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The high-cost U.S. healthcare system is growing and becoming increasingly more complex. At the same time, stakeholders are striving for more efficiency and better utilization of resources. In this setting, there is a mandate for healthcare providers to develop further understanding of key players and systems to effectively care for their patients.

Systems-based practice (SBP) is defined as “the demonstration of an awareness of and responsiveness to the larger context and system of health care and the ability to effectively call on system resources to provide care that is of optimal value.”1 Our system is composed of multiple payers, including federal (i.e., Medicare), state (i.e., Medicaid), and private financers. Various governmental and non-governmental organizations dictate standards and norms of care, rules and regulations, legislation, certifications and licensure, and financial regulations, among other things. Knowledge of this complex system from a policy, provider, and payer point of view is critical for effective patient 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 one of the six core competencies in which physicians must be proficient to deliver patient care that is safe and high in quality.

Settings of Practice in PM&R
PM&R has four service models for post-acute 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

The Medicare IRF benefit provides rehabilitation for patients in a resource-intensive environment. Patients should (1) have a medical need and sufficient complexity requiring physician supervision and nursing needs, (2) generally should be able to tolerate three hours of therapy per day (physical therapy, occupational therapy, speech therapy; one of which must be PT or OT), (3) make progress in a reasonable period of time (CMG length of stay for diagnosis), and (4) be medically stable. Beyond this, local insurers, agencies, and regulatory bodies may have admitting decision tools or criteria that are distinct from CMS criteria (e.g., local coverage determinations of Medicare, selecting certain elements of the Medicare 75% rule, and private organizations’ products) that make admission to an IRF particularly challenging.

IRFs are reimbursed through the prospective payment system (PPS), where discharge payments are based on case-mix groups (CMGs). For classification as an IRF, sixty percent (commonly called the 75% rule) of the IRF’s total patient population during the cost reporting period must match one or more of thirteen 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. As of October 1, 2019, the FIM has been removed from the IRF patient assessment instrument and updated relative weights and LOS have been established. Other standardized quality indicators will be used instead of the FIM. Unfortunately, the new indicators do not assess cognitive function as well as the FIM score did.

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 five days per week for an average of three hours per day, based on clinical need and insurance guidelines.

Outpatient facilities may provide more than one type of therapy, but visits are less frequent. In order to qualify for outpatient benefits, patients should not be requiring home health aide (HHA) services.

SNFs provide short-term skilled nursing and rehabilitative care on a daily basis provided by a skilled nursing or therapy staff for a hospital-related medical condition or a condition that started while a patient was getting care in a SNF.

SNFs currently receive per diem payments for each admission using a methodology that takes into account geographic factors and is adjusted for case mix by using a system called RUG-IV (Resource Utilization Groups Version IV) wherein each RUG has associated nursing and therapy weights that are applied to base payment rates.3 A new proposed rule to go into effect on October 1, 2019 would replace this with a system called the Patient-Driven Payment Model (PDPM) which would instead base payments on five components – physical therapy, occupational therapy, speech-language pathology, nursing, and non-therapy ancillary services – in an effort to incentivize whole patient care.4

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.5 As of January 1, 2020, reimbursement will be done with the Patient-Driven Groupings Model “with the intent to place patients into payment categories and eliminate the use of therapy service thresholds.”6


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

The aforementioned 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 an important issue in qualifying patients for acute IRF versus SNF level of rehabilitation as problems can arise if a patient is categorized into a level of rehabilitation without considering the individual’s needs and evidence of documented progress.

Rehabilitation providers and institutions may encounter random onsite audits as rehabilitation services are under the scrutiny of the Office of Inspector General since 2003. An OIG report in 2018 estimated that nearly $6 billion in services may not have been “reasonable and necessary” citing “inappropriate admissions” as one potential cause.7

There is growing evidence supporting various levels of rehabilitation which would be useful for clinicians and administrators to be familiar with. For instance, a 2017 systematic review concluded that inpatient rehabilitation for older adults improved functional status and reduced length of stay.8

Economic factors and external pressures to contain health care costs can influence 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.

