Administrative Rehabilitation Medicine: Systems-based Practice

Author(s): K. Rao Poduri, MD

Originally published:11/05/2012

Last updated:12/27/2012


Systems-based practice (SBP) is the demonstration of an awareness of and responsiveness to the larger context and system of health care. There is a growing focus and accompanying requirement for physicians to have knowledge of health care systems and technologies, which stems from efforts to decrease medical errors and reduce costs. All components of the health care system are being scrutinized, and there is a higher demand for information and expectations by consumers to access a variety of services in a system of care.1

As the complexity of health care delivery continues to increase, it is essential to understand how individual practices relate to the larger system of care. The literature demonstrates that knowledge and competency in SBP are interrelated and contribute to improving quality and safety of patient care.2 It is within this context that the Accreditation Council for Graduate Medical Education (ACGME) and the American Board of Medical Specialties (ABMS) identified SBP as 1 of the 6 core competencies in which physicians must be proficient to deliver patient care that is safe and high in quality.

SBP involves all aspects of physiatric practice. Physical medicine and rehabilitation (PM&R) interfaces with many agencies in organized medicine, including the American Medical Association, American Hospital Association, and the Centers for Medicare and Medicaid Services (CMS), which dictate financial regulations. Implementing and evaluating SBP requires an understanding of the system, coupled with an understanding of the system’s thinking.

Settings of Practice
PM&R potentially has 4 service models for postacute care (PAC) in rehabilitation, as defined by the CMS: inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs) (subacute), home health services, and day hospital rehabilitation/outpatient facilities

  1. IRFs:
    IRFs are defined by the CMS by reimbursement through the prospective payment system (PPS), where discharge payments are based on case-mix groups (CMGs).
  2. For classification as an IRF, 60% (commonly called the 75% rule) of the IRF’s total patient population during the cost reporting period must match 1 or more of 13 CMS designated medical conditions. Payments under a PPS are made on a per discharge basis, and payment rates are based on CMGs reflecting the clinical characteristics of the patient resources needed for treatment.

Admitting a patient to an IRF under CMS (Medicare) guidelines is challenging and complex. Medical decision for IRF admission involves consideration of medical need and complexity, functional status, need for specialized nursing, physical and occupational therapy, speech language service, among other criteria.3 Additionally, local insurers, agencies, and regulatory bodies have admitting decision tools or criteria that are distinct from CMS criteria. Examples include: local coverage determinations of Medicare, selecting certain elements of the Medicare 75% rule, and private organizations’ products.

To comply with Medicare regulations for an IRF, one must document the need for restorative rehabilitation requiring multiple therapies and rehabilitation nursing. Patients must tolerate 3 hours of therapy per day (physical therapy, occupational therapy, speech therapy), make progress in a reasonable period of time (CMG length of stay for diagnosis), and be medically stable. Other insurers may require additional criteria based on coverage benefits.

  1. Day Hospital Rehabilitation or Outpatient Facilities:
    Day hospital rehabilitation, which is rather rare, is a system where a patient receives rehabilitation during the day and returns home in the afternoon. Patients attend therapy 5 days per week for an average of 3 hours per day, based on clinical need and insurance guidelines. Outpatient facilities may provide more than 1 type of therapy, but visits are less frequent. In order to qualify for outpatient benefits, patients should not be requiring HHA services.
  2. SNFs Per Diem Payments Based on Resource Utilization Groups (RUGs):
    SNFs provide short-term skilled nursing and rehabilitative care on a daily basis and use the Minimum Data Set 2.0 (MDS 2.0) instrument to obtain a comprehensive assessment of each patient’s functional capabilities to help nursing home staff identify health problems.3 SNFs receive per diem payments for each admission, which are case-mix adjusted using a classification system called the RUG-III, based on data from MDS 2.0 and relative weights developed from staff time data. RUG-III classification includes need for therapy, special treatments, and functional status.
  3. Home Health Agency (HHA) 60-Day Episode Payments Based on National Rate:
    Medicare home health visits require a patient to be under the care of a physician, have an intermittent need for skilled nursing care, or need physical/occupational/speech therapy. The beneficiary must be homebound and receive home health services from a Medicare-approved HHA. Health assessment information is captured by HHAs in the Outcome and Assessment Information Set. Under the home health PPS, Medicare pays higher rates to home health agencies to care for beneficiaries with greater needs.4
  4. Underlying Managerial or Business Principles:
    Depending on the setting and the payers, business principles and managerial principles vary.


Expected/Unexpected Outcomes of Application at Various Levels Including the Individual, the Social Support System, the Environment and Larger Social Policy/Legislation

  1. These clinical settings are appropriate as long as patient selection is appropriate, considering the level of dependence, disability, and available social supports in the community. Medical necessity is the key issue in qualifying patients for acute IRF versus SNF level of rehabilitation. Major problems arise when a patient is categorized into a level of rehabilitation without considering the individual’s needs and evidence of documented progress.
  2. Under the PPS, rehabilitation providers and institutions can expect to face random onsite audits, because rehabilitation services claims submitted have been under scrutiny of the Office of Inspector General since 2003. Another challenge is to track compliance to the 3-hour rule, which differentiates acute rehabilitation from other levels of rehabilitation. Inappropriate or inadequate documentation in the medical record can result in penalties.
  3. On the positive side, patients that qualify as candidates for acute rehabilitation admission to an IRF clearly benefit. The research evidence supporting the effectiveness of a multidisciplinary approach for postacute rehabilitation services is strongest for stroke patients.5
  4. Economic factors and external pressures to contain health care costs dictate the setting in which patients receive PAC. A patient’s condition may change over time and therefore the most appropriate setting of care often changes and may require different types of delivery settings at a given point of recovery.
  5. PAC in rehabilitation is a key component of the health care delivery system. An executive summary of the 2007 conference on the state-of-the-science of postacute rehabilitation sponsored by the Rehabilitation Research and Training Center on Measuring Rehabilitation Outcomes and Effectiveness discussed many aspects of PAC.6,7 With health care reform, the PM&R community must learn to provide cost-effective care for patients with an emphasis on quality and safety at both inpatient and outpatient levels with clear measures of quality and programs for quality improvement. The Health Information Technology legislation initially provides bonus payments for meeting quality standards, but eventually will penalize practices that fail to meet these standards. At present, PM&R still has few specific standards, and therefore there is some flexibility in the metrics used, but eventually quality standards will be established, and regulators will mandate their use.

