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9/25/26  3:40 pm
Commenter: Virginia Hospital & Healthcare Association

VHHA Comment Letter - Rehab Rate Methodology
 
 
September 25, 2026
 
Ms. Meredith Lee Policy Supervisor
Department of Medical Assistance Services 600 East Broad Street
Richmond, 23219
 
Re: Public Notice - Intent to Amend State Plan - Rehabilitation Hospital Reimbursement
 
Dear Ms. Lee,
On behalf of the Virginia Hospital & Healthcare Association (VHHA) and its member hospitals and health systems, we write regarding the Department of Medical Assistance Services’ (DMAS) August 27, 2026, Public Notice of Intent to Amend the Virginia State Plan for Medical Assistance concerning reimbursement for rehabilitation hospitals.
 
VHHA is deeply concerned about the lack of information and transparency accompanying this public notice. The notice states that DMAS intends to update the reimbursement methodology for rehabilitation hospitals “to provide more equitable reimbursement rates for each rehabilitation hospital relative to its total cost of services provided to Medicaid recipients” and that the change will be budget neutral. However, DMAS has not made available for public review the proposed reimbursement methodology, the data or assumptions underlying it, the calculations used to determine revised payments, or the anticipated impact on individual rehabilitation hospitals.
 
At the same time, the notice specifically solicits input from stakeholders and providers regarding the potential impact of the proposed changes. Providers are unable to offer meaningful comments on the impact of a reimbursement methodology that has not been disclosed.
 
VHHA strongly believes that Medicaid reimbursement methodologies and changes should be developed and implemented through a transparent process. Budget neutrality could mean that increases in reimbursement for some rehabilitation hospitals may be offset by reductions for others. Affected hospitals should have an opportunity to understand the methodology, review the underlying data, assess the financial impact, and provide informed feedback before the methodology is finalized or submitted for federal approval.
 
The General Assembly directed DMAS to update its reimbursement methodology to provide more equitable reimbursement relative to each rehabilitation hospital’s total cost of services provided to Medicaid recipients. Meaningful stakeholder review is important to determining whether the proposed methodology accomplishes that objective. Without access to the methodology and supporting information, stakeholders cannot assess whether the proposed approach appropriately treats similarly situated providers consistently, or produces the equitable distribution contemplated by the General Assembly.
 
Accordingly, VHHA respectfully requests that DMAS:
1. Publish the complete proposed reimbursement methodology, including the formulas, definitions, data sources, cost measures, base periods, and other assumptions used to calculate reimbursement;
2. Provide hospital-level modeling of the proposed methodology, including current reimbursement and projected reimbursement under the proposed methodology, so affected providers can understand the impact of the change to Base Operating rates and capital percentages and rates;
3. Explain how the proposed methodology implements the General Assembly’s direction, including how DMAS defines and measures each rehabilitation hospital’s “total cost of services provided to Medicaid recipients” and how budget neutrality will be achieved; and
4. Provide a meaningful opportunity for public comment after this information is released. At a minimum, DMAS should extend or reopen the comment period, so stakeholders have sufficient time to review the complete proposal and provide informed comments before the methodology is finalized or submitted to CMS; and
5. Provide a timeline for completion that allows for retroactive reimbursement changes to the beginning of SFY27.
 
VHHA supports the General Assembly’s objective of establishing equitable Medicaid reimbursement for rehabilitation hospitals. Our concern is not with that objective, but with attempting to solicit public comment on a material reimbursement change without providing the information necessary to evaluate it.
 
Transparency is particularly important when the proposal determines how limited Medicaid funding will be allocated among Virginia rehabilitation hospitals. Providers should not be asked to comment on, or ultimately be reimbursed under, a methodology whose underlying calculations and impacts are not available for review.
 
For these reasons, VHHA urges DMAS not to consider the current public comment period sufficient to satisfy meaningful stakeholder review of the proposed methodology. DMAS should publish the complete methodology and supporting analyses and then extend or reopen the comment period to provide affected hospitals and other stakeholders a meaningful opportunity to evaluate and respond to the actual proposal before DMAS moves forward with the State Plan amendment.
 
VHHA appreciates the opportunity to comment and respectfully asks DMAS to make the proposed methodology and supporting analyses publicly available and provide stakeholders an appropriate opportunity to review and comment on that information before moving forward with the State Plan amendment.
 
Sincerely,
 
Sean T. Connaughton
President & CEO
Virginia Hospital & Healthcare Association
CommentID: 241950
 

9/25/26  5:47 pm
Commenter: Encompass Health Corporation

Encompass Health Corporation Comment Letter - Rehab Rate Methodology
 

September 25, 2026

 

Submitted via Email: Meredith.Lee@dmas.virginia.gov

Meredith Lee, Policy Supervisor   

Department of Medical Assistance Services

Policy Division

600 East Broad Street
Richmond, 23219

 

RE:      Public Notice - Intent to Amend State Plan - Rehabilitation Hospital Reimbursement dated August 27, 2026

 

Dear Ms. Lee:

 

On behalf of all six of our hospitals in Virginia, Encompass Health Corporation (“Encompass Health”) appreciates this opportunity to comment on the above-referenced public notice, which was published on August 27, 2026 (“Notice”, See Exhibit A). Encompass Health takes great interest in this Notice since it aims to create a new Medicaid reimbursement methodology for inpatient rehabilitation hospitals in Virginia.

