Providers are concerned about the future of long-term care hospitals

MedPAC study, House bill seek to redefine LTCH role

Concern over the 75% rule, new local medical review policies, and the on-again, off-again outpatient therapy cap certainly have kept rehab advocates busy over the last year. Now another area of concern is emerging: the future of long-term care hospitals (LTCHs).

LTCHs were the latest segment of the rehab continuum to go under a prospective payment system (PPS), which began for cost reporting periods after Oct. 1, 2002. The LTCH version has proven to be a windfall for some hospitals, but some specialty providers are losing money and fear for the future.

"If you can pick and choose who comes into your LTCH and control the length of stay, you can make money," says Gary Ulicny, CEO of Shepherd Center in Atlanta, which specializes in spinal cord and traumatic brain injuries. "But organizations like ours that serve a well-defined population can’t pick and choose who comes in. We can’t control those patients, and we’re getting killed. We’ll lose $350,000 this year alone on the new PPS, and we haven’t even fully phased it in yet."

It’s not just the rehab field feeling the heat; it’s a hot topic for the Centers for Medicare & Medicaid Services (CMS) and Congress as well. In February, Rep. Pete Stark (D-CA), senior Democrat of the House Ways and Means Health Subcommittee, introduced a bill that would place a moratorium on the growth of LTCH beds.

"With the dramatic growth of long-term care hospitals, Congress ought to take a hard look at whether this growth corresponds to actual need," Stark said in a press release. "At issue is whether these facilities are merely cash cows for their corporate investors or if they are truly adding value to the care provided to our seniors and people with disabilities."

The bill is a response to recent government reports that LTCHs have become the most costly post-acute setting for CMS. Medicare expenditures to these facilities have grown from $398 million in 1993 to an anticipated $2.3 billion in 2005. In that same time frame, the number of LTCHs has jumped from 109 to more than 300.

"If you look at the dramatic growth that’s occurred in the long-term care hospital sector, it’s being driven by big for-profit companies raking in huge profits," Stark said. "These are not mom-and-pop, nickel-and-dime operations. Their margins swamp those of acute hospitals and skilled nursing facilities, all the while drawing sizable dollars from Medicare."

Stark’s bill would place a hold on LTCH growth until specific public policy questions are addressed. It also would require the secretary of Health and Human Services to submit a report to Congress specifying rationale and evidence before terminating the moratorium.

The Medicare Payment Advisory Commission (MedPAC) is studying long-term care hospitals now and released a draft recommendation in March to redefine the role of LTCHs under Medicare. MedPAC commissioners were expected to vote on the recommendations to Congress in April. MedPAC calls for narrowing the types of patients admitted to LTCHs and creating a clinically based definition of LTCHs. Other LTCH requirements would be considered, including:

  • mandatory admissions criteria;
  • standard patient assessment tool;
  • daily physician assessment/intervention of patients;
  • minimum licensed nurse staffing of six to 10 hours per patient day;
  • 24-hour staffing of therapy services;
  • classification of a high percentage of patients into broad (and as yet undefined) LTCH categories.

The new criteria would distinguish LTCHs from other levels of care and also ensure patients admitted to LTCHs would be best served there and could not be treated in a less costly setting.

Crucial questions raised

MedPAC raised questions about this issue in a June 2003 report to Congress (available at The report pointed out that LTCHs are unevenly distributed throughout the country. For example, Louisiana, Massachusetts, and Texas together have more than 35% of LTCHs but only 10% of Medicare beneficiaries. Since some states, such as Alaska, New Hampshire, and Montana, have no LTCHs at all, is this level of care even needed?

"What CMS concludes is you can do without LTCHs," says Marsha Lommel, president and CEO of Madonna Rehabilitation Hospital in Lincoln, NE. "But those states have these patients, too. Some of them are living in acute care hospitals."

Lommel is chairing a new task force for the American Medical Rehabilitation Providers Association on post-acute inpatient care. She and the 25 members of the task force are researching these issues in the hopes of helping CMS and Congress sort through what she calls "a mess."

"The hard part for the hospitals and for the post-acute industry and for CMS is that these patients are not going away," Lommel continues.

"They can rewrite the rules and change all the payments for all these different levels of care, and it just shifts all the patients into different levels of care. If we close rehab tomorrow, where would all these patients go? They are not going home," she points out.

Madonna has dealt with the shifting ideas of which patients should go where by obtaining certification for all three levels of post-acute inpatient care: LTCH, acute rehab, and skilled nursing. So the new PPS has not hurt the hospital’s bottom line.

But Lommel remains concerned that no one is looking at the big picture. "It’s not just the new PPS for LTCHs that is causing the problem. The issue is all these rules the government has created. You can’t fix these things separately. These patients have to go somewhere. What I want to see is a payment system that makes sense across the post-acute continuum."

