Medicare Compliance & Reimbursement

MedPAC's cautions all but ignored in new rule.

The Medicare Payment Advisory Commission suspects that the Centers for Medicare and Medicaid Services' high Medicare payments for long-term care hospitals could provide for-profit facilities with an incentive to try to qualify as LTCHs.

So why is CMS raising LTCH's Medicare reimbursement rates again?

Medicare payment rates will increase by 3.4 percent for patient discharges from July 1, 2005 to June 30, 2006. CMS applied these payment increases to its final rule on LTCHs' annual payment rates and policy changes, despite MedPAC's repeated warnings about Medicare's overspending on LTCH.

CMS will offer to pay an amount in addition to the LTCH prospective payment system amount for the LTC diagnosis-related group if the case is unusually costly, according to a final rule published in the May 6 Federal Register. To receive this additional payment, LTCHs' costs must exceed the LTC-DRG payment by an outlier fixed-loss amount, which is $10,501 for rate year 2006 - down than $7,000 from last year. Also, CMS is extending the surgical DRG exception to the three-days-or-less interrupted-stay policy to RY 2006. The exception provides that Medicare will only pay for one LTC-DRG when a patient is discharged to another facility and then readmitted to the LTCH within three days. The LTCH is responsible for the other facility's covered inpatient or outpatient services during the interruption.  

CMS: Rule Helps Those Who Need It Most

The final rule's payment rates and policies will ensure that Medicare beneficiaries receive the level of care they need in LTCHs, CMS Administrator Mark McClellan said in a statement. "We also believe this final rule will lead to the efficient provision of services to some of our most seriously ill beneficiaries," he added.

MedPAC remains skeptical of the LTCH PPS payment-rate increases, however. Because many of the new LTCHs in the past few years were for-profit facilities, this indicates that Medicare's LTCH payments could be more than adequate, according to MedPAC's March 29 letter addressed
to McClellan.