Department of Health and Human Services, Centers for Medicare and Medicaid Services: Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2010

GAO-09-974R, Aug 24, 2009

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GAO reviewed the Department of Health and Human Services, Centers for Medicare and Medicaid Services' (CMS) new rule on the Medicare Program and the inpatient rehabilitation facility prospective payment system for federal fiscal year 2010. GAO found that (1) the final rule updates the payment rates for inpatient rehabilitation facilities (IRF) for fiscal year 2010 (for discharges occurring on or after October 1, 2009, and on or before September 30, 2010); and (2) CMS complied with applicable requirements in promulgating the rule.

Department of Health and Human Services, Centers for Medicare and Medicaid Services: Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2010, GAO-09-974R, August 24, 2009

B-318537

August 24, 2009

The Honorable Max Baucus
Chairman
The Honorable Charles E. Grassley
Ranking Minority Member
Committee on Finance
United States Senate

The Honorable Henry A. Waxman
Chairman
The Honorable Joe L. Barton
Ranking Minority Member
Committee on Energy and Commerce
House of Representatives

The Honorable Charles B. Rangel
Chairman
The Honorable Dave Camp
Ranking Minority Member
Committee on Ways and Means
House of Representatives

Subject: Department of Health and Human Services, Centers for Medicare and Medicaid Services: MedicareProgram; Inpatient Rehabilitation Facility Prospective Payment System forFederal Fiscal Year 2010

Pursuant to section801(a)(2)(A) of title 5, United States Code, this is our report on a major rulepromulgated by the Department of Health and Human Services, Centers forMedicare and Medicaid Services (CMS), entitled Medicare Program; InpatientRehabilitation Facility Prospective Payment System for Federal Fiscal Year 2010(RIN: 0938-AP56). We received the ruleon July 31, 2009. It was published inthe Federal Register as a final ruleon August 7, 2009. 74 Fed. Reg. 39,762.

The final rule updates the payment rates for inpatientrehabilitation facilities (IRF) for fiscal year 2010 (for discharges occurringon or after October 1, 2009, and on or before September 30, 2010) as requiredunder section 1886(j)(3)(C) of the Social Security Act (Act). Section 1886(j)(5) of the Act requires theSecretary to publish in the FederalRegister on or before the August 1 that precedes the start of each fiscalyear, the classification and weighting factors for the IRF prospective paymentsystems case-mix groups and a description of the methodology and date used incomputing the prospective payment rates for that fiscal year.

The final rule is effectiveon October 1, 2009, except for the amendments to three provisions that areeffective January 1, 2010. TheCongressional Review Act requires major rules to have a 60-day delay in theireffective date following publication in the FederalRegister or receipt of the rule by Congress, whichever is later. 5 U.S.C. sect.801(a)(3)(A). The final rule was not published in the Federal Register until August 7, 2009,which means that the final rule will not have the required 60-day delay in itseffective date.

Enclosed is our assessment of the CMSs compliance withthe procedural steps required by section 801(a)(1)(B)(i) through (iv) of title5 with respect to the rule. Notwithstandingthe required 60-day delay in effective date under the Congressional Review Act,our review of the procedural steps taken indicates that CMS complied with theapplicable requirements.

If you have any questions about this report or wish tocontact GAO officials responsible for the evaluation work relating to thesubject matter of the rule, please contact Shirley A. Jones, Assistant GeneralCounsel, at (202) 512-8156.

Robert J. Cramer
Managing Associate General Counsel

Enclosure

cc: Annie Lamb
Regulations Coordinator
Department of Health and
Human Services


ENCLOSURE

REPORT UNDER 5U.S.C. sect.801(a)(2)(A) ON A MAJOR RULE
ISSUED BY THE
DEPARTMENT OF HEALTH AND HUMAN SERVICES,
CENTERS FOR MEDICARE AND MEDICAID SERVICES
ENTITLED
"MEDICARE PROGRAM; INPATIENT REHABILITATION FACILITY
PROSPECTIVE PAYMENT SYSTEM FOR
FEDERAL FISCAL YEAR 2010"
(RIN: 0938-AP56)

(i) Cost-benefit analysis

CMS prepared a cost-benefit analysis for this final rule andestimates that the total impact of these charges for fiscal year 2010 will be anet increase of $145 million in payments to IRF providers. Overall, the estimated payments per dischargefor IRFs in fiscal year 2010 are projected to increase by 2.5 percent, comparedwith those in fiscal year 2009. IRFpayments are estimated to increase 2.7 percent in urban areas, and 1.1 percentin rural areas, per discharge compared with fiscal year 2009.

(ii) Agency actions relevant to the RegulatoryFlexibility Act, 5 U.S.C. sections603-605, 607, and 609

CMS concluded that this final rule will have a significantimpact on a substantial number of small entitles, and prepared a finalregulatory flexibility analysis for this rule.According to CMS, because it lacked data on individual hospitalreceipts, it could not determine the number of small proprietary IRFs or theproportion of IRFs revenue that is derived from Medicare payments. Consequently, CMSs conclusion is based onthe assumption that all IRFs (an approximate total of 1,200 IRFs, of whichapproximately 60 percent are nonprofit facilities) are considered smallentities and that Medicare payment constitutes the majority of their revenue. As stated above, CMS estimates that this finalrule will increase estimated payments to IRFs by about 2.5 percent.

(iii) Agency actions relevant to sections 202-205 ofthe Unfunded Mandates Reform Act of 1995, 2 U.S.C. sections1532-1535

CMS states that this final rule will not impose annualspending costs on state, local, or tribal governments, in the aggregate, or bythe private sector, of $133 million.

(iv) Other relevantinformation or requirements under acts and executive orders

Administrative ProcedureAct, 5 U.S.C. sections551 et seq.

This final rule was issuedusing the notice and comment procedures found at 5U.S.C. sect. 553. On May 6, 2009, CMS published a Notice ofProposed Rulemaking in the FederalRegister. 74 Fed. Reg. 21,052. In response, CMS received approximately 686timely responses, which are addressed in the final rule. 74 Fed. Reg. 39,765.

Paperwork Reduction Act, 44 U.S.C. sections3501-3520

This final rule contains new information collectionrequirements. In this final rule, CMS isproviding a 30-day public comment period for these new information collectionsas required by the Paperwork Reduction Act.

Statutory authorization for the rule

CMS states that it is promulgating this final rule underthe authority in sections 1102, 1862, and 1871 of the Social Security Act, 42U.S.C. sections 1302, 1395y, and 1395hh.

Executive Order No. 12,866 (Regulatory Planning andReview)

CMS determined that this final rule was an economicallysignificant regulatory action under the Executive Order, and submitted therule to the Office of Management and Budget for review.

Executive Order No. 13,132 (Federalism)

CMS states that this final rule will not have asubstantial effect on state and local governments, preempt state law, orotherwise have a federalism implication.