CMS Pub. 100-04, ch. 3, § 150.9.1.4

Hospitals within hospitals (HwH), satellite facilities, and onsite SNFs:

The LTCHs that are co-located with other Medicare providers (acute care hospitals, IRFs,

SNFs) are subject to the interrupted stay policy (§150.9.1.2) but in addition, if such

discharges and readmissions exceed 5 percent of the LTCH’s total discharges during a

cost reporting period, all such readmissions during that cost reporting period are to be paid

as one discharge, regardless of the time spent at the intervening facility.

• One 5 percent calculation is applied to discharges to and readmissions from onsite

acute care hospitals and a separate 5 percent calculation is made for the combined

discharges to, and readmissions to, the LTCH from onsite IRFs, SNFs, and

psychiatric facilities.)

• Prior to triggering either of the 5 percent thresholds, such cases are to be evaluated

and paid under the interrupted stay policy. (Presently, there is no interrupted stay

policy for psychiatric facilities, so in the case of a LTCH patient who is directly

readmitted from a psychiatric facility, there will be two LTC-DRG payments

unless, and until, the number of such readmissions (counted along with

readmissions from an onsite IRF or SNF) reach the 5 percent threshold.)

The LTCHs were required to notify their A/B MACs (A) about the providers with which

they are co-located within 60 days of their first cost reporting period that began on or after

October 1, 2002. A change in co-located status must be reported to the A/B MACs (A)

within 60days of such a change. The implementation of the onsite policy is based on

information maintained by A/B MACs (A) on other Medicare providers co-located with

LTCHs. A/B MACs (A) notify the CMS RO of such arrangements.

Payments under this policy are determined at cost report settlement.

Beginning FY 2005, an additional payment adjustment was established for LTCH HwHs

and satellites of HwHs relating to the percentage of patients discharged during a specific

cost reporting period that were admitted from their host hospital. Effective for cost

reporting periods beginning on or after July 1, 2007, the payment adjustment that governs

LTCH HwHs and satellites of HwHs discharging patients from their host hospital was

extended to govern discharges from all LTCHs (not already addressed by the existing

policy) that are admitted from any referring hospital. This policy adjustment includes

discharges from “grandfathered” LTCH HwHs and LTCH satellites that were admitted

from their host hospitals; LTCH and LTCH satellite discharges from referring hospitals

that are not co-located with the discharging facility; and discharges from “free-standing”

LTCHs that were admitted from any referring hospital.

Basic Payment Formula under the 25 Percent Threshold Payment Adjustment for

Medicare Discharges from Referring Hospitals

NOTE: On December 29, 2007, the Medicare, Medicaid, and SCHIP Extension Act of

2007 (MMSEA) was enacted with mandated several modifications to this policy for a 3-year period beginning on the date of enactment of the Act. For clarity, each modification

to the policy is specified in a bullet point immediately below the explanation of the

particular aspect of the policy as it was effective on July 1, 2007. The bullet points below

also include additional amendments made by the enactment of the American Recovery

and Reinvestment Act (ARRA) of 2009 on February 17, 2009, to the 25 percent threshold

payment adjustment. It is important to note that for those policies that operate on an

October 1 cycle (i.e. pre-MMSEA regulations at 42 CFR §412.534), the ARRA has

amended the MMSEA so that the MMSEA relief is effective for cost reporting periods

beginning on or after October 1, 2009, and before October 1, 2010. For policies that

operate on a July 1 cycle, (e.g., pre-MMSEA regulations at 42 CFR 412.534(h) and §412.

536) the ARRA amendments to the MMSEA relief are effective for cost reporting periods

beginning on or after July 1, 2007 and before July 1, 2010.

With the passage of the Affordable Care Act of 2010, all provisions of MMSEA as

amended by the ARRA affecting the LTCH PPS were extended an additional 2-years.

Therefore, provisions due to sunset on July 1, 2010, and October 1, 2010, have been

extended until July 1 2012, and October 1, 2012, respectively. The revisions to this

section (below), indicate these new dates.

