Medicare Program Final Rule for Long Term Care Hospital Prospective Payment System Policies and FY 2012 Rates

On August 1, 2011, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that will, among other things, update Medicare payment policies and rates for long term care hospitals (LTCHs) in federal fiscal year (FY) 2012. The rule will affect Medicare payments to LTCHs for inpatient stays. In its press release, CMS states that the rule “supports efforts to promote ongoing improvements in hospital care that will lead to better patient outcomes while addressing long-term healthcare cost growth.”

Rates. CMS projects that total Medicare payments to LTCHs in FY 2012 are projected to increase by $126 million or 2.5% in FY 2012 relative to FY 2011, due to a 1.8% increase in payment rates and other policies adopted in the final rule. The rule, which will apply to approximately 420 LTCHs, will be effective for discharges occurring on or after October 1, 2011, unless otherwise specified in the rule. The rule will increase payments to LTCHs by 2.5%, compared with 1.9% in the proposed rule.
Methodology for LTCH Prospective Payment System (PPS) Payments. The rule discusses several factors used in the LTCH PPS payment methodology, including: (1) MS-LTC-DRG classifications; (2) relative weights; (3) severity levels in developing relative weights; (4) hospital-specific relative value methodology; (5) use of low-volume data; (6) average length-of-stay issues; (7) standard federal rate; (8) area wage levels; and (9) high-cost outlier cases.
Quality Reporting. Section 3004(a) of the Affordable Care Act (ACA) authorized an additional quality reporting program for LTCHs. For FY 2014 and future years, the Secretary must reduce an LTCH’s annual update by two percentage points if it does not comply with quality data submission requirements for that FY. The first quality measures for FY 2014 payment determination must be published by CMS no later than October 1, 2012. CMS has selected three quality measures that it is developing for FY 2014: (1) urinary catheter-associated urinary tract infections, (2) central line catheter-associated bloodstream infections, and (3) pressure ulcers that are new or have worsened. CMS also requested comments on additional quality measures for future years.
Change in LTCH Moratorium on New Beds. Section 114(d)(1)(B) of the Medicare, Medicaid, and State Children’s Health Insurance Program (SCHIP) Extension Act of 2007 (Pub. L. 110-173) (MMSEA) established a moratorium (Bed Moratorium) on the increase of LTCH beds in existing LTCHs or satellite facilities. Section 114(d)(4) of MMSEA defines “an existing hospital or satellite facility” as a hospital or satellite facility that received payment under the LTCH PPS as of December 29, 2007, the date of enactment of MMSEA. Section 114(d)(2) of MMSEA also enacted a moratorium (New Facility Moratorium) on establishing or classifying a facility as a LTCH or satellite facility after December 29, 2007. Exceptions to the New Facility Moratorium are contained in MMSEA. By definition, LTCHs or satellite facilities that were established or classified as such under an exception to the New Facility Moratorium first received payments under the LTCH PPS after December 29, 2007. (Such facilities are referred to as “Unlimited Facilities.”) Therefore, Unlimited Facilities would not fall under the definition of “an existing hospital or satellite facility” to which the Bed Moratorium applies.

CMS states in the preamble to the rule that it does not believe that it was Congress’ intent to allow this subset of hospitals and satellite facilities (the Unlimited Facilities) that were established or classified as LTCHs after the enactment of MMSEA to be able to engage in unlimited bed growth and expansion. CMS states that continued Congressional concern regarding the increase in the number of LTCHs and satellite facilities and LTCH beds is indicated in the two-year extension of the moratorium provided by Sections 3106 and 10312 of ACA.

CMS also stated in the preamble that Section 123 of the Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 (Pub. L. 106-113) (BBRA), as amended by Section 307(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554). BIPA, confers upon the Secretary discretion in creating the LTCH PPS as the payment system for LTCHs beginning in FY 2003. CMS also stated that the Secretary has authority, under the general rulemaking authority of sections 1102(a) and 1871(a) of the Act, to establish rules and regulations as necessary to administer the Medicare program and for the efficient administration of the Medicare program. Citing these authorities, CMS provides in the final rule that, effective October 1, 2011, the Bed Moratorium will be applied to those LTCHs and LTCH satellite facilities established or classified as such pursuant to an exception to the New Facility Moratorium.

CMS notes in the preamble that it is possible that some Unlimited Facilities have already increased their bed numbers beyond those that existed when they were first certified by Medicare and paid under the LTCH PPS. Therefore, the Bed Moratorium on increases in bed numbers for Unlimited Facilities will apply to the number of beds at the LTCH as of October 1, 2011.

The Preamble notes that one commenter cited a longstanding U.S. Supreme Court decision (Chevron U.S.A. v. NRDC, 467 U.S. 837, 842-843 (1984)) that established the standard for determining the validity of regulations. The commenter stated that under Chevron’s two-pronged test: (1) if it is determined that Congress has directly spoken to ” . . . the precise question at issue,” then ” . . . we must give effect to the unambiguously expressed intent of Congress;” but (2) if the statute is “silent or ambiguous with respect to the specific issue” it need only be asked whether the regulation is “based on a permissible construction of the statute.” The commenter argued that because MMSEA specified that the Bed Moratorium applied to “existing LTCHs and satellites,” the extension of the moratorium by CMS to Unlimited Facilities would be a violation of the Chevron decision.

CMS disagrees that the failure to include a specific extension of the Bed Moratorium on bed increases to Unlimited Facilities in subsequent legislation extending the two moratoria indicates that Congress intended to allow Unlimited Facilities unlimited authority to expand their bed numbers while restricting the growth of “existing” LTCHs. CMS also does not agree that the statute precisely answers the question at issue. CMS believes the description of CMS’ understanding of Congress’ intent as well as the law governing the authorities for creating the LTCH PPS and the authorities to establish rules and regulations as necessary to administer the Medicare program and for the efficient administration of the Medicare program, provide an appropriate and sufficient basis for CMS to issue this rule change. CMS emphasizes that it does not believe that it was Congress’ intent to allow the one subgroup of LTCHs and LTCH satellite facilities established after the enactment of the MMSEA unlimited bed growth and expansion, particularly while extending both of the moratoria applicable to “existing” LTCHs and LTCH satellite facilities an additional two years in Sections 3106 and 10312 of ACA.

The rule will appear in the August 18, 2011 Federal Register.

CMS has issued a press release to accompany the rule’s release.