MedPAC Votes Again to Recommend an Eight-Day ICU Length of Stay to Qualify for LTCH-PPS Payments

February 12, 2014

In January 2014, the Medicare Payment Advisory Commission (MedPAC), a commission that provides nonbinding but influential recommendations to Congress on Medicare issues and related payment policies, voted to recommend for Congress to pass legislation requiring an eight-day length of patient stay in an intensive care unit (ICU) of a general acute care hospital before admission to a long-term care hospital (LTCH) would trigger higher reimbursement to LTCHs under the Long-Term Care Hospital Prospective Payment System (LTCH-PPS).

MedPAC has defined these patients as “chronically critically ill” (CCI) patients. CCI patients would also include patients who receive prolonged ventilator services during an immediately preceding general acute care hospital stay. If a patient does not have either an eight-day ICU stay, or receive prolonged ventilator support services prior to being admitted to an LTCH, then the case would not qualify for reimbursement at the LTCH-PPS rate and the LTCH would instead be reimbursed at the lower Acute Care Hospital Inpatient Prospective Payment System (IPPS) rate. In its 2013 recommendations to Congress, MedPAC had recommended using an eight-day length of patient stay as a condition for LTCH-PPS reimbursement. Overall, MedPAC predicted that this change would result in approximately 41 percent of patients admitted to an LTCH being classified as CCI cases eligible for reimbursement at the LTCH-PPS rate. MedPAC estimated this change could save Medicare approximately $2 billion dollars on LTCH payments over the next 10 years, which savings could then be redistributed to general acute care hospitals in the form of higher outlier payments.

In contrast to MedPAC’s pending recommendation to Congress, the Bipartisan Budget Act of 2013, which was signed into law Dec. 26, 2013, and which includes the Pathway for SGR Reform Act of 2013 containing the relevant LTCH payment changes (together, the Act), has already substantially changed the way Medicare will reimburse LTCHs for services beginning Jan. 1, 2015. The Act establishes new criteria for LTCHs to be paid under the LTCH-PPS rather than at the IPPS rate. In particular, the Act establishes new site-neutral Medicare payment criteria for LTCH services. Subject to certain exceptions, LTCHs will be reimbursed at the rate paid under the IPPS unless the patient had a preceding hospital stay including at least three days in an intensive care unit or critical care unit or received qualifying ventilator services.

MedPAC noted that its recommendation “differs from current LTCH reform that was passed recently [under the Act] in that we recommend equalizing rates for more LTCH cases, because we’re going to eight days and current law is three days. This generates bigger savings than current law.” However, MedPAC further noted that “[w]e also differ from current law in that we’re recommending the savings be transferred to [general acute care hospitals] in the form of higher outlier payments. The net result is that our recommendation would increase Medicare spending by between $250 and $750 million over one year, and by between $1 and $5 billion over 5 years.”

Questions remain how MedPAC determined eight ICU days to be the appropriate threshold. In 2013, MedPAC noted that eight days was chosen based on CMS-sponsored work of RTI and Kennell. MedPAC, however, noted that the number is “a number that obviously could be changed. It could be higher or lower, depending on one’s preferences.” In its January 2014 meeting, MedPAC again noted in reference to the eight-day length of stay requirement that “there is no magic number, but ICU days, … are positively associated with case complexity.”

MedPAC’s recommendations regarding Medicare payments to LTCHs are due to Congress in March 2014. Please contact one of the authors if you have any questions regarding MedPAC’s proposal or the recently enacted changes to the LTCH payment system pursuant to the Act.