Medical Device Daily Washington Editor

WASHINGTON — Congress has passed more than one law seeking to help the Centers for Medicare & Medicaid Services corral the cost of Medicare, but it often plays “chicken” when the moment of truth arrives.

Thus, bills currently being considered in the House and the Senate, mandating that CMS develop admission criteria for long-term care hospitals (LTCHs), may or may not have much impact on Medicare Part A spending — especially since CMS has not yet begun to develop the criteria for admission to LTCHs.

And, if the past is any indicator, any such legislation probably has no better than even odds of preventing CMS’s long-term care tab from matching the increases in other portions of the CMS budget.

The House version of this effort — H.R. 562 — goes by the name of the Medicare Long-Term Care Hospital Improvement Act and would require the use of “additional certification criteria for LTCHs, including facility and patient criteria” that its sponsors hope will “promote the appropriate placement of severely ill patients into LTCHs.”

The bill’s sponsors also aim to further shape the use of these facilities by means of assessment tools for continued stay and discharge.

To meet those conditions, the House bill calls upon LTCHs to qualify a patient within 48 hours of admission and to evaluate patients periodically and assesses available discharge options when patients no longer meet the continued-stay criteria.

Under this House bill, the Department of Health and Human Services would generate an annual market basket update and would re-weigh long-term, diagnostic-related groups and adjust for wage levels annually. The department would have to pull this off “in a budget neutral manner each year.” The House bill also stipulates that HHS “not perform a proposed one-time budget neutrality adjustment, and not extend the 25% limitation on reimbursement of co-located hospital patient admissions to freestanding LTCHs.”

At press time, the text of S. 338, the Senate’s companion bill to H.R. 562 was not available.

LTCHs have found themselves in Congress’s crosshairs because of unusual growth in volume and intensity, the same devils that plague doctors’ fees under Part B.

In testimony before the House Ways and Means Committee last March, Mark Miller, executive director of MedPAC, told legislators that “Medicare payments to LTCHs have increased rapidly — from $398 million in 1993 to about $3.3 billion in 2004.”

He added that CMS anticipates that it will pay out roughly $5.2 billion in 2007, citing “an increase in the numbers of LTCHs, the number of cases, and the payment-per-case,” the last of which has gone up despite the fact that “the average length of stay has fallen.”

Miller noted that “growth has been particularly rapid since the start of the new LTCH prospective payment system in 2003,” with payments jumping 38% just in 2004.

According to Miller’s testimony, payments to the LTCH operating within the larger acute-care hospital — an arrangement known as a hospital-within-a-hospital (HWH) — grew at more than twice the rate of freestanding LTCHs. The possibility that the host hospital and the LCTH might bill CMS for two care episodes for what is essentially one care episode prompted a rule change at CMS that adjusts payments for services to patients who are transferred from the host hospital to the LTCH.

These hospitals are apparently not hurting.

Miller noted that MedPAC “found Medicare payments for LTCH services are more than adequate” and that Medicare spending for these facilities increased twice as fast as the volume of patients.

“As mentioned, [profit] margins are high” for these operation, Miller said, recommending that “Congress eliminate the update to payment rates for LTCH services in 2007.

Margins, which Miller defined as “the difference between Medicare payments and providers’ costs, as a percentage of Medicare payments,” reached 9% in 2004 and a projected 7.8% in 2006.

Much of the concern on the parts of CMS and Congress revolves around the possibility that doctors are referring their patients to LTCHs when a skilled nursing facility (SNF) will do.

Miller stated that the 25-day stay criterion — which he called “the only criterion currently in place for LTCHs — does not prevent SNF-level patients from being treated in LTCHs at much higher costs to Medicare.”

Miller added that, over time, as patient criteria clearly delineate the types of patients appropriate for treatment in LTCHs, CMS may reevaluate this duration-of -tay criterion.

Reference in the bill to the 25% reimbursement addresses a CMS rule that adjusts reimbursement if more than 25% of the patients in the LTCH, who came from the host hospital, left that host facility prior to receiving a full continuum of care. CMS put this rule into play in FY04 to remedy what it saw as “patient swapping.”

The acceleration of growth of LTCH volume associated with the HWH phenomenon served as the driver for CMS’s and MedPAC’s scrutiny of this arrangement. The rule — and the concerns about that arrangement — also applies to satellite LTCHs, which are deemed so if a substantial majority of their patients come from one acute care hospital.

Don May, a VP for the American Hospital Association (AHA; Chicago), told Medical Device Daily that CMS has “taken some aggressive and blunt approaches to controlling growth.”

He argued that “[w]hat we need to be focusing on is whether patients are getting the right care at the right time in the right setting,” and that the CMS approach interferes with a doctor’s ability to make a decision based on appropriate care.

CMS is charged with coming up with the criteria, and May remarked that those criteria “will definitely be the devil in the details.” But he noted that the House bill requires CMS to consult with stakeholders in developing those criteria.

“I believe the legislation is trying to create an environment in which the determination of which patients go to a long-term care hospital is based on a certain criteria and that theses facilities meet these criteria, rather than just cutting payments to these hospitals,” May noted.

He said that many in the hospital industry are concerned that growth is overshadowing the possibility that “we’ve found a new and better way to care for these patients.”

May insisted that LTCHs constitute “a change in medical practice,” but that where budgetary matters are concerned, “I don’t think that limiting the growth is the answer.”