Recent Developments in Medicare Affecting Long-Term Care Hospitals Page: 3 of 6
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the principle that patients be cared and paid for in the appropriate setting.6 Although
generally supportive, another group representing LTCH providers focused on the
challenges inherent in creating appropriate patient assessment tools and using program
safeguard methods, including QIOs, to ensure cost-effective, appropriate care in safe
A post-acute care demonstration project mandated by the Deficit Reduction Act of
2005 (DRA) may eventually help address some of the broader changes necessary to
encourage the cost-effective provision of post-acute care in the most appropriate setting.
As mandated by DRA, the Secretary of Health and Human Services (HHS) is required to
establish a three-year demonstration program to better understand costs and outcomes
across different post-acute care sites. Under the program, individuals receiving treatment
for specified diagnoses will receive a comprehensive assessment on the date of discharge
from an acute care hospital (paid under Medicare's inpatient prospective payment system,
or IPPS). The assessment will evaluate clinical characteristics and patients' needs in
order to determine appropriate placement of the patient in a post-acute care site. The
same standardized patient assessment instrument will be used across all post-acute care
sites to measure functional status and other factors. The Secretary is required to submit
a report to Congress on results and recommendations no later than six months after the
end of the program. DRA authorized the transfer of $6 million from Medicare's Hospital
Insurance Trust Fund to carry out the demonstration.
Defining Entities as LTCHs
In the meantime, certain operational issues have come to the forefront. A long-
simmering issue concerns the establishment of an LTCH operating as part of another
provider.8 Although the Medicare statute does explicitly address the exclusion of distinct-
part psychiatric and rehabilitation units of other hospitals from the inpatient prospective
payment system (IPPS) used to pay acute care hospitals, no comparable provision
excludes long-term care units in those hospitals from IPPS. Until recently, HwHs have
accounted for much of the growth in long-term care hospitals.9 In 2004, CMS acted to
tighten the requirements by which HwHs can be established to function as independent
LTCHs.10 As established in the final rule, Medicare will continue to provide LTCH
payments for patients referred from other than the host hospital. With certain exceptions,
6 See [http://waysandmeans.house.gov/hearings.asp?formmode=view&id=2795] for testimony
delivered on behalf of the Acute Long Term Hospital Association (ALTHA).
A medical record review performed by QIOs found that 29% of 1,400 randomly selected LTCH
Medicare admissions in 2004 did not need LTCH hospital-level care. See
[http://waysandmeans.house.gov/hearings.asp?formmode=view&id=2794] for testimony
delivered on behalf of the National Association of Long Term Hospitals (NALTH).
8 The Prospective Payment Assessment Commission (ProPAC, a precursor to MedPAC)
recommended that growth in the number of HwHs should be monitored in order to evaluate
whether Medicare's certification requirements should be changed. ProPAC, Report and
Recommendations to the Congress, March 1, 1997, p. 59.
9 As of October 2005, 175 of the 376 LTCs were HwHs. However, according to CMS, since
October 1, 2004, 22 of the 25 newly-established LTCHs are freestanding.
10 This policy applies to satellite LTCHs established on the same campus of other providers.
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Tilson, Sibyl. Recent Developments in Medicare Affecting Long-Term Care Hospitals, report, March 14, 2006; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc822533/m1/3/?q=medicare: accessed March 25, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.