Medicare Long-Term Care Hospital
Prospective Payment System
Payment Rule Brief — FINAL RULE
Program Year: FFY 2016
Overview and Resources
On August 17, 2015, the Centers for Medicare and Medicaid Services (CMS) released the federal fiscal year
(FFY) 2016 final payment rule for the Medicare Long-Term Care Hospital Prospective Payment System (LTCH
PPS). The final rule reflects the annual update to the Medicare fee-for-service (FFS) LTCH payment rates and
policies based on regulatory changes put forward by CMS and legislative changes previously adopted by
Congress.
A copy of the final rule Federal Register (FR) and other resources related to the LTCH PPS are available on the
CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/LongtermcarehospitalPPS/download.html.
An online version of the rule is available at https://federalregister.gov/a/2015-19049.
A brief of the final rule is provided below along with FR page references for additional details. Program
changes adopted by CMS will be effective for discharges on or after October 1, 2015 unless otherwise noted.
Effect of BiBA and PAMA on the LTCH PPS
FR pages 49601-49623
The Bipartisan Budget Act (BiBA) of 2013 and Protecting Access to Medicare Act (PAMA) of 2014 included
several significant provisions related to current and future LTCH PPS policies and payment.
The laws direct CMS to establish two different types of LTCH PPS payment rates: the standard LTCH PPS
payment rates; or the and new, lower, site neutral LTCH PPS payment rates based on the IPPS rates. All LTCH
discharges meeting certain clinical criteria (detailed below) will be paid at the LTCH PPS standard federal
payment rate. LTCHs will be paid the new site-neutral payment rate unless they meet that specified exclusion
criteria. In particular, CMS will implement a statutory transitional payment method for site neutral cases
occurring in cost reporting periods beginning during FFYs 2016 and 2017. The laws provide a two-year
transition period for those paid at the site neutral payment rate. During that transition, site neutral payment
rate cases will be paid based on a 50/50 blend of LTCH PPS standard Federal payment rate and the LTCH PPS
site neutral payment rate.
The following is a brief summary of the mandates:

Site Neutral Payments (FR pages 49,601-49,623): BiBA mandates the use of “site neutral” Inpatient Prospective
Payment System (IPPS) equivalent payment rates for LTCHs beginning FFY 2016 (with a two-year phase-in).
The following criteria were finalized by CMS in order to identify cases eligible for a standard LTCH PPS
payment:
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o
The LTCH discharge does not have a principal diagnosis relating to a psychiatric diagnosis or to
rehabilitation;
o
A case must be “immediately discharged” from an inpatient PPS hospital. CMS withdrew its
proposed requirement that “immediately discharged” cases have discharge status code 63 or 91
for the prior hospital stay. This immediate discharge will be evidenced by the dates of discharge
and admission to the LTCH; and
One or both of these criteria:

Must receive at least three days of care in an ICU or CCU during the prior hospital stay.
CMS will use the full set of ICU and CCU revenue codes when counting a patient’s ICU
and CCU days during the prior acute care hospital stay; and/or

The patient received at least 96 hours of ventilator services in the LTCH stay.
For cost reporting periods beginning in FFYs 2016 and 2017, site-neutral cases would be paid a 50-50 blend
of the standard LTCH PPS rate and the applicable site-neutral rate. All applicable adjustments would apply
to each of the rates contributing to the blended payment. Following this transition period, site-neutral
cases would be paid fully under the site-neutral rates.
CMS finalized that the site neutral payment rate is the lesser of either the IPPS comparable per diem
amount, or 100 percent of the estimated cost of the case
In addition, BiBA mandates an IPPS equivalent payment rate for ALL discharges for LTCHs that fail to meet
the applicable discharge threshold (less than 50% of patients for whom the standard LTCH PPS payment is
made). This mandate would be effective for discharges occurring in cost reporting periods during or after
FFY 2021. The law includes a reinstatement process for LTCHs that fail to meet the required discharge
threshold percentage in a particular year.
For calculating whether an LTCH or LTCH satellite meets the existing greater than 25-day average length of
stay requirement, BiBA mandates the exclusion of cases paid at the site neutral rate and those paid by
Medicare Advantage.

