The Centers for Medicare & Medicaid Services (CMS) today issued a proposed rule designed to assure appropriate payment for services by long-term acute care hospitals (LTCHs) to severely ill or medically complex patients, while providing incentives for more efficient care for Medicare beneficiaries. Under this proposed rule, Medicare total payments to LTCHs are expected to be $4.4 billion for rate year (RY) 2008.

"The rule we are proposing today is intended to promote accurate payments for patients who need inpatient care in long-term care hospitals," said Acting CMS Administrator Leslie V. Norwalk, Esq. "We look forward to receiving public comments on this set of proposals that are part of our effort throughout the Medicare program to promote the delivery of high quality, efficient care."

Long-term care hospitals, in general, are defined as hospitals that have an average Medicare inpatient length of stay of greater than 25 days. These hospitals typically provide extended medical and rehabilitative care for patients who are clinically complex and may suffer from multiple acute or chronic conditions. Services typically include comprehensive rehabilitation, respiratory therapy, head trauma treatment and pain management.
The LTCH prospective payment system (PPS), which sets payments for approximately 390 long-term care hospitals, was implemented in FY 2003, is updated annually, effective for discharges on or after July 1 of each year. CMS analysis of the latest available LTCH claims data indicates that a significant portion of the estimated 3.49 percent increase in observed case mix between FY 2004 and FY 2005 is due to changes in coding practices and documentation rather than to the treatment of more resource intensive patients.

In light of these data, CMS is proposing to update the LTCH PPS Federal rate by 0.71 percent to $38,356.45 for RY 2008. This update reflects the Rehabilitation, Psychiatric, and Long-Term Care (RPL) market basket of 3.2 percent adjusted for the difference between the reported case mix increase due to coding practices and the real case mix increase due to increases in patient severity. The proposed update is higher than the zero percent update recommended by the Medicare Payment Advisory Commission (MedPAC) earlier this year. The payment per discharge to LTCHs is also significantly higher than the Federal rate for acute care hospitals paid under the Inpatient Prospective Payment System (IPPS), which, for FY 2007, is generally about $5,300 per discharge.

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