therapy within a resource-intensive hospital environment for patients who, due to the complexity of their medical, nursing and rehabilitation needs, require and can reasonably be expected to benefit from an inpatient stay and an interdisciplinary approach to the delivery of rehabilitation care.

In 2013, non-paralyzed stroke patients in the highest margin IRFs had an average motor Functional Independence Measure (FIM™) score (29.0) that was almost the same as the average motor score of paralyzed stroke patients in the lowest margin IRFs (29.2). This finding was surprising because stroke patients with paralysis typically have poorer motor function than stroke patients without paralysis. The consistent findings that high-margin IRFs have patients who are, on average, less severely ill in the acute care hospital but appear more functionally disabled upon assessment in the IRF suggests that assessment and scoring practices contribute to greater profitability in some IRFs, especially given the comparatively low level of costs and cost growth observed in high-margin facilities.

The Medicare fee-for-service (FFS) improper payment rate decreased from 12.1 percent in 2015 due to the success of corrective actions implemented to address improper payments for inpatient hospital services. CMS plans to continue monitoring services that drive the improper payment rate, including home health and inpatient rehabilitation facility claims, in order to more effectively target our provider education efforts to address payment vulnerabilities as they are identified.

In 2016, the estimated FFS improper payment rate percentage of Medicare dollars paid incorrectly was 11.0 percent. This means that Medicare improperly paid an estimated $41.1 billion between July 1, 2014, and June 30, 2015. For 2016, CMS adjusted the improper payment rate by 0.2 percentage points ($0.7 billion) from 11.2 percent to 11.0 percent to account for the effect of rebilling inpatient hospital claims denied under Medicare Part A (Part A to B rebilling). The methodology for calculating the 2016 FFS improper payment rate was the same as in 2015.

During the 2016 report period, the most common cause of improper payments (accounting for 64.1 percent of total improper payments) was lack of documentation to support the services or supplies billed to Medicare. In other words, the Comprehensive Error Rate Testing (CERT) contractor reviewers could not conclude that the billed services were actually provided, were provided at the level billed, and/or were medically necessary.

Specific medical record documentation, at the time of IRF admission, must support a reasonable expectation that the patient needs multiple intensive therapies, one of which must be physical or occupational therapy; is able to actively participate and demonstrate measurable improvement; and requires supervision by a rehabilitation physician to assess and modify the course of treatment as needed to maximize the benefit from the rehabilitation process.

It was found by the Medicare Advisory Commission (2016), that IRFs with the highest margins in 2013 had a higher share of other neurological cases and a lower share of stroke cases. When patients in high-margin and low-margin IRFs were compared, patients in high-margin IRFs were less severely ill and resource intensive during the acute care hospitalization that preceded the IRF stay:

  • Patients in high-margin IRFs had, on average, a lower case-mix index in the acute care hospital as well as a lower level of severity of illness and a shorter length of stay
  • Patients in high-margin IRFs were less likely to have been high-cost outliers in the acute care hospital or to have spent four or more days in the hospital intensive care or coronary care unit

For IRF care to be considered reasonable and necessary, the documentation in the patient’s IRF medical record must demonstrate a reasonable expectation that the following criteria were met at the time of admission to the IRF. Admission orders must be generated by a physician at the time of admission; any licensed physician may generate the admission order. Physician extenders, working in collaboration with the physician, may also generate the admission order. These admission orders must be retained in the patient’s IRF medical record. For admission, the patient must:

  • Require active and ongoing intervention of multiple therapy disciplines: Physical Therapy (PT), Occupational Therapy (OT, Speech-Language Pathology (SLP), or prosthetics/orthotics, at least one of which must be PT or OT
  • Require an intensive rehabilitation therapy program, generally consisting of: three (3) hours of therapy per day at least five (5) days per week; or, in certain well-documented cases, at least 15 hours of intensive rehabilitation therapy within a consecutive seven-day period, beginning with the date of admission
  • Reasonably be expected to actively participate in, and benefit significantly from, the intensive rehabilitation therapy program (the patient’s condition and functional status are such that the patient can reasonably be expected to make measurable improvement, expected to be made within a prescribed period of time and as a result of the intensive rehabilitation therapy program, that will be of practical value to improve the patient’s functional capacity or adaptation to impairments)
  • Require physician supervision by a rehabilitation physician, with face-to-face visits at least three (3) days per week to assess the patient both medically and functionally and to modify the course of treatment as needed
  • Require an intensive and coordinated interdisciplinary team approach to the delivery of rehabilitative care

It is important to note that the improper payment rate does not measure fraud. Instead, it estimates the payments that did not meet Medicare coverage, coding, and billing rules. The Medicare FFS improper payment rate includes instances where reviews could not be completed due to no or insufficient documentation, improper payments of all dollar amounts (e.g., no dollar threshold under which errors will not be cited), and improper payments caused by policy changes as of the effective date of the new policy (e.g., no grace period permitted).

Common Inpatient Rehabilitation Therapy Services Errors

  • Documentation does not support medical necessity
  • Missing, incomplete, or illegible signature
  • Coding errors
  • Insufficient documentation or no documentation

What Do I Need to Know to Prevent Errors?

  • The rehabilitation physician must sign and date the preadmission screening before the patient is admitted to the IRF
  • Therapy provided in the IRF should be provided primarily one-on-one with a therapist
  • Use group treatment as an adjunct to the individual treatment when it is well-documented in the patient’s medical record that this better meets the patient’s needs
  • Submit claims in accordance with CMS billing instructions for IRFs
  • Report the correct patient discharge status code
  • Submit the IRF-PAI data to the CMS National Assessment Collection Database by the 27th calendar day (17 days plus a 10-day grace period) from the date of the inpatient’s discharge

Educational References and Resources





Last Updated: 01/17/2019