CMS Pub. 100-04, ch. 3, § 140.2.1

Under the BBA, the Federal fiscal year in which a facility's cost reporting period begins

determines which transition period percentages apply. The first transition period

percentages are applicable for cost reporting periods beginning during Federal fiscal year

2001. The second transition period percentages are applicable to cost reporting periods

beginning during Federal fiscal year 2002, that is, periods beginning on or after October 1,

2001, and before October 1, 2002. For cost reporting periods beginning during Federal

fiscal year 2003 and after, payment is based on 100 percent of the adjusted Federal

prospective payment.

Since CMS is implementing the IRF PPS for discharges that occur during the IRF's cost

reporting period that begins on or after January 1, 2002, IRFs are phased directly into the

second transition period, where payment will be based on 66 2/3 percent of the PPS

payment and 33 1/3 percent of the TEFRA payment. A facility will continue to be paid

under the TEFRA (reasonable cost-based) system for its entire cost reporting period

beginning prior to January 1, 2002.

In addition, §305 of the BIPA 2000 states facilities may elect to be paid 100 percent PPS

payment, rather than payment based on the transition method. If a facility chooses not to

be paid under the transition method, they must notify their A/B MAC (A) no later than 30

days prior to its first cost reporting period for which the IRF PPS applies to the facility.

The request to make the election must be made in writing to the Medicare A/B MAC (A)

for the facility. The A/B MAC (A) must receive the request on or before the 30th day

before the applicable cost reporting period begins, regardless of any postmarks or

anticipated delivery dates. Requests received, postmarked, or delivered by other means

after the 30th day before the cost reporting period begins will not be approved. If the 30th

day before the cost reporting period falls on a day that the postal service or other delivery

sources are not open for business, the facility is responsible for allowing sufficient time

for delivery of the request before the deadline. If a facility's request is not received or not

approved, payment will be based on the transition method.