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 is uniquely positioned 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

SBP for Medical Students, Residents and the Board-Certified Physicians:

SBP is one of the six core competencies defined by the ACGME and the ABMS that is required of residents and physicians to deliver high-quality medical care. SBP incorporates less concrete areas of medicine such as advocacy, healthcare economics, safety and quality, and transitions and settings of care and is therefore one of the more abstract and difficult aspects to define. The goal of SBP and its sub-competencies is to train physicians to observe, understand, and improve the healthcare system within which they practice. Appreciating the different requirements and regulations in deciding appropriate rehabilitation settings, coordinating with team members and administrators regarding disposition, providing adequate transitions of care, and advocating for patients when the health system fails them are integral factors in becoming good physiatrists.

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:

  • Professional standing, for example, unrestricted license, hospital privileges, and peer and patient ratings.
  • Commitment to lifelong learning, for example, self-assessment, continuing medical education, and simulations.
  • Cognitive expertise.

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.


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. Though the role for PM&R practice in ACOs is limited now, there is potential for much greater involvement. Physiatrists and therapists are critical in advocating for and ensuring optimal patient function; as key providers in PAC, those in PM&R can help manage costs and improve patient outcomes. Future physiatric participation in ACOs will depend on the regulations that govern the ACOs and the reasonable balance between potential risks and rewards.9 Bundled payments, furthermore, may become more common as Medicare tests out models of care similar to the Comprehensive Care for Joint Replacement model already in place.


There is strong evidence supporting rehabilitation in post-acute care, such as after stroke, though further research is needed to help define assessment of patient recovery and outcomes. 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. Rehabilitation Medicine has been critical in helping patients transition from the acute care setting to home via IRFs and SNFs for decades. Helping prevent recurrent disease and disease complications are two areas where rehabilitation providers can continue to provide excellent patient care and coordination of care. The IDT model embraced by the field can help assure a proper transition from acute care to PAC.


  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. Skilled Nursing Facility Services Payment System. Payment Basics. http://medpac.gov/docs/default-source/payment-basics/medpac_payment_basics_16_snf_final.pdf?sfvrsn=0. Reviewed October 2016. Accessed July 30, 2019.
  4. CMS Proposes Major Change in SNF Payment System. PT in Motion News. https://www.apta.org/PTinMotion/News/2018/04/30/ProposedSNFPPS2019/. Published April 30, 2018. Accessed July 31, 2019.
  5. Cotterill PG, Gage BJ. Overview: Medicare post-acute care since the Balanced Budget Act of 1997. Health Care Financ Rev. 2002;24:1-6
  6. “AAPM&R Post-Acute Care (PAC) Toolkit.” https://www.aapmr.org/quality-practice/aapm-r-post-acute-care-(pac)-toolkit/payment-facility#HH
  7. OIG Report No. A-01-15-00500. U.S. Department of Health and Human Services – Office of Inspector General. https://www.apta.org/PTinMotion/News/2018/04/30/ProposedSNFPPS2019/. Published September 2018. Accessed July 31, 2019.
  8. Bindawas SM, Vennu V, Moftah E. Improved functions and reduced length of stay after inpatient rehabilitation programs in older adults with stroke: A systematic review and meta-analysis of randomized controlled trials. NeuroRehabilitation. 2017;40(3):369-390.
  9. Melvin JL, Worsowicz G. What are the implications of accountable care organizations for physical medicine and rehabilitation practices? PMR. 2011;3:1068-1071.

Original Version of the Topic

K. Rao Poduri, MD. Administrative Rehabilitation Medicine: Systems-based Practice. Original Publication Date: 12/27/2012

Author Disclosure

Arpit Arora, MD
Nothing to Disclose