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Insights and Trends

CMS Final Rule Recap: What Rehabilitation Hospitals Can Expect heading into 2024

CMS recently released the Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS), for fiscal year (FY) 2024. The rule includes several changes that will impact IRFs and acute rehabilitation units (ARUs). It is set to go into effect on October 1, 2023.

Key takeaways of the rule include:1

  • Increased payment rates: CMS is increasing IRF PPS payment rates by 4.0%, or $355 million, for FY 2024. The increase is a result of several factors, including inflation and changes in the IRF market basket. Not only will the payment rate increase help offset some of these rising costs, but it will help ensure IRFs can continue providing high-quality care to patients experiencing medically complex conditions.
  • New quality measures: CMS is adding various new quality measures to the IRF Quality Reporting Program (QRP). Two of these measures include:

      • IRF Patient Assessment Instrument (PAI) 90 Goal: This assesses the percentage of patients who achieve a 90% or greater improvement in their IRF-PAI score at discharge. Implementation begins October 1, 2024.

      • Discharge Function Score: This assesses the percentage of patients who meet or exceed an expected discharge function score and utilize mobility/self-care items already collected on the IRF-PAI. Implementation is set to begin with the FY 2025 QRP.

        These new quality measures are projected to help IRFs improve the quality of care provided in their facility or unit as it shifts the focus away from quantity of care episodes to quality of patient outcomes with a mission to reduce readmission risk and excess care cost.
  • Modifications to excluded units: The modified regulations will allow hospitals to open a new rehabilitation unit and begin being paid under the IRF PPS at any time during the cost reporting period. Historically, hospitals could only open a new unit at the start of a cost reporting period.

    These modifications will make it easier for hospitals to open new units, therefore alleviating administrative burdens and increasing critical inpatient rehabilitation access to patients.

In summary, the final payment rule is stronger and more favorable to rehabilitation hospitals and acute rehabilitation units than was initially proposed by CMS.

These revisions will help rehabilitation hospitals and units address key areas of concern amid what has been an unpredictable year in healthcare.

View the full CMS fact sheet.


  1. The Centers for Medicare and Medicaid Services. (2023, July). Fact sheet fiscal year 2024 inpatient rehabilitation facility prospective payment system final rule (CMS-1781-F). CMS.

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