AAPM&R Post-Acute Care (PAC) Toolkit

Payment: Facility

This content was last updated in 2019. AAPM&R is currently in the process of refreshing these webpages.

• Inpatient Rehabilitation Facility
• Skilled Nursing Facility
• Long Term Acute Care Hospital
• Home Health

Inpatient Rehabilitation Facility

The payment rates for IRFs are federally mandated by the IRF Prospective Payment System (IRF PPS). Medicare pays IRFs a predetermined per discharge rates. This rate is based primarily on the patient’s condition (diagnoses, functional and cognitive statuses, and age) and market area wages. Under the IRF PPS, these Medicare payments are allocated to overhead costs (associated with operating the facility and the capital expenditures) of services provided.[i]

For an IRF claim to be considered reasonable and necessary, there must be a reasonable expectation that the patient meets the eligibility requirements. There are documentation requirements to demonstrate that the patient for whom the IRF seeks payment is reasonably expected to meet the eligilbity requirements at the time of admission. The patient's medical record at the IRF must contain the following documents:

• As of October 1, 2020, a comprehensive preadmission screening that includes prior level of function, expected level of impreovement, expected length of time to achieve that level of improvement, risk for clinical complications, conditions that caused the need for rehabilitaiton, combinations of treatments needed, and anticipated discharge destination. As of October 1, the preadmission screening documentation does not need to include expected frequency and duration of treatment in the IRF, any anticipated post-discharge treatments, other information releant to the patient's care needs.
• An individualized overall plan of care for the patient that is developed by a rehabilitaiton physician with input from the interdisciplinary team within four days of the patient's admission to the IRF and is retained in the patient's medical record at the IRF. 

As of October 1, 2020, the post-admission physician evaluation document is no longer required.[ii] 

>>> Jump to the next topic for Inpatient Rehabilitation Facilities

Skilled Nursing Facility

The payment rates for SNFs are federally mandated by the SNF Prospective Payment System (SNF PPS). Medicare pays the facility a pre-determined daily rate for each day a beneficiary is in care for skilled nursing, rehabilitation, and select other services. These Medicare payments are allocated to overhead costs (associated with operating the facility and the capital expenditures) of services provided. Certain ancillary services, characterized by being high-cost and low-probability, that are paid separately.[iii]

The Patient Driven Payment Model (PDPM) is replacing the Resource Utilization Groups, version IV as of October 1, 2019. The PDPM is a more specific analysis of patient condition and needs for different therapies, which will indicate payment level. The patient payment to the facility can change over time. The PDPM is tied to how much is spent on a patient each day. Read more.

Under the PDPM, CMS finalized revisions to the PPS assessment schedule to reflect elimination of all scheduled assessments after the initial 5-day, Medicare-required assessment and to instead state that the assessment schedule must include performance of an initial patient assessment no later than the 8^th day of post-hospital SNF care. The 8^th day reflects a 5-day assessment window plus a longstanding 3-day grace period. This is consistent with PDPM policies finalized last year.

>>> Jump to the next topic for Skilled Nursing Facilities

Long-Term Care Hospital

The payment rates for LTCHs are federally mandated by the LTCH Prospective Payment System (LTCH PPS). Under the LTCH PPS, Medicare pays for overhead costs incurred by the facility in services provided.[iv]

>>> Jump to the next topic for Long Term Acute Care Hospitals

Table 2: This table summarizes the facility payment regulations of each PAC facility at a high level.

4 PAC and 4 PPS

Home Health

Under the Home Health Prospective Payment System (HH PPS), Medicare pays home health agencies a predetermined base rate that is adjusted for health condition, beneficiary care needs, and the regional wage. The adjustments based on the health condition and care needs is called the “case-mix adjustment.” The HH PPS provides payment in 60-day episode increments. There are no limits to the number of episodes paid for by Medicare.[v] As of January 1, 2020, payment will be provided in 30-day increments.[vi]

The HH PPS 2020 final rule implemented the Patient-Driven Groupings Model (PDGM), effective January 1, 2020. The PDGM, a revised case-mix adjusment methodology. The PDGM relies more heavily on patient information, such as clincial characteristics, with the intent to place patients into payment categories and elimate the use of therpay service thresholds.[vii]