CMS' proposed rule for updating inpatient rehabilitation hospital rates for FFY04 contains a bombshell that poses a serious threat to the Medicare revenue of virtually every rehabilitation hospital and unit. In order to be excluded from acute care PPS, rehabilitation hospitals and units must have 75 percent of their discharges fall within 10 diagnoses. CMS has analyzed its data and has found that currently less than 15 percent of all excluded rehabilitation hospitals or units meet the "75 percent" test.  CMS has stated that it will instruct intermediaries to enforce the "75 percent rule" for cost reporting periods beginning on or after October 1, 2003.  Knee replacement and hip replacement patients are not included in the ten diagnoses that count toward meeting the 75 percent requirement.  It is not clear what quantitative or clinical data, if any, that CMS is relying upon to justify its decision not to expand the list of diagnoses that can be counted toward the 75 percent.

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