CMS Pub. 100-04, ch. 3, § 150.10.1

The PPS for LTCHs is to be phased-in over a five- year period from cost-based

reimbursement to Federal prospective payment. During this transition period, payment is

based on an increasing percentage of the LTCH prospective payment and a decreasing

percentage of each LTCH's cost-based reimbursement rate for each discharge as follows:

Cost Reporting Periods Beginning

On or After

LTCH PPS

Federal Rate

Percentage

TEFRA

Rate

Percentage

October 1, 2002, through September 30, 2003 20 80

October 1, 2003, through September 30, 2004 40 60

October 1, 2004, through September 30, 2005 60 40

October 1, 2005, through September 30, 2006 80 20

October 1, 2006 100 0

The LTCHs can exercise a one-time irrevocable option to elect payment based on 100

percent of the Federal rate rather than transition from cost-based reimbursement to

prospective payment. To exercise this option, for cost reporting periods beginning on or

after October 1, 2002, and before December 1, 2002, the LTCH was to notify its A/B

MAC (A) of this election in writing, and it was to be received by the A/B MAC (A) no

later than November 1, 2002. To exercise this option, for cost reporting periods beginning

on or after December 1, 2002, the LTCH must notify its A/B MAC (A) in writing 30 days

prior to the start of the LTCH's next cost reporting period.

Payments to new LTCHs, i.e., a hospital that has its first cost reporting period as a LTCH

beginning on or after October 1, 2002, are made based on 100 percent of the standard

Federal rate.

NOTE: under the BIPA, during cost reporting periods beginning during FY 2001, target

amounts under TEFRA were increased by 25 percent. This increase will continue to be in

effect for the TEFRA portion of transitions payments.