LTCH Outline
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Feb 20, 2024
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1
Long-Term Care Hospital Prospective Payment System
Patients with multiple acute and chronic diseases may require medically complex care.
Long-term care hospitals (LTCHs) can provide inpatient care to these patients for extended periods. 1)
Background:
- Medicare beneficiaries’ long-term care hospitalizations are covered under Part A Medicare
- Beneficiaries have up to 90 days of hospital services within the benefit period
- Admissions to both acute-care hospitals and LTCHs are counted in the benefit period
- Beneficiaries pay cost-sharing for their LTCH services
- One inpatient deductible is required for each 90-day benefit period
- For days 61-90, a daily coinsurance payment is also required
- The 60 lifetime reserve days may also be used after the 90
th
day. - Once the lifetime reserve days are used, the patient is responsible for all inpatient costs.
- The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act (BBRA) of 1999, as amended by the Benefits Improvement and Protection Act of 2000, mandated that a PPS be implemented for LTCHs.
- In October 2002, CMS implemented the long-term care hospital prospective payment system (LTCH PPS) that utilizes a case-rate reimbursement methodology.
- Extended neoplastic disease care hospitals are excluded from the LTCH PPS and are reimbursed at a reasonable cost.
- LTCHs treat groups of patients who have longer-than-average lengths of stays (LOS) (days as inpatient) - CMS requires the average length of stay (ALOS) to be 25 days or more.
- LTCH can be freestanding, satellites of other larger facilities, or co-located units within acute-care hospitals, inpatient rehabilitation facilities, or skilled nursing facilities.
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- When they are co-located within larger medical facilities, they are sometimes known as hospitals within hospitals (HwH) - Types of hospitals excluded from the LTCH PPS are:
Extended neoplastic disease care hospitals
Department of Veterans Affairs (VA) hospitals
Hospitals reimbursed under state cost-control systems or authorized demonstration projects
Nonparticipating hospitals furnishing emergency services to Medicare beneficiaries.
- To qualify as a long-term care admission the principal for the admission cannot be psychiatric diagnosis or relate to a rehabilitation diagnosis.
- These admissions are better suited for an inpatient psychiatric facility for an inpatient rehabilitation facility.
- Beginning in October 2016, under provisions of the Pathway for SGR Reform Act of 2013, only certain types of discharges from LTCHs will qualify for the LTCH PPS payment.
- Nonqualifying discharges will be paid under the IPPS for acute-care hospitals
- Either of two circumstances qualifies an LTCH discharge for payment under the LTCH PPS:
Patient had an immediately preceding acute-care hospital stay that included at least three days of intensive care services.
Patient had an immediately preceding acute-care hospital stay and the LTCH admission has a principle diagnosis that indicates that the patient received at least 96 hours of mechanical ventilation during the encounter. - Nonqualifying discharges are paid under the IPPS in what are called “site-neutral payments”
.
- Site Neutral payments are the lesser of the IPPS amount or 100% of the discharge’s costs.
3
- By 2020, and LTCH with an LTCH discharge payment percentage that demonstrates that more than 50% of the LTCH’s discharges were paid for based on the site-neutral payment rate will subsequently be paid the site-neutral amount for all charges.
2)
Data Collection and Reporting:
- LTCH’s are responsible to complete, submit, and maintain patient assessments using
the LTCH Continuity Assessment Record and Evaluation (CARE) Data Set
.
- The LTCH CARE Data Set is a required assessment form that has specific dates by which
assessments must be completed.
- Data collection using the LTCH CARE Data Set is applicable to all patients regardless of
the patient's age, diagnosis, length of stay, or payer.
3)
Structure of Payment:
- The LTCH PPS is a case-rate system that categorizes patients with similar clinical
characteristics and resource intensity into groups.
- There are 3 components in the structure of payment under the LTCH PPS
The Standard Federal Rate
The Medicare Severity-Long-Term Care-Diagnosis-Related Groups
classification system (MS-LTC-DRGs)
Adjustments
- There are 3 steps based on the components of the foundation of an LTCH PPS
Payment:
Step 1: Adjust for geographic factors.
Step 2: Adjust for resource consumption.
Step 3: Determine payment.
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- The LTCH PPS payment includes reimbursement for all the following costs related to
providing covered services:
Operating
Capital Related
Routine (regular room, dietary and nursing services, minor medical and
surgical supplies, and equipment for which a separate charge is not
usually made)
Ancillary - Excluded from the PPS are the following costs
(Although the LTCH can bill them separately to CMS)
Bad Debts
Approved Educational Activities
Blood-clotting Factors
4)
Standard Federal Rate (Base Rate):
- The Standard federal rate converts the MS-LTC-DRG relative weight into a payment.
