The government must pay long-term acute-care hospitals on the basis of their costs starting the day they open, rather than after a six-month trial period, a federal court ruled last month.
But HHS is expected to appeal the ruling, and long-term acute-care hospitals are not counting on an increase in Medicare reimbursements any time soon.
Hospitals that specialize in treating ventilator-dependent or otherwise medically complex long-term patients are exempt from Medicare's DRG-based payment system and are paid according to their costs, up to annual caps. However, the exemption does not kick in until average lengths of stay have exceeded 25 days over a six-month period. That provision is invalidated by the ruling.
The ruling stems from a case begun in 1997, when two hospitals operated by Las Vegas-based Transitional Hospitals Corp. filed suit in the U.S. District Court for the District of Columbia to force HCFA to apply the exemption from the first day of operations.
They argued that the six-month trial period flouted Congress' intent to exempt long-term acute-care hospitals from a payment system designed for short-term acute-care hospitals. The court agreed.
Louisville, Ky.-based Vencor acquired the hospitals through a merger two months after the lawsuit was filed.
The ruling would require HCFA to pay about $1.3 million to 75-bed Vencor Arlington, Texas, and $1.2 million to 78-bed Vencor Hospital-New Orleans, he said.
John Fitzgerald, chief executive officer of SCCI Health Services Corp., a Dallas-based chain of 11 long-term acute-care hospitals, characterized the ruling as "extremely important to the industry."
These hospitals often operate at only 25% of capacity during the first six months to minimize losses, which generally run between $1 million and $1.5 million. Eliminating the six-month start-up period would allow them to fill beds quicker and provide services to more patients, Fitzgerald said.