By Vinita Ollapally

On May 2, 2008, the Centers for Medicare and Medicaid Services (CMS) issued its Interim Final Rule with Comments Implementing Medicare, Medicaid, and SCHIP Extension Act of 2007 to the Long Term Care Hospital Prospective Payment System (Final Rule).  The Final Rule increases the standard Federal rate for long term care hospitals (LTCHs) for Rate Year 2009 by 2.7 percent from the rate established for 2008.  CMS estimates that the changes in the Final Rule will result in total payments to LTCHs of $4.47 billion, which is approximately $110 million over the 2008 rates.

LTCHs are generally defined as hospitals that have an average Medicare inpatient length of stay greater than 25 days.  Medicare pays LTCHs a single, predetermined amount under the LTCH prospective payment system (PPS), which uses Medicare-severity long term care diagnosis related groups (MS-LTC-DRG) to determine payments.  These are the same MS-DRGs that are used to determine payments for inpatient stays in acute care hospitals, but the payment amounts are different to reflect different hospital resources required to treat patients during long stays.  In unusually costly cases, Medicare may pay a LTCH an additional amount, called an outlier payment, in addition to the LTCH PPS payment for the MS-LTC-DRGs.  In order to be eligible for an outlier payment, the LTCH’s estimated costs in treating the patient must exceed the MS-LTC-DRG by a fixed-loss amount.  The Final Rule increases the fixed-loss amount for high cost outlier cases from $20,738 to $22,960.      

The CMS press release on this rule is available at this link. 

The final rule is available at this link.