- The LTCH PPS payment begins with the standard federal rate for each discharge.
- This per discharge rate is known as the base rate.
- The Standard federal rate is a standardized payment amount based on average costs
and
is undated each year in the LTCH PPS final rule.
- The Standard Federal Rate is calculated using data from the LTCH’s previous cost
reports.
- These reports provide data on operating and capital costs.
- Into the calculation, CMS also inputs data from the prices of the market basket of
goods and services.
- Thus, the standard federal rate is based on operating costs and capital costs adjusted
by the data from the market basket, which is updated annually.
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5)
Geographic Adjustments:
- There are 2 adjustments based on geography and location:
Labor portion
is adjusted for the area’s local wage index.
Large part of the standard federal rate is based on labor (part of
operating costs)
The LTCH PPS uses the local wage index to factor in the effects of the
area’s wages.
The labor portion varies each year from approximately 62% to 71%
Cost of Living Adjustment (COLA)
is applied for LTCHs in Alaska and Hawaii
6)
Medicare Severity Long-Term Care Diagnosis-Related Groups (MS-LTC-DRGs):
- The LTCH PPS utilizes Medicare-severity long-term care diagnosis related groups or MS-
LTC-DRGs, to adjust for resource consumption.
- MS-LTC-DRGs is a classification system that groups like patients with like resource
consumption into groups.
- MS-LTC-DRGs account for variations in the use of resources to care for patients in
LTCHs.
- Based on coding, patients’ discharges are grouped into MS-LTC-DRGs.
- MS-LTC-DRGs are organized into major diagnostic categories and are divided into
surgical and medical partitions.
- This duplication extends to their numeric titles and word titles
- A computer software program called a “
Grouper”
classifies patient discharges into MS-
LTC-DRGs.
- Groupers have internal logic or an algorithm that determines the patient's groups.
- The grouper uses the following data to determine the patient's MS-LTC-DRG:
Principal Diagnosis
Additional Diagnosis (up to 24)
Procedures (up to 25)
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Sex
Age
Discharge Status - Primarily
, the primary diagnosis determines the MS-LTC-DRG.
- Additional (secondary) diagnoses and certain procedure codes also affect the
assignment of the MS-LTC-DRG. - Additional diagnoses represent complications and comorbidities (CC):
Complications are conditions that occurred after the admission
(during the hospitalization)
Comorbidities were present at the time of the admission.
- Like MS-DRGs, CCs and MCCs affect the assignment of a patient’s discharge to an MS-
LTC-DRG.
- MS-LTC-DRGs have assigned relative weights and these weights reflect the resources
necessary to treat LTCH patients who require medically complex care.
- Patients who consume more resources are grouped to MS-LTC-DRGs that have higher
relative weights.
- The relative weights of MS-LTC-DRGs differ from the relative weights of MS-DRGs
because the mix of patients in LTCHs differs from the mix of patients in acute-care
inpatient hospitals. - Patients in LTCHs are characterized by the complexity of their multiple medical
conditions. - Second, the distribution of MS-LTC-DRGs differs from the distribution of MS-DRGs.
- The difference results because LTCHs do not typically treat the full range of diagnosis
as acute inpatient hospitals do.
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- Therefore, some MS-LTC-DRGs have very few or no cases. - CMS manages this situation by creating two subsets of MS-LTC-DRGs:
I.
Low-Volume
MS-LTC-DRGs have fewer than cases (pt discharges)
They’re divided among 5 quintiles (1/5 of cases in a distribution) based on average charges per discharge.
Each quintile has a relative weight.
II.
No-Volume
MS-LTC-DRGs have no cases.
CMS assigns no-volume MS-LTC-DRGs relative weights and average length of stays.
To assign these relative weights and average length of stay, CMS cross walks the no-volume group to another MS-LTC-DRG with clinical similarity and relative costliness.
CMS assigns these relative weights and lengths of stay to prepare for the upcoming fiscal year because LTCHs could have patient discharges in these groups in the upcoming year.
CMS also includes MS-LTC-DRGs with relative weights of 0.0000 in
the count of no-volume MS-LTC-DRGs.
These MS-LTC-DRGs are the MS-LTC-DRGs for organ transplants (organ transplants should no occur at an LTCH) and the MS-LTC-
DRGs for administrative errors. - Low-Volume MS-LTC-DRGs share the relative weight of their quintile.
