Measuring function for medicare inpatient rehabilitation payment

Health Care Financing Review, Spring, 2003 by Grace M. Carter, Daniel A. Relles, Gregory K. Ridgeway, Carolyn M. Rimes

A comparison of the FRGs with the FIM[TM]-FRGs shows that the FIM[TM]-FRGs were better predictors of length of stay (LOS). The FRG system explained 18.3 percent of the variance in LOS (Harada, Kominski, and Sofaer, 1993), but the FIM[TM] FRG explained 31 percent of the variation (Stineman et al., 1994). Subsequent work showed the FIM[TM]FRGs were similarly good predictors of other measures of resource use (charges and accounting costs). The functional measures in the FIM[TM] appeared to strengthen the predictive ability of FRGs to meet the assessment criteria:

"The degree to which the defined patient groups explain variation in resource use, the predictive gradient across groups within the system, the homogeneity of individual groups and the stability of predication in new data." (Stineman, 1995.)

Case-mix measurement is a scientific and clinical process that identifies patient characteristics that predict outcomes of interest such as LOS, or the costs of an episode. The next step in the research was to assess the feasibility of using the FIM[TM] for payment. Because stakeholders have varying values, a payment system must include political and administrative considerations in addition to scientific ones. In 1994, CMS embarked on a series of studies to assess the feasibility of developing a PPS for IRFs using an updated version of the FIM[TM]-FRGs to account for impairment and functional status (Carter, Relles, and Buchanan, 1997; Carter et al., 1997). These studies concluded that development of a PPS was feasible.

IRF PPS MANDATE

The law that governs the IRF PPS, as amended by the Balanced Budget Refinement Act of 1999, mandated the creation of classes of patient discharges or FRGs (referred to as a case-mix group) "based on impairment, age, comorbidities, and functional capability of the patient and such other factors as the Secretary deems appropriate to improve the explanatory power of functional independence measure-function related groups." Each case-mix group was to be assigned "... a weighting factor that reflects the relative facility resources used for patients classified within the group as compared with patients classified within other groups ..." (Federal Register, 2001). Payment rates are proportional to these weights.

DATA AND VARIABLE DEFINITIONS

Data Sources

Our primary data sources are the Medicare Provider Analysis and Review (MEDPAR) File which contains one record for each inpatient discharge paid by Medicare, the FIM[TM] data recorded by a subset of IRFs, and the annual cost reports from the Hospital Cost Report Information System. The FIM[TM] data come from the UDSmr and HealthSouth. (4) In developing parameters for the IRF PPS, we used data from 1996-1999. In this article, however, we restrict our analyses to calendar year 1999 data.

The MEDPAR and FIM[TM] Files that described the same discharge were linked using a probability matching algorithm (Carter et al., 2002). The algorithm had two steps. The first step determined the Medicare provider number(s) corresponding to each facility code in the FIM[TM] database. The second step matched FIM[TM] and MEDPAR patients within paired facilities using a probabilistic match algorithm. In addition to hospital identity, the variables used were admission and discharge dates, ZIP Code, age at admission, sex, and race. All these variables are on each of the files, although sometimes in a slightly recoded form.