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Long-Term Care Hospital PPS

The Medicare, Medicaid, and SCHIP [State Children's Health Insurance Program] Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-113) and the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554) provide for payment for both the operating and capital-related costs of hospital inpatient stays in long-term care hospitals (LTCHs) under Medicare Part A based on prospectively set rates. The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Social Security Act (the Act), effective for cost reporting periods beginning on or after October 1, 2002. Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as "a hospital which has an average inpatient length of stay (as determined by the Secretary of Health and Human Services (the Secretary)) of greater than 25 days.” Section 1886(d)(1)(B)(iv)(II) of the Act also provides an alternative definition of LTCHs.

Section 123 of the BBRA requires the PPS for LTCHs to be a per discharge system with a diagnosis-related group (DRG) based patient classification system that reflects the differences in patient resources and costs in LTCHs while maintaining budget neutrality. Section 307(b)(1) of BIPA, among other things, mandates that the Secretary shall examine, and may provide for, adjustments to payments under the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment.

Section 114 of the Medicare, Medicaid and SCHIP [State Children's Health Insurance Program] Extension Act of 2007 (MMSEA), Pub. L. 110-173, added new subsection (m) to section 1886 of the Social Security Act (the Act) for the “Prospective Payment For Long-Term Care Hospitals.” Section 114 of the MMSEA also specifies other payment policy changes under the LTCH PPS. Among other things, the MMSE provides for a 3-year moratorium on the establishment of new LTCHs, LTCH satellites, and increase in the number of LTCH beds (with certain exceptions) and delays the implementation of certain LTCH PPS payments policies for a 3-year period. The MMSE also provides for expanded review of medical necessity for admission and continued stay at LTCHs.

Transition of Inpatient Hospital Review Workload

Please see links below in the Downloads Section to some helpful informational materials on the subject of Inpatient Prospective Payment System Hospital and Long Term Care Hospital Review and Measurement.

Hospital Center

For a one-stop resource web page focused on the informational needs and interests of Medicare Fee-for-Service (FFS) hospitals, go to the Hospital Center (see under "Related Links Inside CMS" below).