Favorable Medicare reimbursement for long-term acute care and a growing demand for high-acuity care is leading to a proliferation of long-term acute-care hospitals set up within other hospitals. But recent and forthcoming government scrutiny of these facilities may dampen some of the enthusiasm among providers looking to build them.
Rep. Pete Stark (D-Calif.) last week introduced a bill in Congress that would place a moratorium on the growth of long-term acute-care hospitals until federal officials answer questions about the necessity for the facilities, the sector's rapid growth and the appropriateness of Medicare payments. At issue is whether long-term acute-care hospitals are "merely cash cows" for their corporate investors or if they are adding value to the care provided to seniors and other high-acuity patients, Stark said in a news release.
"Their margins swamp those of acute hospitals and skilled-nursing facilities, all the while drawing sizable dollars from Medicare," he said.
Frank Morgan, an analyst with investment banking firm Jeffries & Co., said Stark's bill is unlikely to go far this year, but the CMS, the Medicare Payment Advisory Commission and HHS' inspector general's office are studying the industry. The hospitals, which provide extended care for clinically complex patients, need average inpatient lengths of stay of more than 25 days to receive reimbursements.
The CMS' regulations suggest that when a patient is transferred from a long-term acute-care hospital to its host hospital and back again, Medicare should in many cases treat the episode as a single discharge. The inspector general's office plans to study the frequency of such discharges and the CMS' related reimbursements.
"The CMS appears to be afraid of a situation where there's this deal being done between the two hospitals where they're bouncing patients back and forth so they can improve reimbursement," said Michael Soisson, a consultant with Gill/Balsano Consulting who helps providers open hospitals within hospitals.
The number of long-term acute-care hospitals in the U.S. has grown to 300 from 100 in the last 10 years, the CMS said. The hospitals are reimbursed by the CMS through a prospective payment system that was created to assure appropriate reimbursement for high-acuity services while providing incentives to hospitals to provide more efficient care.
Morgan said while long-term acute-care patients represent about 3% of all patients, they can represent as much as 40% of the critical-care dollars acute-care hospitals spend. Medicare patients make up roughly 70% of the patient census in long-term acute-care hospitals and account for 60% of the hospitals' revenue, he said. Late last month the CMS issued proposed regulations that would increase the Medicare payment rates for long-term acute-care hospitals by 2.9% beginning July 1.
But Soisson said there is more to the inquiry than examining payment and discharge policies, such as "whether the host hospital creates a separate company that's not controlled by the host hospital or health system board."
In addition to length of stay, CMS regulations require that long-term acute-care hospitals have a separate governing body, maintain their own administrative and employee structure and have a distinct medical staff. The long-term acute-care hospital may purchase ancillary services from the host hospital, but to accept unlimited patient referrals from the host, no more than 15% of the specialty hospital's operating expenses may be purchased from the host.