Long-Term Care Hospitals Prospective Payment System

Published 10/02/2023

Medicare reimburses for inpatient hospital services for Long-Term Care Hospitals (LTCH) discharges under the LTCH Prospective Payment System (PPS). After the enactment of the 2013 Bipartisan Budget Act (Public Law 113-67), clinical criteria was established for patients treated in LTCHs and revision to payments under LTCH PPS establishes two separate payment categories for LTCH patients for discharges on or after October 1, 2015:

  • Standard payments for patient discharges meeting specific clinical criteria; and
  • Site Neutral payments for those discharges that do not meet the specified clinical criteria

Standard Payments
In order to receive payment at the standard LTCH PPS amount, an LTCH patient must either:

  • Have been admitted directly from an inpatient prospective payment system (IPPS) hospital during which at least three days were spent in an Intensive Care Unit (ICU) or Coronary Care Unit (CCU), but the discharge must not be assigned to a psychiatric or rehabilitation LTCH diagnosis related group (DRG); or
  • Have been admitted directly from an IPPS hospital and the LTCH discharge includes the procedure code 5A1955Z for ventilator services of at least 96 hours and cannot be assigned to a psychiatric or rehabilitation LTCH DRG

LTCHs are required to meet the same Medicare Conditions of Participation (COPs) as acute care hospitals that are paid under the IPPS. Remember, the primary criteria for a hospital to be designated as an LTCH for Medicare reimbursement purposes is a "greater than 25 day average length of stay" requirement. Non-subsection (d) hospitals cannot fulfill the IPPS admission qualification. Therefore, a site neutral payment rather than the standard LTCH PPS amount would be justified.

Existing LTCH PPS policies, such as the Short-Stay Outlier (SSO) policy and the Interrupted Stay policy, will continue to apply in determining the standard LTCH PPS payment for those discharges meeting the specific clinical criteria.

Site Neutral Payments
The Site Neutral payment, which is the lesser of an "IPPS-comparable" payment amount or 100 percent of the estimated cost of the case, will be reimbursed for patients discharged from the LTCH that do not meet the above criteria.

Medicare's claims processing system was programmed correctly to identify subsection (d) hospitals, however, the patient may have had an immediately preceding inpatient stay at a subsection (d) hospital that is not present in the Medicare claims processing system. For example, the patient may have used their Veteran Affairs benefits or received inpatient care at a military treatment facility that qualifies as an "immediately preceding" stay (prior to admission to the LTCH) if verified by the MAC.

In other scenarios, the immediately preceding subsection (d) hospital may submit claims to Medicare; however, billing errors made by the hospital may cause the LTCH claim to inappropriately receive the site neutral payment. The LTCH should contact the immediately preceding hospital when errors are identified and encourage them to adjust their claim to correct any billing error.

In either occurrence, upon receipt of the site neutral payment the LTCH shall contact their MAC. The MAC will work with the LTCH to obtain the documentation it finds sufficient to demonstrate that the applicable criteria for exclusion from the site neutral payment rate have been met and adjust the applicable LTCH claim to make any appropriate adjustments to payment.

Providers should submit the Long Term Care Hospital (LTCH) Site Neutral Exclusion Form (PDF) in order to make their request. The providers must submit a completed LTCH Site Neutral Exclusion Form and the following records from both their claim and the non-Medicare hospital to Medical Review. (Reference form for fax number and address information.) 

  • History and physical (H&P)
  • Discharge summary and progress notes from the immediately preceding inpatient stay

Note: The LTCH shall collect and submit the appropriate records from the immediately preceding hospital, as well as their records.

If the medical reviewer determines the documentation received reflects the Standard payment criterion is met, our claims department will adjust the applicable LTCH claim to make any appropriate payment adjustments. If the medical reviewer determines the criterion is not met, the claim will not be adjusted and the reviewer will send the provider written notification.

Resource: MLN Matters® Number: SE1627 (PDF).

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