Dissecting the Long-Term Acute Care Hospital PPS Final Rule


In August, the Centers for Medicare & Medicaid Services (CMS) issued a final rule on the 2019 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Acute Care Hospital (LTCH) Prospective Payment System Final Rule (CMS-1694-F). That’s a long-winded title, but the contents are every more complicated. I will try to save you some time and trouble here by boiling it down to the basics of what is in this final rule.

Let me add a caveat that not everything here directly applies to long-term care (LTC). However, in this age of Accountable Care Organization (ACOs), bundled payments, and managed care, LTC providers and practitioners increasingly need to know what is happening in the acute care world, how hospitals are paid, and what issues are of concern to administrators and practitioners in this setting. We can no longer afford to function in a silo. LTC providers and practitioners who will survive and thrive moving forward are ones who speak the language and address the issues of acute care settings. They will have the tools and resources to partner successfully with hospitals to care for frail, elderly patients and others who require long-term care.

Starting at the Start

As a little background, CMS generally pays acute care hospitals for inpatient stays under the IPPS and long-term care hospitals under the LTCCH prospective payment system. In both payment systems, CMS sets base payment rates prospectively for inpatient stays according to each patient’s diagnosis and severity of illness. A hospital receives a single payment for each case based on the payment classification: Medicare Severity Diagnosis-Related Groups (MS-DRGs) under the IPPS and Medicare Severity Long-Term Care Diagnosis-Related Groups (MS-LTC-DRGs) under the LTCH PPS (assigned at discharge).

Moving past this alphabet soup of terms, CMS is required to update payment rates for IPPS hospitals every year and account for changes in the prices of goods and services used by these facilities to care for Medicare patients, among other factors. This is the hospital “market basket.” Payment rates to LTCHs are typically updated annually according to a separate market basket based on LTCH-specific goods and services.

The changes in the final rule will affect approximately 3,300 acute care hospitals and approximately 420 LTCHs and apply to discharges occurring on or after October 1, 2018.

Payment Changes

CMS acknowledges that patients are leaving hospitals sicker and sooner and that these very ill patients often are admitted to LTCHs. In the final rule, the agency updates the LTCHH PPS standard federal payment rate by 1.35%. According to CMS, “This is the payment rate applicable to LTCH patients that meet certain clinical criteria under the dual rate LTCH PPS payment system required by the Pathway for SGR Reform Act of 2013. Overall, under the changes included in this final rule, CMS projects that LTCH PPS payments will increase by approximately 0.9% or $39 million in FY 2019, which reflects the continued phase-in of the dual payment rate system, which was recently extended through FY 2019 by the Bipartisan Budget Act of 2018.”

The agency also is finalizing its proposal to eliminate the 25% threshold policy in “a budget neutral manner.” According to CMS, “To do so, we adopt a budget neutrality adjustment. The exact amount of the adjustment will be different until 2021 to account for the end of transitional payments for site-neutral payment rate discharges; however, the adjustment in each year will be approximately -0.9%.

Quest for the Holy Grail of Interoperability

In addition to payment and policy proposals, CMS released a Request for Information in the IPPS/LTCH PPS proposed rule to get feedback on positive solutions to better achieve interoperability—the Holy Grail of health information technology. This, says the agency, will “Inform next steps in advancing this critical initiative.”

In the final rule, CMS made changes to the Promoting Interoperability Programs to “increase interoperability and flexibility while reducing burden and placing a strong emphasis on measures that require the exchange of health information between providers and patients.”

Key provisions related to interoperability include:

  • The rule finalizes an EHR reporting period of a minimum of any continuous 90-day period in 2019 and 2020 for new and returning participants attesting to CMS or their state Medicaid agency.
  • For the Promoting Interoperability Program, the rule finalizes a new performance-based scoring methodology consisting of a smaller set of objectives. CMS says that this “will provide a more flexible, less-burdensome structure.”
  • Finalization of two new e-prescribing measures related to e-prescribing of opioids. The “Query of PDMP” measure will be optional in 2019 and will be required beginning in 2020 to allow additional time to develop, test, and refine certification criteria and standards and workflows. The Verify Opioid Treatment Agreement will be optional for both 2019 and 2020 to give providers additional time to research and implement methods for verifying the existence of an opioid treatment agreement.
  • Finalization of changes to measures, including removing certain measures that don’t emphasize interoperability and the electronic exchange of health information.
  • Starting with the 2019 reporting period, all eligible hospitals and CAHs under the Medicare and Medicaid Promoting Interoperability Programs are required to use the 2015 Edition of Certified Electronic Health Record Technology (CEHRT).

