CMS Implements Changes to Prospective Payment System for Long-Term Care Hospitals

The Centers for Medicare & Medicaid Services (CMS) has implemented a revised payment system for Long-Term Care Hospitals (LTCHs). The changes, which became effective on October 1, define two separate payment categories for LTCH patients. Medicare pays for LTCH inpatient services under the LTCH Prospective Payment System (PPS). Under this payment system, CMS sets predetermined, fixed payment rates for inpatient stays. Rates vary based on a patient’s diagnosis and severity of illness, and the hospital generally receives a single payment for each case based on the payment classification when the patient is discharged.

Until 2013, there were no clinical criteria for LTCH patients. However, Section 1206 of the 2013 Bipartisan Budget Act established two separate payment categories for the LTCH PPS. Patient discharges that meet specific clinical criteria will be paid “standard” payments, and those that do not meet the criteria will receive “site neutral” payments. A “standard” payment is what is generally paid under existing LTCH PPS policy, while a “site neutral” payment is the lesser of a comparable Inpatient Prospective Payment System [IPPS] payment amount or 100 percent of the estimated cost of the case.

In order to receive a “standard” payment, the LTCH patient encounter must meet one or both of two clinical criteria:

  1. The patient must have been admitted directly from a hospital paid under the Inpatient PPS; at least three days of the patient’s stay were spent in an Intensive Care Unit or Coronary Care Unit; and the discharge was not assigned to a psychiatric or rehabilitation payment classification in the LTCH.
  2. The patient was admitted directly from an IPPS hospital, and the patient’s LTCH discharge includes the procedure code for ventilator services of at least 96 hours, but was not assigned to a psychiatric or rehabilitation payment classification in the LTCH.

If the patient’s discharge does not meet one or both of these criteria, the LTCH will receive the “site neutral” amount, and the Medicare Administrative Contractor will place a code indicating this on the remittance advice. Moving forward, CMS advises LTCH providers to ensure that their billing staffs are aware of and implementing these changes. CMS has also provided an official instruction regarding the change to Medicare Administrative Contractors.

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