A long-awaited, CMS-mandated report that may have a financial impact on the lucrative business of providing long-term acute care could open the door to congressional action this year.
Rep. Pete Stark (D-Calif.), the new chairman of the House Ways and Means health subcommittee who has long been concerned about incentives in the payment structure for long-term-care hospitals, said the issue will be a topic for oversight in the 110th Congress. The RTI report will help us in that effort, he said.
The study commissioned by the agency and conducted by RTI International in Research Triangle Park, N.C., concluded that long-term, acute-care hospitals should have a continued role in the industry, provided that boundaries are set up to better redefine these hospitals.
Specifically, RTI made a number of recommendations to impose restrictions on the admissions of long-term-care hospitals or LTACs, as well as require higher staffing levels and lower the industrywide Medicare margins of these hospitals.
Bill Walters, chief executive officer of the Acute Long Term Hospital Association, which represents two-thirds of the LTAC hospital industry, said members welcomed the report after a yearlong delay. The RTI study acknowledges that LTAC hospitals have a legitimate role to play in the American healthcare continuum, Walters said. Reasonable people can differ about some of the details, but the CMS should no longer have any doubt that medical care provided by long-term, acute-care hospitals helps millions of patients.
Nevertheless, Walters said the new restrictions would undoubtedly affect payments to LTAC hospitals, but didnt provide further details. The regulatory environment for LTAC providers has continued to shift, and growth in the market has come to a standstill because the CMS keeps readjusting the DRGs every year, which results in payment reductions, Walters said. Our margins have dropped from 10% to 2% in the past year and a half.
The bottom line is the long-term-care hospital community is looking for regulatory stability, and this report is the first step toward creating clinical certainty for LTAC hospitals, he said.
The consensus in both government and industry has been that the definition of LTAC hospitals is outdated. The question is what should replace it, said R. Alexander Vachon, president of Hamilton PPB, a Washington-based healthcare consulting firm. LTAC hospitals are defined in law as hospitals with an average length of stay of 25 days. These hospitals say they treat the most complicated patients, and that they excel in team coordination. Yet, critics say the length-of-stay average is meaningless, Vachon said.
RTI suggested keeping the 25-day length-of-stay requirement to delineate more clearly between general and long-term acute care, but provided additional definitions on what type of patients LTAC hospitals should treat.
The report specified that admissions be restricted to cases or diagnoses that are medical as opposed to physical functioning or psychiatric, and that they must be medically complex, meaning that the patients must be suffering from severe medical complications, co-morbidities or system failures.
Restricting admissions to only the most medically complex cases endorses the notion that these hospitals should exist, Vachon said. The biggest players in the LTAC fieldKindred Healthcare and Select Medical Corp.two companies that say they only take medically complex patients, have been pushing for these restrictions to get the government off their backs, he said. The companies were unavailable for comment at deadline.
RTI also recommended excluding high-margin ventilator patients from LTAC hospitals, who account for 10% of admissions. These cases, which have been traditionally maintained in LTACs without expected improvement, could be cared for in a lower-level setting at a lower cost, the report stated. Analysts such as Citigroup Research have estimated that this would have a negative impact on LTAC providers.
The CMS also has concerns about the types of patients being admitted to LTACs and wants there to be standards, Walters said. What we want is a set of rules by which our hospitals can provide care and help with communities.
LTAC hospitals are the highest-paid hospitals in the Medicare program, despite recent reductions in their profit margins. The RTI report highlighted the fact that the underlying profitability stems from a generous base rate, which per patient per discharge can amount to more than $38,000, seven times higher than the base rate for acute-care hospitals under the inpatient prospective payment system.
These higher base rates are because of design problems within Medicares payment system, RTI concluded.
The report doesnt address that issue, however, other than calling the base rate generous, Vachon said.
The big question is whether RTIs recommendations will be reflected in any CMS proposed regulations this year, Vachon said. Some might appear in the LTAC proposed rule, which comes out this month, or in the proposed inpatient prospective payment rule, usually issued in April or May.
Its premature to say whether the CMS will be proposing to reduce the base rate in any upcoming regulations this year, or whether the restrictions on admissions will have a financial impact on LTACs, an agency spokeswoman said.