Lommel says she doesn’t oppose the Stark bill because she doesn’t think the LTCH growth is particularly healthy. But she also doesn’t think it’s enough to just stop the growth; positive change must be made. Because for-profit companies have been able to set up LTCHs as "hospitals within hospitals," they are taking market share from traditional rehab providers without incurring the same regulations and outcomes standards, she says.

"What’s happening to us is we’re providing a comprehensive rehab program that is very intensive and costly, but an LTCH in an acute care hospital can take that same patient and not provide all of that and get the same amount of money," Lommel says. "People who have been in rehab a long time are losing market share to LTCHs who are taking traditional rehab patients. CMS continually says all of these levels are the same — they’re interchangeable, yet they make all these different rules. They don’t look at the whole thing at once, they just look at each piece individually, and they never get the full picture."

Lommel asserts it only makes sense to buy services from rehab hospitals. "First, it’s cheaper; second, you document and are accountable for your outcomes; and third, you get the patient out of the hospital much faster," she notes. "When patients end up staying in a nursing home, they run out of money and become Medicaid patients and now the government ends up paying again. It makes no sense."

For Ulicny at Shepherd Center, it also makes no sense that the new PPS is forcing his hospital to send away many patients who need to return for short-term specialized care. "Because of the prohibitive rules on short length of stay, people who receive specialized care like baclofen pump patients or bladder augmentation surgeries, we’ve now had to send somewhere else," he adds. "Under the new rules, it jeopardizes your overall length of stay because they don’t base it on all the patients; they just base it on Medicare. So to even qualify as an LTCH, those people can no longer receive those specialized services here."

Because most patients who experience spinal cord and traumatic brain injuries are young, Shepherd Center has only a small percentage of Medicare patients. The average patient age at Shepherd is 32. "We’ve had to go train other hospitals on how to provide those services. We would not meet the 28-day length of stay if we continued to take those people, so we’ve had to transfer them out. We can’t take people with an anticipated length of stay of less than 10 days. Unfortunately there are no other hospitals that are really equipped, so we’ve had to go and train other people. Our physicians are now going over to another hospital to see their own patients."

Acute hospitals aren’t necessarily equipped with lifts and other specialized equipment for people with such severe impairments. "We’re scared that patients are going to go to the other hospitals and the hospitals are just going to freak out," Ulicny says. "We have been that provider for about 20 years in this community, and now you just simply say, You guys have to do it.’ They’ve depended on us. Patients who really need highly specialized care are going to have to fend for themselves. It’s really a service issue on our part."

He says Shepherd would be willing to take a loss on performing those procedures but cannot risk losing the LTCH designation. "We even told Medicare we would continue to serve these people if they didn’t count them in our length of stay, but if they have Medicare, you have to bill Medicare. It came down to an issue of survival for us."

Some action needed

Ulicny supports the Stark bill. "For most people, this is a windfall. But hospitals that really serve specialty type patients are getting burned."

"That’s what these hospitals are for: They’re supposed to be for those people who don’t fit into the average acute care hospital length of stay. I support Stark’s bill 100% because I do think that a lot of these companies are using the system to their advantage," he adds.

Like Lommel, Ulicny says that the bigger issue is defining post-acute care. "We need to step back and say, What is this level of care and who is it really for?’ Fixing the situation for us is not the issue. The issue is: How does an LTCH fit in the continuum of care for these patients, and what is that level of care really all about and who is it really designed for? We’ve dramatically moved away from what LTCHs were designed for. Why do you think there weren’t a bunch of these prior to this new legislation?"

Denny O’Malley, president and CEO of Craig Rehabilitation Hospital in Englewood, CO, says the reimbursement changes may harm the quality of care.

"There is a concern that the quality of rehabilitative services may not be the same, because we tend to have more comprehensive services in places like ours," he notes.

"If patients instead are going to these other licensed facilities that are getting into this because it actually represents an increased reimbursement, it may give them an incentive to take more patients than they used to take," O’Malley explains.

He says he understands the federal government’s desire to create an efficient, sensible reimbursement policy. "But it is absolutely astounding to me that whenever a policy changes that the policy-makers are not aware of just how the field will respond to that. There is going to be created a new kind of way to give care because people are going to try to find a way to make a buck."

O’Malley also finds much of the policy-making shortsighted. If patients are denied access to appropriate care, they may end up back in acute care with costly complications.

"Some of the things they do end up biting them in the backside, and I think there’s the potential for that in this issue," he says.

Need More Information?

  • Marsha Lommel, CEO, Madonna Rehabilitation Hospital, 5401 South St., Lincoln, NE 68506. Phone: (402) 483-9564.
  • Denny O’Malley, CEO, Craig Rehabilitation Hospital, 3425 S. Clarkson St., Englewood, CO 80113. Phone: (303) 789-8800.
  • Gary Ulicny, CEO, Shepherd Center, 2020 Peachtree St. N.W., Atlanta, GA 30309-1402. Phone: (404) 350-7311.