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Health Care Costs and Financing

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New prospective payment system for inpatient rehabilitation facilities considers patients' severity of disability

The Centers for Medicare & Medicaid Services has implemented an inpatient rehabilitation facility prospective payment system (IRF-PPS) based on case-mix groups (CMGs). The CMGs, now almost identical in structure to the Functional Independence Measure-Function-Related Groups (FIM-FRGs), will measure patients' functional severity by the FIM instrument. Inpatient rehabilitation admission decisions will become more equitable with Medicare payments based on CMGs because admission will be driven more by clinical need, according to Margaret G. Stineman, M.D., of the University of Pennsylvania. Her work was supported in part by the Agency for Healthcare Research and Quality (HS07595).

In a recent commentary, Dr. Stineman points out that, because current payments based on TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) account for neither diagnoses nor severity of disability, there are strong economic incentives against admitting patients with complex diagnoses or severe disabilities. By adjusting for patients' primary impairments, medical complexity, and functional severity, payments based on CMGs will enhance access to care by providing greater levels of reimbursement to facilities caring for patients with greater clinical needs.

Continuous quality improvement, monitoring, and program evaluation strategies developed for the FIM-FRGs can be easily adapted to CMGs. The CMGs are distinct from the DRGs (diagnosis-related groups) and from the Resource Utilization Groups' measures for acute- and long-term care, respectively. From a policy standpoint, this delineates rehabilitation efforts as separate from the other aspects of care.

More details are in "Prospective payment, prospective challenge," by Dr. Stineman, in the December 2002 Archives of Physical Medicine and Rehabilitation 83, pp. 1802-1805.

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