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Long Term Care Hospital and Inpatient Rehab Facility Reimbursement

As of Oct. 1, 2018, long-term care hospitals (LTCHs) and inpatient rehabilitation facilities (IRFs) began transitioning to the Centers for Medicare and Medicaid (CMS) prospective payment system (PPS), rather than receive reimbursement based on TRICARE lesser of cost or billed charges principle.

  • LTCHs – Certified as acute care hospitals, but focus on patients who, on average, stay more than 25 days.
  • IRFs – Freestanding rehabilitation hospitals and rehabilitation units in acute care hospitals that provide intensive rehabilitation programs. Patients who are admitted must be able to tolerate three hours of intense rehabilitation services per day.

Reimbursement Rates – LTCH

New LTCH admissions on or after Oct. 1, 2018, are reimbursed as follows:

  • Standard LTCH PPS payment rate: In order to receive the standard LTCH PPS rate, the LTCH admission must occur within one day of a hospital discharge, which includes discharges from military or U.S. Department of Veterans Affairs hospitals.
  • Site-neutral LTCH PPS payment rate: This lower reimbursement rate is for patients who do not use prolonged mechanical ventilation (at least 96 hours) during their LTCH stay or who did not spend three or more days in the intensive care unit during their prior acute care hospital stay, and for patients with a psychiatric or rehabilitation principal diagnosis. Medicare posts updated rates to www.cms.gov in August each year for the fiscal year (Oct. 1) update.

Reimbursement Rates – IRF

Payment for IRFs is on a per discharge basis, with rates based on such factors as patient-case mix, rehabilitation impairment categories and tiered case-mix groups. Rates may be adjusted based on the length of stay, geographic area and demographic group.

To be paid under the IRF Preferred Payment System (PPS), facilities must adhere to CMS 42 CFR 412 requirements and complete a Patient Assessment Instrument (PAI) upon admission and discharge, and supply the physician order for patient admission. This required data must be electronically encoded into a CMS-approved IRF-PAI software, such as jIRVEN,  available for free at www.cms.gov > Medicare > Inpatient Rehabilitation Facility PPS > IRF-PAI. Federal rates are updated annually.

  • The jIRVEN software allows IRFs to create an electronic IRF-PAI for each patient and produces a report with a distinct CMG number. The first character of the CMG number is alphabetic character and indicates the comorbidity tier. The last four characters of the CMG number are numeric and represent the distinct CMG number.

Acute care hospitals (or CAH) rendering IRF services must meet Subpart B of CMS 42 CFR 412 requirements for classification as an IRF in order to be reimbursed under the IRF PPS.

Submission of claim must be either Healthcare Insurance Portability and Accountability Act (HIPAA) compliant electronic claim or paper claim (UB-04) with the following codes:

  • Bill Type 11X 
  • Revenue Code 0024

Transition Period

The Defense Health Agency implemented a transition period beginning Oct, 1, 2018, to buffer the financial impact for LTCHs and IRFs:

  • For the first 12 months, the TRICARE PPS allowable cost will be 135 percent of Medicare PPS amounts.
  • For the second 12 months, the TRICARE PPS allowable cost will be 115 percent of the Medicare PPS amounts.
  • For the third 12 months, and subsequent years, the TRICARE PPS allowable cost will be 100 percent of the Medicare PPS amounts.


The following are excluded from this change:

  • Hospitals with a waiver exempting them from Medicare’s Inpatient Prospective Payment System (IPPS) or the TRICARE DRG-based payment system
  • Children’s and VA hospitals
  • Costs of physician services or other professional services
  • Custodial or domiciliary care, even if rendered in an otherwise authorized LTCH