AHA says Medicare payments to long-term care hospitals are inadequate

Photo: sturti/Getty Images

A change in Medicare payments to long-term care hospitals (LTCHs) may result in such hospitals incurring ever-increasing losses while threatening beneficiaries' future access to care, according to a new white paper published by the American Hospital Association.

LTCHs care for complex patients who require extended hospitalization. Traditional Medicare reimburses for this care through the LTCH prospective payment system, which includes a high-cost outlier (HCO) policy that, as with similar policies in other payment systems, is intended to ensure these hospitals are adequately reimbursed for extremely costly care provided to the most severely ill beneficiaries.

It specifically does this, the AHA said, by helping ameliorate some of the costs LTCHs experience when caring for these beneficiaries.

Congress, beginning in 2016, put in place a dual-rate payment system under the long-term care hospital payment system. This change, along with other coinciding market factors, dramatically reshaped the landscape of both LTCHs and their beneficiaries in a positive way, AHA said. The HCO policy and underlying methodologies, however, remained largely unchanged.

The result, the AHA maintained, is an HCO policy that is now failing to achieve its stated purpose. Specifically, as the fixed-loss amount for HCO cases continues to rise, LTCHs are incurring greater and greater losses.

WHAT'S THE IMPACT?

The high-cost outlier policy's fixed-loss amount, which is the threshold for an expensive LTCH case to qualify for additional reimbursement, rose 55% from 2023 to 2024, and now sits at $59,873. The AHA is predicting the threshold to increase by an additional 17% next year, which would translate to $54 million more in losses.

Without swift action from policymakers, the group said financial pressures on LTCHs will likely result in loss of essential access for some of Medicare's most severely ill beneficiaries.

"This will have ripple effects across the care continuum, placing additional burdens on short-term acute care hospitals and their intensive care units (ICUs), which may no longer be able to partner with LTCHs for the care of this unique population due to financial challenges or closures," according to the white paper.

The AHA is suggesting several reforms that the Centers for Medicare and Medicaid Services could make in its annual regulatory cycle to relieve the pressures on LTCHs.

These include:

• indexing the fixed-loss amount to market basket growth, which would help ensure the fixed-loss amount grows consistent with payment.
• including all LTCH cases in its methodology when calculating annual updates to the fixed-loss amount, which would provide more stability from year to year, as well as provide only one fixed-loss amount for the entire LTCH PPS, allowing providers to better predict both HCO losses and the partial relief provided under the system,
• initiating an analysis of LTCH cases' cost variation within payment groups to determine whether refinements to improve overall payment accuracy are needed.

AHA also recommends that Congress make fundamental reforms to the LTCH payment system, including increasing funding for HCO cases; indexing future changes to the fixed-loss amount to inflation; and adopting a stop-gap policy, pending a further restructuring of the LTCH PPS.

THE LARGER TREND

As far back as August the AHA has voiced concern that payment rates were not keeping up with inflation and costs.

"The AHA is deeply concerned with CMS' woefully inadequate inpatient and long-term care hospital payment updates," said Ashley Thompson, AHA senior vice president of Public Policy Analysis and Development, at the time. "The agency continues to finalize rate increases that are not commensurate with the near decades-high inflation and increased costs for labor, equipment, drugs and supplies that hospitals across the country are experiencing."
 

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.