[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
LONG-TERM ACUTE CARE HOSPITALS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HEALTH
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
__________
MARCH 15, 2006
__________
Serial No. 109-70
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
30-439 WASHINGTON : 2006
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
E. CLAY SHAW, JR., Florida CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona JOHN S. TANNER, Tennessee
JERRY WELLER, Illinois XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri LLOYD DOGGETT, Texas
RON LEWIS, Kentucky EARL POMEROY, North Dakota
MARK FOLEY, Florida STEPHANIE TUBBS JONES, Ohio
KEVIN BRADY, Texas MIKE THOMPSON, California
THOMAS M. REYNOLDS, New York JOHN B. LARSON, Connecticut
PAUL RYAN, Wisconsin RAHM EMANUEL, Illinois
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON HEALTH
NANCY L. JOHNSON, Connecticut, Chairman
JIM MCCRERY, Louisiana FORTNEY PETE STARK, California
SAM JOHNSON, Texas JOHN LEWIS, Georgia
DAVE CAMP, Michigan LLOYD DOGGETT, Texas
JIM RAMSTAD, Minnesota MIKE THOMPSON, California
PHIL ENGLISH, Pennsylvania RAHM EMANUEL, Illinois
J.D. HAYWORTH, Arizona
KENNY C. HULSHOF, Missouri
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of March 8, 2006, announcing the hearing................ 2
WITNESSES
Center for Medicare Management, Centers for Medicare and Medicaid
Services, U.S. Department of Health & Human Services, Herb
Kuhn, Director................................................. 6
Medicare Payment Advisory Commission, Mark E. Miller, Executive
Director....................................................... 11
______
Hospital for Special Care, John Votto............................ 38
Kindred Healthcare, William M. Altman............................ 26
MassPRO, Laura N. Moore.......................................... 35
LONG-TERM ACUTE CARE HOSPITALS
----------
WEDNESDAY, MARCH 15, 2006
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Health,
Washington, DC.
The Subcommittee met, pursuant to notice, at 3:15 p.m., in
Room 1100, Longworth House Office Building, Hon. Nancy L.
Johnson (Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON HEALTH
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
March 8, 2006
No. HL-13
Johnson Announces Hearing on
Long-Term Acute Care Hospitals
Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on
Health of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on long-term acute care hospitals
(LTCHs). The hearing will take place on Wednesday, March 15, 2006, in
the main Committee hearing room, 1100 Longworth House Office Building,
beginning at 3:00 p.m. or immediately following the Subcommittee on
Human Resources hearing on unemployment, whichever time is later.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing.
BACKGROUND:
Medicare patients currently account for more than 70 percent of
discharges from LTCH facilities. Long-term acute care hospitals are
required to meet all the conditions of participation for short-term
acute care hospitals, and they must have an average length of stay for
their patients greater than 25 days. Medicare currently does not
require LTCHs to use assessment tools or patient criteria to evaluate
whether beneficiaries being treated in these facilities specifically
need the level of care that LTCHs provide.
Spending for LTCH services has increased significantly in recent
years. According to the Medicare Payment Advisory Commission (MedPAC),
between 2001 and 2004 the number of LTCHs increased by 9 percent per
year, while the volume of services increased by 12 percent annually.
Medicare spending on LTCHs during 2001 to 2004 increased 25 percent per
year during that period, and in 2004 alone Medicare spending for
services in this setting increased by 38 percent. Long-term acute care
hospitals, however, do not exist nationwide; patients who reside
inareas without LTCHs often receive long-term care services in other
hospitals or skilled nursing facilities.
The Centers for Medicare and Medicaid Services (CMS) have proposed
a payment rule for 2007 that would make several changes to the LTCH
payment system. The rule would provide a zero update to the LTCH base
rate of $38,086 for the 2007 rate year (for discharges occurring on or
after July 1, 2006). The Medicare Payment Advisory Commission also
recommended a zero update for LTCHs in its March 2006 payment policy
report.
The CMS also proposes a change in the short-stay outlier payment
methodology. Currently, LTCHs are paid a reduced short-stay amount for
patients whose length of stay in the facility is five-sixths or less of
the average length of stay for that patient's long-term care-diagnosis
related group (LTC-DRG). The CMS notes that 37 percent of LTCH cases
are short-stays in institutions where the average length of stay must
be more than 25 days. Under current rules, there is a special
adjustment for short-stay cases so that payment is the lesser of 120
percent of costs, 120 percent of the per diem amount multiplied by the
length of stay for that discharge, or the full LTC-DRG payment amount.
The CMS proposed rule would change the 120 percent of costs to 100
percent of costs. The rule also adds a fourth option of paying the
short-term acute care payment for that diagnosis related group.
In announcing the hearing, Chairman Johnson stated, ``This hearing
will provide Committee Members valuable insight into the changing
reimbursement world for long-term care hospitals. The Center for
Medicare and Medicaid Services has proposed a seismic change in how
these facilities are paid, so it is important to understand the current
payment environment and the rationale for these reforms.''
FOCUS OF THE HEARING:
Medicare payment policy as it relates to LTCHs, including the CMS
proposed rule and MedPAC's March recommendations.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Any person(s) and/or organization(s) wishing to submit
for the hearing record must follow the appropriate link on the hearing
page of the Committee website and complete the informational forms.
From the Committee homepage, http://waysandmeans.house.gov, select
``109th Congress'' from the menu entitled, ``Hearing Archives'' (http:/
/waysandmeans.house.gov/Hearings.asp?congress=17). Select the hearing
for which you would like to submit, and click on the link entitled,
``Click here to provide a submission for the record.'' Once you have
followed the online instructions, completing all informational forms
and clicking ``submit'' on the final page, an email will be sent to the
address which you supply confirming your interest in providing a
submission for the record. You MUST REPLY to the email and ATTACH your
submission as a Word or WordPerfect document, in compliance with the
formatting requirements listed below, by close of business Wednesday,
March 29, 2006. Finally, please note that due to the change in House
mail policy, the U.S. Capitol Police will refuse sealed-package
deliveries to all House Office Buildings. For questions, or if you
encounter technical problems, please call (202) 225-1721.
FORMATTING REQUIREMENTS:
The Committee relies on electronic submissions for printing the
official hearing record. As always, submissions will be included in the
record according to the discretion of the Committee. The Committee will
not alter the content of your submission, but we reserve the right to
format it according to our guidelines. Any submission provided to the
Committee by a witness, any supplementary materials submitted for the
printed record, and any written comments in response to a request for
written comments must conform to the guidelines listed below. Any
submission or supplementary item not in compliance with these
guidelines will not be printed, but will be maintained in the Committee
files for review and use by the Committee.
1. All submissions and supplementary materials must be provided in
Word or WordPerfect format and MUST NOT exceed a total of 10 pages,
including attachments. Witnesses and submitters are advised that the
Committee relies on electronic submissions for printing the official
hearing record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. All submissions must include a list of all clients, persons,
and/or organizations on whose behalf the witness appears. A
supplemental sheet must accompany each submission listing the name,
company, address, telephone and fax numbers of each witness.
Note: All Committee advisories and news releases are available on
the World Wide Web at http://waysandmeans.house.gov.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Chairman JOHNSON. The hearing will come to order. Mr. Stark
is on his way, and he advises that we should begin, so we will
do so.
Welcome, Mr. Kuhn and Mr. Miller. I am pleased to chair
this hearing on long-term care hospitals in the Medicare
Program. Medicare patients currently account for more than 70
percent of the discharges from long-term acute care hospitals,
and Long-Term Care Hospitals (LTCH) are required to meet all
the conditions of participation for short-term acute care
hospitals, but also must have an average length of stay for
their patients of greater than 25 days.
Medicare currently does not require LTCHs to use assessment
tools or patient criteria to evaluate whether beneficiaries
being treated in these facilities specifically need the level
of care that LTCHs provide. Furthermore, spending on LTCH
services has increased significantly in recent years, although
the total payments to LTCHs is less than 1 percent of total
Medicare spending, and these hospitals are, as we know,
returning people to life and independence that not very many
years ago would have died or been permanently disabled.
Between 2001 and 2004, the number of LTCH facilities
increased 9 percent a year while the volume of services
increased 12 percent annually. Medicare spending on LTCHs
during 2001 to 2004 increased 25 percent per year during that
period, and in 2004 alone Medicare spending for services in
this setting increased by 38 percent. Needless to say, it is
clear why this sector has caught our attention. Long-term acute
care hospitals, however, do not exist nationwide, and patients
who reside in areas without LTCHs often receive long-term care
services in Intensive Care Units (ICU), as outliers in acute
care hospitals, in other rehabilitation type hospitals, or in
skilled nursing facilities; or they simply do not receive the
care they need and die or are permanently disabled.
The Medicare payment Advisory Commission recommended a zero
update for LTCHs in its March 2006 payment report. In the past,
it has proposed and I support establishing criteria for
facilities and patients so that both have the comfort to know
they are providing and receiving appropriate care at the right
time and in the right place.
This hearing will provide us with valuable insights into
the changing reimbursement world for long-term care hospitals.
Centers for Medicare and Medicaid Services (CMS) has proposed a
significant change in how thee facilities are paid in its 2007
payment rule, so it is important to understand the current
payment environment and the rationale for these reforms.
I am pleased to have with us today two distinguished panels
of witnesses to help us explore the issues facing our long-term
care hospitals. On our first panel, we will hear Mr. Herb Kuhn,
the Director of the Center for Medicare Management at the CMS.
Mr. Kuhn will describe for us the thinking behind CMS' proposed
payment rule for long-term care hospitals, along with the
ongoing work the agency is doing on developing patient criteria
for LTCHs.
We will also hear from Dr. Mark Miller, Executive Director
of the Medicare Payment Advisory Commission. Dr. Miller will
discuss the work of MedPAC done recently in evaluating the
growth of long-term care hospitals in Medicare and their
recommendations for the use of patient and facility criteria to
ensure that beneficiaries are being admitted to these
facilities appropriately.
On our second panel, we will hear from William Altman,
Senior Vice President of Kindred Healthcare, a nationwide
provider of long-term care services. Mr. Altman will provide us
with an industry response to the proposed CMS rule from the
perspective of a diversified, for-profit provider of post-acute
services ranging from skilled nursing facilities to LTCHs in 40
States.
We will then hear from Laura Moore, Vice President of
Strategy and Operations at MassPRO, the QIO for the State of
Massachusetts. MedPAC has recommended that Quality Improvement
Organizations (QIO) be more involved in evaluating LTCH
admissions for medical necessity, and Ms. Moore will discuss
with us the process MassPRO uses for evaluating LTCH
admissions.
Finally, I am pleased to welcome to our second panel Dr.
John Votto, President and Chief Executive Officer of the
Hospital for Special Care, which is in my hometown of New
Britain. Dr. Votto will provide us with an industry reaction to
the CMS proposed rule from the perspective of a localized
nonprofit long-term care facility, and also will comment on the
issue of criteria-based admissions, an issue he has worked hard
on as the chairman of a Committee of physician and other
specialists from across the country looking at this issue.
Long-term care hospitals provide critical services to
medically complex patients, and it is essential that we
preserve beneficiary access to these services while also
protecting the interests of taxpayers and of the Medicare
Program as a whole.
I look forward to hearing from all of our witnesses on this
issue, and Mr. Stark will submit his comments for the record
and will be along shortly. Mr. Kuhn?
[The prepared statement of Mr. Stark follows:]
Opening Statement of The Honorable Pete Stark, a Representative in
Congress from the State of California
Madam Chair, the topic of today's hearing is one of those that can
rightfully be described as being in the underbelly of Medicare payment
policy. We've seen tremendous growth in long-term care hospitals and
associated spending, and it's an area that deserves attention. Indeed,
while I have generally supported past CMS efforts to reign in this
burgeoning industry, I do think that the proposed rule needs to be
revisited, and I look forward to today's testimony and discussion.
However, I can't help but note, again, that we are fiddling while
Rome burns. We have been asking for hearings, in writing, in private,
and on the dais, on Part D for well over a year, yet the Committee on
Ways and Means refuses to move forward. Every other authorizing
committee and a few others have held hearings. Not us. We are
apparently too busy.
Let's put this in perspective. In 2004, Medicare paid for about
122,000 cases in long-term care hospitals out of a Medicare population
of almost 42 million Medicare beneficiaries. Iif every case were
unique, which it might be for LTCHs, that would be less than 3/10ths of
a percent. This rule was proposed January 27. My staff was first
lobbied on this a week or two ago. The comment period closes at the end
of this month. And here we are in a hearing on this very narrow issue.
In contrast, the MMA was enacted in December, 2003. Medicare
spending for the new private prescription drug program is projected to
run between $23-37 billion this year (CBO versus Actuaries), and the
program may affect up to 37 million beneficiaries. Regardless of the
precise number, it's a lot of money and a lot of people. And no matter
how optimistic Wall Street is about the potential for profit in the
long-term care hospital industry, this sector is a long way from
competing with Part D.
I speak from experience when I say that it can be uncomfortable to
review your own party's--much less your own--activities. But we are
abrogating our Congressional and Constitutional responsibilities when
we fail to do so. That said, I look forward to today's discussion, and
hope we can get closer to a sensible approach that ensures appropriate
access to care while minimizing the conditions that are clearly driving
industry growth.
STATEMENT OF HERB B. KUHN, DIRECTOR, CENTER FOR MEDICARE
MANAGEMENT, CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Mr. KUHN. Thank you, Madam Chairman Johnson, Congressman
McCrery. I appreciate the time you have taken to invite me to
testify about long-term care hospitals. Long-term care
hospitals, also known as LTCHs, typically provide post-acute
medical and rehabilitative care for clinically complex patients
including comprehensive rehabilitation and respiratory
services. To be classified as an LTCH, a hospital must have an
average Medicare inpatient length of stay of greater than 25
days. Despite the fact that their availability varies widely
across the Nation, the number of LTCHs has increased
exponentially over the last 10 years. In addition, LTCHs are
the highest paid hospitals in the Medicare Program, with
average Medicare margins of nearly 12 percent.
CMS published the long-term care hospital prospective
payment system proposed rule on January 27, 2006. The rule is
intended to assure appropriate payment for services to severely
ill or medically complex patients, while providing incentives
for more efficient care of Medicare beneficiaries.
The proposed rule provides for no increase in Medicare
payment for LTCHs in 2007. MedPAC similarly, as you suggested
in your opening statement, made this recommendation in their
March 2006 report to Congress that Medicare payments to LTCHs
are more than adequate, recommending a zero update for 2007.
Again, their recommendation focused on efficiency without
affecting the ability to furnish high-quality care to Medicare
beneficiaries.
The proposed rule also would revise the payment adjustment
formula for short-stay outlier cases. Short-stay outliers are
cases where the patient may be discharged early, and often the
hospital's costs are significantly below average. The most
recent available data show that short-stay outlier cases
comprise approximately 37 percent of LTCH discharges, and CMS
believes that is an inappropriately high number of patients
treated in LTCHs. Existing payment policy may unintentionally
provide a financial incentive for LTCHs to admit a large number
of short-stay cases, including premature and even inappropriate
patient shifting from the referring acute care hospitals. The
proposed rule would ensure that payments for short-stay
outliers do not exceed costs. It would also add a fourth
component to the current formula that would allow payment based
on an amount comparable to what would be paid under the
inpatient prospective payment system. We estimate that these
revisions would result in approximately $440 million in savings
to the Medicare Program.
CMS also discusses in the proposed regulation additional
considerations of the hospital within a hospital criteria. As
of October 2005, there were 376 LTCHs in the CMS database, of
which 176 were hospitals within hospitals, and these facilities
have been growing at a rate of 35 percent per year from 1993 to
2003. CMS recognizes that collocation of an acute care hospital
and LTCH services may be an efficient way to deliver care and
may be less disruptive for patients at the same time. However,
collocation also leads to patient shifting from one part of a
hospital to another, resulting in two Medicare payments for
what is essentially one episode of patient care.
To ensure that Medicare avoids making two payments, CMS
implemented a payment adjustment for fiscal year 2004 relating
to the percentage of patients discharged from a hospital within
a hospital or satellite that were admitted from its collocated
host hospital before receiving a full episode of treatment at
the host hospital. This payment adjustment is commonly called
the 25-percent payment threshold policy. It is CMS' obligation
to ensure that beneficiaries receive the right care in the
appropriate setting at the appropriate payment for the
services. Thus, CMS will continue to monitor the admission
patterns of LTCHs to determine if further rulemaking is
warranted.
Finally, CMS wants to ensure that the criteria used to
determine placement in an LTCH are appropriate. In June 2004,
MedPAC did release a report providing recommendations that
urged us to establish facility and patient criteria for LTCHs
and provide an expanded role for quality improvement
organizations (QIO) in monitoring compliance with the newly
established criteria. Currently, CMS is pursuing MedPAC's
recommendations. We have awarded a contract with Research
International, Inc. (RTI) in 2004 for this purpose, and a final
report is expected this spring.
Since parts of the country lack LTCHs, LTCH-type patients
may receive hospital-level treatment at acute care hospitals as
outlier patients, or, for example, at an inpatient facility
with significantly lower payments per beneficiary discharge
than at LTCHs. RTI's research attempts to determine whether
patient outcomes are equivalent across these sites. One
specific area of evaluation will be whether there is a
correlation between the higher payments of LTCHs and improved
patient outcomes for the same types of patients in different
treatment settings.
The goal of the Medicare Program is to assure cost-
effective delivery of the highest quality of medical services
to beneficiaries. CMS looks forward to receiving comments on
the proposed rule--the comment period closes next Monday, March
20--in order for us to be able to develop the final policy and
guide the future of LTCHs appropriately. I look forward to your
questions.
Thank you.
[The prepared statement of Mr. Kuhn follows:]
Statement of Herb B. Kuhn, Director, Center for Medicare Management,
Centers for Medicare and Medicaid Services, U.S. Department of Health &
Human Services
Madam Chairman Johnson, Congressman Stark, distinguished
Subcommittee members, thank you for inviting me to testify about long-
term care hospitals (LTCHs). Long term care hospitals (LTCHs) typically
provide post-acute medical and rehabilitative care for clinically
complex patients including comprehensive rehabilitation, respiratory
therapy, head trauma treatment and pain management. Despite the fact
that their availability varies widely across the nation, the number of
LTCHs has increased exponentially over the last 10 years. The number of
LTCHs more than tripled between 1993 and March 2005. Although the two
States with the largest number of LTCHs are Texas and Louisiana,
substantial growth is also occurring in States with large numbers of
elderly populations including Pennsylvania, Ohio, Michigan, Georgia,
Indiana, and Oklahoma. LTCHs are the highest paid hospitals in the
Medicare program; preliminary cost report data for FY 2004 indicate
average Medicare margins of almost 12 percent.
CMS published the long-term care hospital prospective payment
system (LTCH PPS) proposed rule on January 27, 2006. The rule is
intended to assure appropriate payment for services to severely ill or
medically complex patients, while providing incentives to LTCHs for
more efficient care of Medicare beneficiaries. CMS believes the
proposed rule promotes appropriate payment, efficient care, and the
Agency is looking forward to receiving your feedback as well as
comments from the public. I do want to note that the FY 2007
President's Budget proposal assumes a zero percent update for Rate Year
(RY) 2007 and a modified LTCH PPS short stay outlier policy.
Background
Most patients in LTCHs are clinically complex and have multiple co-
morbidities--that is, they have secondary health conditions that can
interact with and lead to an intensification of the primary diagnosis
requiring hospital-level medical treatment. Medicare beneficiaries
comprise, on average,83 percent of LTCH patients and the distributions
vary from 68 percent to 90 percent at the 25th and 75th percentiles.
LTCHs also provide care to a disproportionately large number of
beneficiaries who are Medicare eligible because of disability. To be
classified as an LTCH, a hospital must have an average Medicare
inpatient length of stay that is greater than 25 days. CMS is
considering payment adjustments for LTCHs that are tied to specific
patient classification criteria based recommendations from the Medicare
Payment Advisory Commission (MedPAC) and the results from the research
currently underway by RTI International (RTI).
The LTCH PPS was implemented October 1, 2002 to assure appropriate
payment for services to the medically complex patients treated in
LTCHs. The LTCH PPS currently sets payments for approximately 376
LTCHs, and payments under the LTCH PPS are updated annually.
CMS issued the LTCH Proposed Rule for Rate Year 2007
Public comments on the LTCH PPS Proposed Rule for Rate Year (RY)
2007 will be accepted until March 20, 2006. The proposed rule provides
for no increase in Medicare payment rates to LTCHs for RY 2007, which
means the LTCH PPS standard Federal rate would remain at $38,086.04.
