CMS Awards Contracts to Evaluate the Medical Necessity of Patient Admissions to Long Term Acute Care Hospitals (LTACHs)

December 22, 2008

CMS announced on December 19, 2008 that it has awarded two LTACH-related contracts, in accordance with the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA), to study the medical necessity of patient admissions to LTACHs. The MMSEA, which was signed into law December 29, 2007, made sweeping changes impacting Long Term Acute Care Hospitals (LTACHs). The MMSEA, among other things, provided for a three-year moratorium (with certain exceptions for facilities already under development) on the establishment of new LTACHs, LTACH satellite facilities, and increases in the number of LTACH beds, and also delayed the implementation of certain LTACH payments policies. The MMSEA also provided for expanded review of Medicare claims data by fiscal intermediaries and Medicare administrative contractors to ensure that:

  • LTACHs only admit high-acuity, medically complex patients; and
  • LTACH patients are discharged to other less costly Medicare covered settings, such as skilled nursing facilities, inpatient rehabilitation facilities and short-term acute care hospitals, as soon as they have sufficiently recovered.

The Centers for Medicare & Medicaid Services (CMS) has historically expressed concern about the growing number of LTACHs, and CMS continues to be concerned about the potential over-utilization of LTACHs in light of their substantially higher reimbursement rates.

The first contract was awarded to AdvanceMed to perform LTACH sampling and validation. The second contract was awarded to Wisconsin Physician Services (WPS) to review LTACH Medicare claims for discharges occurring on or after October 1, 2007 to determine whether LTACHs are admitting only medically appropriate patients. The information collected by these entities will allow CMS to develop a national error rate for medically unnecessary patient admissions to LTACHs, and may be shared with recovery audit contractors, fiscal intermediaries and quality improvement organizations for the purpose of recovering Medicare overpayments. CMS expects these medical reviews to begin in January 2009.

If you have any questions regarding LTACHs, how to prepare for a Medicare claims audit, or the impact of such an audit on your organization, please contact one of the authors or another member of the McGuireWoods Health Care industry group.