Rehab’s solution to 75% rule could be costly

Transfer rule may affect facilities

Health care consultant Fran Fowler says the rehab field is making a huge mistake. Two huge mistakes, actually, which could wind up costing the industry millions of dollars and forcing hospitals to close acute rehab units. One of them has to do with the 75% rule; the other relates to an overlooked proposal by the Centers for Medicare & Medicaid Services (CMS) for acute care hospitals that has the potential to reshape the future of rehab, she says.

Fowler, the president of Fowler Health Affiliates in Atlanta, agrees with the loud and clear message the rehab field has sent to CMS in recent months regarding the 75% rule. "I think you should get paid regardless of the diagnosis; you shouldn’t be held to a 75% rule," Fowler says. "But rehab is making a serious mistake. They will get what they want, but the pot of money is not going to grow to pay for it."

The rehab field presented a united front at the town hall meeting CMS held in May to discuss the 75% rule for payment as an inpatient rehab facility. The industry’s overwhelmingly preferred solution to the problem is for CMS to to determine compliance with the rule by using the 21 rehabilitation impairment categories (RICs) from the prospective payment system, instead of using the original "HCFA-10" categories. CMS did not appear likely to favor that solution, so the rehab field is backing legislation co-sponsored by U.S. Rep. Frank LoBiondo (R-NJ) that would require it.

"If the legislation is passed, what no one in the industry has recognized is that there is a pool of money CMS has under a Republican Congress, and they’re not going to give more money for rehab," Fowler says. "The folks at CMS are going to have to take the pool of money and divide it over more people and more CMGs [case mix groups]. They’re going to have to reduce the payment on every CMG. This is a congressional edict. They don’t have any more money."

Fowler points out that LoBiondo’s bill does not ask for an increase in money to pay for the additional RICs. "The amount of money paid per RIC will drop dramatically, because they’ve only got a total number of dollars to spend," she says. "No one ever looks at what the government constraints are. CMS will not have a choice."

Fowler says the industry should have asked CMS to recognize the RIC for hips and knees and to form an advisory committee to see how CMS could achieve equitable payment for all the RICs. Instead of using a 75% rule, Fowler suggests hospitals should validate the rule that requires rehab patients to have three hours of therapy, five days a week.

"All CMS has to do is have people document that patients have received those hours, regardless of their DRG [diagnosis-related group]," she says. "If people had to do that, you would get away from the rehab providers who don’t provide three hours of therapy a day. There are a number of them, sometimes because of scheduling problems or patients refusing therapy. The people who really can’t tolerate or won’t cooperate with the three-hour therapy get moved to the right level of care.

"CMS is saying the only way to distinguish rehab from acute care is the 75% rule. But the two differences really are the hours of nursing care and hours of therapy," Fowler explains. "It’s called acute rehab because these people have tremendous rehab needs that can’t be met anywhere else. If they can measure it that way for skilled, I don’t know why they can’t do it for acute. No one has ever measured it."

Fowler fears that if the legislation passes, more hospitals will decide to open rehab units. "But when they change the payment, you will see everyone’s mouths drop open," she says. "I agree the 75% rule is ridiculous, but the industry’s solution is not the answer. No one will be able to make money in rehab, and hospitals will end up losing acute rehab. That’s where the industry can shoot itself in the foot."

Another potential problem for rehab that has been overlooked in the hue and cry over the 75% rule is a proposed rule published in the June 9 Federal Register that would add 19 DRG codes, several of which apply to rehab, to the transfer rule for acute care hospitals. The transfer rule penalizes acute care hospitals if they discharge patients under these DRGs to post-acute care earlier than the desired length of stay. Hospitals receive only a per diem amount if those patients are discharged early.

"If hospitals keep these patients for the full length of stay, some won’t go to rehab," Fowler says. "Others will go to rehab more functional, and that means rehab will get less dollars. Or you will see an increase in the volume for skilled care. It has a negative impact on acute rehab and a positive impact on skilled care rehab."

Most people in the rehab industry have not paid attention to this information because, on the surface, it applies to acute care. "They only read the rules that apply to rehab; they haven’t read this one," Fowler says. "They won’t feel it initially. They will feel it as they look out one or two years."

The problem CMS is trying to address with the transfer rule is summed up in this example from Fowler: A hospital might be paid $10,000 by CMS for a case with a 10-day length of stay. But if the hospital gets the patient well and discharges him or her in five days, then the hospital’s cost is only $5,000. If the patient is discharged to post-acute care, CMS might incur an additional cost of, say, $9,000 for that level of care.

"CMS just spent $19,000 on somebody, and you made $5,000 on that. You get to keep the rest of the money. But Medicare says, No you don’t, not if you’re pushing them out early and shoving them into acute rehab,’" Fowler says. "It’s legitimate, what they’re thinking. There are people out there who could game the system. CMS thinks people really plan these events, but I don’t think it happens that way."

Fowler says the federal government needs to look at the whole continuum of care before forcing patients to stay longer in an acute setting. "Because so many of the beds are filled, more and more acute care hospitals are going to have to build more facilities to accommodate the demand for Medicare patients," she says. "If we could flow patients through the continuum to open up more beds so we don’t have to spend that money, have not we done the better thing for the community?"

For patients who need comprehensive rehab, acute care is the worst place to be, Fowler says. "They are not staffed and put together to manage a rehab model of care. What you’re going to do is have more fragmented care, and the people who would really get the functional gains from acute rehab are not going to get them."

Nosocomial infections also are a problem. "That’s the biggest gamble. I’d rather pay somebody else to do the rehab and not have to deal with the infections," she says. "You can do your darndest to protect people, but they are in a less-than-optimal physical condition, and those bugs just love living in the hospital. It is not in the best interest of anyone to be in acute care one moment longer than they have to be."

Fowler’s advice for acute rehab staff is to stay on top of what happens with the transfer rule. She advises learning the length of stay that Medicare wants for your patients when they are in acute care, and make sure your hospital is meeting those criteria. She also suggests meeting with the hospital’s finance department to determine the financial implications of moving patients from acute care to rehab earlier. "If you bring someone to rehab, is there somebody else waiting for that acute bed that you could put in there? Convince the hospital it makes sense to give you patients early if they can make up revenue by filling that bed. That will help ensure your population base." 

Need more information?

Fran Fowler, President, Fowler Health Affiliates, 2000 RiverEdge Parkway, Atlanta, GA 30038. Telephone: (770) 261-6363. E-mail: