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Medicare PPS May Significantly Decrease Funding for Individuals with Severe Traumatic Brain Injury

Categories: Costs and Insurance

The Question

What affect will the Medicare Prospective Payment System for reimbursement have on inpatient rehabilitation for individuals with traumatic brain injury?

Past Studies

Past Studies Medicare uses a Prospective Payment System (PPS) that is intended to transfer the financial risk to the healthcare provider, instead of the payer. This is accomplished by paying health care providers upfront by case complexity rather than paying them at patient discharge based on the patient’s length of stay. By using a PPS, clinicians have more of an incentive to work efficiently.

Inpatient rehabilitation services have their own form of PPS called Case-mix groups (CMGs). Case-mix groups are designed to forecast the cost of care for each individual that enters inpatient rehabilitation. CMGs are determined by an individual’s functional status at the time of admission to rehabilitation. “Functional status” refers to how independently an individual can perform activities needed for daily living. “Activities of daily living” are the very basic self-care activities that individuals perform to take care of themselves during a typical day. Examples include toileting, bathing, eating, and dressing. Other examples are thinking skills. They include the ability to remember things or figure things out, and communication skills. Individuals with traumatic brain injury can experience difficulty performing activities of daily living because brain injuries can affect the way they think, act, feel, and move their bodies.

Concerns have been raised that the PPS system would not pay for all of the services needed by individuals with severe trauma. In particular, individuals with severe traumatic brain injuries are some of the most costly patients in inpatient rehabilitation. Poor payment could possibly reduce the number of individuals with the severe traumatic brain injury that inpatient rehabilitation centers would be willing to take and lead to a significant amount of individuals who do not receive services. Poor payment could also decrease the number of days that an individual stays in a rehabilitation facility, which might affect his or her recovery.

This Study

This study evaluated the affect that the Medicare Prospective Payment System (PPS) may have on inpatient rehabilitation. The experiences of 1,807 individuals with traumatic brain injury from 14 TBI Model Systems were evaluated. The researchers determined how many days the participants spent in rehabilitation and how much it cost. The researchers used an assessment called the Functional Independence Measure (FIM) to rate, record, and measure the individuals’ ability to perform activities of daily living. The participant’s FIM scores upon admission and at discharge from inpatient rehabilitation were compared to determine their outcomes. The researchers found that the average cost of inpatient rehabilitation was greater that the average PPS payment by 16%. Only three of the 14 rehabilitation sites received PPS payment that was greater than their costs for their inpatients with traumatic brain injury. Losses were greater for individuals with severe traumatic brain injury. Losses ranged from 5% to 41% of the costs. The researchers determined that for the facilities to “break even” on costs, the individuals’ rehabilitation stays would need to be shortened by three days. After analyzing the FIM scores, the researchers stated that 12 of the 14 TBI Model Systems in this study would need to increase the efficiency of their treatments for the participants to achieve similar outcomes in a shorter amount of time.

Who May Be Affected By These Findings

Individuals with traumatic brain injury and their loved ones, health care providers, insurers, advocates, and researchers.


The researchers state that although only a small amount of individuals with traumatic brain injury are funded by Medicare, these results are important because other payers are likely to follow the PPS example.

Bottom Line

It appears that the PPS may significantly decrease funding for individuals with severe traumatic brain injury. The researchers speculate that inpatient rehabilitation centers may reduce the time an individual spends in their facility so that they do not lose money.

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Find This Study

Hoffman, J.M., Doctor, J.N., Chan, L., Whyte, J., Jha, A., & Dikmen, S. (2003). Potential impact of the new Medicare Prospective Payment System on reimbursement for traumatic brain injury inpatient rehabilitation. Archives of Physical Medicine and Rehabilitation, 84, 1165-1172.


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