Healthcare Headlines from the Hill: August Edition

Stay ahead of the latest regulatory shifts and healthcare breaking news with Headlines from the Hill.

In this month’s edition you will find:

• Review Choice Demonstration Updates for Inpatient Rehabilitation Facilities.
• CMS Releases 2027 IRF Final Rule.
• CMS Releases 2027 Inpatient Psychiatric Facility Final Rule.
• Behavioral Health Best Practices Pledge: Released by HHS.
  

Review Choice Demonstration Updates for Inpatient Rehabilitation Facilities.

Recent contractor updates on the Inpatient Rehabilitation Facility (IRF) Review Choice Demonstration (RCD) reveal shifting enforcement focus and region-specific documentation hurdles. For hospital leaders, these operational trends directly impact revenue cycle stability and claim affirmation rates. Failing to meet contractor expectations risks immediate claim non-affirmations, delayed reimbursement and increased administrative burden as the program expands.

Key focus areas:

• Preadmission screening (PAS) rigor: Scrutiny is rising in CA (Noridian) and AL (Palmetto) over PAS completeness, 48-hour timeliness updates and medical necessity. Notably, Noridian is citing missing cognitive status, even though it isn't a formal requirement.
  
• Intensive therapy and medical necessity: A top cause of non-affirmations across all regions remains in insufficient documentation proving the patient's clinical ability to participate in and benefit from intensive therapy.
  
• Physician supervision compliance: Rehabilitation physician supervision rules have re-emerged as a major non-affirmation trigger, with TX (Novitas) auditing weekly face-to-face visit requirements during initial 3-day pre-claim reviews.

Hospitals must work to ensure clinical and intake teams closely audit pre-admission screening workflows and physician encounter logs to meet evolving MAC expectations and protect IRF reimbursement. As regulatory oversight intensifies and contractor scrutiny shifts, partnering with a dedicated post-acute expert is more critical than ever to maintain compliance, streamline documentation workflows and safeguard IRF revenue streams.

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CMS Releases 2027 IRF Final Rule.

The CMS Fiscal Year (FY) 2027 IRF Final Rule pairs a positive financial expansion with strict operational mandates. While a net 2.3% payment increase will bring an estimated $340 million into post-acute care, hospital leadership must actively manage heightened clinical and administrative compliance burdens to capture these gains and protect bottom lines.

Other key operational updates and financial implications include:

• Stricter clinical mandates: These mandates will enforce therapy initiation within 36 hours of admission and require initial Interdisciplinary Team (IDT) meetings by day four, with mandatory follow-ups every seven days.
• Compressed quality reporting: Starting in FY 2029, Quality Reporting Program (QRP) submission windows will shrink from 4.5 months to ~45 days, risking a 2-percentage-point payment penalty for non-compliance.

Read the full CMS fact sheet

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CMS Releases 2027 Inpatient Psychiatric Facility Final Rule.

The CMS FY 2027 Inpatient Psychiatric Facility (IPF) Final Rule offers critical short-term operational flexibility alongside a 2.3% payment increase, delivering an estimated $60 million in additional Medicare funding. For hospital leaders, these phased implementation timelines provide a valuable runway to update clinical documentation and intake workflows before stricter reporting requirements and outlier caps take full effect.

Additional updates include:

• Phased IPF-PAI rollout: Mandatory reporting for the new Patient Assessment Instrument (IPF-PAI) has been pushed to July 1, 2028, following a voluntary period starting October 1, 2027 (penalty-free). CMS also reduced assessment items and lowered initial compliance thresholds to 50%.
• Delayed outlier cap and measure relief: The 20% facility-level outlier payment cap is delayed until FY 2028 and exempts facilities with under 50 annual Medicare stays (affecting just 0.8% of providers). CMS also removed the SUB-2/2a and TOB-2/2a quality reporting measures.

Read the full CMS fact sheet

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Behavioral Health Best Practices Pledge: Released by HHS.

The U.S. Department of Health and Human Services (HHS) Secretary Robert F. Kennedy, Jr. announced a pledge signed by insurers, medical societies and providers to advance behavioral health best practices.

The commitments include timely access to care, evidence-based treatment, quality measurement, patient-centered and recovery-focused care, and whole-person care that addresses comorbidities like HIV/HCV alongside behavioral health treatment. The pledge is a voluntary agreement among the participating organizations, announced as part of a roundtable discussion at HHS headquarters. It supports the administration's Great American Recovery initiative, co-chaired by Secretary Kennedy and White House Senior Advisor Kathryn Burgum. It is described as consistent with the President's executive order on addiction and public safety. HHS has not indicated next steps beyond the pledge itself, such as whether it will inform future rulemaking or CMS quality measures.

For hospitals the pledge's emphasis on quality measurement and outcomes tracking may be useful context for understanding where behavioral health priorities are headed at the federal level.

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