• Admitted to co-located LTCHs and LTCH satellites from their host hospitals

o This policy was finalized for FY 2005

o If a LTCH HwH or satellite admits from its host hospital in excess of 25

percent or the applicable percentage) of its discharges for the LTCH’s cost

reporting period, an adjusted payment will be made of the lesser of the

otherwise full payment under the LTCH PPS and an amount that would be

equivalent to what Medicare would otherwise be paid under the IPPS. For

LTCHs and LTCH satellites subject to the transition period described

below, there is a 3-year transition to the full 25 percent threshold payment

adjustment.

As amended by the MMSEA of 2007 and further amended by the ARRA and the

ACA:

• The percentage threshold for “applicable” LTCHs and LTCH satellites

(i.e., subject to the transition described below) is raised from 25 percent to

50 percent for LTCH cost reporting periods beginning on or after October1,

2007, and before October 1, 2012. “Grandfathered” LTCH satellites are

also “applicable” for this increase, under the ARRA but on a July 1 cycle,

as noted above.

• For LTCHs with “special circumstances,” specified below, the 50 percent

threshold is raised to 75 percent for the same 3-year period.

o In determining whether a hospital meets the 25 percent criterion, patients

transferred from the host hospital that have already qualified for outlier

payments at the acute host would not count as part of the host’s allowable

percentage and therefore the payment would not be subject to the

adjustment. Those patients would be eligible for full payment under the

LTCH PPS. (Cases admitted from the host before the LTCH crosses the 25

percent or applicable threshold would be paid under the LTCH PPS.)

• Admitted to Grandfathered LTCH HwHs and LTCH Satellites from their

Host Hospitals

Prior to the enactment of the MMSEA and the ARRA, this policy was effective for

cost reporting periods beginning on or after July 1, 2007.

o Subject to the 3-year transition described below, if a grandfathered LTCH

HwH or a grandfathered satellite of a LTCH has admitted from its host

hospital in excess of 25 percent or the applicable percentage) of its

discharges for the LTCH’s cost reporting period, an adjusted payment will

be made of the lesser of the otherwise full payment under the LTCH PPS

and an amount that would be equivalent to what Medicare would otherwise

be paid under the IPPS.

o In determining whether a hospital meets the 25 percent criterion, patients

transferred from the host hospital that have already qualified for outlier

payments at the acute host would not count as part of the host’s allowable

percentage and therefore the payment would not be subject to the

adjustment. Those patients would be eligible for full payment under the

LTCH PPS. (Cases admitted from the host before the LTCH crosses the 25

percent or applicable threshold would be paid under the LTCH PPS.)

• Admitted to all LTCHs and LTCH Satellites from Referring Hospitals other

than those with which they are Co-located:

○ This policy is effective for cost reporting periods beginning on or after July

1, 2007.

○ Subject to the 3-year transition specified below, if a LTCH or LTCH

satellite admits from its host hospital in excess of 25 percent or the

applicable percentage) of its discharges for the HwH’s cost reporting

period, an adjusted payment will be made of the lesser of the otherwise full

payment under the LTCH PPS and an amount that would be equivalent to

what Medicare would otherwise be paid under the IPPS. (See details of

this payment adjustment below the discussion of the MMSEA and the

ARRA changes.)

○ In determining whether a hospital meets the 25 percent criterion, patients

transferred from the host hospital that have already qualified for outlier

payments at the acute host would not count as part of the host’s allowable

percentage and therefore the payment would not be subject to the

adjustment. Those patients would be eligible for full payment under the

LTCH PPS. (Cases admitted from the host before the LTCH crosses the 25

percent or applicable threshold would be paid under the LTCH PPS.)

As amended by the MMSEA of 2007 and further amended by the ARRA and the

ACA:

• For cost reporting periods beginning on or after July 1, 2007, and before

July 1, 2012, grandfathered LTCH HwHs are exempted from the 25 percent

threshold for admissions from co-located hospitals or referring hospitals

with which they are not co-located.

• “Freestanding” LTCHs, i.e., LTCHs not co-located with another hospital as

a HwH or as a satellite are exempted from the 25 percent threshold for

admissions from any referring hospital.

As amended by the ARRA of 2009:

• The ARRA amended the MMSEA changes to the 25 percent threshold

policy by adding another category of LTCHs that would be subject to the 3-year delay in application of the 25 percent payment provision, i.e., LTCHs

or LTCH satellites that were co-located with provider-based locations of an

IPPS hospital that did not deliver services payable under the IPPS at those

campuses where the LTCHs or LTCH satellites were located.