Educational Issues That Are Relevant

  1. SBP for Medical Students, Residents and the Board-Certified Physicians:
  2. SBP is 1 of the 6 core competencies defined by the ACGME and the ABMS that is required of residents and physicians to deliver high-quality medical care. SBP is one of the most challenging competencies to define, incorporate into training, practice, and evaluate. SBP for medical students and residents includes systems of practice, medical economics, management of diseases, and assessment of treatment outcomes using a systems-based approach to track patient data. SBP also requires the application of evidence-based medicine across an entire spectrum of patients instead of 1 patient at a time. By involving patients in their care, SBP is an essential part of patient- and family-centered care. Patient care outcomes can be improved through integrating community resources, developing relationships with community care coordinators, and becoming aware of available services. Competency in SBP requires an understanding of how patient care relates to the health care system as a whole and the use of data to improve the quality and safety of patient care. Students and residents need to learn to interact with the rehabilitation team and acquire knowledge of risks, benefits, limitations, and the costs of patient care while advocating for patients in dealing with system complexities. This includes working effectively with other services, health care agencies, patients, and families.
  3. SBP is also an important component of Maintenance of Certification, which was established in 2000 by the ABMS to promote recertification, which assesses the continuing competencies of physicians.2 It includes the following 4 components:
    1. Professional standing, for example, unrestricted license, hospital privileges, and peer and patient ratings.
    2. Commitment to lifelong learning, for example, self-assessment, continuing medical education, and simulations.
    3. Cognitive expertise.
    4. Evaluation of performance and improvement in practice, for example, an ability to demonstrate that care is safe, effective, patient-centered, timely, efficient, and equitable, and that one has incorporated quality improvement as a habit of practice.

As SBPis incorporated into medical education at the undergraduate, graduate, and practicing physician levels, it is now an integral part of the certification and recertification process, confirming the importance of learning SBP.


The Affordable Care Act of 2010 aims to deliver quality health care at a lower cost through accountable care organizations (ACOs) and medical homes; it is already in place for some primary care practices. The role for PM&R practice in ACOs is limited now, but will increase for physiatrists as part of group practices closely aligned with hospitals. Future physiatric participation in ACOs will depend on the regulations that govern the ACOs and the reasonable balance between potential risks and rewards.8


Research is needed to define assessment of patient recovery and outcomes as well as the benefits of postacute rehabilitation care in various rehabilitation settings. Current examples of valid and uniform measures of progress and patient outcomes include the International Classification of Functioning, Disability and Health.

The further development of disease and injury models and assessment of rehabilitation settings may be facilitated by participation in demonstration projects offered by the CMS. Failure to recognize and respond to challenges and opportunities in the current health care and economic environment could lead to marginalization or extinction of the field of PM&R.


  1. Graham MJ, Naqvi Z, Encandella J, Harding KJ, Chatterji M. Systems-based practice: taxonomy development and role identification for competency assessment of residents. J Grad Med Educ. 2009;1:49-60.

  2. Johnson JK, Miller SH, Horowitz SD. Systems-based practice: improving the safety and quality of patient care by recognizing and improving the systems in which we work. In: Henriksen K, Battles JB, Keyes MA, Grady ML, eds. Advances in Patient Safety: New Directions and Alternative Approaches. Vol. 2. Rockville, MD: Agency for Healthcare Research and Quality; 2008.

  3. Melvin JL. American Academy of Physical Medicine and Rehabilitation Task Force on medical inpatient rehabilitation criteria: standards for assessing medical appropriateness criteria for admitting patients to rehabilitation hospitals or units. 2006. Available at:
    medical-necessity/Documents/mirc0211.pdf. Accessed October 10, 2012

  4. Cotterill PG, Gage BJ. Overview: Medicare post-acute care since the Balanced Budget Act of 1997. Health Care Financ Rev. 2002;24:1-6.

  5. Prvu Bettger JA, Stineman MG. Effectiveness of multidisciplinary rehabilitation services in post acute care: state-of-the-science. A review. Arch Phys Med Rehabil. 2007;88:1526-1534.

  6. Heinemann AW. State-of-the-science on post acute rehabilitation: setting a research agenda and developing an evidence base for practice and public policy: an introduction. Am J Phys Med Rehabil. 2007;86:869-874.

  7. Heinemann AW. State-of-the-science on post acute rehabilitation: setting a research agenda and developing an evidence base for practice and public policy: an introduction. Arch Phys Med Rehabil. 2007;88:1478-1481.

  8. Melvin JL, Worsowicz G. What are the implications of accountable care organizations for physical medicine and rehabilitation practices? PM R. 2011;3:1068-1071.

Author Disclosure

K. Rao Poduri, MD
Nothing to Disclose

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