Fact sheet





On May 1, 2008, the Centers for Medicare & Medicaid Services (CMS) issued an interim final rule with comment (IFC) implementing changes to several payment policies under the Long-Term Care Hospital (LTCH) Prospective Payment System (PPS) mandated by the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA).  On May 19, 2008, CMS issued a second IFC addressing two additional MMSEA-mandated LTCH PPS payment policies: the modification of the “25 percent threshold policy” for certain LTCHs and LTCH satellites and the establishment of a moratorium on new LTCHs, LTCH satellites, and an increase in beds in existing LTCHs and LTCH satellites.


The new LTCH payment provisions will be incorporated into the existing LTCH PPS regulations. 



LTCHs are generally defined as hospitals that have an average Medicare inpatient length of stay of greater than 25 days.  These hospitals typically provide extended medical care for patients who may suffer from multiple acute or chronic conditions or require clinically complex care.  Services provided by LTCHs typically include respiratory therapy, head trauma treatment, and rehabilitation programs.


Medicare pays LTCHs under a PPS first implemented for LTCH cost reporting periods beginning on or after October 1, 2002.  The most recent annual update to the LTCH PPS was announced in the RY 2009 LTCH PPS final rule.



Payment Adjustment For Certain Discharges In Excess Of 25 Percent Threshold:

Prior to RY 2008, in general, CMS applied a payment adjustment for discharges in excess of a 25 percent threshold that an LTCH “hospital-within-a-hospital” (HwH) admitted from its co-located host hospital.  The adjustment was not applied, however, to “grandfathered” HwHs or “grandfathered” LTCH satellites.  In its May 1, 2007, LTCH PPS RY 2008 final rule, CMS extended the 25 percent threshold payment adjustment to grandfathered HwHs and LTCH satellite facilities.  This final rule also extended the “25 percent threshold” payment adjustment to LTCH discharges admitted from hospitals with which the LTCH or satellite facility was not co-located.


In this IFC, which incorporates in regulation the MMSEA provisions affecting the “25 percent threshold” payment adjustment, CMS is delaying for three years, the extension of the 25 percent threshold payment adjustment to “grandfathered” LTCH HwHs and also to freestanding LTCHs. In addition, CMS is increasing the patient percentage thresholds from 25 percent to 50 percent for certain LTCH HwH and satellite discharges admitted from a co-located hospital, and from 50 percent to 75 percent for certain LTCH HwH and satellite discharges admitted from a co-located rural, MSA-dominant, or urban single hospital.  These provisions are effective for cost reporting periods beginning on or after December 29, 2007, and before December 29, 2010.



Effective with the December 29, 2007 signing of the MMSEA, Congress placed a three year moratorium on:


  • Construction of New LTCHs and LTCH Satellite Facilities:  This IFC sets forth policies implementing the moratorium on establishing and classifying new LTCHs and LTCH satellite facilities unless one of the following exceptions is met.


  • The hospital began its qualification period for payment as a LTCH on or before December 29, 2007;
  • o       As of December 29, 2007, the LTCH has a binding written agreement with an outside, unrelated party for the actual construction, renovation, lease, or demolition for a LTCH, and has expended, before December 29, 2007, the lesser of 10 percent of the estimated cost of the project or $2.5 million; or
  • o       The LTCH has obtained an approved certificate of need (CON) from the State if one is required on or before December 29, 2007.


  • Increasing Beds in Existing LTCHs and LTCH Satellite Facilities:  The IFC also establishes a 3-year moratorium on the increase of LTCH beds in existing LTCHs or satellites, unless both of the following conditions are met:


  • The LTCH or LTCH satellite facility is located in a state where there is only one other LTCH; and
  • It requests an increase in bed size following the closure or decrease in beds of another LTCH in the state.


Decisions regarding whether a specific situation will be considered to meet the exceptions to the establishment and classification of new LTCHs or new LTCH satellite facilities or the exceptions on increasing the number of beds in existing LTCHs or LTCH satellite facilities will be determined on a case-by-case basis by the applicant's fiscal intermediary (FI) or its Medicare Administrative Contractor and the CMS Regional Office. 


The IFC will be published in the May 22, 2008, Federal Register, CMS will accept comments on the IFC until July 21, 2008and will respond to the comments in a final rule. 


Note:  For more information, see the CMS Web site at:


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