The standard Federal rate for RY 2007 would apply to LTCH patient
discharges taking place on or after July 1, 2006, through June 30,
2007. Similarly, MedPAC stated in its March 2006 Report to Congress
that Medicare payments to LTCHs are more than adequate, recommending a
zero update for LTCHs in 2007. MedPAC determined that keeping payments
at the same level as 2006 would increase program efficiency without
affecting the ability of LTCHs to furnish high quality care to Medicare
beneficiaries.
The CMS update proposal is based on analysis of the LTCH case-mix
index before and after implementation of the LTCH PPS, analysis of LTCH
margins based on the latest available cost report data, and recent
update recommendations for the LTCH PPS from MedPAC in the Commission's
March 2006 Report to the Congress. In analyzing LTCH data, CMS found
that the case-mix index increased by 6.75 percent between fiscal years
(FYs) 2003 and 2004, which is believed to be due in large part to
changes in coding practices and documentation rather than the treatment
of more resource intensive patients. This belief is based on an
analysis of LTCH cost report data that shows LTCH payments are
increasing without a commensurate increase in average case costs. The
LTCH PPS Federal rate for RY 2007, which would be the same as the
Federal rate for RY 2006, would reflect an adjustment to the market
basket update to account for the increase in case mix due to changes in
coding practices. In addition, cost report data show increasing
Medicare margins among LTCHs since the implementation of the LTCH PPS.
Specifically, in an analysis of LTCH cost report data, CMS found that
LTCH Medicare payments for FY 2003 (the first year of the LTCH PPS)
were 8.8 percent higher than LTCHs' Medicare costs. Preliminary cost
report data for FY 2004 data reveal an even higher Medicare margin of
11.7 percent.
Currently CMS uses the excluded hospital with capital market basket
as the measure of inflation for calculating the annual update to the
LTCH PPS Federal rate. CMS is proposing to adopt the Rehabilitation,
Psychiatric and Long-Term Care (RPL) market basket to calculate the
annual update to the LTCH PPS Federal Rate. The RPL market basket is
based on the operating and capital costs of Inpatient Rehabilitation
Facilities (IRFs), Inpatient Psychiatric Facilities (IPFs), and LTCHs.
CMS would also revise the labor-related share of the Federal rate based
on the RPL market basket. The revised labor-related share would
increase from 72.855 percent (based on the excluded hospital with
capital market basket) to 75.923 percent. Increasing the labor share
will have a positive impact on payments to LTCHs in areas with a wage
index of greater than 1.0.
The proposed rule also presents for comment a preliminary model of
an update framework for possible future use under the LTCH PPS. The
framework would account for other appropriate factors affecting the
efficient delivery of services and care provided in LTCHs when
determining future Federal rate update proposals. CMS intends to
consider comments in refining the framework and would propose a refined
framework in a future regulation before using it to determine an update
proposal.
CMS's Proposed Ruke Would Revise the Payment Adjustment Formula for
Short-Stay Outlier Cases
The proposed rule would revise the payment adjustment formula for
short-stay outlier (SSO) cases (i.e., cases with a length of stay less
than or equal to 5/6 of the average length of stay of the LTC-DRG).
SSOs are cases where the patient is discharged early and often the
hospital's costs are significantly below average. Currently, under the
LTCH PPS, SSO cases are paid the lesser of 120 percent of the estimated
cost of the case; 120 percent of the LTC-DRG per diem amount; or the
full LTC-DRG payment. Since the implementation of the LTCH PPS in FY
2003, CMS has continued to monitor the SSO policy. The most recent
available LTCH data reveal that SSO cases comprise approximately 37
percent of LTCH PPS discharges (as compared to 48.4 percent based on
the LTCH data used to develop the LTCH PPS prior to its implementation
in FY 2003).
CMS believes that 37 percent of LTCH discharges that are SSO cases
is an inappropriate number of patients being treated in LTCHs. The
Agency is concerned that these patients may be more appropriately
served in acute care hospitals and that the existing SSO payment policy
may unintentionally provide a financial incentive for LTCHs to admit a
large number of short stay cases.
The proposed rule would reduce the part of the current payment
formula that is based on costs to ensure that payments for SSOs do not
exceed costs. It would also add a fourth component to the current
formula that would allow payment based on an amount comparable to what
would be paid under the inpatient prospective payment system (IPPS) for
acute care hospitals for patients that group to that DRG. CMS proposes
that payments for SSO cases would be the lesser of 100 percent of the
estimated cost of the case, 120 percent of the LTC-DRG per diem amount,
the full LTC-DRG payment, or an amount comparable to what would be paid
under the IPPS. CMS estimates that revising the current SSO policy by
reducing the percentage of costs in the formula and including a fourth
part of the formula would result in approximately $440 million in
savings to the Medicare program in RY 2007. Under this proposed payment
alternative, LTCHs, which are certified as acute care hospitals, would
be paid by Medicare under the LTCH PPS at a rate that is more
consistent with the rate paid to acute care hospitals when they treat
shorter stay patients. Additionally, the proposed reduction in the
percentage of costs to 100 percent would reduce what CMS perceives to
be a financial incentive under the current policy for LTCHs to treat
short stay cases.
Adding an amount comparable to what would be paid under the IPPS to
the SSO payment formula is appropriate since the vast majority of LTCH
patients are admitted directly from acute care hospitals. Thus, CMS
believes that short stay patients at LTCHs may indicate premature and
even inappropriate patient shifting from the referring acute care
hospitals. CMS perceives that LTCHs are acting more like short-term
acute care hospitals by admitting such a large percentage of short-stay
patients. Therefore, CMS believes that a patient admitted to an acute
care hospital for a short stay and a patient admitted to a LTCH (which
is certified as an acute care hospital) for the same number of days,
should be paid a comparable amount.
CMS Proposes Increasing the Outlier-Fixed Amount
Medicare will pay a hospital an amount in addition to the Federal
rate payment under the LTCH PPS for the LTC-DRG for unusually costly
cases. To be eligible for this additional high cost outlier payment,
the hospital's estimated costs in treating the case must exceed the
LTC-DRG payment by an outlier fixed-loss amount. Aggregate estimated
outlier case payments are limited to 8 percent of total estimated LTCH
payments. For RY 2006, the outlier fixed-loss amount is $10,501. The
proposed rule would increase the outlier fixed-loss amount for RY 2007
to $18,489. Since the proposed changes to the short stay outlier policy
would result in reduced total LTCH payments, it is necessary to
increase the outlier fixed loss amount in order to maintain the 8
percent limit on total LTCH outlier payments. CMS established the
outlier target at 8 percent of estimated total LTCH PPS payments when
the Agency implemented the LTCH PPS to allow CMS to achieve a balance
between the conflicting considerations of the need to protect hospitals
with costly cases, while maintaining incentives to improve overall
efficiency.
CMS Notes Continuing Issue of Hospital within Hospitals
The IPPS for acute care hospitals was designed to provide one
appropriate payment for hospitalized patients. The Standard Federal
payment rate under the IPPS for FY 2005 is $4,555 whereas the Standard
Federal payment rate under the LTCH PPS for RY 2005 was $38,086. Since
LTCHs are certified by Medicare as acute care hospitals and in many
parts of the country patients who could otherwise fit the typical
profile of LTCH patients are treated in acute care hospitals as high
cost outliers, CMS wants to ensure that the significantly higher
Medicare payments made to LTCH facilities reflect treatment for
patients who most need and can benefit from the specialized care they
offer.
As of October 2005, there were 376 LTCHs in the CMS database, of
which 176 were hospitals within hospitals (HwHs). In recent years,
MedPAC as well as CMS, has been conducting a careful study of the rapid
growth in LTCHs, particularly LTCH HwHs (which have been growing at a
rate of 35 percent per year from 1993 to 2003--three times the overall
rate of LTCH growth. Medicare regulations specify that an LTCH is an
HwH when it is co-located with another Medicare hospital-level
provider, its ``host'', generally an acute care hospital. Under present
regulations, for an LTCH that occupies space in a building also used by
another hospital, or in one or more separate buildings located on the
same campus as buildings used by another hospital, to be considered a
HwH, the entity must meet separateness and control criteria that
demonstrate organizational and functional separateness from its host
hospital. An LTCH may establish a satellite facility in another
hospital, which must also demonstrate compliance with similar
separateness and control criteria regarding its relationship to its
host hospital.
These requirements are in place to ensure that host hospitals and
HwHs or satellites are separate in medical and administrative
governance and that a given LTCH HwH or satellite is not merely serving
as a ``step-down'' unit of the acute care hospital. In such a case,
Medicare would be paying under two payment systems, the IPPS and the
LTCH PPS for what is essentially one episode of care. CMS recognizes
that co-location of an acute care hospital and LTCH services may be an
efficient way to deliver care and may be less disruptive for patients
at the same time; however, co-location also leads to patient shifting
from one part of a hospital to another, resulting in two Medicare
payments for what is essentially one episode of patient care.
Therefore, CMS believes that co-location creates incentives that can
lead to patient admission, treatment, and discharge decisions that
reflect maximization of Medicare payments, rather than provision of the
most effective and efficient care based on patient need.
In order to ensure that Medicare avoids making two payments (one to
the acute care and one to the onsite LTCH HwH or LTCH satellite) for a
single episode of care, in addition to the ``separateness and control''
requirements, CMS implemented a payment adjustment for FY 2004 relating
to the percentage of patients discharged from an HwH or satellite that
were admitted from its co-located host hospital prior to receiving a
full episode of treatment at the host hospital. This payment adjustment
is commonly called the 25 percent payment threshold policy. Presently,
CMS is monitoring and evaluating several identified behaviors that may
be attempts to circumvent specifics of the implementation of this 25
percent threshold payment adjustment such as ``patient-swapping,''
(that is hosts cross-discharging to one another's HwH or satellite).
CMS is aware that, following the implementation of the 25 percent
threshold payment adjustment for co-located LTCHs, the significant
growth in the LTCH industry has been in the development of free-
standing LTCHs. CMS data indicate that many free-standing LTCHs are
receiving high percentages of their patients from specific acute care
hospitals (often a sole acute care hospital) and therefore are, in
effect, acting as units of the acute care hospital, thereby replicating
the concerns CMS has with LTCH HwHs or LTCH satellites.
As stewards of the Medicare trust fund, it is CMS' obligation to
ensure that beneficiaries receive the right care, in the appropriate
setting, at the appropriate payment for the services. Thus, CMS is
concerned about the developments in LTCH HwHs and satellites and will
continue to monitor the admission patterns of LTCHs to determine if
further rulemaking is warranted.
CMS is Evaluating the Criteria Used to Define LTCHs
Since 1994, CMS has been studying the relationships between
treatment at acute care hospitals and LTCHs, as well as the linkage
between payment policies and substitution of services, especially among
acute care hospitals, LTCHs, IRFs, and some skilled nursing facilities
(SNFs). Many similar services are provided in an LTCH as are provided
in an acute care hospital. In both cases, patients need a high level of
care from nurses, technicians, and other health professionals. There
are many existing acute care hospitals that treat as patients with the
same profile as those typical of LTCHs. These acute care hospitals,
paid under the IPPS, treat many, if not more, outlier (i.e., long
length of stay) cases than do most LTCH HwHs. Furthermore, given that
many acute care hospitals, IRFs, IPFs, and SNFs may serve as settings
for potential LTCH patients, CMS wants to ensure that the criteria used
to determine placement in an LTCH are appropriate. For example, CMS
data reveal that one of the most frequent LTC-DRGs found in LTCHs is
462--Rehabilitation, a diagnosis that could receive appropriate
treatment at IRFs. Another of the most common LTC-DRGs is 430,
Psychoses, a diagnosis which could also be treated at IRFs. Many SNFs
also offer a high-level of post-acute care including access to
rehabilitation services and therapies.
In June of 2004, MedPAC released a report providing recommendations
urging CMS to establish facility and patient criteria for LTCHs and
provide an expanded role for Quality Improvement Organizations (QIOs)
in monitoring compliance with the newly-established criteria.
Currently, CMS is pursuing MedPAC's recommendations to develop patient
and facility-level criteria and to determine the feasibility of
developing a more clinically sophisticated admissions policy in order
to distinguish Medicare patients who could most benefit from LTCH
treatment. CMS awarded a contract to Research Triangle Institute,
International (RTI) in 2004 for this purpose and a final report is
expected in late Spring.
Since in parts of the country that lack LTCHs, LTCH-type patients
may receive hospital-level treatment at acute hospitals as outlier
patients, at IRFs, or in some cases, IPFs with significantly lower
payments per beneficiary discharge than at LTCHs. RTI's research
attempts to determine whether patient outcomes are equivalent across
these sites. One specific area of evaluation will be whether there is a
correlation between the higher payments at LTCHs and improved patient
outcomes for the same types of patients in different treatment
settings. Since there is wide variation in the range of post-acute care
facilities available throughout the country, if payments are equivalent
per case and patient outcomes are generally equal in different areas of
the country, the variations may be explained as a reflection of
variations in regional practices. However, if outcomes differ
substantially for certain types of patients, indicating that LTCH
patients have better outcomes, the recent growth of the LTCH industry
could result in the availability of a better level of care for Medicare
beneficiaries nationwide. Alternatively, if payments differ among
provider types but patient outcomes are equivalent, one could question
whether higher cost LTCH services are needed for all types of cases
currently treated, or more specifically, which types of patients
benefit from the higher cost LTCH services.
Conclusion
Madam Chairman Johnson, Congressman Stark, distinguished
Subcommittee members, thank you for inviting me to testify about long-
term care hospitals today. The goal of the Medicare program is to
ensure the cost-effective delivery of the highest quality of medical
services to beneficiaries. CMS looks forward to receiving comments on
the proposed rule in order to develop final policy and guide the future
of LTCHs appropriately. I will be happy to answer your questions.
Chairman JOHNSON. Thank you, Mr. Kuhn. Mr. Miller?
STATEMENT OF MARK E. MILLER, PH.D., EXECUTIVE DIRECTOR,
MEDICARE PAYMENT ADVISORY COMMISSION
Mr. MILLER. Chairman Johnson, Congressman McCrery, I am
Mark Miller, Executive Director of the Medicare Payment
Advisory Commission. The facts that Chairman Johnson went
through are the same facts that got the attention of the
Commission and drove us to look more intensively at long-term
care hospitals. As you noted, these are very rapidly growing
facilities, 9 percent per year, expenditures in the 25 and 35
percent growth rate. A decade ago, we spent about $400 million
on long-term care hospitals, and in 2007 we are expected to
spend about $5 billion on long-term care hospitals.
The other points that you made which also drew our
attention is that they are not uniformly distributed across the
country, and so Medicare beneficiaries receive post-acute care
services in certain communities without using long-term care
hospitals. All of these facts at least raise questions in the
mind of the Commission.
Before I talk about the studies, you both know that there
is a prospective payment system that started in 2003. The
payment rates for long-term care hospitals are very high
relative to inpatient hospitals and relative to skilled nursing
facilities, and I will make a point about that in just a
second. Under Prospective Payment System (PPS), both the
payments and the costs of care have been increasing rapidly
since the implementation. However, payments have grown faster
than costs; hence, long-term care hospitals are a profitable
Medicare service, and we are estimating margins in 2006 of
about 8 percent for this industry.
As I mentioned, about a year and a half ago, we did
intensive analysis of long-term care hospitals. We did our
usual very intensive analysis of data--claims, costs, that type
of thing. We did structured interviews of providers in
communities to see what role long-term care hospitals played.
We also made site visits to the long-term care hospitals and
met with the medical staffs of the long-term care hospitals. We
took our own physicians along for these discussions so we could
have clinically meaningful conversation.
There are a couple of things from that study that I want
you both to understand. The first is that in markets where
long-term care hospitals are present, you have a shorter
hospital length of stay and less use of skilled nursing
facilities. Long-term care hospitals substitute for part of the
hospital stay and for skilled nursing facility services.
The second thing I want you to get is that if you look at
the episode of care, the acute care hospital stay and the post-
acute care associated with that for the beneficiary. Just look
at expenditures for the Medicare Program, you find that when
long-term care hospitals are present, it costs the Medicare
Program more. This is an important caveat; if you instead focus
on the patients who are most likely to need those services,
select a diagnosis and the most severe patients in that
diagnosis, you find that long-term care hospitals for that
episode of care, when you include long-term care hospitals, it
is not significantly different than alternative settings of
care.
That fact, coupled with some of the things that we learned
in the site visits, the long-term care hospitals told us how
they conducted their business, how they conducted the care of
the patient. They said things like they have more intensive
nursing services, higher presence of physicians on the floor,
multidisciplinary teams, things like that. With that
information, coupled with what we felt was the need to target
the services to the patients who most need that level of care--
we made the recommendations that you are referring, the
patient-level characteristics and the facility-level
characteristics. The objective is to define the patients who
most need this care and to improve the value of the long-term
care hospital services to the Medicare Program.
I am not going to go through those criteria in detail, but
I am willing to do it in questions if you are interested.
In closing, I just want to say a couple of things. One is
that you should not take these recommendations as a blanket
endorsement of long-term care hospitals. We see rapid growth in
a setting where there are high payments and poorly defined
criteria, and any policy analyst is going to look at that and
it is going to raise questions in their mind.
The Commission is concerned that the long-term care
hospitals not be used solely to reduce the inpatient length of
stay, and then, as I have tried to stress throughout all my
comments, with these payment rates, to assure that the patient
who arrives there truly needs that level of care, and that is
the objective of the criteria.
I look forward to your questions.
[The prepared statement of Mr. Miller follows:]
Statement of Mark E. Miller, Ph.D., Executive Director, Medicare
Payment Advisory Commission
Chairman Johnson, Ranking Member Stark, distinguished Subcommittee
members. I am Mark Miller, executive director of the Medicare Payment
Advisory Commission (MedPAC). I appreciate the opportunity to be here
with you this afternoon to discuss Medicare payment policy for long-
term care hospitals.
Medicare beneficiaries can seek care after a hospitalization in
four different post-acute settings: skilled nursing facilities (SNFs),
home health agencies (HHAs), long-term care hospitals (LTCHs), and
inpatient rehabilitation facilities (IRFs). In addition, in three of
these settings patients can be referred directly from the community.
Use and spending for these services have grown rapidly since the
introduction of new prospective payment systems for them. About 3.7
million beneficiaries used post acute care in 2002. In 2004 Medicare
spending for these settings was about $36 billion, accounting for more
than 12 percent of total Medicare spending.
The overarching issue in Medicare post-acute care (PAC) is that
there are no clear and comprehensive criteria for which of these
settings are best for patients with particular characteristics or
needs. The recuperation and rehabilitation services provided are
important for Medicare beneficiaries. Yet, these settings and their
payment systems have developed separately over the years, and it is not
clear that together they form an integrated whole that provides the
highest quality, most appropriate care for beneficiaries or the best
value for the Medicare program and the taxpayers who support it. There
is a need for comprehensive payment system reform across all PAC
settings. Aligning Medicare payment systems with the patient's needs
and characteristics and the quality of the care provided, rather than
by type of facility, remains a challenge that will have to be met to
get the best value for the Medicare program.
The Commission maintains that in the post-acute care sector, just
as for the other sectors of Medicare, the services provided should meet
the needs of the beneficiaries, Medicare payments should cover the
costs of an efficient provider of those services, and higher quality
services should be rewarded. Currently in post-acute care, none of
these conditions is fully satisfied.
Long-term care hospitals, the subject of this hearing, illustrate
the larger problem in the Medicare post acute care payment systems.
Medicare payments to LTCHs have increased rapidly--from $398 million in
1993 to about $3.3 billion in 2004--and continue to rise. CMS estimates
LTCH payments will be $5.2 billion in 2007. As shown in Table 1, along
with the increase in Medicare spending there has been an increase in
the number of LTCHs, the number of cases, and the payment per case. The
average length of stay has fallen. Growth has been particularly rapid
since the start of the new LTCH prospective payment system (PPS) in
2003. From 2002 to 2004, 71 new facilities entered the program and
Medicare payments increased 38 percent in 2004 alone. Medicare is very
important to these hospitals, accounting for 73 percent of discharges,
on average, in 2004.
What are long-term care hospitals?
The characteristics of long-term care hospitals vary. Some are
converted from former public health hospitals; these tend to be the
largest and are concentrated in New England. Others are freestanding
but have entered the program more recently. The newest entrants, called
``hospitals within hospitals,'' are collocated with an acute care
hospital but have separate ownership and financial arrangements.
Hospitals within hospitals (HWHs) are smaller than the older LTCHs. The
numbers of HWHs and freestanding LTCHs both increased following
implementation of the LTCH PPS in 2003, but the rate of growth in HWHs
was more than twice the rate for freestanding LTCHs. Both nonprofit and
for-profit long-term care hospitals increased from 2001 to 2004, but
nonprofits grew more slowly than for profits. Almost 60 percent of
LTCHs are for profit, two-thirds of which are owned by just two chains.
