Last night the House passed, as part of the Ryan-Murray budget, a three-month patch to the Sustainable Growth Rate (“SGR”) formula that includes policy changes that significantly impact long-term care hospitals (“LTCHs”). The current SGR patch expires December 31, and this proposed legislation, titled the Pathway for SGR Reform Act of 2013 (the “Act”), is expected to pass the Senate shortly.
Executive Summary
The Act reinstates the moratorium on the establishment and expansion of LTCHs, effective January 1, 2015 through September 30, 2017, and does not include any of the original moratorium exceptions. Current LTCH projects are now within a small window for completion of January 1, 2013 through December 31, 2014.
The Act implements a phased-in site-neutral payment policy for select cases. Beginning October 1, 2015, LTCHs will be reimbursed at a 50/50 blended rate of the LTCH reimbursement rate and the Inpatient Prospective Payment System (“IPPS”) rate unless a patient can satisfy certain criteria related to the use of a ventilator or a previous intensive care unit (“ICU”) stay. Effective October 1, 2017, patients unable to satisfy those requirements will be reimbursed at solely the IPPS rate.
The Act continues the suspension of the 25% Rule, which prohibits LTCHs from admitting more than 25% of its Medicare inpatients from any one hospital. Under the Act, freestanding LTCHs gain an additional four years of exemption from the 25% Rule. Grandfathered LTCHs will be permanently exempt from the 25% threshold, and hospital-within-a-hospital (“HwH”) LTCHs will have their threshold updated based on their location status.
LTCH Moratorium Reinstated
The Act reinstates the moratorium on the expansion or establishment of LTCH beds that was included in the Medicare, Medicaid and SCHIP Extension Act of 2007 (“MMSEA”). The moratorium originally expired December 31, 2012; however, the Act proposes to reinstate the moratorium effective January 1, 2015 through September 30, 2017. Exceptions available under the original MMSEA moratorium for buildings under construction or projects that received certificate of need (“CON”) approval were explicitly excluded from the Act.
As currently written, a brief window of January 1, 2013 through December 31, 2014 is available for the establishment of new LTCHs. Given the vagaries involved in the establishment of an LTCH, including the 6 month qualifying period requirement, this is an incredibly tight timeframe for any LTCH project currently in progress.
Site-Neutral Payments
The Act requires, effective October 1, 2015, LTCH reimbursement adjusted towards site-neutrality for patients not meeting certain level of care requirements. LTCHs will still receive the full LTCH reimbursement for Medicare patients whose LTCH stay was immediately preceded by a discharge from an acute care hospital and either (i) received at least 96 hours of ventilator services at the LTCH; or (ii) the patient’s acute care hospital stay included at least three days in an ICU. In either of these cases, the principal diagnosis must not relate to a psychiatric diagnosis or rehabilitation for the full LTCH reimbursement.
Patients not meeting either of these exceptions will be reimbursed at a 50/50 blended rate of the normal LTCH rate and the then-current IPPS rate. This blended rate will be effective for discharges in cost reporting periods beginning October 1, 2015 through September 30, 2017. Beginning October 1, 2017, patients unable to satisfy the above two exceptions will be reimbursed solely at the IPPS rate.
Patient stays that are reimbursed at the site-neutral rate, or Medicare Advantage patients, will not be utilized in the calculation for the 25-day average length of stay requirement.
25% Rule Relief
Under the Act, the limitations imposed on the percentage of LTCH admissions from any one hospital (commonly referred to as the 25% Rule) are relaxed. The MMSEA provided for a suspension of the 25% Rule for freestanding and grandfathered LTCHs, which expired on December 29, 2012. The Act will extend this suspension for an additional four-year period for freestanding LTCHs and make grandfathered LTCHs permanently exempt.
During this four-year period, rural HwH LTCHs and HwH LTCHs co-located with a metropolitan statistical area (“MSA”) dominant hospital will be subject to a 75% threshold, instead of a 50% threshold. Other HwH LTCHs will be subject to the 50% threshold.
Additionally, the Secretary of Health and Human Services must submit a report to Congress no later than one year prior to the expiration of this extension on the need for any further extensions or modifications of the 25% Rule.
Conclusion
The proposed Act includes many aspects that touch upon LTCHs. LTCH projects currently underway should be evaluated to determine if they can be completed prior to the imposition of the moratorium, and all LTCHs need to consider the impact of the site-neutral payment requirements. The site-neutral payment requirements are projected to reduce LTCH payments by $2 billion over a 10-year period. Currently, the Act is not expected to be significantly altered prior to passing.
If you have any questions or would like additional information about this topic, please contact:
- Stephan Masoncup at 317.338.2432 or smasoncup@hallrender.com;
- Todd Selby at 317.977.1440 or tselby@hallrender.com;
- David Bufford at 502.568.9368 or dbufford@hallrender.com; or
- Your regular Hall Render attorney.
