CMS published a final rule on August 6, 2013 that updates Medicare IRF PPS rates for FY 2014. CMS is applying a 1.8% payment update to IRF PPS rates for FY 2014, derived from a 2.6% market basket update that is reduced by a 0.5 percentage point multi-factor productivity adjustment and an additional 0.3 percentage point reduction as required by the ACA. This results in a standard payment conversion factor of $14,846 for discharges in FY 2014, up from the FY 2013 conversion factor of $14,343. CMS also decreased the outlier threshold from $10,466 to $9,272, which has the effect of increasing IRF PPS payments by an estimated 0.5%. In addition, CMS is revising the list of diagnosis codes that are used to determine presumptive compliance under the “60 percent rule” and qualify a facility to be excluded from the IPPS and be paid under the IRF PPS. Under the final rule, CMS is removing from the “presumptive compliance” list certain non-specific diagnosis codes, arthritis diagnosis codes, unilateral upper extremity diagnosis, some congenital anomalies diagnosis codes, and other miscellaneous diagnosis codes, effective for compliance review periods beginning on or after October 1, 2014. CMS also adopted revisions to the conditions of payment for IRF units of acute care hospitals to specify a minimum number of hospital beds that the IPPS hospital must have to meet the regulatory standard for having an IRF unit. Under the rule, the institution of which the IRF unit is a part must have at least 10 staffed and maintained hospital beds that are not excluded from the IPPS, or at least 1 staffed and maintained hospital bed for every 10 certified IRF beds, whichever number is greater (CAHs that have IRF units are excluded from these requirements because they already have specific bed size restrictions). CMS is delaying implementation of this change until October 1, 2014 to give impacted IRFs adequate time to comply with state certificate of need or other state licensure laws. The final rule also updates the IRF facility-level adjustment factors, revises the Inpatient Rehabilitation Facility-Patient Assessment Instrument, and revises and updates quality measures and reporting requirements under the IRF quality reporting program.