 

As background, Encompass Health is the nation’s largest provider of inpatient rehabilitation services with 177 hospitals in 39 states and Puerto Rico. In Virginia, Encompass Health currently operates six rehabilitation hospitals: Encompass Health Rehabilitation Hospital of Northern Virginia, Rehabilitation Hospital of Bristol, a joint venture of Ballad Health and Encompass Health, Encompass Health Rehabilitation Hospital of Fredericksburg, Encompass Health Rehabilitation Hospital of Petersburg, Encompass Health Rehabilitation Hospital of Richmond, and UVA Encompass Health Rehabilitation Hospital.

 

In Virginia, all six Encompass Health hospitals exceed the national average for several key Centers for Medicare & Medicaid Services (“CMS”) quality metrics related to Inpatient Rehabilitation Facility (“IRF”) care. This information, which is publicly available through CMS Care Compare[1], shows that patients receiving care at Encompass Health’s Virginia hospitals experience significantly better improvements in self-care, mobility, and functional outcomes at the time of their discharge than comparable patients discharged nationwide (See Exhibits B-M). Each Encompass Health hospital in Virginia is also Joint Commission certified in one or more of the following areas: stroke rehabilitation, brain injury rehabilitation, and amputee rehabilitation (See Exhibits Q-V). As evidenced by these results, our hospitals in Virginia are deeply committed to providing the highest quality of inpatient rehabilitative care to Virginians.

 

As of the date of this letter, neither the proposed State Plan Amendment (“SPA”) associated with the Notice nor its supporting data have been released by the Virginia Department of Medical Assistance Services (“DMAS”). Encompass Health tried multiple times, through Freedom of Information Act Requests (“FOIA”), to obtain this information. For each denied FOIA request, the Commonwealth of Virginia provided the following reasons as to why they could not release the requested information:

 

  1.  Request 26-212 Denied (See Exhibt N)
    1. FOIA request filed by Encompass Health with the Office of the Governor of Virginia on September 1, 2026.
    2. FOIA request denied by the Office of the Governor of Virginia on September 9, 2026, due to Encompass Health not being a citizen of Virginia.
  1. Request 26-231 Denied (See Exhibit O)
    1. FOIA request filed by Vidhya Kannan, Chief Executive Officer of Encompass Health Rehabilitation Hospital of Northern Virginia, with the Office of the Governor of Virginia on September 14, 2026.  
    2. FOIA request denied by the Office of the Governor of Virginia on September 18, 2026, due to DMAS being the proper custodian of the requested record. Instructed to file a FOIA request specifically with DMAS.
  2. Request FOI001052 Denied (See Exhibit P)
    1. FOIA request filed by Vidhya Kannan, Chief Executive Officer of Encompass Health Rehabilitation Hospital of Northern Virginia, with DMAS on September 18, 2026.
    2. FOIA request denied by DMAS on September 21, 2026, because the requested document does not currently exist.

 

In response to the third FOIA request (See Exhibit P), DMAS admitted that there is no proposed SPA for rehabilitation providers to review during the comment period, which closes on September 26, 2026. According to recent information shared by our partners at the Virginia Hospital & Healthcare Association (“VHHA”), on September 21, 2026, DMAS is still in the process of developing and finalizing its proposed methodology and it does not plan to make any substantive methodology available to the public for review during the comment period.

 

This lack of transparency surrounding the proposed changes to the reimbursement methodology for inpatient rehabilitation hospitals violates the provisions of 42 CFR §447.205(c)(1) and §1902(a)(13) of the Social Security Act, 42 U.S.C. §1396a(a)(13). These provisions require Virginia, when making changes to Medicaid reimbursement, to state what payment methodologies are changing, define which providers are affected, and state how the rates will be calculated going forward. The Notice, when combined with the lack of a SPA, fails to follow these clear requirements as it neither provides the public with the proposed change in methodology nor with ample time to review and comment upon such changes. 

 

Given this lack of transparency, Encompass Health is unable to provide substantive feedback on the proposed SPA. Encompass Health emphasizes that while the stated purpose of the Notice is to provide for “more equitable reimbursement rates,” equitable reimbursement does not equate to increasing the reimbursement for one sole provider to the detriment of other providers. Furthermore, basing reimbursement rates on a hospital’s “total cost of services provided to Medicaid recipients” inherently rewards cost-inefficient hospitals at the expense of hospitals that have implemented operational strategies to keep costs low. Higher costs are ultimately passed onto the patient, making healthcare more unaffordable.

 

Encompass Health also urges DMAS to acknowledge the harm in further reducing inpatient rehabilitation hospital per diem rates. In 2025, across all Encompass Health hospitals in Virginia, Medicaid reimbursed, on average, only 73% of the Medicare rate for a comparable patient. Any further reduction to inpatient rehabilitation hospital per diem rates could not only jeopardize the ability of inpatient rehabilitation hospitals to continue delivering high-quality rehabilitative care but could also, over time, diminish their ability to provide access to critical rehabilitation services for Virginians.

 

Thank you for considering these comments. Encompass Health looks forward to providing additional feedback once the proposed SPA is made available for review and comment.

 

Sincerely,

 

Robert W. McCallum, III

Chief Tax & Reimbursement Officer

Encompass Health Corporation

 

cc:  Elizabeth Dervan, Chief Deputy of Virginia Department of Medical Assistance Services


[1] https://www.medicare.gov/care-compare/?providerType=InpatientRehabilitation&redirect=true

CommentID: 241965