LTCHs are unevenly distributed across the country (Figure 1). Some
areas have many LTCHs; other areas have none. As shown in Table 2, the
5 states with the greatest number of LTCH beds per thousand Medicare
beneficiaries account for 39 percent of the available beds but only 12
percent of the Medicare beneficiary population. Long-term care
hospitals serve a wide mix of patients including ventilator patients,
those requiring wound care, and those with respiratory and other
infections.
The regulatory distinction between long-term care hospitals and
acute care inpatient hospitals is the length of stay. Long-term care
hospitals are certified as hospitals and are intended to treat
medically complex patients with long lengths of stay. Medicare requires
that the average Medicare length of stay be more than 25 days (the
average length of stay in hospitals under the acute care inpatient PPS
is approximately 5 days). Cost sharing and coverage follow the acute
care hospital rules.
Medicare payments to LTCHs
Before October 2002, long-term care hospitals were paid on the
basis of their average costs per discharge, subject to an annually
adjusted limit calculated for each facility. Since then, under the new
PPS, Medicare has paid LTCHs under a prospective payment system based
primarily on the patient's diagnosis. Payment rates range from $15,665
to $121,376 for a LTCH in an average wage area. These rates are higher
than those hospitals receive under the inpatient PPS and they are also
higher than rates for SNFs. In fiscal year 2004, for patients with the
most common LTCH diagnoses, Medicare rates for LTCHs ranged from about
3 to almost 12 times as much as estimated rates for SNFs.
Under the previous payment system, the change in payment per case
was at or below the change in cost per case (Figure 2). After PPS
implementation, payment per case rose rapidly: it increased 5.5 percent
in 2003 and 13.2 percent in 2004. The case-mix index (CMI) also appears
to be increasing for LTCH patients, but CMS points out that CMI
increases are at least partially due to coding improvement with a
comparatively larger number of cases being assigned to LTC--DRGs with
higher relative weights.
There was little change (less than--0.1 percent) in the reported
cost per case from 2001 to 2003, the first year of PPS. It then
increased substantially in the second year of the PPS (by 8.9 percent).
More complicated LTCH patients could account for at least part of this
increase in cost per case. However, the average length of stay
decreased in 2004, which generally would decrease costs. The rapid rate
of growth in costs could also be attributable to the rapid rate of
increase in payments under the PPS which would have allowed LTCHs to
spend more than under the old system.
Even though cost rose after the PPS started, payments outstripped
them. Margins rose rapidly as suggested by the increasing difference
between payments and costs in Figure 2. Margins reached 9.0 percent in
2004 and we project a margin of 7.8 percent in 2006. The Medicare
margin is the difference between Medicare payments and providers'
costs, as a percentage of Medicare payments.
In our March 2006 report to the Congress, the Commission assessed
the adequacy of payment for long-term care hospitals. We found Medicare
payments for LTCH services are more than adequate. The supply of LTCHs,
the volume of services, and the number of beneficiaries admitted to
LTCHs have all increased rapidly since 2001and access to capital is
good. Moreover, Medicare spending for these facilities increased twice
as fast as volume. As mentioned, margins are high.
The Commission concluded that long-term care hospitals should be
able to accommodate increases in the cost of care in 2007 and
recommended that the Congress eliminate the update to payment rates for
LTCH services for 2007.
CMS actions
CMS has reacted to the growth in LTCHs and Medicare spending with
several regulatory changes. First, CMS established a new policy, the 25
percent rule, which CMS intended to protect the integrity of the
inpatient PPS by attempting to ensure that HWHs do not function as
hospital-based units of host hospitals. Second, CMS made other changes
to increase the accuracy of payments under the new PPS.
LTCHS can substitute for other settings
The Commission undertook extensive quantitative analysis,
interviews, and site visits to understand which beneficiaries use LTCH
services, what services they otherwise would have used, and what are
the costs to Medicare. We found that LTCHs provide post-acute care to a
small number of medically complex patients who are more stable than
patients in an intensive care unit (ICU) but may still have unresolved
underlying complex medical conditions. Many of these patients require
ventilator support for respiratory problems, have failure of two or
more major organ systems, neuromuscular damage, contagious infections,
or complex wounds needing extended care.
Using quantitative analysis, we found that the tendency to use
LTCHs is associated with certain diagnoses, severity levels, and the
proximity of the facility. Having a diagnosis of tracheostomy is the
single strongest predictor of LTCH use. Diagnoses other than
tracheostomy also predict long-term care hospital use--respiratory
system diagnosis with ventilator support, acute and subacute
endocarditis, amputation, skin graft and wound debridement, and
osteomyelitis. When we divided each diagnosis into four levels by how
severely ill the patient was, those with the highest severity level,
regardless of diagnosis, had almost quadruple the probability of LTCH
use. Beneficiaries living near an LTCH were more likely to use them,
and being in an acute hospital with a HWH quadrupled a beneficiary's
probability of using an LTCH.
LTCHs can substitute for both hospital care and post-acute care.
LTCHs can substitute for the end of an acute hospital stay. About 80
percent of LTCH Medicare patients are transferred from acute hospitals
and patients who use LTCHs have shorter acute hospital lengths of stay
than similar patients who do not use these facilities. Freestanding
SNFs are the principal post acute alternative to LTCHs. Patients who
would be most likely to use LTCHs often use SNFs and when patents use
LTCHs the probability of using SNF care declines--suggesting that SNFs
and LTCHs are used as substitutes.
In general, patients who use long-term care hospitals are more
costly to Medicare than similar patients using alternative settings
when we account for payments over an entire episode--that is, including
payments in both the acute and post acute settings. However, the cost
differences narrow considerably when LTCH care is targeted to very ill
patients who are most likely to need and benefit from this level of
care.
To better understand which patients most need and can most benefit
from the particular capabilities of LTCHs, we undertook site visits and
held discussions with LTCH representatives. According to LTCH
clinicians, long-term care hospitals:
frequently use admission criteria to determine whether
patients require an LTCH level of care and have sicker patients who are
more likely to improve
have active daily physician involvement with patients
have licensed nurse staffing of 6 to 10 hours per day per
patient (much higher than other post-acute care settings)
frequently employ specialist registered nurses and employ
physical, occupational, speech, and respiratory therapists the latter
of whom are available 24 hours per day; and
have multidisciplinary teams that prepare and carry out
treatment plans.
We drew on these observations to help tailor our recommendations.
Commission recommendations
In its June 2004 Report to the Congress: New Approaches in
Medicare, the Commission recommended that Congress and the Secretary
define long-term care hospitals by patient and facility criteria that
ensure that patients admitted to these facilities are medically complex
and have a good chance of improvement.
Patient-level criteria should identify specific clinical
characteristics and treatment modalities.
Facility-level criteria should characterize this level of
care by features such as staffing, patient evaluation and review
processes, and mix of patients.
Medicare should use more precise criteria to ensure that LTCHs
treat only appropriate patients. Criteria should describe the level of
care required by LTCH patients so that their needs are clearly
distinguishable from those of less resource-intensive patients who
should be treated in other less costly settings. LTCH criteria should
focus, to the extent possible, on patients and their care needs, rather
than on facility characteristics.
Patient-level criteria would identify specific clinical
characteristics and treatments required by patients cared for in LTCHs.
All of these criteria would be intended to ensure that the patients
admitted to LTCHs require an intensive level of resources and have a
good chance of improvement.
National criteria could be required for both admission and
discharge for each of the major categories of patients treated in
LTCHs, including respiratory, infectious disease, other medically
complex, wound care, ventilator-weaning, and cardiovascular or
peripheral vascular patients. Because these criteria would be specific
to each of the most common case types, they would need to be as
detailed and clinically relevant as possible. Discharge criteria would
ensure that patients are medically ready for discharge to less
intensive and medically appropriate alternative care settings.
Patient mix and severity criteria are directed toward ensuring that
LTCHs treat only medically complex cases. For example, one requirement
could be that a high share (e.g., 85 percent) of a facility's patients
must be classified into broad diagnosis categories--such as complex
medical, complex respiratory, cardiovascular, ventilator-dependent, or
extensive wound care--and that a large share (e.g., 85 percent) of an
LTCH's patients demonstrate a high level of severity of illness at
admission.
Facility-level criteria should delineate features of the care
provided in LTCHs. Some examples include a patient evaluation and
review process, a patient assessment tool, and the availability of
physicians. A standard patient assessment tool would ensure consistency
in the assessment process. Though most LTCHs already use assessment
tools all facilities should use the same tool that emphasizes clinical
and functional assessments of patients. The level of physician
availability should be specified. Physicians' presence and their active
involvement with patients are key aspects of the care that
differentiates long-term care hospitals from SNFs. Also, requiring
multidisciplinary teams of professionals, including physicians, to
prepare and carry out treatment plans would encourage a team-based
focus on patient care.
The 25 day length of stay criterion, the only criterion currently
in place for LTCHs, is intended to ensure that patients require a high
level of resources. Without other criteria, however, the length of stay
criterion does not prevent SNF-level patients from being treated in
LTCHs at much higher costs to Medicare. Over time, as patient criteria
clearly delineate the types of patients appropriate for treatment in
LTCHs, CMS could reevaluate use of this criterion.
A minimum staffing requirement would ensure that LTCHs provide an
intensive level of care that is comparable to a step-down unit (from
ICU-level care) in a hospital and would be consistent with long-term
care hospitals treating medically complex patients who cannot be
treated in SNFs.
The Secretary will need to monitor the compliance of LTCHs with
facility--and patient-level criteria. Therefore, the Commission also
recommended that the Secretary should require the Quality Improvement
Organizations (QIOs) to review long-term care hospital admissions for
medical necessity and monitor that these facilities are in compliance
with defining criteria. A recent QIO medical record review found that
29 percent of 1,400 randomly selected LTCH Medicare admissions in 2004
did not need hospital-level care.
The Commission's recommendation to better target the patients
treated in long-term care hospitals should not be taken as a blanket
endorsement of LTCHs and their role in the post-acute care continuum.
The rapid growth in long-term care hospitals, the opportunities for
excess profit, and the fact that patients get care in other settings in
markets where LTCHs do not exist all raise concerns for the Commission.
The growth and incentives of the HWHs are of particular concern.
Quality
Refinements to the LTCH payment policies should be consistent with
Medicare's longer-term goals for payment policy. These goals include
improving quality and promoting patient care in the most appropriate
and cost-effective setting. Better measures of quality for long-term
care hospitals are needed. Additional measures of quality at the
hospital-specific level, probably not available from administrative
data, may come from the LTCH industry. One association and a large
chain report independent efforts to develop quality indicators. If the
data for these indicators were available, CMS might use them to monitor
LTCH care. For example, both organizations plan to measure rates of
weaning from ventilators, pneumonia contracted while on a ventilator,
decubitus ulcers acquired in the LTCH, blood stream inflections, falls,
and use of restraints. However, the specific measures for these
indicators differ widely between the two organizations. It is a
positive step that the industry is starting to develop new quality
indicators. However, the next steps that should be taken are CMS
involvement, greater validation of the measures, and decisions on a
data collection strategy.
Chairman JOHNSON. Do you both agree that we should be
moving to a criteria-based system, both patient and facility
criteria?
Mr. KUHN. Yes, we do agree with the recommendations MedPAC
made in 2004 and agree with your statement, that, yes, I think
better classification, better criteria for both facility as
well as patients are long overdue here.
Chairman JOHNSON. Dr. Miller, do you agree with that?
Mr. MILLER. Right, it is a recommendation.
Chairman JOHNSON. Well, it seems to me that if you have a
criteria-based system that is correct, then that addresses the
short-stay issue; that addresses the possibility of an acute
care transfer to a long-term care facility that is
inappropriate, does it not?
Mr. KUHN. I think it would certainly help us. I don't know
whether that gets us to the end game, because, you know, having
the classification system is absolutely key, but also payment
policy can drive behavior as well. Synching of both the payment
policy as well as the classification system are going to be
absolutely important components as we go forward.
Chairman JOHNSON. Dr. Miller?
Mr. MILLER. From our point of view, and we said at the end
of our report that we think patient and facility criteria were
important to define this benefit. Still at the end of the
report, and as I tried to do in my opening comments, we think
there are still potential concerns and that you might want,
even within the payment system, some kinds of adjustments to
capture inappropriate behavior. We do think that the criteria
are the way to go and should be pushed forward.
Chairman JOHNSON. I would hope that if we had good
criteria, we wouldn't have to have artificial additional
structures. I see your short-stay policy as the parallel in the
long-term care arena to the transfer policy in the acute care.
Is that unreasonable?
Mr. KUHN. I think the tools that we have are--or I should
say the strongest tool that we have is really payment, and so
to deal with the post-acute care policy we had last year and
last year's In-patient Prospective Payment System (IPPS) rule
was really designed to make sure that when we had an episode of
care and we were paying for an episode of care in the acute
care side, we wanted to make sure that we got those full
services, and that was to try to prevent premature transfer to
some post-acute care facility.
The same holds true here, that we really want to pay
accurately for the care that is provided, and so, that is what
is driving the proposal that we have before us now with the
short-stay outlier policy.
Mr. MILLER. What I would say about that is that if you
think about, and I am not sure this is a lot different than
what Herb is saying--If you think about payment systems and you
are trying to build these on the basis of average and you build
your payment per case around what is happening in the field, in
the delivery at that time, just like in IPPS, you still might
want to deal with the extreme cases differently in the payment
system. You have outlier payments when a case becomes extremely
expensive, and similarly, in a system of averages, you might
want to address the other end of the distribution when a case
is extremely different than what you expected the average to
be.
Chairman JOHNSON. Yes, and we did do that in the acute care
setting. We addressed both the transfer payment and the outlier
issue at the same time, hoping that that would balance out.
This, I see a little differently, because when you define
short stay as five-sixths of the mean and you begin to drop off
those short stays, you put in place a mathematical system that
is sort of inexorable. After you deal with the first set of
short-stay patients, and, remember, you can deal with them in a
number of ways--You can deal with them in keeping them in the
acute care setting or sending them to a nursing home, and those
are the ones you are sort of after. You can also deal with them
by not accepting certain diagnoses because of the tremendous
unpredictability of that patient, and we are going to hear more
of that in the next panel. How much do we know about short
stays? How predictable is it, how long a patient with this kind
of complexity will need to be in the hospital? If you look at
the comparison by diagnostic group, between the length of stay
in an acute care hospital and the length of stay in a long-term
care hospital, it is about 3 days to 1.
There is substantial difference between these patients, and
if you lop off the bottom, then the next five-sixths is just
going to include more complex patients and so and so up the
ladder because it is five-sixths in every diagnostic group. You
are going to have five-sixths of the ventilator patients and
five-sixths of this and five-sixths of that. Every year you are
going to get more and more complex patients. You are going to
be moving up the complexity ladder through this automatic
system. That is not quite exactly what happened in the acute
care sector. This seems to be a far less balanced approach, a
far more dangerous approach, and when you look at just the
Lewin Study and its prediction in terms of the hospitals that
will go from positive to negative margins, almost all of the
institutions have positive margins now. One could say the
margins are too high, but one could also be very concerned
about essentially most of the hospitals going to a negative
margin under the new payment method--in fact, all but the
category of hospitals of 300 beds or more.
I am concerned not only about the tremendous shift that
will take place under this proposal on average, all hospitals
going from an average margin of 9.17 percent to an average
negative margin of 4.9 percent. That is a huge swing.
Institutionally, that is a huge swing. Then, when you look
solely at the ones who end up with positive margins are the big
institutions, I do not want payment policy to drive bigness. I
am worried, terribly worried about the impact of this, and I
think it is due to the definition of short stay as being almost
all the patients, five-sixths.
What is your view, Mr. Kuhn, in proposing this of its
ongoing impact on the existence of LTCHs?
Mr. KUHN. That is a good observation you make, and I think
the observations you made there are what we have heard from a
lot in the stakeholder community that we hope, we get comments
during this open public comment period. I think----
Chairman JOHNSON. Excuse me. I should have asked that
question. What did your analysis show before this?
Mr. KUHN. Yes, and I think your point is well taken. These
are medically complex patients, and that is the whole point of
what we are trying to drive here to make sure that we pay
accurately for them.
Let me give you some information here that we have looked
at and give you a sense of the ideas of why this proposal is
out there. In the acute care setting, the average length of
stay is about 5 days, and so if someone stays 4 days, the delta
there is not that great in terms of the resources consumption,
the activity that is there. If you are looking at these
patients where the average length of stay for the facility and
the only classification criteria is 25 days or more, and
someone is there, presumably, for 30 days, but they are out in
12, that delta is very large, and I think that is something
that we have to raise as a big concern about in terms of the
order of magnitude here in terms of the dollars, the lengths of
stay that we have, and how we are dealing with these short-stay
outlier patients.
In LTCHs in 2004, we had about 118,000 cases. Of those
cases, 44,000 were short stay. Let me give you a couple of
facts about that. Sixty percent of those patients, about
26,000, 27,000, were out in 14 days or less. In fact, 23
percent of them were out in 7 days or less. the point here
behind our policy is really trying to say if they are looking
at--if they are taking acute care patients, maybe should we be
thinking about paying at the acute care rate for these
facilities.
Chairman JOHNSON. Well, see, what disturbs me about your
policy is it does not focus on 14 days or less.
Mr. KUHN. No. That is right. It looks at the entire short-
stay outlier threshold, and----
Chairman JOHNSON. The definition of short stay is not like
in acute care, where you have an average Diagnosis-Related
Group (DRG) and then short stay is something below average, a
certain numbers of days below average. It is five-sixths of the
mean.
Mr. KUHN. Right. Again, the point is that many of these are
very, very short stay, and I think this is something that as
the industry has come in and presented their information--and I
will say that they have been very responsible in coming forward
with good information. These are the kind of points that we
need to have in the notice and comment period that we are in
now so we can evaluate, we can analyze as we move forward to a
final regulation.
Chairman JOHNSON. As you proposed this, did you make any
runs of your information as to what the impact would be? If so,
what was your estimate of the impact?
Mr. KUHN. The impact right now for the short-stay outlier
policy is about savings of $440 million. It is about 11, 11.4
percent, I believe, reduction in payment.
Chairman JOHNSON. Have we ever proposed for any other
provider an 11-percent reduction in a single year?
Mr. KUHN. For institutional providers, I am not aware.
Chairman JOHNSON. I don't remember any reduction of that
magnitude. Mr. McCrery?
Mr. MCCRERY. Thank you, Madam Chair. You asked a lot of
good questions, and you covered much of what I was going to get
into, but let me just probe a little more. The LTCHs are paid
on a PPS; is that right?
Mr. KUHN. That is correct.
Mr. MCCRERY. That PPS, I assume, is based on kind of an
average length of stay?
Mr. KUHN. Yes, basically there is kind of a parallel
system. We have the DRG system that is kind of a charge-based
weight system in there, and the LTCH is basically--the LTC.
DRGs is basically a very parallel system to that with the same
kind of weighting process that goes on. It is based on averages
determine the weights, the values for each and every DRG, and
then, of course, that is multiplied times the standardized
rate.
Mr. MCCRERY. That is why you talked about the delta between
the short stays, the outliers, and the average stay in an LTCH.
Mr. KUHN. Yes, to give you a sense of the order of
magnitude, right now, I think for the acute care side, the
standardized rate is about $4,700; for LTCHs it is $38,000. It
is a huge difference. If you have something that is a weight of
1.5 for each one, you can see the dollar differentiation that
we have here, and that is why I think it raises a big question
for us if we have folks that look like acute care patients.
Should they really be treated as acute care patients and not in
an LTCH facility?
Mr. MCCRERY. Okay. Well, you know, I think your concern is
appropriate, but like the Chair, I would question the
methodology of the five-sixths of the mean, because if you
achieve the logical result, which would be LTCHs, if they are
faced with only getting reimbursed--what the acute care
hospital is going to get reimbursed-- they are not going to
take those patients. Those patients are going to stay in the
acute care hospitals. you will reduce the population of the
LTCHs, but you are still taking five-sixths of the remaining
mean. you see, it just kind of gets smaller and smaller.
I understand what you are trying to get at, and I think it
is a legitimate pursuit. Perhaps, the methodology needs to be
scrubbed a little. You also made a point a couple times, maybe
both of you, about in areas where LTCHs are present, acute care
hospital stays are longer. Is that right?
Mr. MILLER. Shorter. Where long-term care hospitals are
present, acute care hospital lengths of stay are shorter.
Mr. MCCRERY. Acute care hospital stays are shorter?
Mr. MILLER. Yes, so that, in other words, the presumption
here is that someone leaves the hospital earlier and goes to a
long-term care hospital.
Mr. MCCRERY. Okay, yes. The opposite is true as well. In
areas where LTCHs are not present, the acute care hospital
stays are longer. That is what I was trying to get at.
Mr. MILLER. Right, right.
Mr. MCCRERY. Well, duh. I mean, if you don't have an LTCH
to send them to and they have these complex problems, I mean,
they are going to keep them. They may not be able to treat them
as effectively as a LTCH, but there is nowhere else for them to
go. I don't see the point of that data, really.
Mr. MILLER. Well, I think what we were driving at, if I
understand your question--at least let me get a couple of
distinctions in.
Mr. MCCRERY. I may not understand my question either.
Mr. MILLER. No, it is quite all right.
Mr. MCCRERY. We will talk, though.
[Laughter.]
Mr. MILLER. Okay. It is complicated. I mean, what we were
going at was, okay, you have markets with and without. When
these things present in a market, what happens? Relative to
what the average is and what is going on, you know, the secular
trends in the data, when these enter the market--what happens
is--and it is not just hospitals--skilled nursing facility
services go down, and the length of stay in the hospital goes
down. What these things seem to be doing is taking the place of
a person staying in a hospital for a longer period of time, say
in a step-down unit or something like that, or in some
communities these people go to skilled nursing facilities;
although, I would like to stress there that the ability for a
skilled nursing facility to deal with these kind of patients
varies, you know, from facility to facility and market to
market.
We are just trying to say if these didn't exist, the
patient would likely stay in the hospital longer or head to a
skilled nursing facility. When they present, that is where you
see the changes. Then the reason we were doing all of that was
to figure out whether it cost Medicare more or less than if
they had just stayed in those settings. That is what we are all
driving at.
Mr. MCCRERY. Okay. Well, I think it is clear that if the
patient stayed in those settings, it would cost Medicare less
because you pay those treatment facilities less than you pay
the LTCHs.
Mr. MILLER. If I could just get one--that is what we found,
but just one subtlety past that. If you focus on a certain
group of patients, patients with certain diagnosis--ventilator
dependency, need for wound care, infectious disease, that type
of thing, and the most severe of those patients, and then you
ask the same set of questions again, the difference in cost is
not as great.
Mr. MCCRERY. Yes.
Mr. MILLER. If you focus it on certain patients, then the
long-term care hospitals, because you are looking over an
episode of care, do not appear to be as expensive relative to
other settings.
Mr. KUHN. I would just add the point you are making is kind
of part of this overall larger debate of what we are trying to
do here in the entire post-acute care. I know that Chairwoman
Johnson had a terrific hearing on this last year where we
really began to look at thoughtfully, the patient care needs
instead of the name of the facility on the door, because right
now we pay one rate at one facility, another rate at another
facility, but it does not really logically follow what does the
patient need and what is the appropriate payment for that
patient. So----
Mr. MCCRERY. There is a study underway right now to get at
that.
Mr. KUHN. Part of our effort, in fact, in the Deficit
Reduction Act (P.L.109-171), you gave us additional authority
to go out and do a demonstration in this area and do even more
work in this area, and part of these changes that we are
talking about here are a logical extension of that and
incremental movement in that direction.
Mr. MCCRERY. You are not--my time has expired.
Chairman JOHNSON. That is okay.
Mr. MCCRERY. You are not suggesting then, as an uninformed
observer might conclude based on some of your statements, that
LTCHs are just not needed?
Mr. KUHN. No, I wouldn't make that statement at all. I
think they have a good role, and for those very medically
complex patients, they do very good work.
Mr. MCCRERY. If they are needed. If they have a place in
our health care system, then it seems to me that this study is
going to tell us a lot about who should go to these LTCHs and
how much they should be paid. I echo the Chairwoman's comments
that maybe we are putting the cart before the horse here in
adjusting the payment rates before we complete this study, to
get a more complete picture of the appropriate place in our
system for these settings.
Mr. KUHN. I think that is a good observation, and we have
heard that in comments from the stakeholders in the industry
about this. Our thoughts are this: As I indicated earlier, with
the short-stay outlier policy that is about $440 million. We
will have this RTI study this spring. There is going to be some
analysis, discussion with the industry. It may raise additional
questions that we have to answer. It could be several years
before we are ready to move forward on this, and I think as
stewards of the trust fund, the opportunity from things that we
have seen in terms of these short-stay patients, we think it is
appropriate to go ahead and move forward with this policy. That
is why we have proposed it. Again, we are in the comment
period, but that is why we proposed it.
I hear what you are saying, and I think that others have
raised that as well. From our aspect, it could be a few years
before we get to that stage. Meanwhile, we think there is an
opportunity, because the only lever that we have is the payment
changes to go ahead and make some incremental adjustments here
to move forward, and that was the basis of our proposal.
Mr. MCCRERY. Okay, but I would just urge you to scrub your
payment proposal a little bit more.
Mr. MILLER. Could I say one thing about that, too? I am
also aware of that study, and I think Herb said it here right
at the end of his comments, you know, several years. I think
there are two ways to think about it. Fortunately, or
unfortunately, we have a bunch of silos in our post-acute care
systems, and I think the way we think about it is let's try and
get that as right as possible while we are trying to get above
it and get it right across everything. we would urge that the
criteria be thought through here, too, so that you are defining
what is happening inside this box. You know, even though,
maybe, we do not want all these separate boxes, but in the
short run, that is what we are living with.
Mr. MCCRERY. Okay. Thank you, Madam Chair.
Chairman JOHNSON. Thank you. I am very concerned by your
answer, Mr. Kuhn, to Mr. McCrery's inquiry. First of all, the
RTI study, which we all look forward to, was actually due
January 1, 2005. We had this series of hearings planned, we
have others in this series, to look at the criteria in the
whole post-acute care arena, not just long-term care
hospitals--rehabilitation hospitals, nursing homes, home care--
because it isn't just LTCHs that need to have clearer criteria.
The whole system needs to have clearer criteria so that you can
get over the sort of placement between the different settings,
but also guarantee that Medicare patients will have access to
the advanced care that they need, depending on their illness
and state of physical well-being.
We are behind the wheel on this, but I am very disturbed
that you think that it might take you several years to do
criteria-based, and that you would be willing to go ahead with
this short-stay proposal before that, because I see this as
absolutely the old world, blunt instrument. You are going to
hear in the panel or your people will hear in the panel, and
you saw yesterday the industry is far ahead of you. There are
criteria based proposals that we would be better off starting
with. If we do a criteria-based proposal, then we will see what
portion of this problem of under 14 days is criteria-based and
just that you cannot estimate who is going to die or who is
going to get well fast and how much of it is actually the
patient is in too expensive a setting for that patient's
medical needs.
I certainly--if that is what you are thinking, then I do
want to have your staff provide me with copies of the runs that
your staff did to see what would be the impact of a short-stay
proposal you are making, because I want to see if they knew at
the time when they came to the 11 percent, because the 11
percent is about what Lewin comes to, too. I want to see did
they realize that everybody was going to be negative margins?
Did they realize that the average margin in the South was going
to go from plus 7 to minus 7 and that 78 percent of the
providers were going to have negative margins? That is just in
the South.
In the Midwest and in the North, 55 percent, 56 percent
would have negative margins; 52 percent would have negative
margins. I am not interested in a system that treats people as
complex and sick as these people are, needing as many services
and as many physicians available to them.
I want to see those runs because I want to see exactly what
your people thought you were doing, not just in terms of how
much money you were going to save, but what was going to be the
impact on the provider community.
The last comment. This mechanistic issue is a big issue
because the five-sixths 1 year is going to be five-sixths--
somebody whose normal DRG is 65 days, and they got 55, or
whatever five-sixths is. That is a lot of time. If you pay them
at an acute care rate, you don't even pay short stays in an
acute care hospital, an acute care day rate. You pay them
double the first day. To go from the acute care setting to a
long-term care setting and propose that you pay an acute care
rate, I mean, that worries me. It worries me that this project
is not only a very blunt instrument, but the lowest ball on the
totem pole. I can't tell you any comparable experience that I
have had, and I have been serving on this Committee since, I
don't know,1979 or something.
I do want to see the work sheets and know how you got here
because this isn't where I am interested in going myself. I am
interested in going to a criteria-based system, and you will
hear both sides, both the big national chains and the smaller
nonprofits, have done an enormous amount of work and are ready
to hand you a criteria-based system. With a year's experience
with that, then we could see what is the real honest short-stay
problem.
Mr. KUHN. We would be happy to give you all the impacts
that we have in the regulation and any others that would help
you understand kind of our analysis and what we did.
Chairman JOHNSON. It is the analysis that I am interested
in understanding.
Mr. KUHN. You bet.
Chairman JOHNSON. Thank you. Thank you very much. Anything
else?
Mr. MCCRERY. No.
Chairman JOHNSON. Thank you very much. We will start with
the next panel.
Chairman JOHNSON. Welcome, Mr. Altman. Will you proceed,
please?
STATEMENT OF WILLIAM M. ALTMAN, SENIOR VICE PRESIDENT, KINDRED
HEALTHCARE, LOUISVILLE, KENTUCKY
Mr. ALTMAN. Good afternoon, Chairman Johnson, Mr. McCrery.
Thank you for the opportunity to address the Subcommittee on
the role of long-term care hospitals in the health care
continuum.
My name is Bill Altman, and I serve as senior VP of
Compliance and Government Programs for Kindred Healthcare. As
you noted in your introductory remarks, Kindred has a diverse
set of post-acute services ranging from long-term acute care
hospitals, nursing facilities, rehabilitation services, and
pharmacy services, and we operate in over 40 States. I am also
here on behalf of the Acute Long Term Hospital Association,
ALTHA, which is the trade association for LTCHs. It represents
over 60 percent of LTCHs nationwide.
In the time that I have, I want to basically address three
issues. First of all, I want to talk about the role of LTCHs in
the health care continuum, but in the broader context of the
deliberations of the Subcommittee and MedPAC about the entire
post-acute space in an attempt to rationalize it. Then, I want
to amplify a little bit on your comments about the impact of
this proposed CMS policy on LTCHs. Then, I want to talk
specifically about why the CMS policy proposal is flawed.
With respect to the role of LTCHs, let me be clear. Kindred
and ALTHA support the Committee's initiatives to make sure that
Medicare beneficiaries are placed in the most appropriate
setting and that the payments are designed first and foremost
based on the clinical needs of the patients and the intensity
of the services they provide. Simply put, the proper role for
LTCHs, as we have consistently told this Committee, MedPAC, and
CMS, is to treat the small number of medically complex,
severely ill patients that require the intense unique services
that LTCHs provide. As you noted, we have put proposals forth
that would specifically be designed to ensure that that is the
proper role of LTCHs.
Now, unfortunately, as you pointed out, CMS has not
reciprocated our overtures to them in terms of pursuing this
shared policy goal, and they have resorted to the blunt payment
approach that you talked about. I applaud you for asking for
the data that they relied on and the impact analysis. We have
asked for the same data. We have also asked for data on
severity of illness of the patients, both among the short-stay
outliers and the rest of the LTCH patients, and, frankly, we
have not received that. We have done our own analysis, and I
want to talk a little bit about that.
Before I do, I do want to talk a little bit more about the
impact and put it in the context of total Medicare spending. As
you noted, despite growth, LTCH spending from Medicare amounts
to around 1 percent, and it has been consistent over time, and
that is an important contextual piece to understand the
increase in LTCH spending.
I would also note, to digress for a moment here, that since
the implementation of the Hospitals In Hospitals (HIH) rule, we
have seen a significant decline in the number of new LTCHs
opening. This is based on CMS' own data, and I am not quite
sure where CMS gets its information from to assert that we are
seeing continued growth in LTCHs, particularly among free-
standing LTCHs, which is primarily what Kindred does, because
in 2005, according to CMS's own data, we saw a dramatic decline
in the number of HIHs that were started, and that is when the
HIH rule really hasn't gone fully into effect. It is phased in
over a number of years. We saw one fewer--ten--new free-
standing LTCHs that achieved provider numbers in 2005, and that
is compared with eleven the year prior. I am not quite sure
where CMS gets its information to suggest that we are
continuing to see rapid growth.
I think the HIH rule has begun to take hold, and we support
rational growth limited to LTCHs treating medically complex,
severely ill patients, and I think we are beginning to see
that. Certification criteria will achieve that in a much more
direct way. We don't think it should take 2 to 3 years. MedPAC
made their recommendation in 2004, and we are ready to go, and
we want to work with this Committee and CMS to see proper
certification criteria put in place.
The other thing I want to emphasize is that as a percentage
of what the Administration has proposed in terms of Medicare
savings; although LTCHs only represent 1 percent of total
Medicare spending, in fiscal year 2000 this rule alone accounts
for 10 percent of the savings proposed by the Administration.
We think that is disproportionate.
Let me jump right to the short-stay outlier policy. It has
been described and you have pointed out some of the logical
flaws and the actual flaws in it and questioned some of the
data. Let me just walk very quickly through four assumptions
that CMS has made in justifying their policy and point out
through their own data why it is flawed.
First of all, CMS makes the assumption that LTCH short-stay
patients--and as you pointed out, many of these patients are
not short-stay. They have a very long length of stay relative
to other patients. They make the assumption that those patients
are clinically similar to patients in the short-term acute care
hospital and that is the rate that they want to pay. That is
not accurate.
We took their same data, the MedPAR data, and assigned
severity of illness ratings to all LTCH patients, short-stay
LTCH patients, and compared them with the short-term acute care
hospital patients. What we see is two things: First of all,
there is really no difference between the short-stay LTCH
patients and the regular LTCH patients in terms of their
severity of illness. The second thing we see is that almost
twice as many short-stay LTCH patients are in the highest
severity of illness categories as compared to the short-term
hospital world.
Now, that has significant implications not only for
payment. It is easy to see why the payment shortfall exists
that you pointed out and the negative margins that Kindred,
too, will experience as a result of this rule. It is also
important to know that when the patient comes to us, they look
basically the same. We do not know whether they are going to be
short stay or long stay or very long stay. Many are very long
stay, high-cost outliers. that is the first assumption that is
actually false based on the data from MedPAR database,
Medicare's own data, with respect to severity of illness.
The second assumption that CMS makes is that the short-stay
patients, just by virtue of their label of short stay, as you
pointed out, Mrs. Johnson, they have a similar length of stay
to the short-term acute care hospital patient. We also know
that that isn't true. Even the short-stay patients have an
average length of stay of almost 13 days, and that is based on
the five-sixths threshold. That compares with an average length
of stay in the short-term hospital world of just over 5 days.
It is easy to see when you put those two pieces of
information together--the high severity of illness and the long
length of stay--why there is such a significant payment
shortfall and why it is inappropriate to use the short-term
hospital rate.
The third assumption that you pointed out, Mrs. Johnson, is
that LTCHs can predict in advance who is going to be short
stay, who is going to be normal stay, who is going to be long
stay, and, more importantly, what the clinical outcome is going
to be of those patients when they come to us. With this
medically complex population, it is impossible to predict,
particularly who is going to be successfully treated and live
or die. Many of these patients, as it has been pointed out, are
dependent on ventilators for breathing, and the science is not
there in terms of being able to predict who is going to
successfully wean from that ventilator. That is a big
assumption made in this proposed rule, that we can actually
change our behavior. We will just not admit short-stay
patients. The physicians who make the discharge decisions and
the admission decisions are unable to predict in advance, and I
would argue should not predict before the full course of care
is attempted and completed in the LTCH.
Finally, the last assumption, as you pointed out, is that
the 37 percent of cases that happen to fall in by CMS' own
definition as short-stay outliers is too high and that we can
do something about it. Mrs. Johnson, you have pointed out the
mathematical inevitability of that statistic, but I would add
one thing to that, and that is, there is a built-in
disincentive for LTCHs to knowingly admit patients who are
going to be short-stay. If we do that on a routine basis, we
are no longer going to qualify as an LTCH under the current
criteria, the 25-day length of stay. You will notice from our
proposal for certification criteria, we are actually
recommending that we retain the 25-day length of stay as a
requirement and put on top of that patient and facility
criteria. That is one of the reasons, because we do think LTCHs
are appropriate for the longer-stay patient on average, as you
have pointed out.
I would just conclude by saying that I think that the--we
do believe that the policy proposal is excessive. It results in
negative margins. We have not been able to find the data to
support it based on their own data or what we have asked for,
which they have not given it to us, and I think that that is a
very problematic. Again, we think that certification criteria
would address the legitimate policy issues that have been
raised and would address patient placement, growth, and margin,
and I have to end by saying that the thing that is most
disturbing to me about the rule is the lack of discussion about
quality. We have provided a lot of data about the quality
outcomes we achieve, and the New York Times article that
referenced the critical shortage of ventilators in this country
in the event of a bird flu epidemic is more proof of the needed
role of LTCHs in our health care continuum.
Thank you very much.
[The prepared statement of Mr. Altman follows:]
Statement of William M. Altman, Senior Vice President, Kindred
Healthcare, Louisville, KY
Good afternoon Chairman Johnson, Ranking Member Stark and members
of this Subcommittee. Thank you for the opportunity to comment on the
role of Long Term Acute Care Hospitals (LTCHs) in the health care
continuum.
My name is Bill Altman and I serve as Senior Vice President of
Compliance and Government Programs for Kindred Healthcare, which is
based in Louisville, Kentucky. Kindred is a leading provider of
diversified long term care services, with 78 Long Term Acute Care
Hospitals, 248 skilled nursing facilities, and several assisted living
facilities providing services in 40 states. We also provide contract
rehabilitation and pharmacy services to hospitals, nursing centers,
outpatient centers and assisted living facilities nationwide. I am also
testifying as Chair of the Public Policy Committee for the Acute Long
Term Hospital Association (ALTHA), the association representing over
two-thirds of LTCHs nationwide.
We are grateful for the opportunity to testify about a recent rule
proposed by CMS that reduces payments to LTCHs to a point where care is
jeopardized for the critically ill Medicare patients LTCHs serve. But
first I would like to make a few comments on the broader context of the
Subcommittee's discussions about the role of LTCHs in the health care
continuum and your efforts to promote a rational policy for the post-
acute sector.
Kindred is uniquely situated to assist policymakers to define the
proper role of LTCHs in relation to other providers such as SNFs,
Inpatient Rehabilitation Facilities, Hospice and Home Health because of
the diversity of our service lines. Let me be clear from the start--
Kindred and ALTHA support the Subcommittee's initiatives to make sure
that Medicare beneficiaries are placed in the most appropriate setting
and that Medicare payments are based first and foremost on the needs of
patients. Simply put, the proper role for LTCHs is to treat the small
number of medically complex, severely ill Medicare beneficiaries who
can benefit from the unique set of intensive services that only LTCHs
are equipped to provide. To support this policy goal, ALTHA testified
before this Subcommittee in June of 2005 and expressed our support for
a range of policies related to post-acute care. Specifically, we
recommended four guiding principles we believe policymakers should
follow in this area:
1. First, policy should seek clearer definitions of the distinct
role of each post-acute provider, while recognizing that a certain
amount of overlap is inevitable and necessary to ensure continuity of
care across settings;
2. Second, policy should explore development of a unified post-
acute assessment instrument. Development of such an instrument is an
important prerequisite to deciding appropriate patient placement,
coordinating care, and possibly determining appropriate payment;
3. Third, consistent with MedPAC's recommendations, patients
should be cared and paid for in the most appropriate setting, based on
an objective evaluation of clinical characteristics, needs and resource
intensity. Patients who can be safely and effectively cared for in SNFs
should not be treated and paid for in LTCHs or IRFs. Likewise, severely
ill, medically complex patients should have access to the intensive set
of services only available in LTCHs;
4. Fourth, also consistent with MedPAC's recommendations, policy
should require not only that patients be placed in the appropriate
setting, but that providers have the capacity to meet the needs of
patients, in terms of staffing levels, staff skill mix, availability of
diagnostic tests, sophistication of technology and intensity of
service.
Chairman Johnson, as we have discussed with you and your staff,
Kindred has begun our own work in developing tools to evaluate patients
for the purposes of making appropriate decisions about placement and
care planning. And ALTHA has put forth specific policy proposals to
refine the current LTCH certification criteria to help ensure that
LTCHs admit, treat and get paid for medically complex Medicare
beneficiaries. These are critical steps towards rationalizing the
entire post-acute sector and we stand ready to work with policymakers
through demonstration projects or joint research studies to advance
policy in this area.
Unfortunately, all of our attempts to work with CMS toward these
shared policy goals have not been reciprocated. Instead, CMS has
resorted to the bluntest of policy approaches--draconian payment cuts
at unprecedented levels--with little to no transparent data and without
even considering other mechanisms that this Subcommittee and MedPAC
have consistently endorsed. More troubling, CMS has taken these actions
without even discussing their proposals with other branches of
government or the LTCH provider community. Nor has CMS analyzed the
mass of data readily available to it showing the defects in its policy.
