Long-term acute-care hospitals, or LTACs, were disappointed last week when the CMS softened but did not eliminate proposed restrictions on how many patients the specialized facilities can accept for full payment.
Hospital officials in New York were none too happy either. In that state, many hospitals expect reduced payments as a result of new Medicare labor markets established in the CMS' final inpatient regulation for 2005, displayed last week in the Federal Register and scheduled for official publication on Aug. 11.
The annual inpatient regulation, which is more than 2,000 pages long and becomes effective Oct. 1, addresses a host of issues from new Medicare rates to rural hospital payments.
The CMS' handling of long-term acute-care hospitals, especially those that operate within general acute-care hospitals, fired up but also confused industry officials who scrambled last week to figure out exactly what the regulation said and how it would affect their operations.
Under the regulation the CMS proposed in May, LTACs that operate within other hospitals would have been allowed to draw no more than 25% of their patients from the host hospital to receive LTAC rates, which are significantly higher than acute-care rates. When that proposal came out, many LTAC operators said it would literally put them out of business if adopted (May 17, p. 8).
In the final regulation issued last week, the CMS said it would instead phase in the 25% threshold requirement over four years, with no changes in 2005. Starting in 2006, LTACs within other hospitals will be permitted to accept 75% of patients from the host hospital. In 2007, they will be permitted to accept 50%; in 2008, they can accept only 25%.
As a result of the CMS' regulation, general acute-care hospitals that do not currently house an LTAC might think twice about doing so, said Don May, vice president of policy at the American Hospital Association. The four-year phase-in plan applies only to LTACs currently operating or under development. As a result, any LTAC that begins development after Oct. 1 will immediately be subject to the 25% threshold, which is likely to persuade some would-be hospitals within hospitals to scrap their plans, May and others said.
"The rule certainly puts a damper on growth after Oct. 1," said Rod Laughlin, president of Regency Hospital Co., which operates 11 LTACs. The CMS' approach, he said, "limits the ability to serve patients that really need LTAC care based on where they're coming from. That's just bad healthcare policy."
In the wake of the regulations, Regency has put on hold at least two LTAC facilities it planned to open in the coming months. "We'll probably have to kill those," Laughlin said.
A spokeswoman for Mechanicsburg, Pa.-based Select Medical Corp., which operates 79 LTACs, said last week that the company was reviewing the regulations and was not ready to comment on any effects they might have.
CMS Administrator Mark McClellan said the new regulation "assures continued access to adequate payment, especially for outlier patients the LTAC hospitals were primarily intended to serve." Under the regulation, patients who reach outlier status at the host hospital before they are admitted to the LTAC do not count against whichever threshold is in place at the time.
Even so, LTAC lobbyists disagreed that the regulation is friendly to consumers or providers, arguing that physicians will make choices about where to send patients based on Medicare quotas rather than clinical factors.
"Seventy-five to 80% of the LTACs that exist in this country would not meet the 25% rule and never really could," said Brad Traverse, executive director of the Acute Long Term Hospital Association. Traverse and others, including many members of Congress, have argued to the CMS that hard-and-fast patient quotas are not the way to go, and that LTAC admissions should be based on patient and facility-level criteria, as recently suggested by the Medicare Payment Advisory Commission.
Members of Congress are on August recess, but a House Ways and Means aide said the committee is continuing to examine LTACs and what policy solutions may be required. Regency's Laughlin said Congress should intervene immediately by putting the CMS' new policy on hold until better admissions criteria can be developed and mandated.
As LTAC executives reviewed the CMS' regulations, other hospitals were riled up over another set of provisions dealing with the Medicare wage index.
In using newly defined regions to determine the portion of Medicare payments based on area wages, the CMS upset many hospitals-especially in New York-where payments will be lower as a result of their new geographic classification.
"We are getting calls from federal agencies asking how we can help with the terror crisis threat at the same time as these clearly unjustifiable wage index changes clobber the capability of our hospitals," said Daniel Sisto, president of the Healthcare Association of New York State. "There is no consistency to how this wage index is promoted (and) it has become a political fiasco around the country."
Among other affected areas, rural hospitals in the South Atlantic will see a 0.8% decrease in their payments as a result of the new labor markets, and urban New England hospitals will see a 0.1% decrease, according to the CMS.
The agency did make allowances for urban hospitals that became rural as a result of the new regions. Those hospitals will continue to be paid as urban facilities for three years, at which point rural rates will kick in.
Revising the current wage index labor markets will cost hospitals in New York City and New York's Westchester, Rockland and Putnam counties a total of $48 million in 2005 and $930 million over the next 10 years, according to an analysis by the Greater New York Hospital Association. That $48 million will instead go to hospitals in three New Jersey counties that will, beginning in fiscal 2005, receive payments based on New York City-area wages.
The final regulation gave affected hospitals some breathing room. Instead of immediately moving to payments based on the new regions, the CMS will give hospitals one year to adjust. During 2005, any hospital-in New York or elsewhere-that experiences a decline in its wage index will receive a blended payment based on 50% of the current rate and 50% of the new rate.
"The blend will mitigate significant losses," said Ashley Thompson, senior associate policy director at the AHA. Still, she added, "These are Band-Aid fixes in an increasingly broken system."