CMS solicits public comment for a new demonstration to offer inpatient rehab providers flexibilities and reduce Medicare fraud

Dec. 15, 2020

The Centers for Medicare & Medicaid Services (CMS) announced it is seeking public comment on a new Review Choice Demonstration (RCD) for Inpatient Rehabilitation Facility (IRF) services. This demonstration develops improved methods for the identification, investigation, and prosecution of potential Medicare fraud.

The demonstration would also help ensure the right payments are made at the right time for IRF services through either pre-claim or post-payment review; thus, protecting the Medicare Trust Fund from improper payments, reducing the number of Medicare appeals, and improving IRF compliance with Medicare program requirements.  

“This demonstration is in line with CMS’s ongoing efforts to identify and prevent fraudulent billing, protect our Medicare program and safeguard taxpayer dollars,” said CMS Administrator Seema Verma. “This new demonstration will ensure that patients receive the appropriate services for which they are covered for under Medicare and help sustain the Medicare Trust Fund.”

CMS plans to implement the demonstration in Alabama, and then expand to Pennsylvania, Texas, and California. These states were selected due to particularly high rates of improper payments for IRF services. The demonstration would begin in 2021.

An IRF provides more intensive rehabilitation medical care than a skilled nursing facility or home-based rehabilitation services.  CMS chose IRFs for a demonstration due to the potential for high rates of improper payments in these facilities, which could lead to potential fraud, waste and abuse. In fiscal year 2020, the estimated amount of improper payments to IRFs under Medicare fee-for-service was more than $2.4 billion, or 30.8percent, the second-largest amount among Medicare service areas. In 2019, The Medicare Payment Advisory Commission (MedPAC), a nonpartisan, legislative branch agency that provides the U.S. Congress with Medicare program analysis and policy advice, reported that IRFs’ marginal profit—a measure of providers’ financial incentive to expand the number of Medicare beneficiaries they serve—has risen steadily since 2009. While high profit margins are not inherently indicative of fraud, it could incentivize IRFs to increase inappropriate admissions.

The demonstration would incorporate flexibility and choice for IRFs, as well as risk-based options to reward IRFs who demonstrate compliance with Medicare IRF policies. Under the demonstration, IRFs participating in the demonstration would have an initial choice between pre-claim review and post-payment review to demonstrate compliance with Medicare program policies.

Under the pre-claim review choice, services can begin prior to the submission of the pre-claim review request and continue while the decision is being made. The pre-claim review request with required documentation must be submitted and reviewed before the final claim is submitted for payment. Under the post-payment review choice, IRFs would provide services, submit all claims for payment following their normal processes, and then submit required documentation for medical review. This would determine whether the inpatient rehabilitation services for the beneficiary complied with applicable Medicare coverage and clinical documentation requirements.

The IRF RCD would not create new documentation requirements; rather, it would require submission of the same information IRFs are currently required to maintain for Medicare payment. IRFs have flexibility to choose their path to demonstrate compliance with the applicable Medicare rules and policy requirements.

Comments on the proposed collection of information for the IRF RCD demonstration will be accepted until February 16th, 2021.  More information about how to comment is available in the Federal Register Notice at

CMS has the release.