The 5-year delay in the application of the percentage threshold payment adjustment for

each of the above categories is effective for cost reporting periods beginning on or after

July 1, 2007 and before July 1, 2012.

NOTE: For cost reporting periods beginning on or after July 1, 2007 and before July 1,

2012 or on or after October 1, 2007, and before October 1, 2012, as applicable (see

explanation above), this payment adjustment continues to be applicable under the specific

circumstances set forth in the MMSEA and the ARRA as amended by the ACA.

Payment adjustment under the 25 percent threshold payment policy

Under the LTCH PPS, payments for LTCH or LTCH discharges in excess of the specified

threshold percentages are based on the lesser of an amount otherwise payable under the

LTCH PPS or an amount that is equivalent to what would otherwise be paid under the

IPPS for the costs of inpatient operating services would be based on the standardized

amount adjusted by the applicable IPPS DRG weighting factors. This amount would be

further adjusted for area wage levels using the applicable IPPS labor-related share based

on the CBSA where the LTCH is physically located and the IPPS wage index for non-reclassified hospitals published in the annual IPPS final rule. For LTCHs located in

Alaska and Hawaii, this amount would also be adjusted by the applicable COLA factors

used under the IPPS. Furthermore, an amount equivalent to what would otherwise be paid

under the IPPS for the costs of inpatient operating services would also include, where

applicable, a DSH adjustment and where applicable, an IME adjustment.

Additionally, to arrive at the payment amount equivalent to what would otherwise be

payable under the IPPS, a LTCH would also be paid under the LTCH PPS for the costs of

inpatient capital-related costs, using the capital Federal rate determined under adjusted by

the applicable IPPS DRG weighting factors. This amount would be further adjusted by

the applicable geographic adjustment factors set forth, including local cost variation

(based on the IPPS wage index for non-reclassified hospitals published in the annual IPPS

final rule), large urban location, and COLA, if applicable.

For discharges governed by this payment, an amount that is equivalent to an amount that

would otherwise be paid under the IPPS for the inpatient capital-related costs would also

include a DSH adjustment if applicable, and an equivalent IME adjustment), if applicable.

An amount equivalent to what would be paid under the IPPS would be determined based

on the sum of the amount equivalent to what would be paid under the IPPS inpatient

operating services and the amount equivalent to what would be paid under the IPPS for

inpatient capital-related costs. This is necessary since, under the IPPS, there are separate

Medicare rates for operating and capital costs to acute care hospitals, while under the

LTCH PPS, there is a single payment rate for the operating and capital costs of the

inpatient hospital’s services provided to LTCH Medicare patients.

Note that there is a difference between the policy that we have codified for adjusted

payments to LTCH HwHs and satellites of LTCHs, which is based on an amount

“equivalent” under the existing payment, and the additional component to the SSO

payment adjustment that is based on an amount “comparable” to what would otherwise be

paid under the IPPS adjustment. The distinction is that if a SSO case also qualifies as a

high cost outlier (HCO) case after the SSO payment amount is determined, the SSO

payment formula uses the LTCH PPS fixed loss amount. In contrast, under the payment

adjustment for LTCH HwHs and LTCH satellites if the amount payable by Medicare for a

specific case is equivalent to what would be otherwise payable under the IPPS and the

case also qualified as a HCO, the outlier payment for this case would be based on the IPPS

HCO policy because the resulting payment would then be more equivalent to what would

have been payable under the IPPS. Similarly, if under this payment adjustment the lesser

amount resulted in an “otherwise payable amount under the LTCH PPS,” and the stay

qualified as a HCO, Medicare would generate a HCO payment governed by the LTCH

PPS fixed loss amount calculated under the LTCH PPS and if the estimated cost of the

case exceeds the adjusted LTC-DRG plus a fixed loss amount under §412.525(a), the

LTCH would receive an additional payment based on the LTCH PPS HCO policy.

Specific Circumstances (applicable to all of the above scenarios)

NOTE: MMSEA changes described above, as amended by the ARRA and

further amended by the ACA, are applicable for cost reporting periods

beginning on or after October 1, 2007, and before October 1, 2012, or on or

after July 1 2007, and before July 1, 2012..

