CMS Pub. 100-04, ch. 3, § 190.8.1

The IPF PPS is phased-in over 3 years from the cost based reimbursement to the Federal

prospective payment. All IPF providers must transition over the 3-year transition period.

There is no election of 100 percent PPS in the first year.

During the transition period, payment is based on an increasing percentage of the IPF

prospective payment and a decreasing percentage of each IPF’s TEFRA-based

reimbursement rate for each case as follows:

Transition

Year

Cost Reporting

Periods

Beginning on or After

TEFRA Rate

Percentage

IPF PPS Federal Rate

Percentage

1 January 1, 2005 75 25

2 January 1, 2006 50 50

3 January 1, 2007 25 75

January 1, 2008 0 100

The 3-year transition period is separate from the annual update cycle of the IPF PPS. The

transition is effective according to cost reporting periods, but the updates to the rates take

effect July 1 of each year. For more detailed information regarding the annual update

cycle, refer to §190.4.3-Annual Update.

Although the IPF PPS is effective January 1, 2005, an individual IPF's PPS transition year

start date is the first day of the first cost reporting period that begins on or after that date.

An IPF may begin the IPF PPS as early as January 1, 2005, or as late as December 31,

2005, should a cost reporting period begin on that date.

The IPF PPS applies to claims for discharges occurring in the IPF's first cost reporting

period beginning on or after January 1, 2005. Where the IPF has already billed interim

claims for an inpatient that has benefit days remaining after the PPS implementation date,

the provider must submit a cancel bill and re-bill under the IPF PPS so that payment for

the entire stay is made under the IPF PPS.

If the provider ever had a TEFRA limit, the IPF is not a new provider and therefore will

receive the blended payment. This includes those providers that previously closed their

psychiatric units and then re-opened the psychiatric units. If the provider had a TEFRA

limit established, that TEFRA limit is updated using the rate of increase percentages in

42 CFR 413.40.

For cost reporting periods beginning in FY 1999 through FY 2002, the applicable rate-of-increase percentage is the market basket increase percentage minus a factor based on the

percentage by which the hospital’s operating costs exceed the hospital’s ceiling for the

most recently available cost reporting period.

To update the TEFRA limit for IPFs that were closed during FY 1999 through FY 2002

and then re-opened (including CAHs that were statutorily precluded from having a distinct

part unit), the rate-of-increase for these years would be the full market basket up to the cap

on the target amounts.