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Insights and Trends

CMS 2023 Final Rule Recap: Its Impact on Your Rehabilitation Hospital

The Centers for Medicare and Medicaid Services (CMS) recently released the Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) for fiscal year (FY) 2023. The payment rule will take effect for cost report periods beginning on or after October 1, 2022 for all rehabilitation units and freestanding hospitals.

The key takeaways from CMS’ final rule on IRFs include:1,

    • Requirement that the IRF-patient assessment instrument be completed on all patients, regardless of payer, beginning Oct. 1, 2024. This is delayed from the proposed Oct. 1, 2023, reporting date.


    • A 3.7% net increase to the IRF standard federal Medicare rate for providers in compliance with the CMS IRF quality reporting program, resulting in a $275 million increase in IRF payments.
      • This increase is higher than the 2.0% proposed net increase as a direct result of comments received urging CMS to more accurately reflect inflationary pressures, such as significant labor costs experienced by IRFs.


    • The standard IRF conversion rate was increased from the current $17,240 to $17,878 after October 1, 2023.


    • Unchanged labor-related share with CMS maintaining the current 72.9%.


    • Updated case mix group relative weights using updated FY 2021 claims and FY 2020 cost report data.


    • Permanent 5% cap on annual wage index decreases to smooth year-to-year changes in providers’ wage index payments.


  • A 32% increase in the outlier threshold amount from the current $9,491 to $12,526 to maintain estimated outlier payments at 3% of total estimated aggregate IRF PPS payments.
    • This will result in fewer cases being eligible for an outlier payment.

The final payment rule is stronger and more favorable to rehabilitation hospitals than was initially proposed by CMS. It is evident that the federal agency took into consideration the input and feedback from the industry, particularly in regard to significantly increased costs experienced by healthcare providers, in their decision to increase standard Medicare rates by a more robust 3.7%. Additionally, the one-year delay in facilities completing IRF patient assessments on all patients will provide a more appropriate amount of time to prepare for the new requirement.

Click here to access the full CMS fact sheet


  1. Centers for Medicare & Medicaid Services. (2022, July 27). Fact sheet fiscal year 2023 inpatient rehabilitation facility prospective payment system final rule (CMS-1767-F). CMS. Retrieved August 11, 2022, from