OIG recommends CMS launch inpatient rehabilitation facility preauthorization demonstration

November 7, 2018
Medicare Web

Most inpatient rehabilitation facility (IRF) stays might not meet Medicare coverage or documentation requirements and compliance could be improved through a preauthorization process, according to a recent Office of Inspector General (OIG) report.

Out of 220 sampled IRF stays, 175 did not meet all coverage and documentation requirements. On the basis of these results, the agency projects that Medicare paid for $5.7 billion of inappropriate or unnecessary IRF care.

The OIG’s report, released October 2, looked at IRF claims from 2013. Of those claims that did not meet coverage requirements, the most common reason was that the medical record didn’t demonstrate that the patients needed the intensive, interdisciplinary level of rehabilitation provided in an IRF. One example cited in the report was a patient who had undergone a right hip replacement without complications and was admitted to an IRF even though the patient was able to tolerate bearing weight and walk 40 feet with minimal assistance.

Most claims were also missing key pieces of required documentation including the following:

  • Comprehensive preadmission screening
  • Demonstration that the patient requires an interdisciplinary approach to care with weekly interdisciplinary team meetings led by a rehabilitation physician
  • Individualized overall plan of care developed and documented by a rehabilitation physician
  • Post-admission rehabilitation physician evaluation


The report identified several reasons for the errors. Most IRFs don’t have adequate internal controls to prevent inappropriate admissions and CMS does not require prior authorization for IRF admissions, according to the report. Other reasons include lack of CMS participation in administrative law judge hearings for IRF appeals and misalignment between cost and payment in the IRF payment system that might have created a financial incentive for inappropriate IRF admissions.

The OIG recommends that CMS establish postpayment medical reviews of IRF claims and a demonstration project requiring preauthorization for Medicare Part A IRF stays modeled on Medicare Advantage preauthorization practices. CMS agreed with these recommendations as well as the OIG’s other recommendations to reduce IRF overpayments.

The report isn’t the first time the OIG and other federal agencies have scrutinized IRF reimbursement. CMS’ Comprehensive Error Rate Testing program found that the error rate for IRFs increased from 9% in 2012 to 62% in 2016. A February OIG audit report of Memorial University Medical Center in Savannah, Georgia, found that incorrect IRF claims led to $444,458 in overpayments. Although the 2019 IRF prospective payment system final rule eased some of the documentation requirements and allows the post-admission physician evaluation to count as one of the required face-to-face physician visits, IRF stays continue to present billing compliance hurdles.