In 2010, about 118,300 Medicare beneficiaries received care for almost 134,700 long term acute care hospitals (LTACH) stays worth $5.2 billion in roughly 412 LTACH nationwide.1 In 2011, about 123,000 Medicare beneficiaries received care for almost 140,000 LTACH stays worth $5.4 billion in roughly 424 LTACH. For patients discharged from an LTACH, the unadjusted rate of readmission to a short-stay acute-care hospital or a LTACH in the 30 days after an LTACH discharge was about 26 percent (RTI analysis of 2010–2011 Medicare Claims data). Faced with such a large proportion of patients being readmitted to an acute level of care (i.e., to either a short-stay acute care hospital or a LTACH), CMS proposes to monitor the readmission rates for each LTACH to improve patient care and transitions of care. By doing so, CMS hopes to reduce LTACH readmission rates that are inappropriately high and improve patient safety and quality of care.

CMS pays acute care hospitals (with a few exceptions specified in the law) for inpatient stays under the IPPS and long-term care hospitals under the LTCH PPS. Under these two payment systems, CMS generally sets payment rates prospectively for inpatient stays based on the patient’s diagnosis and severity of illness. A hospital receives a single payment for the case based on the payment classification – MS-DRGs under the IPPS and MS-LTC-DRGs under the LTCH PPS – assigned at discharge. By law, CMS is required to update payment rates for IPPS hospitals annually, and to account for changes in the costs of goods and services used by these hospitals in treating Medicare patients, as well as for other factors. This is known as the hospital “market basket.”  LTCHs are paid according to a separate market basket based on LTCH-specific goods and services.


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