Seeing Through Transparency

Among the proposed changes regarding transparency, hospitals will be required to make public a list of their standard charges via the Internet in a machine-readable format and to update this information at least annually. CMS sought public comment about barriers preventing providers from informing patients of their out of pocket costs. The agency says it will “consider” the comments received for future rulemaking.

Seeking Balance on Meaningful Measures

CMS claims that the IPPS/LTCH PPS final rule provides a “balanced approach to quality measurement.” The agency maintains patient safety measures while removing measures that add “limited value.” The final rule reduces the total number of measures hospitals must report across the four quality and value-based purchasing programs—Inpatient Quality Reporting, Value-Based Purchasing, Hospital-Acquired Conditions (HAC) Reduction, and Readmissions Programs. CMS updated the number of measures required for each program. In total, the final rule will remove 18 measures from CMS quality programs and “de-duplicate” another 25.

Hospital Inpatient Quality Reporting (IQR) Program

This is a pay-for-reporting quality program that collects and publishes data on quality measures for the inpatient hospital setting. In the IPPS/LTCH PPS final rule, CMS finalized its proposals to update the IQR Program’s measure set and measure removal factors. In short, the agency’s proposals include the following efforts:

  • Adopt one additional factor to consider when evaluating measures for removal from the Hospital IQR Program measure set.
  • Remove 18 previously adopted measures that are “topped out,” do not result in better patient outcomes, or have associated costs that outweigh the benefit of its continued use in the program.
  • De-duplicate 21 measures to simplify and streamline measures across programs. These measures will remain in one of the other four hospital quality programs.
  • The six healthcare-associated infection (HAI) patient safety measures that are being de-duplicated will be removed for 2020, which is one year later than originally proposed. CMS plans to use the additional time to ensure consistency in the collection and reporting of this data while working to address HAI data collection policies for the Hospital Value-Based Purchasing Program.

Long Term Care Hospital Quality Reporting Program (LTCH QRP)

Under this program, the applicable annual update to the LTCH PPS standard federal rate for LTCH discharges is reduced by 2% if the LTCH doesn’t submit data in accordance with the LTCH QRP requirements to CMS. In the final rule, the agency is cementing the following proposals to address the Meaningful Measures initiative goal of a measure set that focuses on the most critical quality issues while also attempted to minimize clinician/provider burden:

  • National Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset Methicillin-resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF 1716) (beginning with the 2020 LTCH QRP)
  • National Healthcare Safety Network (NHSN) Ventilator-Associated Event (VAE) Quality Measure (beginning with the 2020 program)
  • Percent of Residents or Patients Who Were Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF 0680) (beginning with the 2020 program)

The final rule also removes measures that either have significant operational challenges with reporting or are duplicative of other measures in the program.

Also included in the final rule:

  • An update to the methods by which LTCHs are notified of non-compliance with the program’s requirements.
  • An additional measure removal factor—the costs associated with a measure outweigh the benefit of its continued use in the program.

Reducing Burden

The final rule includes several efforts aimed at reducing burdens on providers and practitioners. These, says CMS, are in response to suggestions from stakeholders. According to the agency, the rule will reduce the time hospitals spend on paperwork by about 2 million hours through easing documentation requirements and providing flexibility in areas such as maintaining patient and program integrity protections.

CMS also is revising regulations to allow LTCHs and other hospitals excluded from the IPPS to operate IPPS-excluded units, as long as these arrangements would be allowed under applicable hospital conditions of participation.

The Good, The Bad, The Support, The Opposition

Organizations as the American Hospital Association have expressed support and concerns about the rule. Earlier this year, the organization said, “In particular, we appreciate and endorse the agency’s proposal to permanently withdraw the 25% Rule; however, we oppose the associated budget neutrality adjustment proposed by CMS. We also support the proposed changes related to…the streamlining of the LTCH quality reporting program.”


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