Given the nursing home industry's troubled times under Medicare's new prospective payment system, one might think other post-acute-care providers would view a new PPS with much trepidation.
But at least one such provider group is lobbying for a PPS.
The group, the Boston-based National Association of Long Term Hospitals, has drafted a bill outlining a system based on hospital DRGs but adjusted for the monthlong stays typical in such facilities. The bill's authors are angling to get some of the PPS provisions written into the federal budget bill.
The association represents 50 hospitals, most not-for-profit.
Medicare now pays long-term acute-care hospitals, known as LTACs, on the basis of their costs. Payments per patient are capped, but hospitals have very little incentive to keep costs much below the caps.
Ed Kalman, the association's general counsel, says LTACs need a PPS to promote efficiency and "rational growth."
LTACs, however, are among the only post-acute care providers without a congressional mandate for a PPS. The size of the industry is small-totaling just 276 hospitals. Two large players dominate the scene: Louisville, Ky.-based Vencor, which operates 57, and Mechanicsburg, Pa.-based Select Medical Corp., with 44.
Vencor filed for Chapter 11 bankruptcy protection last week, citing decreased Medicare reimbursement for all its businesses, hospitals included.
The Balanced Budget Act of 1997, which imposed a PPS on skilled-nursing facilities, home-health agencies, outpatient services and rehabilitation hospitals, reduced caps for LTACsâ´by as much as 50% for a few facilitiesâ´but left the reimbursement system intact. Some LTAC hospital executives complain that the reduced caps have eaten into profits, but many readily admit that past payments were generous and current payments adequately cover costs.
But by next month, HCFA must report to Congress on the possibility of changing the payment system for LTACs. And the industry wants to make sure its voice is heard.
"We've been working closely (with HCFA and Congress) to create our own destiny and get a PPS," says Janie Carver, president and chief executive officer of Dubuis Health System, Houston. Dubuis LTACs follow a hospital-within-a-hospital model that's increasingly attractive in the face of shrinking Medicare payments. An acute-care hospital can rent space to an LTAC and sell services, such as lab and radiology, to the facility. An LTAC also gives the hospital a place where it can discharge patients with medically complex needs who might otherwise occupy acute-care beds for a month or more.
LTACs also thrive under the model, which reduces overhead and makes it easier to keep costs below the Medicare caps.
For some LTACs, the balanced-budget law has meant more business. "The new regulations for short-term acute-care hospitals and the (PPS) for nursing homes have created a higher level of demand for what we offer," says John Fitzgerald, president and CEO of 12-hospital SCCI Health Services Corp., Dallas.
But no matter how much Medicare business SCCI gets, the company is paid only according to its costs, Fitzgerald says. A PPS would allow hospitals with efficient operations to keep the difference between expenses and payments.
It would also level the playing field. Currently, per-patient Medicare payment caps for hospitals established after 1996 are set at about $22,000. Hospitals established in 1996 or earlier are capped at about $37,000. Under the industry's proposal, a PPS would pay all hospitals the same rate.
Kalman and others believe that lobbying now will save headaches later. The industry is particularly worried that the government will peg a PPS to resource utilization groups, or RUGs, which are used for skilled-nursing facilities.
"If we end up with a system based on RUGs, I think we'll repeat the same disaster that the nursing home industry has experienced," says David Siedenstrang, senior vice president of development at NextCare Hospitals, an Austin, Texas-based chain that operates five hospitals. But a DRG-based system such as Kalman is pushing "would be palatable," he says.