Inpatient Rehab: Medicare Coverage Depends on Documentation 

FHAS has observed a modest uptick in traditional Medicare denials related to inpatient rehab Medicare coverage, particularly for stays at inpatient rehabilitation facilities (IRFs). As a subcontractor to Qualified Independent Contractors (QICs), FHAS reviews traditional Medicare claim appeals at the second level of the appeals process.

IRF care is funded through Medicare Part A, which covers between 300,000 and 400,000 stays annually with a projected estimated cost of more than $10 billion for 2025, a smaller but not insignificant cost associated with post-acute care. So, it is not surprising that Medicare has strict guidelines for IRF care coverage.  

In 2023, the Centers for Medicare & Medicaid Services (CMS) implemented the Review Choice Demonstration (RCD) — a prior authorization-like requirement for IRF services – in Alabama. The demonstration was next extended to Pennsylvania in 2024 and for 2026 it is in effect for Texas as of March 2, and California on May 1.  

Outside of these four states, traditional Medicare does not require prior authorization (or pre-admission review) for IRF admission. Nevertheless, understanding the specific documentation requirements of the demonstration program is advisable for two reasons. First, even in states where the RCD is not active, claims are still subject to medical necessity reviews or audits. Second, the same criteria apply to RCD pre-admission review as with the CMS standard review, after claim has been submitted. 

Even with prior authorization, traditional Medicare requires specific documentation of medical necessity to cover the IRF stay, with coordinated care requirements including:  

1. The patient must need intensive rehabilitation therapy that can’t be safely or effectively provided at a lower-level site of care. Three hours of therapy per day, 5 days a week (or 900 minutes) of multidisciplinary therapy (e.g., occupational, physical and / or speech therapy) is the threshold requirement. In addition, the patient must be able to actively participate in the therapy.  
2. The patient must need close medical supervision and active medical management from a rehabilitation physician.  

Melissa Smith, RN, CPC, manages the Medical Review teams at FHAS and offers the following guidance to providers who are pursuing the appeals process.  

“Be as complete and detailed as possible in all medical documentation because coverage relies heavily on those records,” Smith says. “It is not enough to state that a patient has multiple comorbidities, particularly if they are stable. The patient must need close, ongoing care directed by a physician at the IRF.”    

She encourages documentation as follows:  

Prior to admission: 

• Thoroughly document any functional challenges the patient has 
• Capture a thorough detail of their medical complexity and therapy needs 
• Outline why lower levels of care will be insufficient.  

At admission:  

• A physician should evaluate the patient within 24 hours of admission. 
• A detailed and individualized plan of care must be established outlining therapy intensity, functional goals and the expected length of stay. Again, it is critical to establish and support medical necessity.  

During the patient’s stay:  

• The intensity of therapy and progress made must be documented 
• The physician should keep detailed supervision notes 
• Meetings of the full interdisciplinary team of therapists, doctors, nurses, and other care providers responsible for the patient must be documented.  
• If the patient needs to stay longer than initially expected (or approved), the medical necessity must be clear. Therapy should show progress and a need for continued intensive rehabilitation therapy. Also, discharge planning should be active.