Our repeated requests for the data they did rely on have gone
unanswered.
Impact of CMS Proposal
As you heard from earlier testimony, CMS proposes not only to
freeze LTCH rates by holding the LTCH market basket update to zero,
they propose cutting rates an additional 11.1% by applying a policy
that assumes, wrongly, that some 40% of LTCH patients whose length of
stay is shorter than the average for all LTCH patients should have
never been admitted to the LTCH in the first place. Last Friday, ALTHA
submitted comments to CMS detailing why this policy is flawed, and we
have provided these comments to the Subcommittee as part of our written
testimony.
Before summarizing why CMS's policy proposal is wrong, I urge the
Subcommittee to evaluate it in the context of total Medicare spending
and the recent deliberations in Congress about Medicare savings.
Despite recent growth in the number of LTCHs, LTCHs still represent
only about 1% of total Medicare spending. Specifically, in 2005,
Medicare spending on LTCHs represented just 1.3% of total Medicare
spending. Yet, in the Administration's budget, which proposes an
addition $36 billion in Medicare savings over the next 5 years, over 7%
of proposed Medicare savings comes from the LTCH rule we are discussing
today. In fiscal year 2007 alone, over 10% of the proposed savings
comes from LTCHs. This level of cuts is disproportionate to the share
of Medicare attributable to LTCHs. It is important for the Subcommittee
to understand that these LTCH cuts would be imposed by regulation--
unlike other parts of the proposed Budget, no Congressional action is
needed or requested for these cuts to take effect on July 1st of this
year.
It is not surprising therefore that CMS's proposal violates the
threshold principle that Medicare payment systems should at least
attempt to cover costs. On the contrary, CMS's proposal fails to cover
the costs that LTCHs incur in caring for Medicare's most medically
complex beneficiaries. For Kindred, CMS proposes to pay rates in the
upcoming rate year that fall short of our actual costs by 6.2%. Revenue
shortfalls of this magnitude cannot help but call into question our
ability to continue to provide the level and intensity of service our
patients expect and deserve.
CMS Policy on ``Short Stay Outlier'' Patients is Flawed
The major reason that CMS's proposal cuts rates so significantly is
the way it proposes to pay for so-called ``short stay outlier''
patients. As you know, LTCH payments are divided into 3 categories: 1)
Normal DRG payment for patients whose length of stay is about average;
2) High Cost Outlier payments for patients with usually high and
unpredictable costs of care--those whose length of stay is longer than
average; and 3) Short Stay Outlier payments for patients whose length
of stay is shorter than average.
It is important to understand what a short stay outlier patient is,
and what it is not, to understand why CMS's policy is flawed. CMS
defines ``short stay outliers'' as those patients with lengths of stay
less than 5/6ths of the mean length of stay for all patients in the
same diagnostic category (i.e., DRG). Each DRG has its own length of
stay and, not surprisingly, patients in those DRGs have different
lengths of stay resulting in an average length of stay for all
patients. For example, the average length of stay for the most common
LTCH patient, those dependent on mechanical ventilators for breathing,
is about 34 days. The threshold for defining these patients as ``short
stay'' is 5/6ths of the mean, or 28.5 days. So an LTCH could
successfully wean a patient from the ventilator in 26 days, send the
patient home, and that patient would be defined as a ``short stay
outlier.'' Likewise, weaning attempts could fail and the patient, with
family support, could decide to terminate life support before reaching
the average length of stay. The average length of stay for all ``short
stay'' patients is just under 13 days, almost 3 times as long as the 5-
day average length of stay for all patients in a short-term acute care
hospital.
CMS now proposes to pay for these ``short stay'' outlier patients
at rates that are equivalent to what short-term community hospitals are
paid for patients in the same diagnostic categories. CMS assumes--
wrongly-- that the patients in these two settings are clinically
similar and therefore require the same level of resources and cost the
same to treat. In fact, CMS's own data, which it failed to consider in
formulating the policy, shows the opposite--LTCH patients in the same
diagnostic categories are much sicker and have much longer lengths of
stay than patients in short-term acute care hospitals. This is true
even for so-called ``short stay outlier'' patients in LTCHs. In fact,
short stay outlier patients in LTCHs are really no different from other
LTCH patients in terms of how sick they are, their risk of mortality
and their major diagnostic categories.
The following graph shows the percentage of patients that are
classified in the highest severity of illness categories for all LTCH
patients, ``short stay'' LTCH patients, and short-term acute care
hospital patients. I want to re-emphasize that these data come from
CMS's own database--MedPAR--and CMS could have done the same analysis
to evaluate the appropriateness of its proposed policy. The graph shows
that LTCH patients are much sicker than equivalent short-term acute
care hospital patients in the same diagnostic categories. Even ``short-
stay'' outlier LTCH patients are sicker--in fact, nearly twice as many
short stay LTCH patients are in the highest severity of illness
categories. Equally important, shorter stay LTCH patients are really no
different than other LTCH patients in terms of how severely ill they
are.
Likewise, LTCH patients--even so-called ``short stay'' patients--
have much longer lengths of stay than do equivalent short-term acute
care hospital patients. Table One shows that, on average, LTCH patients
have a length of stay of about 27 days, ``short stay'' patients have a
length of stay just under 13 days, and Short-Term Acute Care Hospital
patients have lengths of stay of just over 5 days.
TABLE 1
LTCH
Short Short-
Stay
LTCH DRG Description Average Hospital
Length
of of Stay
Stay
475 RESPIRATORY SYSTEM DIAGNOSIS WITH VENTILATOR SUPPORT 13.0 8.0
87 PULMONARY EDEMA & RESPIRATORY FAILURE 13.0 4.9
88 CHRONIC OBSTRUCTIVE PULMONARY DISEASE 9.8 4.1
271 SKIN ULCERS 13.0 5.5
89 SIMPLE PNEUMONIA & PLEURISY AGE >17 W CC 10.1 4.8
All DRGs (weighted by case frequency) 12.7 5.6
The combined effects of higher severity of illness and longer
lengths of stay explains why CMS's policy is flawed and results in such
significant payment shortfalls. Simply put, patients who are, on
average, more severely ill and have longer lengths of stay are more
costly to care for. Prospective payment systems produce rates based on
these averages. Use of a prospective payment system for short term
hospitals, based on one set of averages, will never produce rates that
are adequate for the LTCH prospective payment system, which is based on
another set of averages.
Consider the example I mentioned above regarding patients dependent
on ventilators. The payment rate for LTCHs for a ventilator dependent
patient assumes that the patient will stay in the LTCH 34 days, on
average. Even ``short stay'' patients stay, on average, 13 days. Under
CMS's proposed rule the LTCH would receive the short term hospital
payment rate for all patients who stay less than 28 days--the threshold
for defining ``short stay''--when the average ventilator dependent
patient in the short term acute care hospital stays only 8 days. The
perverse effect of CMS's policy is to penalize LTCHs who admit and
treat the most medically complex patients who happen to be defined as
``short stay'' under CMS's own rules.
HHS had it right in 1982 when it told this Subcommittee that paying
LTCHs (and other exempt hospitals) under a short-term hospital DRG
system would be inappropriate because the system ``was not designed to
account for [the] types of treatment'' found in these hospitals and
therefore ``would be inaccurate and unfair'' (August 31, 2002 Federal
Register, Vol. 67, No. 169, p. 55957). Congress had it right in 1983
when it exempted LTCHs because ``the DRG system was developed for
short-term acute care hospitals and as currently constructed does not
adequately take into account special circumstances of diagnoses
requiring longer stays.'' Report of the Committee on Ways and Means,
U.S. House of Representatives, to Accompany HR 1900, H.R. Rept. No. 98-
25, at 141 (1983). And CMS had it right in 2002 when it first developed
the LTCH-specific DRG system at Congress' direction and stated that the
short-term hospital system could ``systematically underpay'' LTCHs ``if
the same DRG system were applied to them.'' (August 31, 2002 Federal
Register).
Without any data analysis, CMS justifies its proposed policy by
making a number of assumptions, each of which is without substance.
First, CMS asserts that LTCH patients who stay shorter than the average
did not complete their course of care in the short-term acute care
hospital and have been discharged too early. Yet, CMS's own data shows
that patients discharged to an LTCH had prior lengths of stay in a
short-term acute care hospital of over 13 days, nearly 3 times the
average length of stay of just over 5 days for all other patients. So
there is no evidence that short-term hospitals are discharging
medically complex patients to LTCHs earlier than is clinically
appropriate.
CMS next assumes that LTCHs can predict--in advance--how long
patients will stay and what the clinical outcome of their care will be.
This assumption is particularly troubling because it is very difficult
to predict length of stay or clinical outcome with the medically
complex patient population that LTCHs typically treat. As I noted
above, shorter stay LTCH patients are no different than the average
LTCH patient in terms of severity of illness, making it even more
difficult for LTCH physicians to distinguish between patients whose
length of stay may be shorter than average. I would also note that a
certain percentage of these medically complex patients expire during
their LTCH stay, some shortly after admission. Here again, LTCH
physicians cannot predict in advance with any accuracy whether or when
patients may expire. In fact, the ``risk of mortality'' for short stay
patients is virtually identical to the average LTCH patient.
Finally, CMS asserts that because 37% of LTCH cases are defined as
``short stay'' outliers, then LTCHs somehow must be engaged in
admission practices that are inappropriate. But the percentage of short
stay cases is determined by CMS's own rules and it is not surprising
that about half of all patients have lengths of stay below the mean of
all patients--it's simply proving the law of averages. When the same
definition is applied to short-term acute care hospitals, over 40% of
cases are likewise defined as ``short stay,'' a statistic that is
understandable given the definitions used by CMS. And even assuming
LTCHs could predict length of stay or clinical outcome in advance,
there is a built-in disincentive against LTCHs admitting patients whose
length of stay might be short. If they routinely admit short stay
patients, LTCHs risk losing LTCH certification status because they will
no longer be able to meet the 25-day length of stay threshold for
qualifying as an LTCH.
Conclusion and Recommendations
As I noted at the outset, this Subcommittee and MedPAC have raised
legitimate issues regarding the proper role of LTCHs in the health care
continuum, appropriate patient placement and recent LTCH growth.
Kindred, in partnership with other ALTHA members, have developed
specific policy alternatives designed to define an appropriate role for
LTCHs. An inevitable byproduct of this work will be to ensure
appropriate patient placement and limit growth. Specifically, we
fundamentally agree with MedPAC's recommendation and this
Subcommittee's endorsement that LTCH certification criteria should be
refined to ensure that medically complex, severely ill patients are
admitted to LTCHs. We have provided MedPAC and this Subcommittee the
details of this proposal. We also provided a copy to CMS months ago,
but have yet to receive any kind of response. Certification criteria,
not draconian payment cuts, are the appropriate policy response to the
LTCH policy issues we've been discussing today.
We also recommended to CMS in our comments a variety of non-payment
approaches to address the policy issues they perceive to exist with
shorter stay patients. For example, pre-admission physician
certification of the need for LTCH services, coupled with post-hoc
reviews of medical necessity as called for by MedPAC, would address the
concerns raised by CMS. Similarly, ALTHA has long-encouraged CMS, as
has MedPAC, to adopt uniform admission screening criteria to ensure the
appropriateness of LTCH admissions. Many LTCH providers and Quality
Improvement Organizations (QIOs) use such screening tools, but CMS has
yet to standardize their use.
Finally, in our comment letter we have also encouraged CMS to adopt
a more targeted approach to addressing its concerns about shorter stay
patients, rather than resorting to across the board dramatic payment
cuts. While we generally oppose use of the payment system to address
the issues raised, CMS could easily target payment reform to ``very
short stay'' patients and avoid the damage caused by the proposed rule.
I would be remiss if I did not close today by sharing with the
Subcommittee the importance of what LTCHs do in terms of quality
outcomes. Perhaps most disappointing about CMS's proposed rule is the
lack of any discussion about quality or any analysis about the impact
of the payment reforms on access or quality. Kindred is very proud of
the quality outcomes we have been able to achieve over the last several
years in key areas of importance to the medically complex patients we
treat. These outcomes were not achieved by chance--our strategic
quality plan has systematically improved outcomes in key clinical areas
such as ventilator associated pneumonia rates, blood stream infection
rates, customer satisfaction, and ventilator weaning ratios.
* Internal Kindred Data, Rates Per 1,000 Patient Days
Based on available data, our clinical outcomes exceed those in
other settings.
Kindred Complication Rates are Less than Other Health Care Settings*
* National Nosocomial Infection Surveillance (NNIS) (2003)
Internal Kindred Data, Rates Per 1,000 Patient Days
Just this last Sunday the New York Times reported a critical
shortage of available ventilators should the bird flu pandemic reach
the United States. LTCHs are a vital part of our nation's already
fragile infrastructure for complex respiratory care. CMS's proposed
rule would deal a significant blow to this infrastructure. We look
forward to working with the Subcommittee, MedPAC, CMS and others to
implement policy reforms for LTCHs and other post-acute providers that
balance fiscal responsibility with access to critical care.
Thank you again for the opportunity to testify and I would be happy
to answer any questions you have.
Chairman JOHNSON. Thank you. Ms. Moore?
STATEMENT OF LAURA N. MOORE, VICE PRESIDENT, STRATEGY AND
OPERATIONS, MASSPRO, WALTHAM, MASSACHUSETTS
Ms. MOORE. Chairwoman Johnson, Congressman McCrery, and
Congressman Pomeroy, I would first like to thank you for
allowing me to address you today. My name is Laura Moore, and I
am the Vice President of Strategy and Operations for MassPRO,
the quality improvement organization, also known as the QIO,
for Massachusetts. I am here today to provide some information
related to the use of patient criteria for long-term hospital
patients. My discussion will center on screening criteria to
evaluate whether beneficiaries being treated in the long-term
care hospitals specifically need the level of care that these
hospitals provide. As a representative of the QIO community, my
role and the basis of expertise that I can provide to this
Committee is related to the patient-centered and evidence-based
assessment that we practice in our case review efforts, rather
than the financial aspects of the process, since QIOs are
quality/performance improvement, not payment, organizations.
As a QIO, MassPRO has significant experience with assessing
the importance of employing the right criteria to ensure the
appropriateness of both the admission and the continued stay.
More particular to our testimony today, our nurse reviewers
perform case review under contracts with the Centers for
Medicare and Medicaid Services--CMS--one of the statutory
requirements for federally designated QIOs, as well as our
State Office of Medicaid.
In addition to the case review role, MassPRO has
significant experience with long-term care hospitals because of
several targeted projects we have worked on. For example,
MassPRO was contracted by CMS to develop the written manual of
policies and procedures that the QIOs use to ensure consistency
and standardization in the review process. In addition, CMS
used MassPRO's technical expertise in this arena to train other
QIOs on several fronts, including: what the overall environment
in the long-term care hospital setting encompasses; how to
conduct outreach and educate long-term care hospitals on the
QIO case review process; and how to explain the expectations
within the--and at the time that we were doing this the new--
prospective payment system, PPS, to long-term care hospital
providers.
By introducing this new program with consistent materials,
CMS promoted consistent and standard review practices. The only
aspect of the program that was--and still is today--not
standardized is the use of screening criteria. As with criteria
for all case reviews, CMS neither requires not promotes the use
of a single set.
In addition, MassPRO is currently working with the National
Association of Long Term Care Hospitals, NALTH, in its effort
to modernize patient-level screening criteria for the long-term
care hospital industry. We are assessing NALTH's five sets of
screening criteria to ensure that severity of illness and
intensity of treatment are appropriate and valid. Although the
effort is still in process, our assessment so far is that these
criteria are on the right track. They address the complex
medical conditions of long-term care hospital patients, and we
believe that providing a standard, consistent measurement tool
will not only improve quality of care but also help protect the
Medicare trust fund by reducing inappropriate admissions.
An example of our experience with long-term care hospital
providers in Massachusetts is as follows: since August 2005,
MassPRO has reviewed 75 long-term care hospital cases,
including 12 each from two different facilities and 11 cases
involving respiratory DRGs. Our review process enables case
reviewers to begin to see patterns of practice and perhaps
trends, even in the relatively small number referenced above.
When a patient is discharged in fewer days than the SSO
threshold, it will be for one of three reasons, other than the
death of the patient: one, the expertise of the hospital,
therefore, the patient improves and gets better; circumvention
of the rules by the providers, for example, multiple transfers;
or, three, the reality that the patient should not have been
admitted to the hospital in the first place.
In its report to Congress in June 2004, MedPAC reported,
``In general beneficiaries treated in long-term care hospitals
cost Medicare more than patients treated in alternative
settings; however, if long-term care hospital care is better
targeted to those patients who appear to be most suitable for
long-term care hospital care, the costs to Medicare are more
comparable.'' MedPAC, therefore, recommended ``patient-level
criteria should identify specific clinical characteristics and
treatment modalities.''
We believe and are in agreement with the MedPAC report that
many problems with PPS for long-term care hospitals can be
reduced through efforts to develop screening criteria that will
improve the appropriateness of admissions and continued stay.
By having a standard criteria set, long-term care hospitals
will reduce the number of inappropriate admissions. In its June
2003 report, MedPAC asserted, and MassPRO agrees, that ``if
care shifts among settings, it should occur for clinical
reasons and not because of different payment rates or the
profitability of specific settings of care.'' By having
specific criteria in place, only those patients who should be
admitted to long-term care hospital will be.
Thank you again for letting me talk with you today, and I
would be happy to answer any questions.
[The prepared statement of Ms. Moore follows:]
Statement of Laura N. Moore, Vice President, Strategy and Operations,
MassPRO, Waltham, MA
Chairwoman Johnson, Ranking member Stark and the members of the
Subcommittee, I would like to thank you for allowing me to address your
committee today. My name is Laura Moore, and I am Vice President of
Strategy and Operations at MassPRO, the Quality Improvement
Organization (QIO) for the Commonwealth of Massachusetts. I am here
today to provide some information related to the use of patient level
criteria for Long Term Care Hospital (LTCH) patients. My discussion
will center on screening criteria to evaluate whether beneficiaries
being treated in LTCHs specifically need the level of care that these
hospitals provide. As a representative of the QIO community, my role
and the basis of expertise that I can provide to this committee is
related to the patient-centered and evidence-based assessment we
practice in our case review efforts, rather than the financial aspects
of the process, since QIOs are quality/performance improvement, not
payment, organizations.
As a QIO, MassPRO has significant experience with assessing the
importance of employing the right criteria to ensure the
appropriateness of both the admission and the continued stay. More
particular to our testimony today, our nurse reviewers perform case
review under contracts with the Centers for Medicare and Medicaid
Services (CMS), one of the statutory requirements for federally
designated QIOs, as well as our state Office of Medicaid.
In addition to the case review role, MassPRO has significant
experience with LTCHs because of several targeted projects. For
example, MassPRO was contracted by CMS to develop the written manual of
policies and procedures that the QIOs use to ensure consistency and
standardization in the review process. In addition, CMS used MassPRO's
technical expertise in this arena to train other QIOs on several fronts
including: what the overall environment in the LTCH setting
encompasses; how to conduct outreach and educate LTCHs on the QIO case
review process; and how to explain the expectations within the (then
new) Prospective Payment System (PPS) to LTCH providers. PPS was
established in regulation in 2002, training and outreach to providers
occurred in 2003 and the new QIO review process was instituted as
directed by CMS in January 2004.
By introducing this new program with consistent materials, CMS
promoted consistent and standard review practices. The only aspect of
the program that was (and is) not standardized is the use of screening
criteria. As with criteria for all case review, CMS neither requires
nor promotes the use of a single set.
In addition, MassPRO is currently working with the National
Association of Long Term Care Hospitals (NALTH) in its effort to
modernize patient-level screening criteria for the LTCH industry. We
are assessing NALTH's five sets of screening criteria to ensure that
severity of illness and intensity of treatment are appropriate and
valid. Although the effort is still in process, our assessment so far
is that these criteria are on the right track--they address the complex
medical conditions of long-term care hospital patients, and we believe
that providing a standard, consistent measurement tool will not only
improve quality of care but also help protect the Medicare Trust Fund
by reducing inappropriate admissions.
An example of our experience with LTCH providers in Massachusetts
is as follows: that since August 2005, MassPRO has reviewed 75 LTCH
cases, including 12 each from 2 different facilities and 11 cases
involving respiratory DRGs. Our review process enables case reviewers
to begin to see patterns of practice and perhaps trends, even in the
relatively small number referenced above. When a patient is discharged
in fewer days than the SSO threshold, it will be for one of three
reasons (other than the death of the patient): (1) due to the expertise
of the hospital, the patient improves and gets better, (2)
circumvention of the rules by the providers (e.g. multiple transfers),
or (3) the reality that the patient should not have been admitted to
the hospital in the first place.
