Executive Summary
The Office of Inspector General (“OIG”) released a report on March 6 that showed a significant number of Long-Term Care Hospitals (“LTCHs”) that are co-located with skilled nursing facilities (“SNFs”) or acute care hospitals are failing to notify their Medicare Administrative Contractor (“MAC”) or fiscal intermediary (“FI”) of their co-located status. The notification of co-located status is required by LTCH prospective payment system (“PPS”) regulations and can affect reimbursement policies for certain LTCHs that exceed specified readmission thresholds. Failure to appropriately apply the reimbursement policies could result in Medicare overpayments for services provided to beneficiaries in LTCHs.
CMS Study
As part of a study on Medicare Payments for Interrupted Stays in LTCHs, CMS requested data from claims processing contractors and independently verified the geographic locations of LTCHs to determine the LTCHs that are co-located and how many of those have not properly reported their status.
CMS found that 46% of LTCHs determined to be co-located have not notified their claims processing contractor of their co-located status. This failure to properly notify of co-located status could result in overpayments if these LTCHs exceeded the readmission thresholds for co-located LTCH reimbursement policies.
Background
LTCHs can be freestanding or co-located with another hospital or a SNF. An LTCH is co-located when it is located in the same building as another provider or in a separate building on the same campus as another provider. An LTCH that is co-located with an acute care hospital is referred to as a hospital-within-a-hospital. An LTCH may also have a satellite facility that operates as part of the LTCH, but in a separate location. The satellite facility can also be co-located with another provider.
LTCHs are required, under 42 CFR 412.532(i), to notify their claims processing contractor about the provider(s) with which it is co-located within 60 days of its first cost reporting periods and within 60 days of any change in co-located status.
Reimbursement Issues
CMS believes co-located providers have greater incentives in making admission and discharge decisions on the basis of maximizing Medicare payments rather than efficient care. Therefore, CMS developed two policies that apply to co-located LTCHs:
1) 25% Rule. The 25% Rule currently applies to LTCH hospitals-within-a-hospital and satellites. This Rule creates a threshold on the proportion of patients the LTCH admits from its host hospital during a cost reporting period. Medicare payments for stays above the threshold are subject to adjustments that will ultimately reduce the LTCH’s reimbursement to the lesser of the LTCH PPS rate or the Inpatient PPS rate of the host hospital.
2) Interrupted Stays. An interrupted stay is when a patient is discharged from an LTCH for treatments and services unavailable at the LTCH and then readmitted to the same LTCH for further medical treatment. If the patient returns after a specific number of days from the discharge, CMS considers it a new admission rather than an interrupted stay. In that case, the LTCH would receive two Medicare payments – one for the first stay and a separate payment for the subsequent stay, rather than the single payment for the interrupted stay. If the number of discharges and readmissions between a co-located LTCH and the host provider exceeds 5% of the LTCH’s total discharges during a cost reporting period, all excessive discharges and readmissions will be paid as a single discharge regardless of the time spent at the intervening facility.
Practical Takeaways
Co-located LTCHs need to determine if they have properly notified their MAC or FI intermediary of their co-located status. If not, LTCHs will need to properly notify their MAC or FI and review cost reports to determine if they have violated either of the two co-located PPS policies and determine if they have received any overpayments. Under the Affordable Care Act, providers have 60 days to return any overpayments once identified.
Should you have any questions, please contact:
- Todd Selby at 317.977.1440 ortselby@wp.hallrender.com;
- David Bufford at 502.568.9368 ordbufford@wp.hallrender.com;
- Stephan Masoncup at 317.338.2432 orsmasoncup@wp.hallrender.com; or
- Your regular Hall Render attorney.
Please visit the Hall Render Blog athttp://blogs.hallrender.com/ for more information on topics related to health care law.