• For LTCHs and LTCH satellites located in rural areas, instead of the 25

percent threshold, we provide for a 50 percent threshold for patients from

any individual referral hospital. In addition, in determining the percentage

of patients admitted from that referring hospital, any patient that had been

Medicare outliers at the host and then transferred to the HwH would be

considered as if they were admitted from a non-host hospital. Under

MMSEA, the 25 percentage threshold is increased to 50 percent for

applicable LTCH HwHs, satellites, and grandfathered satellites.

• For urban single or MSA dominant referring hospitals, we would allow the

LTCH or LTCH satellite to admit from the host up to the referring

hospital’s percentage of total Medicare discharges in the MSA. A floor of

25 percent and a ceiling of 51 percent applied to this variation. Under

MMSEA, the 50 percentage threshold is increased to 75 percent.

Transition Periods

For Medicare discharges from referring hospitals:

• Admitted to co-located LTCHs and LTCH satellites from their host hospitals

o This policy was finalized for FY 2005.

This payment adjustment will be phased-in over 4 years for existing LTCH HwHs and

also for LTCHs-under-formation that satisfy the following two-prong requirement:

o On or before October 1, 2004 they have certification as acute care hospitals,

under Part 489; and

o Before October 1, 2005 designation as a LTCH.

For purposes of full payment under the LTCH PPS during the transition period, the

percentage of discharges from the LTCH HwH originating from the host hospital

for each applicable cost reporting period, may not exceed the percentage of

discharges during the hospital’s cost reporting period during FY 2004 that were

admitted from the host hospital.

Year 1 -- (cost reporting periods beginning on or after October 1, 2004 through September

30, 2005) a “hold harmless”

o Payments will be made under the LTCH PPS but the percentage of LTCH

HwH discharges originating from the host may not exceed the percentage for

such patients established for cost reporting periods during FY 2004.

Year 2 -- (cost reporting periods beginning on or after October 1, 2005 through September

30, 2006)

o LTCH HwHs will be paid under the otherwise unadjusted LTCH PPS for the

percentage of discharges originating from their host hospital that do not exceed

the lesser of the percentage of those patients for their FY 2004 cost reporting

period or 75 percent.

o For discharges in excess of that threshold, the payments will be determined

under “the basic payment formula” specified above.

Year 3 -- (cost reporting periods beginning on or after October 1, 2006 through September

30, 2007)

o LTCH HwHs will be paid under the otherwise unadjusted LTCH PPS for the

percentage of discharges originating from their host hospital that do not exceed

the lesser of the percentage of those patients for their FY 2004 cost reporting

period or 50 percent.

o For discharges in excess of that threshold, the payments will be determined

under “the basic payment formula” specified above.

Year 4 -- (cost reporting periods beginning on or after October 1, 2007 through September

30, 2008)

o LTCH HwHs will be paid under the otherwise unadjusted LTCH PPS for the

percentage of discharges originating from their host hospital that do not exceed

the 25 percent or the applicable percentage described for “specific

circumstances above.”

o For discharges in excess of that threshold, the payments will be determined

under “the basic payment formula” specified above.

Transition Period for all LTCHs affected by the Above Described Regulations for

cost reporting periods beginning on or after July 1, 2008.

NOTE: MMSEA as amended by the ARRA and further amended by the ACA

changes described above applicable for cost reporting periods beginning on or

after July 1, 2007, and before July 1, 2012 for “grandfathered” LTCH HwHs

and “freestanding” LTCHs.

The full payment threshold adjustment will be phased in over 3-years as follows:

Year 1 - (for cost reporting periods beginning on or after July 1, 2007 through June 30,

2008)

o LTCHs and LTCH satellites will be paid under the otherwise unadjusted

LTCH PPS for the percentage of discharges originating from a referring

hospital that do not exceed the lesser of the percentage of those patients for

their RY 2005 cost reporting period or 75 percent.

o For discharges in excess of that threshold, the payments will be determined

under “the basic payment formula” specified above.

Year 2 - (for cost reporting periods on or after July 1, 2008 through June 30, 2009),

o LTCHs and LTCH satellites will be paid under the otherwise unadjusted

LTCH PPS for the percentage of discharges originating from a referring

hospital that do not exceed the lesser of the percentage of those patients for

their RY 2005 cost reporting period or 50 percent.

o For discharges in excess of that threshold, the payments will be determined

under “the basic payment formula” specified above.

