Expiration of the Long Term Care Hospital Development Moratorium: A Lasting Growth Opportunity?

A Lasting Growth Opportunity?

October 9, 2012

Under the Medicare, Medicaid and SCHIP Extension Act of 2007 (the Act), as amended, Congress imposed an initial three-year moratorium on the establishment of new Long Term Care Hospitals (LTCH), on LTCH satellite facilities and on increases in the number of beds in existing LTCH facilities, unless an exception to the moratorium applied. This moratorium was subsequently extended for two years by the Patient Protection and Affordable Care Act (ACA). The Centers for Medicare and Medicaid Services (CMS) recently announced, in its Final Rule updating fiscal year (FY) 2013 Medicare payment policies and rates for inpatient stays at general acute care hospitals and LTCHs that the LTCH development moratorium would expire as of Dec. 29, 2012.

Many general acute care hospitals and post-acute care providers (in certificate of need and noncertificate of need states alike) have begun plans to develop new LTCHs after expiration of the LTCH development moratorium. These organizations, however, should be aware that the ACA grants CMS authority to impose an administrative moratorium on the enrollment of new Medicare providers and suppliers of a specific type in a particular geographic area. CMS may impose a new moratorium by announcing it in the Federal Register if CMS determines that there is significant potential for fraud, waste or abuse. In making such a determination, CMS may consider such factors as whether a state Medicaid program has declared a moratorium on a particular provider or supplier type and whether a rapid increase in enrollment within a given provider or supplier category has occurred or is likely to occur.

Organizations may wish to consider drafting unwind provisions into their operating documents, leases and other contracts to account for the possibility of CMS’ imposition of an administrative moratorium. It may also become important for parties with plans for LTCH expansion to submit their provider enrollment applications as soon as possible after Dec. 29, 2012, since approved enrollment applications will not be impacted by application of a CMS administrative moratorium.

McGuireWoods has significant experience counseling clients on all aspects of the development, financing and changes of ownership of LTCHs and other post-acute care providers. Please contact one of the authors on this page for more information.