Long-term care hospitals: Overpaid or underappreciated?
A recent study suggested CMS could save $4.6 billion by eliminating Medicare coverage of long-term care hospitals.
The market for long-term care services is growing, and with that comes more scrutiny of its payment rates — and some calling such hospitals overpaid.
Originally a regulatory carve-out for several dozen specialty hospitals, the market has grown to more than 400 hospitals that reap substantially larger Medicare payments than other post-acute care providers.
A recent SSRN analysis suggests Medicare could save $4.6 billion with no ill effects on patients by disallowing discharges to LTCHs. CMS for years has tried to close loopholes it says allows long-term care hospitals to overcharge.
"Given our results, we simply don't see the justification for their much more expensive payment structure," Liran Einav, a professor of economics and senior fellow at the Stanford Institute for Economic Policy Research and the study's lead author, told Healthcare Dive via email.
"To the extent such a justification exists, perhaps through other outcomes that don't manifest themselves in mortality or the speed by which patients get home, we feel that the burden of proof is on LTCHs to systematically collect the data and show it, and so far (as far as we know) they haven't."
Medicare spent $5.1 billion on care provided by LTCHs in 2016, according to the Medicare Payment Advisory Committee.
By regulation, the average length of stay of Medicare patients has to be greater than 25 days. While there is no upward ceiling on how long patients can remain in LTCHs, they are not meant to reside there.
"The idea is to help them through their acute phase of their illness and then move them on to the next level of care," says Susan Maupin, vice president of The Advis Group, which works with nonprofit LTCHs.
The SSRN researchers looked at the impact of patients discharged to an LTCH on different outcomes from 1998 to 2014 in 3,400 hospital markets nationwide. Markets with LTCHs tended to be larger than those without, making up 34% of Medicare enrollees by the end of the study period.
In 2014, per day LTCH rates averaged $1,400, compared with $450 for skilled nursing facility (SNF) care, the alternative for about four-fifths of LTCH patients — or $33,000 more in Medicare spending per acute hospital discharge, according to the researchers. Of the $5.4 billion spent on LTCHs in 2014, about 85% was incremental spending, they said.
According to the study, LTCHs account for about 4% of discharges to facility-based post acute care, but about 12% of spending.
A relief valve for acute care hospitals
LTCH providers dispute conclusions of the SSRN report, saying their facilities are necessary extensions of acute care hospitals. Patients tend to have complex medical problems, often respiratory issues, and risk becoming outliers in regular hospitals because they're unable to wean off a ventilator or tracheotomy collar in the time Medicare allots for short-term stays.
"If they were to eliminate that LTACH venue, it would not be an option for these patients to go to the long-term care venue of skilled nursing," says Maupin, emphasizing the "acute" in LTCH. "They would sit in the short-term acute care hospital, which is the most expensive venue in our delivery system," she adds, noting a trach in a short-term hospital is the "highest paying (diagnosis-related group) in the land."
Bret Perisho, chairman of Regional One Extended Care Hospital in Memphis, Tennessee, agrees. "The LTACH is a better venue for these patients because they can get better and it's cheaper for the payer, the commercial payer" he says. "It's part of the full medical coverage of acute care. The key word is 'acute.'"
As a safety net hospital, Level 1 trauma center and regional burn center, Regional One sees a variety of payer sources. Still, more than half of its patients are Medicare beneficiaries, and many LTCHs have higher rate of Medicare patients. According to MedPAC, roughly two thirds of all LTCH discharges are Medicare patients.
Select Medical, one of the biggest for-profit LTCH operators, called the SSRN study outdated and flawed. "The study criticizes a bygone payment system that the federal government overhauled," the company says in a prepared response. "A study of the current system, which purposely narrowed the types of patients eligible for LTCH care, would produce very different results."
Select, which operates 27 LTCHs in the eastern U.S., Midwest and Arizona, reported revenue of $2.56 billion for the first half of 2018. Of that, $907 million was attributed to its LTCH business and $466 million came from Medicare payments.
A checkered payment history
Over the years, CMS attempts to close the loopholes that allow LTCHs to claim higher Medicare reimbursements than other post-acute care sites have seen mixed success. In 2005, the agency imposed the 25 Percent Rule, which allowed LTCHs to admit up to 25% of their patients from a single general acute care hospital. LTCHs that exceeded the threshold faced a significant reduction in Medicare payment.
The agency also imposed three-year moratoriums, in 2007 and 2014, on certification of new LTCHs or additional beds. And in 2016, a new dual payment structure limited payment at LTCH rates only if a patient was newly discharged from an acute care hospital with three or more days in an ICU or coronary care unit or at least 96 hours of mechanical ventilation at the LTCH, according to the study.
Last month, CMS issued a final rule raising the LTCFH payment rate by 1%, or $35 million. The rule increases reimbursement for site-neutral cases by 0.4%, or $4 million. The rule also gets rid of the 25% threshold, a move long urged by the American Hospital Association.
The move toward bundled post-acute care payments may be the next step in managing these costs by better aligning incentives for providers, says Maupin, who notes LTCHs are frequently confused with skilled nursing facilities and other low-acuity care settings, generally thought of as long-term care.
"The thought that you could replace LTACHs with long-term care reimbursement structure would never work because the costs associated with operating a LTACH are more closely aligned to the short-term acute, although less expensive," she says. "When you’re talking about a SNF, you're talking about much lower nurse ratios, much less imaging and diagnostics. It’s a whole different management of patient episode of care."
According to Select Medical, spending on LTCHs is at a 10-year low, down from $5.4 billion in 2012 to $4.6 billion last year." CMS data projects that under the new criteria nearly 54% of patients will no longer be eligible for payment under the LTCH reimbursement system, further illustrating that the study fails to accurately depict the current LTCH landscape," the company says.
Einav stressed that the SSRN study did not focus on the type of care patients receive in an LTCH, only that when these hospitals exist, the episode of care is much more expensive with no improvement in measurable outcomes.
"We *don't* say that LTCH should get all wiped out, only that it's not clear why they get paid differently," he wrote.
People in the industry acknowledge the need to better educate payers and the public about the role of long-term care hospitals.
"This is an invaluable option for patients when it's available," Perisho says. "We see tremendous outcomes, and it is an appropriate place for patients who need that extended acute care delivery to be placed. It is not a replacement for the long-term care facilities."