In its report to Congress in June 2004, MedPAC reported, ``In
general, beneficiaries treated in long-term care hospitals cost
Medicare more than patients treated in alternative settings; however,
if LTCH care is better targeted to those patients who appear to be most
suitable for LTCH care, the costs to Medicare are more comparable.''
MedPAC therefore recommended, ``patient-level criteria should identify
specific clinical characteristics and treatment modalities.''
We believe, and are in agreement with the MedPAC report, that many
problems with PPS for LTCHs can be reduced through the use of
standardized screening criteria that will improve the appropriateness
of admissions and continued stay.
By having a standard criteria set, LTCHs will reduce the number of
inappropriate admissions. In its June 2003 report, MedPAC asserted, and
MassPRO agrees, that ``if care shifts among settings, it should occur
for clinical reasons and not because of different payment rates or the
profitability of specific settings of care.'' By having specific
criteria in place, only those patients who should be admitted to LTCHs
will be.
MedPAC also recommended that QIOs, given the requisite additional
funding, could review LTCHs for medial necessity and monitor that these
facilities are in compliance with defining criteria. By implementing
both of these recommendations, costs will be reduced and patient care
improved by providing the necessary tools for LTCHs to select
appropriate patients and for QIOs to ensure that they do.
Thank you.
Background Information
Case Review Process
The case review process may need some explanation. On a monthly
basis, CMS assigns a random sample of LTCH cases for full case review.
CMS uses an average of 1,400 per year (116 per month). In January 2006,
this review was incorporated under the Hospital Payment Monitoring
Program (HPMP), whose purpose is to measure, monitor, and reduce the
incidence of improper fee-for-service inpatient payments, including
errors in DRG coding; provision of medically necessary services; and
appropriateness of setting, billing, and prepayment denials. The long-
term goal of HPMP is to help inpatient prospective payment system
hospitals monitor payment patterns by analyzing data, conducting
focused audits, and implementing system changes to prevent payment
errors.
Once the file is selected, the process begins with a request of the
medical record. When the record is received, the nurse reviewer (called
a review case manager, or RCM) uses screening criteria appropriate to
the admission to determine whether or not the
services or items provided to a patient were medically
necessary, reasonable and provided in an appropriate care setting
(Utilization Review),
quality of the services/items was adequate (Quality
Review), and/or
hospital and patient record accurately reflects the
services/items provided and billed (Diagnosis Related Groups (DRG)
Validation Review).
If the case ``passes'' screening criteria, the paperwork is
finalized and the case is closed.
If the RCM identifies any concerns, he/she refers the case to the
physician reviewer (PR). Regulations specify the type of reviewer to
ensure the applicability of peer review. The PR uses his/her medical
experience and judgment to render a decision. PRs do not use screening
criteria in rendering their decisions. The PR may resolve the concerns
of the RCM, in which case the paperwork is finalized and the case
closed. If, instead, he/she agrees with the concerns identified by the
RCM, or identifies additional concerns, the provider is given an
opportunity to discuss the concerns before a final determination is
made. If appropriate, the QIO notifies the Fiscal Intermediary it
should adjust the payment to the facility. In 2004, $2.2M in net
dollars were identified through QIO review as having been made in
error.
The QIO's RCM uses the screening criteria selected by that QIO. CMS
does not require nor even promote the use of any specific screening
criteria (although, for short-term acute care hospitals, QIOs have use
of InterQual criteria as a pass-through cost in their contract).
MassPRO strongly supports NALTH's development of standard screening
criteria for LTCHs.
Chairman JOHNSON. You have to pull the microphone a little
closer. Thank you.
STATEMENT OF JOHN VOTTO, D.O., PRESIDENT AND CHIEF EXECUTIVE
OFFICER, HOSPITAL FOR SPECIAL CARE, NEW BRITAIN, CONNECTICUT
Dr. VOTTO. Thank you for inviting me here today to speak.
My name is John Votto. I am a pulmonary physician. I practice
at the Hospital for Special----
Chairman JOHNSON. Can you pull it closer to you? Try that.
Dr. VOTTO. Can you hear me now?
Chairman JOHNSON. Not very well.
[Pause.]
Dr. VOTTO. My name is John Votto. I am a pulmonary
physician. I practice at the Hospital for Special Care in New
Britain, Connecticut, and at the VA Hospital in Connecticut. I
am President of the Hospital for Special Care. I am on the
Board of Directors of the National Association of Long Term
Hospitals, which I will refer to as NALTH throughout this
testimony. I also chair the Physician Committee and the
Criteria Development Committee, which you just heard about. The
hospitals in NALTH organization care for approximately a third
of all Medicare beneficiaries who receive care at long-term
hospitals. My hospital, the Hospital for Special Care, is a
228-bed long-term acute care hospitals, with a special emphasis
on ventilator and wound programs, and we do act as a safety
valve hospital for the State of Connecticut.
I will refer frequently throughout this testimony to the
analysis of the proposed rule done by the Lewin Group at the
request of NALTH. I know that you have heard a lot of numbers,
but there are a few more important numbers. According to this
report, 66 percent of all short-stay outliers and 28 percent of
all admissions would be paid under the acute inpatient
prospective payment system rate. This policy would obviously
have a negative financial and patient care effect. CMS
estimated 11.3 percent reduction in revenues, and at my
hospital that would represent about $1.1 million. What is clear
is that CMS sees all short-stay outlier cases as patients who
should not be admitted to LTCHs but are instead premature
discharges from acute care hospitals.
The payment penalty is formidable, as you have heard.
Payments for short-stay outliers fall from an average of
$14,500 to approximately $8,000 overall. LTCH margins for
treating these cases will be 81 percent less than cost from
what we hear. As Mrs. Johnson said, many of the LTCHs will have
negative margins on the average of 5 percent. Additionally, a
perverse consequence of the short-stay outlier policy is that
so much money would be taken out of the long-term care payment
system that more costly patients, those that are high-cost
outliers, this threshold would be increased from $10,500 to
$18,500. Therefore, a long-term hospital would be penalized for
patients that are defined as short stay and patients that are
long stay. These patients, as Mr. Altman mentioned, are more
severely ill. According to Lewin's data, the case mix index for
short-stay outliers in LTCHs is approximately 2.05, while the
case mix index for the same DRG in acute care hospitals is 0.9,
a 109-percent difference. The length of stay, according to
Lewin, is 71 percent longer for the long-stay patients.
The proposed rule contains an explicit instruction which
may preclude admission of very ill patients requiring a long
stay. At my hospital we admit long-stay or very ill patients
who have a very limited number of Medicare days left. If they
have days left less than the five-sixths of the geometric mean,
and even if they stayed for a very long time, they would be
considered short-stay outliers and would be paid as a short-
stay outlier, which would substantially under pay for this
necessary care.
The major problem of the policy, as it has been stated, is
that it destroys the fundamental premise of every prospective
payment system, which is that the losses from the high-cost
cases will be offset by the shorter-term low-cost cases. In
other words, the proposal destroys the principle of averaging.
We have heard about the 37 percent of cases being too short. We
have heard the issue of the arithmetic, and the five-sixths
does define, as Lewin states in their report, will always
identify 35 to 40 percent of the patients, and thus, 37 percent
is inevitable.
There are clear benefits to the patients cared for in
LTCHs. MedPAC's 2004 report found that patients treated in
LTCHs were readmitted to an acute care hospital 26 percent less
often than those to other settings. In Nalth's ventilator
outcome study, looking at 1,419 patients discharged from acute
care hospitals, after failing multiple weaning attempts--and
they were defined to have to have failed multiple weaning
attempts--over 400 had stays of less than 29 days, thus
qualified as short-stay outliers. Ninety-four percent of these
patients came directly from ICUs and despite advanced age,
multiple complications, and multiple co-morbidities, 54 percent
of these patients were weaned from the ventilator, and 75
percent of these patients survived to discharge.
NALTH has developed LTCH-specific criteria, as you have
heard. I did lead that Committee, and we did spend a solid 2
years, and I am now on the 31st draft of the admission
criteria. I believe that we are in the final-final-final draft
of these criteria, and I believe that these criteria clearly
constitute a more patient-centered approach to identify
patients who qualify for admission to LTCHs. These criteria
will very shortly be ready for implementation by the
appropriate Medicare review organizations.
I also wish to note, in the March 2006 report to Congress,
MedPAC reported a 29-percent denial rate when they reviewed a
small, 1,400-case sample of LTCH cases. A 29-percent denial
rate is a huge number of cases, and I would suggest that these
criteria might lower that rate of denials.
I would also like to comment just shortly on the 25-percent
rule because when it is phased in, it will be another example
of a payment system driving admissions instead of good clinical
evaluation. When this rule is in effect and under the scenario
of this rule, any patient above the 25-percent threshold will
be paid at the IPPS rate, whether they are a short-stay outlier
or a high-cost outlier, if they are in a collocated hospital.
This is another financially driven disincentive to admit
clinically appropriate patients.
If the Committee would indulge me, I just would like to
comment on the LTCH satellite that we developed in the State of
Connecticut. The State of Connecticut came to us and said that
they were having problems with back-up in the intensive care
units throughout the State. They asked us if we could increase
our number of bed as we are usually full. We researched the
possibility of adding 25 beds to our main campus; however, the
cost was untenable at $25 million.
The Office of Health Care Access then authorized a
demonstration project allowing an LTCH satellite to be
established in an acute care hospital. We then partnered with
the acute care hospital in the State of Connecticut that
happens to be the busiest cardiac surgery hospital in New
England, for obvious reasons, because we thought that would be
the most likely patients.
They identified a unit that they were not using, and at the
cost of $2.1 million we together developed a 28-bed unit in an
acute care hospital. We opened this hospital or this unit in
September of 2004, and under the present 25-percent rule, we
would have to begin dismantling it in September of 2006.
Thank you for your attention, and I will be happy to take
questions.
[The prepared statement of Dr. Votto follows:]
Statement of John Votto, President and Chief Executive Officer,
Hospital for Special Care, New Britain, CT
Chairman Johnson and members of the Subcommittee, thank you for
inviting me to speak before you today on the important issues which are
the focus of this hearing: CMS' proposed changes to the payment system
for long-term care hospitals and, more specifically, the proposed rules
regarding short-stay outliers, the 25% rule and the 0% update. My name
is John Votto. I am a physician with a specialty in pulmonary medicine.
For the past eighteen years, I have practiced medicine at the Hospital
for Special Care in New Britain, Connecticut. Currently, I am the
President of the Hospital for Special Care and also maintain an active
practice caring for patients at the Hospital. Additionally, I care for
pulmonary patients at the Veterans Hospital located in Newington,
Connecticut. I am a Director of the National Association of Long Term
Hospitals and serve as the Chairman of the Association's Physician
Committee, as well as its Committee on Criteria Development. The
hospitals which constitute the National Association of Long Term
Hospitals account for approximately one-third of all Medicare
beneficiaries who receive services in long-term care hospitals. While
many of my remarks today are made on behalf of the National Association
of Long Term Hospitals, they also relate to the Hospital for Special
Care. The Hospital for Special Care is a relatively large, long-term
care hospital with 228 beds and an active outpatient department. The
hospital provides a wide range of clinical services, including
ventilator weaning services, to patients who have complex medical care
needs. The hospital provides rehabilitation services and maintains the
only certified spinal cord injury unit in the State of Connecticut. The
Hospital for Special Care also operates a freestanding, 282-bed skilled
nursing facility. Accordingly, I am keenly aware of the issues related
to the appropriateness of services provided to inpatients in the long-
term care hospital setting as compared to other settings.
At several points during my testimony, I will refer to an extensive
analysis of CMS' January 27, 2006 proposed rule which the National
Association of Long Term Hospitals asked The Lewin Group to prepare.
This report is entitled ``Final Report: Analysis of Long Term Care
Hospitals RY 2007 Prospective Payment System Notice of Proposed
Rulemaking'' and has been made available, in its entirety, to the
Committee's professional staff.
The focus of this hearing is to explore issues related to CMS'
proposed changes to the payment system for long-term care hospitals.
The proposal of these rules, in and of itself, has created an emergency
situation for long-term care hospitals which, if not abated, will
affect Medicare beneficiaries' access to patient care at the Hospital
for Special Care and other long-term care hospitals throughout the
nation in the next month or two, prior to the rule's July 1, 2006
proposed effective date. The situation I am referring to is created by
the proposal of changes to the current short-stay outlier payment
policy.
Effect of Proposed Rule
Currently, short-stay outliers are paid the lower of 120% of
patient costs, 120% of the per diem of the LTCH-DRG or the full LTCH-
DRG payment. CMS proposes to change this to the lower of 100% of
patient costs, 120% of the per diem of the LTCH-DRG, the full LTCH-DRG
or an amount comparable to what would be paid under the acute inpatient
hospital prospective payment system. According to the Lewin Report, 77%
of all short-stay outlier cases, and 28% of all cases, would be paid at
acute inpatient hospital prospective payment system rates under the
proposed rule. CMS' proposed short-stay outlier policy will have a
negative impact on both patient care and the financial viability of
long-term care hospitals. CMS estimates that the effect of this policy
will be an 11.3% reduction in reimbursement. When combined with the
estimated 3.6% reduction resulting from CMS' proposed 0% update, the
aggregate reduction of about 15% would, for example, cost the Hospital
for Special Care $1,100,000 out of approximately $11,500,000 in annual
Medicare revenues.
It is clear that CMS views all short-stay outlier cases as patients
who should not be admitted to long-term care hospitals. This is seen in
the straightforward assertion, contained in the preamble to the
proposed rule, that short-stay outlier cases ``may be inappropriate
admissions of patients who are prematurely discharged from acute care
hospitals.'' 71 Fed. Reg. 4688. The preamble to the rule also
explicitly states that the objective of the short-stay outlier proposal
is to ``discourage LTCHs from admitting patients that could be
premature discharges from acute care hospitals.'' 71 Fed. Reg. 4687.
CMS assumes patients identified as short-stay outlier cases in long-
term care hospitals have lengths of stay more typical of an acute care
hospital and that the long-term care hospitals which admit these
patients may be behaving like acute care hospitals. 71 Fed. Reg. 4687.
CMS clearly and admittedly is proposing the new short-stay outlier
policy as a way, effectively, to preclude Medicare beneficiaries who
would become short-stay outlier patients from being admitted to long-
term care hospitals. The payment penalty which is proposed as a
deterrent for admission of the beneficiaries is indeed formidable.
According to the Lewin Group, the following financial consequences
would accrue as a result of the short-stay outlier policies.
Payments for short-stay outliers would fall from $14,582
per case in 2006 to $8,042 per case in 2007.
Long-term care hospitals' margins for treating short-stay
outlier cases would be a negative 81.2%. That is, hospitals would be
paid 81.2% less than costs for treating a short-stay outlier patient.
On a national basis, 68.6% of all long-term care
hospitals would have negative margins of, on average, negative 4.93%.
Not-for-profit hospitals' negative margins would be double the national
average, at negative 8.80%.
The rural areas and the south would have the worst
negative margins.
Additionally, a perverse consequence of the short-stay outlier
policy is that so much money would be taken out of the long-term care
hospital payment that the cost threshold for treating longer-term,
cost-outlier patients (those whose costs exceed 80% of full LTCH-DRG
payments) would be increased from $10,501 to $18,489. Long-term care
hospitals, therefore, would be penalized for patients CMS defines as
short-stay patients and as high-cost (long-stay) patients.
The underlying policy premises for the short-stay outlier proposal
also are clearly erroneous. Moreover these erroneous assumptions, as a
real matter, drain all validity from the long-term care hospital
prospective payment system.
Short-stay outlier cases in long-term care hospitals are not
comparable, in terms of length of stay or medical resource use, to
patients assigned to the same diagnosis-related groups in acute
hospitals. In fact, the patients CMS identifies as short-stay outlier
cases in long-term care hospitals would be extraordinary long-stay,
costly cases in acute hospitals.
Using the 2004 MedPAR data which CMS used for its impact file in
the proposed rule, the Lewin Group determined that the weighted average
length of stay (``ALOS'') for short-stay outlier cases admitted to
long-term care hospitals is 12.7 days, which is 72% longer than the
ALOS of patients assigned to the same diagnosis-related groups
(``DRGs'') in acute hospitals. The point is made best by comparing the
ALOS of patients in long-term care hospitals with the ALOS of patients
in acute hospitals, for the top three DRGs, as illustrated in the
following chart.
----------------------------------------------------------------------------------------------------------------
Acute Care
DRG DRG Name SSO ALOS Hospital
ALOS
----------------------------------------------------------------------------------------------------------------
475 Respiratory System DX with Ventilator Support 28.8 14.5
87 Pulmonary Edema & Respiratory Failure 21.2 11.7
271 Skin Ulcers 23.1 13.1
----------------------------------------------------------------------------------------------------------------
According to the Lewin Group, only 14% of the short-stay outlier
cases in long-term care hospitals have a length of stay which is below
the geometric mean length of stay of patients assigned the same DRG in
the acute hospitals. It is beyond dispute that short-stay outlier cases
in long-term care hospitals would be very long-stay, high-cost cases in
acute hospitals. I have appended, as Attachment A to my testimony, all
of the average case comparative length of stay data for DRGs which are
in common in both long-term care hospitals and acute hospitals. An
ironic consequence of the short-stay outlier policy is that it would
penalize the Hospital for Special Care when it admits very ill patients
who have a long length of stay and exhaust their Medicare day benefit
prior to reaching 5/6 of the average length of stay for their DRG. CMS
labels these long-stay patients as short-stay patients for billing
purposes and will drastically underpay the cost of their care. These
patients are usually medically indigent. The Medicare program should
not establish financial disincentives for these patients to access care
in long-term care hospitals. A payment system neither should be a
substitution for a physician's clinical decision-making nor should it
impinge on a beneficiary's freedom of choice, as secured by Section
1802 of the Social Security Act.
Short-stay outlier cases also are different in terms of their use
of medical resources and, hence, cost of care, than the acute hospital
patients who are assigned the same DRGs. The Lewin Group has determined
that the case mix index of short-stay outlier cases is 2.0592, which is
109% greater than the 0.9873 case mix index of cases assigned to the
same DRGs in acute hospitals. The difference in DRG weights for all
DRGs which are common to long-term care hospitals and acute hospitals
are contained in Attachment B to my written statements.
Where the average length of stay and case mix of short-stay outlier
cases is dramatically different, it is clear that the proposed short-
stay outlier policy will not make payments which reflect the difference
in patient resource use and cost, which was required by Congress when
it enacted Section 123(a)(1) of the Balanced Budget Refinement Act of
1999. Adherence to this statutory standard is fundamental to the
establishment of a valid prospective payment system. The short-stay
outlier policy, however, destroys the fundamental premise of every
prospective payment system, that standard payments allow losses from
high-cost cases to be offset by shorter-term, low-cost cases. This
fundamental tenet for payment under prospective payment systems was
established by HHS Secretary Schweiker in a 1982 report to Congress\1\
as the base for the then-proposed acute inpatient hospital PPS. The
Lewin Group has concluded that the proposed short-stay outlier policy
destroys the averaging of profit and losses which is essential to a
viable PPS because:
---------------------------------------------------------------------------
\1\ Schweiker, R.S., ``Report to Congress: Hospital Prospective
Payment for Medicare,'' Secretary of the Department of Health and Human
Services, December, 1982.
---------------------------------------------------------------------------
Under the currently proposed rule, averaging is not only taken
away--it is reversed. The very cases required to balance the system as
averages would be widely underpaid ($14,500 in costs vs. $8,000 in
payments), and account for about 40 percent of all LPPS cases. To have
40 percent of cases paid at a 81.2 percent margin, and the other 60
percent paid to barely cover or paid slightly less than costs, is an
untenable situation, should CMS intend to ensure the stability of care
delivery in the LTCH setting.''
CMS states that short-stay outliers currently account for
approximately 37% of all long-term care hospital patients. CMS is wrong
when it states that this percentage reflects ``an inappropriate number
of patients being treated in LTCHs who most likely do not require the
full measure of resources available in [an LTCH].'' Id. CMS' logic is
flawed, as explained by the Lewin report.
CMS defines an SSO case in such a way that it is essentially
impossible for LTCHs to admit a smaller percentage of SSOs in any given
year. CMS uses a relative measure of ``short stay'' that guarantees
that approximately 30 to 40 percent of cases will always be considered
``short.'' A short stay is defined as a ``stay shorter than 5/6 of the
geometric mean length of stay.'' . . . Stays less than 5/6 of the
geometric mean will always account for about 30 to 40 percent of cases,
regardless of the expected-stay threshold the LTCHs require for an
admission. . . . To object that this is ``too many'' is like objecting
to the fact that LTCHs have 50 percent of cases that are below the
median.