- CMS annually adjusts the groups and weighting factors to reflect changes in :
Treatment Patterns
Technology
Number of Discharges
Other factors affecting the relative use of LTCH resources
- These changes in the delivery of healthcare affect the use and consumption of resources.
- By adjusting the groups and weights, CMS accounts for these changes in use and consumption.
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- CMS also adjusts relative weights to reflect current use of resources.
- Changes in treatment patterns or technology can result in increases in relative weights
or in decreases in relative weights.
7)
LTCH PPS Provisions: - Case-Level adjustments reflect unique aspects of patient’s individual hospital stays.
- There are 4 case-level adjustments:
a)
A short-stay outlier
is defined as an LTCH admission shorter than the average length of stay.
Short stay outlier are five-sixths of the geometric average length of
stay.
Short stay outliers are paid at a blend of the IPPS amount and 120% of the MS-LTC-DRG per diem amount.
b)
An interrupted stay
is when a patient is (1) admitted to an LTCH; (2) then discharged to an acute-care inpatient hospital, IRF, or SNF; and (3) readmitted to the LTCH within a fixed period of days (acute-care inpatient hospital, 9 days; IRF, 27 days; SNF, 45 days)
An interrupted stay becomes one discharge and one payment.
Admissions and discharges from co-located facilities come under this adjustment.
Discharges and readmissions among co-located facilities may not exceed 5% without penalty.
c)
A High-Cost Outlier is a discharge with extraordinarily high costs that exceed the typical costs of its MS-LTC-DRG.
To identify high-cost outliers, CMS uses a threshold.
The threshold based on the adjusted federal payment plus the fixed-loss amount.
Each year, CMS publishes the fixed-loss amount (calculated from the latest available data on LTCH cost reports) in the LCTH PPS final rule.
There are two fixed-loss amounts; one for LTCH cases and one for the site-neutral LTCH cases.
CMS pays 8% of the LTCH’s costs above the threshold. d)
The 25% rule
reduces payments for HwH LTCHs and satellite LTCHs that exceed the 25% threshold for patients admitted from their “host” acute-
care hospitals during a cost reporting period.
The purposes of the rule are to ensure LTCHs do not function as units of acute-care hospitals and to ensure that decisions about
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admission, treatment, and discharge are made for clinical rather than financial reasons.
After the threshold is exceeded, the LTCH is paid under the lesser of the LTCH PPS rate or an amount equivalent to the IPPS rate for patients discharged from the host acute-care hospital.
Several acts passed by Congress have delayed the implementation
of the 25% rule, including the Sustaining Healthcare Integrity and Fair Treatment Act of 2016.
- Discharges cane be classified into multiple case-level adjustments.
- For example, an interrupted stay may also be a high-cost outlier.
8)
LTCH PPS Reimbursement
- Under the LTCH PPS, payment for a Medicare patient is made at a predetermined, per discharge amount (case rate) for each MS-LTC-DRG.
- Pricer software calculates the LTCH payment.
- The unit of payment is the discharge - To determine the federal payment rate for each patient discharge, Pricer’s internal logic
uses the components in figure 8.6 and table 8.3. Here are the processes illustrated in table 8.3:
Standard federal rate is adjusted for differences in geographic areas’ wages: - Unadjusted standard federal rate is multiplied by the local wage index for local labor costs.
- Nonlabor-related portion of the standard federal rate is calculated by multiplying the unadjusted standard federal rate by the nonlabor-related portion. - Adjusted federal rate is calculated by adding together the 2 adjusted portions, the adjusted labor-related portion
and the adjusted nonlabor-related portion.
Geographic adjusted standard federal rate is adjusted for case mix by multiplying the adjusted standard federal rate by the MS-
LTC-DRG relative weight,
Column K, the payment, is adjusted for short-stay outlier and high-cost outlier as necessary.
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9)
Implementation
- By establishing the MS-LTC-DRG, correct ICD-10-CM coding drives Medicare’s payment of the claim. - Coders must be careful to record the code that occasioned the admission to the LTCH.
- They must be careful not to record the code that occasioned the admission to the acute-care hospital. - Coding additional diagnoses is also crucial - Additional diagnoses may represent CC’s and MCCs.
- CC’s and MCCs group patients discharges to MS-LTC-DRGs with relatively higher weights than MS-LTC-DRGs without CCs and MCCs.
- Higher relative weights result in higher payments
- As always, the goal is accuracy to ensure correct reimbursement and always the goal is accurate coding to ensure correct payments.