Fact Sheets

INTERIM FINAL RULE WITH COMMENT IMPLEMENTING MEDICARE, MEDICAID, AND SCHIP EXTENSION ACT OF 2007 CHANGES TO

OVERVIEW:

On May 1, 2008, the Centers for Medicare & Medicaid Services (CMS) issued an interim final rule with comment (IFC) implementing changes to the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) that were mandated by the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA).   The LTCH provisions in the law, signed by the President on December 29, 2007, affect, among others, several policies that were adopted in the LTCH PPS final rule for the Rate Year (RY) 2008, which was published in the May 11, 2007 Federal Register.  In this IFC, CMS is incorporating the MMSEA changes into its existing LTCH PPS regulations. 

This IFC includes changes other than the proposed changes that were included in the LTCH PPS proposed rule for RY 2009, which was published in the January 29, 2008 Federal Register and for which the deadline for submission of comments was March 24, 2008.

BACKGROUND:

Long-term care hospitals are generally defined as hospitals that have an average Medicare inpatient length of stay of greater than 25 days.   These hospitals typically provide extended medical care for patients who may suffer from multiple acute or chronic conditions or require clinically complex care.  Services typically include respiratory therapy, head trauma treatment, and rehabilitation programs. 

The final rule for the LTCH PPS for RY 2008 provided a 0.71 percent update in the standard Federal rate which increased the standard federal rate from its RY 2007 amount of $38,086.04 to $38,356.45.  Other payment adjustments finalized in this final rule, however, resulted in reduced aggregate payments to LTCHs.    The final rule extended the “25 percent threshold” restriction on the percentage of patients that an LTCH “hospital-within-a-hospital” (HwH) or a LTCH satellite facility could receive from a co-located hospital, without the application of a payment adjustment, to apply to “grandfathered” HwHs and LTCH satellite facilities.  A similar payment adjustment was also adopted for discharges of LTCH patients in excess of a specified percentage that were admitted from any referring hospital not co-located with the LTCH or LTCH satellite facility.  The final rule also changed the short stay outlier (SSO) policy to adjust LTCH payments for cases that, based on the patient’s length of stay, appeared to be similar to those treated in acute care hospitals. 

MMSEA CHANGES TO LTCH POLICIES IN THE RY 2008 FINAL RULE:

Changes to the LTCH Short-Stay Outlier (SSO) Policy:    The final RY08 LTCH rule revised the LTCH SSO policy (which was adopted at the outset of the LTCH PPS for FY 2003) that provides an additional option for calculating the Medicare payment to the LTCH for SSO cases, i.e., cases that have a covered length-of-stay (LOS) that is less than or equal to five sixths of the geometric average LOS for each LTC-DRG.  The FY07 rule had set payment for SSO cases at the least of:

1. 100 percent of the estimated costs for the discharge;
2. 120 percent of the per diem amount for the LTC-DRG;
3. The full LTC-DRG payment; or
4. A blend of the LTCH PPS payment amount comparable to the per diem amount that would otherwise be paid under the IPPS and 120 percent of the LTC-MS-DRG specific per diem amount.

The RY 2008 final rule revised the fourth option as follows:

4a) The blend of the 120 percent of the LTC MS-DRG specific per diem amount and an amount comparable to the IPPS per diem amount specified for cases where the covered LOS for a SSO case is greater than the IPPS comparable threshold or;

4b) An amount comparable to the hospital IPPS per diem amount for cases where the covered LOS for a SSO is within the “IPPS comparable threshold.” 

The MMSEA required Medicare to delay application of this “IPPS comparable” option and to restore the previous policy for three years, effective for LTCH discharges on or after December 29, 2007.

Revised RY 2008 LTCH PPS Rate:   The May 1, 2007 final RY 2008 rule increased the standard Federal rate from its RY 2007 amount of $38,086.04 to $38,356.45.  The MMSEA required CMS to reset the LTCH base rate back to the 2007 level for RY 2008, but not to apply the revised rate to LTCH discharges occurring on or after July 1, 2007 and before April 1, 2008.   Therefore, the standard Federal rate under the LTCH PPS for RY 2008 is $38,086.04 but the MMSEA specifies that payments  applicable for LTCH discharges occurring on or after July 1, 2007 but before April 1, 2008 will be based on $38,356.45.

Restrictions on the Percentage of LTCH Admissions from Other Facilities:      The MMSEA instructions to delay extending the “25 percent threshold policy” to freestanding LTCHs and to grandfathered LTCH HwHs for three years will be issued in a forthcoming regulation.  The MMSEA also instructed CMS to increase the patient percentage thresholds from 25 percent to 50 percent for certain LTCH HwH and satellite admissions, and from 50 percent to 75 percent for rural, MSA-dominant, and urban single HwHs and satellites that meet certain requirements for a period of three years.  These provisions will be described in a forthcoming regulation.

Moratorium:      The instructions implementing the MMSEA authorized three-year moratorium on the construction of new LTCHs and satellites, and the expansion of beds in existing LTCHs and satellites, will also be issued in a forthcoming regulation.

The IFC will become effective June 5.   CMS will accept comments on the IFC until July 7, 2008, and will respond to the comments in a final rule. 

Note:  For more information, see the CMS website at: www.cms.hhs.gov/LongTermCareHospitalPPS/01_overview.asp.

A copy of the IFC is available on the CMS website at: http://www.cms.hhs.gov/longtermcarehospitalpps/downloads/CMS-1493-IFC-Display.pdf

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