The Centers for Medicare & Medicaid Services (CMS) has issued a proposed payment rule designed to assure that long-term care hospitals (LTCHs) continue to receive appropriate payment for services provided while giving them incentives to provide more efficient care to Medicare beneficiaries. LTCHs are a type of acute care hospital that treats some of Medicare's most severely ill or medically complex patients. The new policies and payment rates would apply to services provided to individuals who are discharged from these hospitals on or after July 1, 2008.

"The proposals ... will help make sure Medicare beneficiaries who need longer term inpatient care get high quality services appropriate to their medical conditions," CMS Acting Administrator Kerry Weems said. "The proposals seek increased incentives for efficient delivery of care, ensuring that beneficiaries and taxpayers get the best value for the Medicare dollar."

The proposed rule would affect the nearly 400 LTCHs across the nation. These hospitals are generally defined as inpatient hospitals where the average length of stay for Medicare patients is greater than 25 days. These hospitals provide extended medical and rehabilitative care for patients with clinically complex conditions. Treatment provided in these hospitals typically includes weaning patients from ventilators so they can breathe without this assistance, pain management, and rehabilitation.
These hospitals have been paid under a prospective payment system (PPS) that provides a single payment to the hospital for the patient's stay based on the patient's diagnosis, since cost reporting periods beginning on or after October 1, 2002. Currently, patients are categorized under the Medicare Severity Long-Term Care Diagnosis Related Groups (MS-LTC-DRGs). The payment is calculated to reflect the average costs incurred by an LTCH in treating this type of patient, but does not include payment for services of physicians and nonphysician practitioners who bill Medicare separately.

CMS is proposing a standard Federal rate of $39,076.28 for the 2009 rate year. This is based on a proposed update of 2.6 percent compared with the standard Federal rate for RY 2008, as revised to comply with provisions of the recently enacted Medicare, Medicaid, and SCHIP Extension Act of 2007("Medicare Extension Act"). The update represents a 3.5 percent increase in the hospital marketbasket (a measure of inflation in the costs of goods and services used in providing inpatient care), less a 0.9 percent adjustment to offset coding changes in RY 2006 that do not reflect real changes in the severity of the cases treated by these hospitals.

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