MIR-2006-8AB, August 2006

Update – Long-Term Care Hospital Prospective Payment System (LTCH PPS) Rate Year 2007

Provider Types Affected
Long-term care hospitals paid under the LTCH PPS by Medicare fiscal intermediaries (FIs)

Provider Action Needed  

Impact to You
Change Request (CR) 5202, from which this article is taken, updates the changes to LTCH PPS for Rate Year 2007 (July 1, 2006 - June 30, 2007). It also announces a policy change regarding payment for LTCH patients during a three-day or less interruption of an LTCH stay if the treatment was grouped to surgical diagnosis related groups (DRGs) in the acute care hospital. CR5202 also announces changes to short stay outlier (SSO) payment calculations.

What You Need to Know
CR5202 provides updates to rates, budget neutrality factors, wage indexes, and so on, for the new rate year for LTCH PPS.

What You Need to Do
See the Background section of this article for further details regarding these changes.

• The standard Federal rate is $38,086.04.
• The fixed loss amount is $14,887.
• The budget neutrality adjustment is 0 percent. (The PPS pricing software [PRICER] payment amount will include the adjustment factor as 1.00.)
• The wage index phase-in percentage for cost reporting periods, beginning on or after October 1, 2006, is five-fifths (100 percent). Note that the wage index table within PRICER will include three columns:
  • A three-fifths column for discharges occurring in LTCH cost report periods beginning during Fiscal Year 2005;
  • A four-fifths column for discharges occurring in LTCH cost report periods beginning during Fiscal Year 2006; and
  • A five-fifths column for discharges occurring in LTCH cost report periods beginning during Fiscal Year 2007.
• The labor-related share is 75.665 percent.
• The non-labor related share is 24.335 percent.

Other Important Facts in CR5202

Short-Stay Outlier Cases
One notable policy change affects payments to short-stay outlier (SSO) cases. Currently, short-stay outlier (SSO) cases (i.e., cases with a length of stay less than or equal to five-sixths of the geometric average length of stay (ALOS) of the LTC diagnosis related groups (DRG)), are paid the least of:

• 120 percent of the estimated cost of the case;
• 120 percent of the LTC-DRG per diem amount; or
• The full LTC-DRG payment.

However, in the RY 2007 LTCH PPS final rule, CMS revised the SSO case payment formula in two ways.

First, the current SSO payment formula option that is based on estimated costs has been reduced from 120 percent to 100 percent (effective for SSO discharges occurring on or after RY 2007). In addition, a fourth option is being added to the SSO payment formula. This option is a blended payment that is based on:

• A percentage of an inpatient prospective payment system (IPPS) comparable amount, computed as a per-diem and capped at the full IPPS comparable amount; and
• A percentage of the 120 percent of the LTC-DRG per diem amount.

Under this new blended fourth component of the SSO payment formula, as the length of the stay increases, it begins to resemble less of a short-term acute care IPPS hospital stay and more of a typical LTCH one.

Consequently, the LTCH PPS payment for the SSO case under this blend option is based on a decreasing percentage of the IPPS comparable per diem amount and an increasing percentage of the 120 percent of the LTC-DRG per diem amount as the LOS of the SSO case increases.

Therefore, effective for LTCH PPS discharges occurring on or after July 1, 2006, the adjusted payment for an SSO case will equal the lesser of:

• 100 percent of estimated cost of the case;
• 120 percent of the LTC-DRG per diem amount;
• The full LTC-DRG payment; or
• A blend of an amount comparable to what would otherwise be paid under the IPPS, computed as a per diem and capped at the full IPPS DRG comparable amount, and 120 percent of the LTC-DRG per diem amount.  

As under the existing SSO policy, SSO cases are eligible for LTCH PPS high-cost outlier payments if the estimated cost of the SSO case exceeds the LTCH PPS outlier threshold (i.e., the SSO payment plus the fixed-loss amount).

CR5202 contains further details regarding the SSO calculations and also includes two very detailed examples of SSO calculations, one for a stay of 11 days and the other for a stay of 27 days. You may view these details by accessing CR5202 at http://www.cms.hhs.gov/Transmittals/downloads/R981CP.pdf on the CMS Web site.

Revised Payment Policy for Three-Day or Less Interruption of Stay
Another important subject addressed in CR5202 is the revised payment policy for a three-day or less interruption of stay .Currently, all inpatient and outpatient treatment and/or care delivered to LTCH patients by acute care hospitals, IRFs, and SNFs during a three-day or less interruption is the LTCH’s responsibility “under arrangements,” unless the patient’s treatment during such an interruption was at an acute care hospital, and was grouped to a surgical DRG.

This means that the acute care hospital was allowed to submit a separate bill for these services (although the patient’s readmittance to the LTCH following the surgical procedure remained governed by the interrupted stay policy).

For RY 2007, this surgical-DRG exception to the three-day or less interruption of stay policy that was in effect for RYs 2005 and 2006 is discontinued, and LTCHs are required to cover such treatment “under arrangements” as they do for all other medical care or services provided to inpatients during a three-day or less interruption of stay.

Therefore, in these instances acute care hospitals will no longer be able to submit a separate bill to Medicare for such treatment but must turn to the LTCH for payment.

Additional Information
CR5202, the official guidance that CMS has provided to your FIs, is located at http://www.cms.hhs.gov/Transmittals/downloads/R981CP.pdf on the CMS Web site.

If you have any questions, please contact your fiscal intermediary at their toll-free number, which may be found at http://www.cms.hhs.gov/MLNProducts/downloads/CallCenterTollNumDirectory.pdf on the CMS Web site.

Disclaimer
This article was prepared as a service to the public and is not intended to grant rights or impose obligations. This article may contain references or links to statutes, regulations, or other policy materials. The information provided is only intended to be a general summary. It is not intended to take the place of either the written law or regulations. We encourage readers to review the specific statutes, regulations and other interpretive materials for a full and accurate statement of their contents.

MLN Matters Number: MM5202
Pub. 100-4, Transmittal# R981CP, CR# 5202
Related CR Release Date: June 15, 2006
Effective Date: July 1, 2006
Implementation Date: July 3, 2006