Long-term-care hospitals will face fewer administrative burdens under a new Medicare payment program that starts next month.
The Centers for Medicare and Medicaid Services published final regulations last week establishing a prospective payment system for long-term-care hospitals. The new system will impact more than 270 hospitals when it goes into effect Oct. 1.
Long-term-care hospitals, which have an average inpatient length of stay of more than 25 days, currently are paid based on their reasonable costs. In 1999, Congress instructed the CMS to change the system, which under the regulations will be paid based on diagnosis-related groups similarly to acute-care hospitals. The CMS has modified the payment groups to reflect the greater costs involved with longer lengths of stay.
The final rule, published in the Aug. 30 Federal Register, has a single payment rate for both operating and capital costs. Unlike other PPS systems, the payment will be the same regardless of whether a hospital is in a rural or urban area. To ensure that the change in payment structure will not cost more than the old system, the CMS will reduce payments to the hospitals throughout the transition period, starting with a 6.6% reduction in fiscal 2003.
Although there is a five-year phase-in for the new payment system, the CMS said it expects about half of the hospitals to elect to move immediately to the new system. Hospitals that do not move in the first year will be paid 20% under the PPS system and 80% under the current payment system.
In a change from the proposed rules that will benefit hospitals in low-wage areas, the final rule establishes an area wage index that will be phased in over five years. In addition, long-term-care hospitals only will have to track short-term stays and interrupted stays, where a patient is transferred to an inpatient acute-care hospital, inpatient rehabilitation, or skilled-nursing facility for a short time before returning to the hospital. Hospitals complained that a third category, called very short stays and proposed in March by the CMS, would be burdensome.
Long-term-care hospital representatives were still poring over 137 pages of regulations at deadline, but said they were pleased overall.
"The system is better than it was. It will lead to stable and predictable payments," said Steven Speil, senior vice president and chief financial officer of the Federation of American Hospitals, the trade association that represents for-profit hospitals, including Kindred Healthcare and Select Medical Corp., the two largest providers of long-term-care hospital services.
"We see a very responsible attempt to get on top of the issues," agreed Daniel Mendelson, chief executive officer of the Health Strategies Consultancy, a Washington-based consulting group that also represents Kindred.
Long-term-care hospitals are concerned about some parts of the rule, however. Mendelson said the area wage index should be phased in rapidly instead of over five years to more accurately reflect the cost differences.