Medicare Releases Proposed Inpatient Rehabilitation Facility and Hospital Regulations for FY2015

May 13, 2014

The Centers for Medicare & Medicaid Services (CMS) proposed Medicare regulations for acute hospitals, long-term care hospitals (LTCH), and inpatient rehabilitation facilities (IRFs), to be effective October 1, 2014. Of approximately 2,200 IRFs, about 2,000 are certified units within acute hospitals.

Acute Hospitals and Long-Term Care Hospitals (LTCHs)

The "2-Midnight Rule" classifies a patient as an inpatient after having been in observation status for 2 nights. CMS notes that suggestions regarding exceptions to the 2-Midnight rule can be sent to CMS via written correspondence or e-mailed to with "Suggested Exceptions to the 2-Midnight Benchmark" in the subject line. CMS is responding to suggestions through postings on the CMS website or manual instruction, rather than in regulation. The feedback should address whether there are "rare and unusual exceptions to the rule." Speech-language pathologists and audiologists should understand that if a patient is not an inpatient, then all Part B outpatient rules apply.

The payment update for acute hospitals is proposed at 1.3%; the LTCH update is 0.8%.

Inpatient Rehabilitation Facilities

The proposed payment increase is 2.1%.

CMS proposes to require the recording of how much and what type of therapy patients receive per week, similar to the current SNF requirement. Beginning with discharges on October 1, 2015, the IRF patient assessment instrument (IRF-PAI) that has been in place since 2002 will include fields for individual, group, or co-treatment minutes. The intent is to eventually determine an appropriate limit to the amount of group therapy provided.

The diagnostic code list used for the "60% rule," which requires 60% of discharges to be from a published list of diagnosis codes, will undergo mapping to ICD-10-CM but will not go into effect until the October 1, 2015, ICD-10-CM conversion date. CMS used the General Equivalence Mappings tool to convert ICD-9-CM to ICD-10-CM. The proposed conversion can be found on the FY 2015 IRF PPS Proposed Rule Data Files page.

The diagnoses include stroke, spinal cord injury, brain injury, neurological disorders, and burns.


Part A inpatient stays are paid for Medicare beneficiaries under a Prospective Payment System (PPS), which sets payment rates for inpatient stays based on a daily rate, diagnosis, and severity of illness. Each setting has a payment classification and rate system that is updated annually. The proposed rules are issued with a 60-day comment period, are finalized, and go into effect in October.

CMS Resources

Please contact the health care economics and advocacy team at for questions regarding the proposed rules.

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