If long-term care hospitals were able, somehow, to eliminate all
short-stay outlier cases, then when CMS engaged in its annual re-
weighting of DRGs, it would re-calculate average lengths of stay,
including calculation of the 5/6 geometric mean lengths of stay of
DRGs, thereby identifying new short-stay outliers. In other words,
cases which were not short-stay outliers last year would be deemed to
be short-stay outliers next year.
Not only is the number of short-stay outliers essentially
inevitable, CMS also is incorrect in its assertion that these patients
most likely do not require the full measure of resources available in a
long-term care hospital. The Lewin Report found that long-term care
hospital short-stay outlier cases, as compared to acute hospital cases
within the same diagnosis-related group, have a 70% higher length of
stay, are about 70% more intense and are more severe. The Lewin Report
also found that both types of hospitals have a similar percentage of
short-stay cases.
In Chapter 5 of its June 2004 (``New Approaches in Medicare'')
Report to Congress, MedPAC found that ``[p]atients treated in LTCHs
tend to have fewer acute hospital readmissions--a measure of outcomes--
than patients treated in other settings. Patients using LTCHs were
readmitted 26 percent less frequently than similar patients in
alternative settings.'' Therefore, proper admission of a patient to a
long-term care hospital can save the Medicare program the costs of
readmission to another hospital.
I can provide you with empirical evidence about the sorts of cases
which CMS is suggesting long-term care hospitals should not admit. A
significant segment of patients admitted to long-term care hospitals
are in respiratory failure with ventilator support. The National
Association of Long Term Hospitals sponsored a study of the
characteristics of these patients, including ventilator weaning rates,
and provided CMS and MedPAC with reports and study outcome data. This
multi-site study, conducted by the Barlow Respiratory Hospital Research
Center, included data on 1,419 patients who were admitted to 23 long-
term care hospitals located throughout the country, which had active
ventilator weaning programs. Most, if not all of the long-term care
hospitals embrace the multidisciplinary, rehabilitative model of care
for weaning patients from prolonged mechanical ventilation.
Of all the patients studied, 32% had stays of less than 29 days,
which means they would qualify as short-stay outliers because they were
admitted under DRG 475 (respiratory system failure with ventilator
support), which has a 5/6 geometric mean length of stay threshold of
28.8 days. Prior to transfer to the long-term care hospital, 93.9% of
patients were in an ICU, with an additional 4.2% transferred from
``step-down'' or monitored units. Patients transferred to long-term
care hospitals for weaning from prolonged mechanical ventilation are
elderly with severe acute illness superimposed on chronic disease. This
population requires extensive continued treatments and interventions at
the long-term care hospital, not only for respiratory failure but for
numerous pre-existing conditions, co-morbidities and complications, the
latter predominantly being infections. In short, these patients were
failing at the acute hospitals and were admitted to the long-term care
hospitals for ventilation weaning, which could not be done as
successfully at the acute care hospital. Despite advanced age and
numerous co-morbidities and complications, and despite the fact that
all of these patients already had failed multiple weaning attempts at
the acute hospitals, more than 50% of all patients enrolled in the
study were weaned successfully from mechanical ventilation at the long-
term care hospitals. The rate of survival to discharge was 74.8%,
illustrating that long-term care hospitals, with their specialized
programs of care, safely can wean a population with exceptional medical
challenges. Nearly 30% of patients returned directly home or to
assisted living following discharge from the long-term care hospital.
This percentage was not comparable to their status prior to their
catastrophic illness. Furthermore, at 12-months post-admission to the
long-term care hospital, nearly two-thirds of survivors reported good
functional status.
Medicare beneficiaries such as those treated in this study have a
right to access long-term care hospitals, which would be defeated by
the short-stay outlier policy.
I understand that CMS and the Committee are concerned that the
Medicare program makes inappropriate payments where patients who
require the same or similar medical resources receive care in different
Medicare provider settings at different rates of payment. An
appropriate response to this concern was recommended by MedPAC in its
June 2004 Report to Congress. MedPAC recommended, and the National
Association of Long Term Hospitals strongly supports, that the
Secretary: (i) develop facility and patient criteria to ensure patients
admitted to long-term care hospitals are medically complex and have a
good chance of improvement; and, (ii) increase medical necessity review
of long-term care hospital admissions by Quality Improvement
Organizations (``QIOs''), which also can monitor whether hospitals
comply with the criteria. Implementation of MedPAC's recommendations
would ensure that Medicare beneficiaries receive care in the most
appropriate, cost-effective and safe setting. CMS' recent proposed
rules effectively ignore MedPAC's recommendations. Rather than
addressing its concerns through a reassessment of the proper placement
of patients, CMS is proposing drastic changes to the long-term care
prospective payment system, which both violate the fundamental logic of
averaging which underlies prospective payments systems and fail to
consider the potential crippling impact on the long-term care hospital
sector and the resultant, negative effect on the treatment of Medicare
beneficiaries.
As part of implementation of the long-term care hospital
prospective payment system, the Secretary included review
responsibilities for the appropriateness of admission to a long-term
care hospital for a small sample of 1,400 Medicare cases in the QIO
scope of work for 2004. The reported denial rate from this review
process was 29%, as reported in MedPAC's March 2006 Report. The
Secretary has retained this small sample size for the 2005 QIO scope of
work. The denial of a patient admission by a QIO means there has been a
finding that the patient could have been treated in a lower-cost, more
appropriate Medicare provider setting, such as at a skilled nursing
facility or at home with care from a home health agency. In every case
where there is a final denial by a QIO, the long-term care hospital
receives zero payment for the case at issue. The National Association
of Long Term Hospitals has followed closely the review of Medicare
cases by QIOs and believes that QIOs effectively and efficiently can
distinguish between cases that require the medical resources and
programs provided by long-term care hospitals and those provided by,
for example, skilled nursing facilities. The Secretary properly may
consider expanding QIO review responsibilities to include the
appropriateness of continued stay and discharge. This would result in
review for medical necessity and length of stay, the two factors which
affect payment under the long-term care hospital prospective payment
system.
Similar issues exist with CMS' proposed changes to the 25% rule.
This rule, once it becomes fully phased-in, will apply when more than
25% of a long-term care hospital-within-hospital's or satellite
facility's Medicare inpatient population (excluding outlier patients)
are admitted from a hospital which is co-located on the same campus.
Payments for the patients who are admitted from the co-located hospital
and who cause the long-term care hospital-within-hospital or satellite
facility to exceed the 25% threshold are the lesser of the amount
otherwise payable under the long-term care hospital prospective payment
system or an amount equivalent to what would be paid under the acute
inpatient hospital prospective payment system. Payment equivalent to
what would be paid under the acute system blatantly ignores the
different resources used by long-term care hospitals and the statutory
requirement, in Section 123 of the Balanced Budget Refinement Act of
1999, that payments should reflect differences in patient resource use
and cost.
In the preamble to the proposed rules (at 71 Fed. Reg. 4697), CMS
acknowledges that it was informed of a study commissioned from the
Lewin Group, which found that 71.2% of freestanding long-term care
hospitals admit more than 25% of their patients from a single source
acute-care hospital. Therefore, long-term care hospitals-within-
hospitals and satellite facilities which do the same are punished
merely because of their co-location.
The State of Connecticut has ICUs which frequently have
insufficient bed capacity to meet patients' needs. To address this
need, the Hospital for Special Care initially decided it would add 25
beds to its facility. This proved to be infeasible because building an
addition to the hospital would have cost $25,000,000. Therefore, to
address the need in a more fiscally responsible way, the State of
Connecticut approved a demonstration project that allowed the creation
of a long-term care hospital within an acute hospital. The cost of
renovating a floor at St. Francis Hospital, to create a 28-bed long-
term care hospital-within-hospital, was only $2,000,000. This long-term
care hospital-within-hospital currently provides much needed services.
However, the proposed changes to the 25% rule, if implemented, would
destroy the long-term care hospital-within-hospital, harm the patient
population it otherwise would serve and strain the capacity of the
State of Connecticut's precious ICU beds.
CMS' proposed rule provides for a 0% update in Rate Year 2007. It
freezes the long-term care hospital prospective payment system standard
amount at the RY 2006 level of $38,086.04. Experts in the LTCH industry
estimate that the effect of this 0% update policy will be a 3.6%
reduction in reimbursement. While most long-term care hospitals could
deal with the effect of this proposal if all other aspects of the
payment system remained unchanged, the cumulative effect of the 0%
update and the proposed changes to the short-stay outlier policy--an
untenable 15% reduction in reimbursement--could mean the destruction of
the long-term care hospital industry. This is an emergency situation
which cannot be ignored.
Requested Relief
The proposed rules, if implemented, would come into force on July
1, 2006. The proposed short-stay outlier rule would apply to patients
admitted to long-term care hospitals in the next few months. The
National Association of Long Term Hospitals and the Hospital for
Special Care suggest the following steps be taken by CMS itself or
under Congressional direction.
1. The proposed changes to the short-stay outlier policy should
be withdrawn immediately because they have a present, adverse effect on
beneficiary access to patient care.
2. CMS should halt the phase-in of the 25% rule for long-term
care hospitals-within-hospitals and satellite facilities which
currently exist (thereby allowing them to admit up to 75% of their
patients from co-located hospitals).
3. CMS should address the issue of appropriate admissions through
the use of more intensive Quality Improvement Organization review (i.e.
to increase the small sample which they currently review).
4. Congress should require CMS to report to Congress on the
development of facility and patient criteria for admission to long-term
care hospitals by January 1, 2008 and to advise whether the
implementation of such criteria would require Congressional authority.
5. If such criteria are not implemented by January 1, 2009, CMS
automatically should implement criteria established by the National
Association of Long Term Hospitals and validated by MassPRO.\2\
---------------------------------------------------------------------------
\2\ The National Association of Long Term Hospitals has developed
long-term care hospital screening criteria, including cardiovascular,
complex medical, respiratory, ventilator weaning, wound care and
rehabilitation criteria sets. The criteria are in the final stage of
validation by MassPRO and will be ready for use within a month. The
Association has shared drafts of these criteria with the Subcommittee
staff, CMS and MedPAC.
I wish to thank you and the Committee's staff again for inviting me
here today and for your courtesy and your attention to these important
questions.
Attachment A to Testimony of John Votto, D.O.
Appendix B
Short Stays and Mean Length of Stays by DRG based on 2004 MedPAR Data
Short Stays and Mean Length of Stays by DRG based on 2004 MedPAR Data
(continued)
Short Stays and Mean Length of Stays by DRG based on 2004 MedPAR Data
(continued)
Short Stays and Mean Length of Stays by DRG based on 2004 MedPAR Data
(continued)
Short Stays and Mean Length of Stays by DRG based on 2004 MedPAR Data
(continued)
Short Stays and Mean Length of Stays by DRG based on 2004 MedPAR Data
(continued)
Short Stays and Mean Length of Stays by DRG based on 2004 MedPAR Data
(continued)
* The short-stay threshold is 5/6 of the nominal LTH GMLOS
Source: Lewin Group analysis of the 2004 Medicare Provider
Analysis and Review (MedPAR) data. The CMS nominal values from
the IPPS Final Rule for FY 2006.
Attachment B to Testimony of John Votto, D.O.
Appendix A
Comparison of LTCH and ACH DRG Weights by DRG for All SSO Cases
Diff
Number of Between
Diagnosis Related Group (DRG) LTCH LTCH DRG Number of LTCH DRG LTCH and
Cases Weight ACH Cases Weight ACH DRG
Weight
7 113 3.0390 14,782 1.8486 1.1904
9 58 1.6313 1,724 0.9803 0.6510
10 66 1.4084 18,551 0.8634 0.5450
12 1,750 1.2480 52,059 0.6364 0.6116
13 41 0.9573 7,063 0.5701 0.3872
14 144 1.3218 235,629 0.8744 0.4474
15 57 0.9657 92,689 0.6734 0.2923
16 92 1.2891 9,895 0.8785 0.4105
18 121 1.1752 29,545 0.6990 0.4762
19 11 0.9560 8,485 0.4911 0.4649
20 154 1.7316 6,179 1.8929 (0.1613)
23 15 1.1852 11,165 0.5737 0.6114
24 72 1.2414 58,700 0.7014 0.5400
27 11 1.4511 4,447 0.9317 0.5195
28 60 1.4822 13,952 0.9304 0.5518
34 234 1.3440 23,699 0.6916 0.6524
35 19 0.7638 7,411 0.4428 0.3211
64 43 1.5637 3,109 0.9113 0.6524
65 5 0.7358 39,944 0.4010 0.3348
67 1 3.7672 383 0.5427 3.2245
68 20 1.2358 11,465 0.4555 0.7804
73 26 1.4268 7,654 0.5703 0.8565
75 9 2.6586 43,245 2.1226 0.5360
76 608 4.7632 44,348 1.9640 2.7992
78 111 1.3039 39,220 0.8856 0.4184
79 1,710 1.6891 167,196 1.1133 0.5758
80 47 0.9747 7,929 0.5853 0.3894
82 158 1.2138 63,922 0.9560 0.2578
85 95 1.3759 22,136 0.8299 0.5460
86 2 0.7097 2,226 0.4783 0.2315
87 2,163 1.8007 60,498 0.9348 0.8659
88 2,008 1.2142 398,325 0.6271 0.5871
89 1,864 1.3499 525,617 0.7244 0.6255
90 49 0.8806 47,542 0.4276 0.4530
92 109 1.1902 15,657 0.8374 0.3528
94 25 1.0823 12,763 0.7895 0.2928
96 61 1.2468 56,023 0.5205 0.7263
97 15 0.9493 28,360 0.3840 0.5652
99 143 1.5350 21,198 0.4901 1.0448
100 2 0.5292 8,182 0.3643 0.1648
Comparison of LTCH and ACH DRG Weights by DRG for All SSO Cases
(continued)
Diff
Between
Diagnosis Related Group (DRG) Number of LTCH DRG Number of ACH DRG LTCH and
LTCH Cases Weight ACH Cases Weight ACH DRG
Weight
101 136 1.3668 22,194 0.6030 0.7638
102 2 1.0346 5,584 0.3793 0.6553
113 60 3.8085 39,525 2.0303 1.7783
114 18 2.5241 8,280 1.1460 1.3781
120 185 2.4948 38,097 1.6150 0.8797
121 48 1.3892 162,443 1.0968 0.2924
123 23 1.5470 38,308 1.0915 0.4555
126 208 1.6560 5,371 1.7552 (0.0991)
127 1,400 1.2546 667,674 0.7117 0.5430
130 498 1.3147 88,024 0.6558 0.6589
131 21 0.9300 26,812 0.3926 0.5374
132 161 1.2110 141,313 0.4458 0.7652
133 13 0.8132 8,584 0.3879 0.4253
134 32 1.0708 40,950 0.4152 0.6556
135 50 1.0918 7,749 0.6441 0.4478
138 127 1.0221 206,600 0.5812 0.4409
139 11 0.6227 86,760 0.3600 0.2627
141 24 1.0640 108,038 0.5210 0.5430
142 7 0.6541 52,222 0.4019 0.2522
144 615 1.2835 94,294 0.8529 0.4306
145 11 0.6396 7,277 0.4036 0.2359
148 11 4.3224 133,149 2.3720 1.9504
151 1 2.6289 5,108 0.9111 1.7177
170 46 3.4173 15,615 1.9687 1.4486
171 1 1.9987 1,508 0.8305 1.1682
172 136 1.5401 31,193 0.9517 0.5884
173 5 0.9743 2,456 0.5246 0.4497
174 92 1.2301 249,690 0.6982 0.5320
175 6 0.4560 34,572 0.3895 0.0665
176 15 1.3985 13,384 0.7665 0.6320
179 30 1.5018 13,115 0.7589 0.7429
180 86 1.4414 89,518 0.6716 0.7698
182 323 1.4524 270,142 0.5733 0.8791
183 11 0.7272 90,281 0.4017 0.3255
185 6 1.3115 5,350 0.6053 0.7062
188 470 1.7765 83,496 0.7722 1.0042
189 13 0.8060 13,002 0.4173 0.3887
Comparison of LTCH and ACH DRG Weights by DRG for AllSSO Cases
(continued)
Diff
Between
Diagnosis Related Group (DRG) Number of LTCH DRG Number of ACH DRG LTCH and
LTCH Cases Weight ACH Cases Weight ACH DRG
Weight
202 72 1.0629 26,597 0.9130 0.1499
203 51 1.2459 29,851 0.9390 0.3069
204 161 1.6195 65,032 0.8124 0.8070
205 74 1.1771 27,308 0.8414 0.3357
207 35 1.2914 32,486 0.8000 0.4914
211 1 0.1411 29,910 0.8679 (0.7268)
213 50 2.8658 9,941 1.3179 1.5479
217 283 2.8227 17,302 2.0906 0.7321
225 14 2.0605 6,458 0.8165 1.2440
233 24 3.2714 9,955 1.3963 1.8751
235 4 1.1596 5,077 0.5240 0.6356
236 28 1.2198 39,734 0.5049 0.7149
238 565 1.7180 8,853 0.9431 0.7749
239 82 1.1457 45,836 0.7293 0.4164
240 44 1.0881 11,991 0.9164 0.1717
242 122 1.7388 2,575 0.8116 0.9273
243 188 1.0084 95,842 0.5242 0.4841
244 41 1.1881 14,536 0.4989 0.6891
245 14 0.9037 5,794 0.3338 0.5699
246 7 1.1017 1,483 0.4229 0.6788
247 27 0.8153 20,262 0.3991 0.4162
248 71 1.1231 13,801 0.5982 0.5249
249 1,922 1.1332 12,889 0.4698 0.6634
253 17 1.0099 21,978 0.5279 0.4820
254 3 0.5843 10,705 0.3110 0.2733
256 174 1.5773 6,679 0.5704 1.0070
263 1,079 2.8294 23,018 1.4324 1.3970
264 58 1.6955 3,859 0.7394 0.9561
265 26 2.2588 4,097 1.1148 1.1441
269 140 3.0307 9,800 1.2373 1.7933
271 2,001 1.6761 19,129 0.7163 0.9599
272 22 1.1947 5,696 0.7094 0.4852
274 9 1.7102 2,283 0.8063 0.9039
277 701 1.2173 99,585 0.6089 0.6085
278 8 0.7974 31,973 0.3775 0.4199
280 59 1.0462 17,758 0.4956 0.5506
281 3 0.2868 7,518 0.3393 (0.0526)
283 23 1.3608 6,010 0.5101 0.8507
285 27 3.2003 6,942 1.4518 1.7485
287 121 2.3060 6,223 1.3171 0.9888
294 244 1.4007 97,377 0.5410 0.8596
296 411 1.3599 277,113 0.5988 0.7611
297 25 0.7324 47,860 0.3537 0.3787
Comparison of LTCH and ACH DRG Weights by DRG for All SSO Cases
(continued)
Diff
Between
Diagnosis Related Group (DRG) Number of LTCH DRG Number of ACH DRG LTCH and
LTCH Cases Weight ACH Cases Weight ACH DRG
Weight
300 25 1.0277 18,635 0.7665 0.2612
301 3 0.8190 3,592 0.4293 0.3897
315 135 2.8792 34,014 1.4505 1.4287
316 853 1.4338 118,639 0.9037 0.5301
317 24 1.4998 2,029 0.5932 0.9066
318 16 1.5144 5,737 0.8261 0.6883
320 438 1.3191 185,666 0.6115 0.7076
321 47 0.9245 30,824 0.3951 0.5295
331 155 1.4582 51,130 0.7395 0.7188
332 6 0.6851 4,964 0.4171 0.2680
334 1 2.3165 10,503 1.0330 1.2834
346 14 1.1964 4,823 0.7118 0.4846
350 30 1.2172 6,669 0.5139 0.7033
357 1 1.4275 5,609 1.5861 (0.1586)
366 22 1.3991 4,555 0.8907 0.5084
368 21 1.5966 3,547 0.8121 0.7845
395 71 1.4058 106,920 0.5770 0.8288
397 38 1.4092 18,865 0.8811 0.5280
398 27 1.2725 18,054 0.8609 0.4117
403 113 1.3262 31,718 1.2678 0.0584
409 65 1.7428 2,155 0.8678 0.8750
413 28 1.4028 5,303 0.9209 0.4820
415 333 2.9569 43,248 2.5272 0.4297
416 1,551 1.5416 190,961 1.1082 0.4335
418 652 1.5435 25,757 0.7420 0.8015
421 26 1.6616 10,646 0.5206 1.1409
423 130 1.6837 8,039 1.2646 0.4192
425 11 0.5728 16,028 0.4726 0.1001
426 12 0.4620 4,549 0.3544 0.1076
428 3 0.7784 793 0.5080 0.2705
429 96 1.2124 27,000 0.5679 0.6445
430 724 0.8735 64,921 0.4732 0.4003
431 8 0.6812 316 0.4605 0.2207
432 1 0.1442 448 0.4542 (0.3099)
439 16 2.6165 1,516 1.2242 1.3924
440 123 2.5308 5,775 1.3162 1.2145
442 37 3.1882 17,534 1.6867 1.5015
443 2 0.4440 3,910 0.6826 (0.2386)
444 40 1.5246 5,723 0.5211 1.0035
445 3 0.8830 2,544 0.3498 0.5332
Comparison of LTCH ans ACH DRG Weights by DRG for All SSO Cases
(continued)
Diff
Between
Diagnosis Related Group (DRG) Number of TCH DRG Number of ACH DRG LTCH and
LTCH Cases Weight ACH Cases Weight ACH DRG
Weight
452 573 1.7898 25,608 0.7280 1.0618
453 22 1.1296 5,670 0.3566 0.7730
461 231 2.6655 4,964 0.8157 1.8498
462 1,528 1.1667 9,653 0.6749 0.4918
463 248 0.9982 26,785 0.4779 0.5203
464 34 0.7624 7,137 0.3473 0.4151
465 335 1.0854 197 0.6196 0.4658
466 1,629 1.1684 1,716 0.5641 0.6044
468 325 4.2355 51,309 2.6472 1.5884
473 22 1.5193 8,064 2.4235 (0.9042)
475 4,959 3.4036 109,073 2.5009 0.9027
477 119 2.9505 26,262 1.3152 1.6353
482 1 3.6175 5,284 2.4243 1.1932
484 1 2.3226 345 3.7689 (1.4463)
487 10 1.3611 3,885 1.3904 (0.0293)
489 113 1.7921 13,365 1.2968 0.4953
490 27 1.1293 5,439 0.7331 0.3962
508 10 1.4059 622 0.9554 0.4505
510 4 1.3835 1,634 0.8220 0.5615
521 13 0.5523 30,580 0.4956 0.0567
523 2 0.4695 15,190 0.2756 0.1939
524 10 0.8570 131,223 0.5104 0.3466
537 11 3.1824 6,861 1.2683 1.9142
Chairman JOHNSON. My first question is going to be to Dr.
