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MEDICARE Announces Updated Rates for Long Term Care Hospitals
June 2, 3003
The Centers for Medicare & Medicaid Services announced that a final rule that
will increase the Medicare payment rate for long-term care hospitals (LTCHs) by 2.5
percent starting July 1 will be published in the June 6
Federal Register. This rule establishes the first payment update for LTCHs since the
implementation of the prospective payment system (PPS) that went into effect for hospital
cost reporting periods beginning on or after October 1, 2002. Overall, Medicare expects to
pay LTCHs $2.17 billion during the 2004 LTCH rate year.
The system, which now sets payments for over 280 hospitals, was designed to assure
appropriate payment for services to severely ill or medically complex patients, while
providing incentives to hospitals for more efficient care of Medicare beneficiaries.
Payments under the LTCH PPS are updated based on the most recent CMS–determined increase
factor for hospitals excluded from the acute care inpatient PPS (the “excluded hospital
market-basket”) and on provider data received by CMS.
CMS is allowing LTCHs a transition period – in this case five years ? during which
hospitals will be paid a blend of their costs subject to a per discharge limit and the
Federal PPS rates. A LTCH may exercise a
one-time, irrevocable election to move to full Federal PPS payment at the start of any of
its cost reporting periods during the transition period.
Long-term care hospitals, in general, are defined as hospitals that have an average
Medicare inpatient length of stay 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, cancer treatment,
head trauma treatment and pain management.
In the final rule, CMS is adopting the following policies:
* The annual update in payment rates is being moved from October 1 to July 1.
Currently, both the inpatient and the long term care hospital prospective payment system
rates, diagnosis-related groups, and relative weights are updated each October 1. Shifting
the LTCH PPS rate update to a different update cycle from the acute care hospital
inpatient prospective payment system will facilitate more efficient use of resources.
Diagnosis-related groups and relative weights will continue to be updated each October 1.
* After the 2004 LTCH rate year, CMS expects to publish future year updates 60 days
prior to the start of the next July 1 LTCH rate year.* The restriction on the number
of satellite beds that can be established by certain LTCHs is being eliminated. This
provision would be effective for a LTCH at the beginning of the first cost-reporting
period during which a LTCH elects to be paid under 100 percent of the Federal rate or when
the transition period ends for a LTCH, whichever comes first.
CMS has decided not to revise the labor share under the LTCH PPS this year. CMS is
currently evaluating the methodology for determining the labor share in the acute
inpatient hospital context, and any decision to propose a revision to the labor share for
LTCHs will be postponed until more research is done on this issue.
The final rule will become effective July 1, 2003.
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