Year 3 - (for cost reporting periods on or after July 1, 2009)

o All LTCHs and LTCH satellites subject to the payment threshold policy

effective for RY 2008, will be subject to the 25 percent (or applicable

percentage) threshold.

o For discharges in excess of that threshold, the payments will be determined

under “the basic payment formula” specified above.

Implementation:

• The payment threshold policy for discharges from co-located LTCH HwHs

and LTCH satellites admitted from their hosts (including grandfathered

LTCH HwHs and satellites) is determined based on a location-specific

basis.

• The payment threshold policy for discharges from LTCHs and LTCH

satellites admitted from referring hospitals with which they are not co-located is determined based upon provider numbers for both the LTCH and

the referring hospital.

For LTCHs and LTCH satellites subject to both the FY 2005 and the RY 2008

threshold payment adjustment policies

• If a co-located LTCH or a co-located referring hospital (host) shares a

provider number with a hospital or satellite at another location, threshold

determinations will continue to be location-specific for the co-located

LTCH and host. The threshold percentage determinations will be applied

to all other location or campus of either a LTCH or referring hospital in the

aggregate. For example, when the policy finalized for RY 2008 is fully

phased in, a co-located LTCH (LTCH A) and host (referring hospital A)

will have a 25 percent threshold under the policy finalized for FY 2005. If

referring hospital A shares a provider number with a remote location (RH

A’), then another 25 percent threshold will be applied to patients

discharged from LTCH A that were admitted RH A’.

• We note that for cost reporting periods beginning on or after October 1,

2007, non-grandfathered co-located LTCHs, are fully phased-in to the full

25 percent (or applicable percentage threshold) for discharges admitted

from their co-located hosts (under the initial 25 percent payment threshold

established for FY 2005)s.

• However, for discharges admitted from non-co-located referring hospitals,

these LTCH HwHs and satellites are governed by the policy finalized for

RY 2008. Therefore, for cost reporting periods beginning on or after July

1, 2007 through June 30, 2008, the 75 percent threshold will apply, and the

50 percent threshold will apply for cost reporting periods beginning on or

after July 1, 2008 through June 30, 2009 as described above in this

response.)

• Furthermore, under our finalized policy for RY 2008, grandfathered LTCH

HwHs and satellites will be subject to the 3-year transition that we are

finalizing under this new policy for all their discharges, both admitted from

their co-located host and from other non-co-located referring hospitals.

When both policies apply:

If a patient discharged from a LTCH HwH or satellite was originally admitted from the

host hospital and immediately prior to that admission to the host, the patient was being

treated at the same LTCH HwH or LTCH satellite, both of the policies described in this

section, the 5 percent on-site policy as well as the 25 percent policy are applicable. In such

a case, the following procedures should be followed keeping in mind that the 5 percent

rule affects number of discharges and the 25 percent rule affects payment.

• The on-site 5 percent computation is first in order to determine the real number of

discharges.

• Focusing on the relationship between an acute host and a LTCH HwH/satellite, if the

number of revolving door discharges between these two facilities exceeds 5 percent

during a CR period, this policy will collapse the number of discharges within that CR

period, halving the # of revolving door LTCH stays where the intervening stay

exceeded the threshold and eliminating from consideration those host stays that were

bracketed by two LTCH stays. All such stays for the entire cost reporting period will

be paid as one LTCH PPS stay.

• The next issue is to determine which of these stays will be paid an unadjusted LTCH

PPS rate and which will be paid an amount equivalent to what would otherwise be

paid under the IPPS. Cases prior to tripping the 25 percent threshold will be paid the

otherwise unadjusted LTCH PPS rate and those after the threshold that had not

achieved outlier status at the host it will be paid based on the adjustment.

• Because of the 5 percent policy that collapsed the discharges from the LTCH, for

purposes of the 25 percent policy, we are focusing on fewer discharges in total from

the LTCH and we need to determine what percent of these discharges originated in the

host so that we can apply the payment adjustment.

BUT, in the event that the 5 percent is not tripped during that cost reporting period, each

acute-->LTCH-->acute--> LTCH cycle, which will count as two LTCH discharges

originating in the host for purposes of the 25 percent policy, since both the first and

second LTCH admission were from the host.