Votto and Mr. Altman, and also Ms. Moore if she cares to answer
it. There seems to be a contradiction in your testimony. On the
one hand, you say you cannot predict who is going to be a short
stay and, on the other hand, you say you will have to not
accept short stays if this proposal goes through. Discuss that
issue. Those two comments were at different points in different
statements, and so, please clarify that.
Mr. ALTMAN. I will start, if that is okay. I think that
what I testified was that we cannot predict and, therefore, I
don't think there is any way that we would be able to not admit
people that would be short stay. that would be what our
position would be, and that is what I am told by our
physicians. I don't think there is any way we can respond to
this rule in the way that CMS assumes by taking fewer patients
that would be short-stay outliers because I don't think we can
predict that.
Chairman JOHNSON. Dr. Votto?
Dr. VOTTO. I will comment on that. I agree that there is no
way and there is no evidence or publication that suggest that
there is any way to predict a short-stay outlier, just like
there is really not a lot of evidence that predicts who can get
off a ventilator and who cannot and the way you do your
weaning, because there is just not a lot of evidence.
I think that one of the problems with long-term acute care
hospitals is in the definition. We are acute care hospitals;
thus, we have to take theoretically acutely ill patients. If
you say--you take acutely ill patients but they have to have a
long length of stay and they have to look similar to acute care
patients, but you have to predict that they are going to stay a
long time, this makes it a little bit tough. That is why it
took us so long to develop the admission criteria. We believe
that we have criteria that can distinguish these groups of
patients, but as was stated, there is no way to predict. I
believe that we can reduce the numbers of very short stay,
possibly, with very good review by QIOs or whoever, if they
audited the admission criteria and the use of the admission
criteria.
Chairman JOHNSON. This leads me to my next question. Dr.
Votto, you have talked about spending 2 years developing
criteria. Mr. Altman, you have talked about developing
criteria. Ms. Moore, you have been very directly involved in
it. How close are you three to being able to sit down and come
together on a set of criteria that we could put in place?
Dr. VOTTO. Well, it is March 15th, and I believe our
criteria will be ready on March 31st. I don't know--but if we
then looked at trying to collaborate with others, I think that
would be reasonable. I think we could put out criteria at this
time and adjust them over time. As most places do that develop
criteria, you usually bring them out, try them out. We have had
them validated, as Laura said, by MassPRO. We believe that they
are good criteria. We believe that they are useful. We have no
problem, though, revisiting them at certain intervals, and we
have to do that, anyway.
Mr. ALTMAN. I think ours will be available March 30th.
[Laughter.]
Mr. ALTMAN. I think what would be helpful perhaps is some
direction from Congress to CMS--and, by extension, the provider
community--to sit down and work this through in an open,
transparent, public way. We at ALTHA and Kindred are more than
happy to sit down, we have been trying to sit down with various
folks in the government to move this thing along.
I think one thing that might be helpful is some direction
from Congress to CMS and to us to engage in an open public
process to come up with criteria that meets the policy goals
that we all seem to share. I think that can be done very
quickly.
Chairman JOHNSON. Well, I hope you will take this hearing
as giving you that direction. You cannot beat something with
nothing. We have something that I think is not only not
workable but positively negative and will have a damaging
impact on the system. I think the answer is to go forward with
what we have said we wanted to do for several years now and
that MedPAC recommended--I don't remember whether it was 2 or 3
years ago--that we need a criteria-based system, because it is
best to start with that with you folks. Then we can back down
on that for the other facilities. We need to get greater
clarity about what kinds of patients you treat, recognizing
that, of course, two people can come in the same state and one
does remarkably well and one does very badly.
The system is supposed to account for that already. The
arbitrariness of short-stay policies in my estimation conflict
with the underlying logic of a DRG system. I am not anxious to
start down that path with facilities that deal with such
extremely complex and ill patients. I would like to get some
idea of whether you can begin working together in your criteria
to see whether you can merge your opinions. I am more familiar
with Dr. Votto's efforts since he is a neighbor, but I know his
Committee has been nationwide. The experience cannot be all
that different. The nature of for-profits and nonprofits in
this arena I do not believe is all that significant. I think,
Mr. Altman, with your experience of not only LTCHs but nursing
homes who do this kind of--you know, do the stepdown, that
could be very useful. Ms. Moore, are you optimistic that we
could move forward on a criteria-based system in a reasonable
period of time?
Ms. MOORE. Like I said, our efforts are with NALTH, and I
echo Dr. Votto's statement, that we really do intend on having
criteria for a long-term care hospital setting completed by the
end of the month. As a quality improvement, performance
improvement organization, we believe in and foster
collaboration, and we would be more than happy to assist in the
effort in any way. It helps us and the Medicare trust fund as
well in terms of----
Chairman JOHNSON. One vastly overlooked strength of the
QIOs is that you are actually on the ground in every single
State and do see the care issues patient by patient and
provider by provider.
Ms. MOORE. Absolutely.
Chairman JOHNSON. All right. Mr. Pomeroy? It is a pleasure
to have Mr. Pomeroy with us. He has taken a great interest in a
number of the issue areas before this Committee, and this is
one of them.
Mr. POMEROY. Madam Chairman, thank you very much, and
although I am not a member of this Subcommittee, I follow your
hearings with the greatest of interest, and this one involves a
segment in the continuum of care that I really was not very
familiar with. I found out, in response to the CMS rule change,
North Dakota has two of these facilities. There are now 122
nationally?
Mr. ALTMAN. More like 380.
Mr. POMEROY. Three hundred and eighty? Oh, that is more
than I thought. Is that a rapidly growing number?
Mr. ALTMAN. It has grown by number of facilities in the
last few years at a pretty good rate. I think it is important
to put that into context, as we discussed before. Number one,
many of these facilities are small. You can have a 40-, 50-,
60-bed hospital.
Mr. POMEROY. Right.
Mr. ALTMAN. It is not like especially the newer ones are
very large. Number two, the interesting thing about the recent
growth and your experience in particular is that there has been
historic geographic mal-distribution of LTCHs concentrated in a
small number of States. The growth has occurred in areas where
there were not formerly LTCH services, including North Dakota
and some other areas.
Then, the last thing that we discussed about growth before
you were able to join us is that the growth has really slowed
down, particularly in the last year, with the implementation of
the 25-percent HIH rule that Dr. Votto referenced, which has
not even really fully gone into effect, so that growth really
hasn't even taken into effect those HIHs that are going to have
to close as a result of this rule. The growth we do see is
slowing down a little bit. The growth that is occurring, is
evening out the distribution and making this service available
to a larger, a more diverse set of---geographic set of
beneficiaries.
Then the last thing that we discussed and probably the most
important, is that the best way to get at growth, because there
is growth that is inappropriate, and then, there is growth that
would arguably be appropriate because it is providing an
expanded service to the people we want that service to be
available to, and that is the medically complex, severely ill
people, and that is the certification criteria. That will also
address growth. The last thing I would say in terms of growth
is that we at Kindred have seen a significant----
Mr. POMEROY. What is the status--so, there is a
certification of what is a legitimate LTCH for purposes of
Medicare reimbursement?
Mr. ALTMAN. Right now, the only certification criteria for
an LTCH is if you have a 25-day length of stay for your
Medicare patients. We are part of a number of people, including
policymakers, who say, you know what, that is not a targeted
enough definition. We really ought to make it based on the
patients more.
Mr. POMEROY. It strikes me that this issue really brings to
the fore the fact that we spend an awful lot of money on very
ill people at the end of life who are struggling to hang on to
life, frankly. Obviously, that is an essential function of the
health care system, provide for people at that time, but it
really does get extremely expensive. I was very interested in
your testimony, Ms. Moore. You talk about noting, yes, these
are expensive, but compared to what? If you look at treatment
of those that are legitimately in these facilities, it really
is not necessarily, more expensive. They are going to be an
extremely expensive patient no matter where they are. They are
very, very ill. Is that correct?
Ms. MOORE. I am sorry. We really cannot comment on the
payment system. We do not have experience with that. The
evidence and data we collect do not talk to that. What we can
say is that the screening criteria really help us direct the
patient to the appropriate setting.
Mr. POMEROY. Okay. On that point, so the industry is
basically saying, look, develop an admission criteria. You have
concerns here; develop an admit criteria. Don't just whack
rates, because you are going to what people that need to be in
these facilities. The institutions in North Dakota that I
visited with on Monday in preparation for this hearing told me
that they believe these rates will dramatically shrink services
and affect the willingness of hospitals to take transfers, and
you are going to have ICUs stacking up all across the country.
Do you have a comment on that?
Ms. MOORE. What I can say, again, in developing the
criteria with NALTH, one of the criterion we look at is weaning
of mechanical ventilation, and what the criteria tells us is
that when the patient fails weaning on a regular basis or
repeatedly, that is a patient appropriate for the long-term
care hospital setting. What that does do, is it frees up a
short-term ICU bed in the acute care hospital setting and gives
the patient the right expertise that they need. I can speak to
that in terms of an example for the Committee.
Mr. POMEROY. Right. If that referral source is not
available, what do you do? You have got--it looks like a long-
term case here, weaning was not successful. Do you pull the
plug on the ventilator because you have got nowhere to send
them? Of course, you cannot do that. They stay in the ICU even
though it is over indicated lengths of stay. That gets very
expensive as well. This whole business is--it needs more of a
holistic approach than just watch the rates and see what
happens. We are talking about lives in the balance. I thank the
Chairman. I yield back.
Chairman JOHNSON. Thank you, Mr. Pomeroy. I do want to
clarify a couple of things while you are before us just for the
record. One is we look at the growth of both the long-term care
hospitals and the hospitals within a hospital, satellites. What
has driven that growth?
Mr. ALTMAN. I am sorry. What has driven the growth----
Chairman JOHNSON. Why has there been a really dramatic
increase in patients needing that level of care? This is not a
hard question. I just want it on the record. It is so obvious
to you that I see you staggering. I do not want some mysterious
answer. I want to put on the record what kinds of treatment
capability have we developed in the last decade that has
allowed this expansion, because Dr. Votto's hospital has been
there a long, long time. When I was first elected to the State
Senate 30 years ago, it was basically a residential facility.
When you went there, you did not leave. I have seen the
evolution. In the last, I do not know, 10 or 12 years, there
have been some advances in medicine because you are a different
operation now than you were even when you moved from a
residential facility to an actual hospital. I think we need to
put on the record what are some of the diagnoses that are, what
are some of the treatment capabilities that are different, and
why are people able to go home from these institutions and
become independent when they are unlikely to be able to go home
from either an acute care hospital or a nursing home.
Dr. VOTTO. Okay. I will try to answer that question. First
of all, technology has prolonged the lives of many people. I
would like to answer Mr. Pomeroy's question maybe before he
leaves, real quick.
Chairman JOHNSON. Do that first, yes.
Dr. VOTTO. Or try to answer it, anyway, because I have to
answer it anecdotally, not with side-by-side data. In our study
looking at ventilator outcomes, our average patient costs
approximately $68,000 from 23 different centers, so the average
is pretty good and that is 1,400 patients.
When we looked at a side-by-side population that was
published in the Critical Care Journal, it looked at the length
of stay of patients that were difficult to wean, not dissimilar
to our patients, and the cost average, if you extrapolated the
costs in an acute care hospital, which is about 2 to 3 times
more per day than a long-term hospital, the cost comparison we
came up with was about $210,000 versus $68,000.
Mrs. Johnson's question gets to the issue of possibly why
do we have more of these patients. The answer is that there is
better technology. Patients who had septic shock 15 years ago
probably died most of the time. Patients with septic shock
nowadays, certainly many of them live. They end up on a
ventilator. They end up pretty sick, but they will live. They
are very sick when they get out, and it takes them a long time
to recover.
The reason, I think, LTCHs in general have better outcomes
is because we have a more programmatic rehabilitative approach
with a team approach. In my hospital, we have a team that, as
soon as you come in and you are a ventilator-weaning patient,
just like NASA's job was to get somebody on the Moon and
everybody understood that was their job, get somebody on the
Moon, for all those years and they got somebody on the Moon,
our job is to get people off ventilators, so we spend all of
our time, energy, and staff getting them off the ventilator.
That is the job, so that physical therapy and occupational
therapy see them the day they come in. Nutrition sees them the
day they come in.
It is an approach that you have to use with critically ill
patients, or you don't get good outcomes. Critical masses are
the important issue in LTCHs. If you have a critical mass of
patients who are ventilator dependent, then you know how to do
it. You have a whole team that can do it. If you have patients
who are ventilator dependent scattered throughout a big acute
care hospital, you cannot have the team approach. The same with
wounds, the same with head injury, lots of specific diagnostic
categories that relate to LTCH care. I would think that that
would be the answer that I would give for those questions.
Chairman JOHNSON. Would you like to add anything?
Mr. ALTMAN. The only thing I would add is the notion of
interdisciplinary versus multidisciplinary care, and the
interdisciplinary care approach that Dr. Votto has described,
where you have a team captain and all the disciplines working
toward a common goal is really not the way short-term acute
care hospitals are set up. They are set up to stabilize and
treat, and they do a very good job of that. They are not set up
to do the extended course of care that is what we do in LTCHs.
Chairman JOHNSON. If you come in for knee replacement and
you have heart problems, you go down to the cardiac floor.
Dr. VOTTO. Right.
Mr. ALTMAN. Right.
Chairman JOHNSON. It is a very different concept, and I
think we need to recognize that.
The last thing I want to get on the record is your
experience, Dr. Votto--in the cost of a new bed, building a
free-standing institution versus the cost of building a bed in
a hospital that has space.
Dr. VOTTO. Well, the example that I used, when we looked at
25 beds costing $25 million, I found out that the industry--
this is not unusual in the industry. A million dollars a bed
for a hospital is pretty much fairly standard, at least in New
England. When we realized that we could afford to do that, we
looked to partner, and there are certainly many older hospitals
in New England with lots of new attachments, new buildings to
them, and so they have units that they have not used. What we
found was that we could renovate a very large unit, as we said,
28 beds, at a price 10 percent of the cost of building a new
building. It seemed like a very logical approach.
I believe that we have the same--we do have the same
programs there as we have at the base hospital. One advantage
that we have at the satellite is that we can actually take even
sicker patients because we can get surgeons to come over more
quickly, and if there are diagnostic tests that you absolutely
need, you can get them a little bit easier. There are
advantages to the satellite.
Chairman JOHNSON. All right. Thank you very much for your
testimony. It has been very helpful. We are expecting that the
RTI study will be done in a couple of months or so. I know some
of you have been interviewed by their researchers and have had
input into it, and we certainly will encourage them to move
along rapidly. I encourage you to move along rapidly so that we
can get some sense of what is the consensus from the care giver
community and what impact you think it will have. That way we
will be able to compare your analysis, your information with
the administration's analysis and information, which has not
yet been made public and should be made public, and what RTI is
doing. Because, clearly, we need to move to a criteria-based
system, and we need to figure out how we make that transition,
and that is number one. Then after that is done, we will know
whether there is or is not a legitimate problem with people
being in the high-cost setting of an LTCH versus a more
appropriate setting for that particular patient of a nursing
home or an acute care facility.
That is our goal. We must pursue it, and you will just have
to accelerate your time to do this and come to some conclusion
so you can provide guidance. You know, the real answer is, in a
democracy, for the real world to provide guidance to the
government. The government should only come in to do what the
real world cannot on their own, and you cannot individually
assure that the criteria is the same for all institutions. We
can do that. The criteria should come from the patient-
physician level, and I am pleased that you are so far along,
and we look forward to working with you, and thank you, Ms.
Moore, for the role of the Massachusetts QIO in not only
developing this approach and teaching other QIOs and doing some
basic work over the last few years, but also for working with
NALTH to review their proposal.
Thank you very much.
[Whereupon, at 4:45 p.m., the hearing was adjourned.]
[Question submitted from Mr. Sam Johnson to Mr. Kuhn and
his response follow:]
Question: In your testimony, you mentioned that CMS estimates the
margins of Long-term Care Hospitals (LTCHs) to be around 12 percent. Do
those margins take into account changes in regulation that have taken
place over the last couple years, such as the so-called ``25-percent
rule,'' or the re-weighting of the DRGs? Do you think that those
changes have taken full effect? If not, do you think there is any
wisdom in letting those policies run their course?
Answer: In the long-term care hospital prospective payment system
(LTCH PPS) final rule for rate year (RY) 2007, the Centers for Medicare
& Medicaid Services (CMS) calculated ``revenue-weighted'' Medicare
margins to evaluate the overall financial status of LTCHs. CMS'
analysis of the latest available LTCH data found that LTCH Medicare
margins for fiscal year (FY) 2003--the first year of the LTCH PPS--were
7.8 percent, and preliminary data for FY 2004 based on the most recent
data revealed a Medicare margin of 12.7 percent. These estimates do not
take into account changes in the regulations that have taken place over
the last few years, including the impact of the ``25-percent rule'' or
the re-weighting of the long-term care diagnosis related groups (LTC-
DRGs).
The ``25-percent rule'' is a special payment provision for long-
term care hospitals-within-hospitals (HwHs) and satellites, which
comprise approximately 39.5 percent of all LTCHs. Under this policy,
CMS adjusts payments for patients admitted from the host hospital to
the co-located LTCH that exceed a specified threshold percentage (in
most cases, 25 percent). For cost reporting periods beginning on or
after October 1, 2003, which was the effective date of the rule, the
only affected facilities were those co-located LTCHs that had their
first cost reporting period as a LTCH after the effective date.
Existing co-located LTCHs were held-harmless for their first cost
reporting period following the effective date of the regulation.
Therefore, CMS did not have the data to evaluate the impact of this
policy, and could not factor in the anticipated behavioral changes by
both the host hospital and the co-located LTCHs.
CMS determines LTC-DRG relative weights to account for differences
in resource use by LTCH patients who typically have complex cases and
multiple medical problems. For payments for discharges occurring in FY
2006, CMS recalibrated the LTC-DRG relative weights based on an
analysis of LTCH claims data from FY 2004. The recalibration of LTC-DRG
weights only corrects for coding improvement for the purpose of making
accurate LTCH PPS payments in FY 2006. Annual recalibration does not
serve to account for payments that were made based on improved coding
(rather than patient severity) in prior years.
Based on the information available to us, we do not believe that it
would be appropriate to ``postpone implementation'' of the policies
finalized for FY 2007, including the zero percent update to the
standard Federal rate, the payment adjustment for short-stay outlier
cases, and the case mix adjustment to the market basket, pending an
analysis of other impacts on LTCH payment adequacy.