25% Payment Adjustment Threshold (FR pages 49611-40612): Since 2005, legislative and regulatory action has
delayed full application of the 25% payment adjustment threshold for most LTCHs. This policy will reduce
LTCH payment amounts to the inpatient PPS amount for LTCHs that admit more than 25% of Medicare
cases from an onsite or neighboring inpatient acute care hospital. Certain “grandfathered” LTCHs are now
permanently exempted from the policy by law. The 25% threshold policy will be applied to site neutral
payment rate cases.

Restrictions on the Establishment/Classification of New LTCHs and Bed Growth (FR pages 49637-49638): In
2014, the Protecting Access to Medicare Act (PAMA) established freezes on the increase of the number of
hospital beds in existing LTCHs and LTCH satellite facilities. Without exception, an LTCH may not increase
the total number of Medicare certified beds beyond the number that existed prior to April 1, 2014. The
number of Medicare certified beds in an LTCH includes beds in all locations, including, as applicable,
satellite facilities.
LTCH Payment Rate
FR pages 49795-49797
Incorporating the adopted updates and the effects of a budget neutrality adjustment, the table below lists the
full LTCH standard federal rate for FFY 2016 compared to the rate currently in effect:
Final
Final
Percent Change
FFY 2015
FFY 2016
LTCH Standard Federal Rate
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$41,043.71
$41,762.85
+1.7%
(proposed at +2.05%)
The table below provides details of the adopted updates for the LTCH standard federal rate for FFY 2016:
Marketbasket (MB) Update
LTCH Rate Updates and
Budget Neutrality
Adjustments
+2.4%
Affordable Care Act (ACA) - Mandated Productivity MB Reduction
-0.5 percentage points
ACA Pre-determined Reduction
-0.2 percentage points
Wage Index Budget Neutrality Adjustment
Overall Rate Change
(proposed at +2.7%)
(proposed at -0.6%)
(no change from proposed)
+0.0513%
(proposed at +0.1444%)
+1.7%
(proposed at +2.05%)
Effect of Sequestration
FR page reference not available
While the final rule does not specifically address the 2.0% sequester reductions to all lines of Medicare
payments authorized by Congress and currently in effect through FFY 2024, sequester will continue unless
Congress intervenes. Sequester is not applied to the payment rate; instead, it is applied to Medicare claims
after determining co-insurance, any applicable deductibles, and any applicable Medicare secondary payment
adjustments.
Wage Index, Labor-Related Share, and COLA
FR pages 49797-49800
There will not be any major changes to the standard calculation of wage index for LTCHs. As has been the case
in prior years, CMS will use the most recent inpatient hospital wage index, the FFY 2016 pre-rural floor and prereclassified hospital wage index, to adjust payment rates under the LTCH PPS for FFY 2016. CMS is not
adopting any changes to the cost-of-living adjustments applicable to LTCHs in Alaska and Hawaii.
The wage index, which is used to adjust payment for differences in area wage levels, is applied to the portion of
the LTCH standard federal rate that CMS considers to be labor-related. For FFY 2016, CMS will decrease the
labor-related share from 62.306% for FFY 2015 to 62.0% for FFY 2016 (proposed at 62.2%). This change will
provide a slight increase in payments to LTCHs with a wage index less than 1.0.
Updates to the MS-LTC-DRGs
FR pages 49614-49617, 49623-49634
Each year, CMS updates the MS-LTC-DRG classifications and relative weights. These updates are made to
reflect changes in treatment patterns, technology, and any other factors that may change the relative use of
hospital resources. Although the DRGs used to classify patients under the LTCH PPS are identical to those used
under the inpatient PPS, the relative weights are different for each setting. CMS is adopting its proposal that,
beginning with FY 2016, the MS–LTC DRG relative weights will be determined using only data from LTCH
discharges that meet the criteria for exclusion from the site neutral payment rate (that is, LTCH PPS standard
Federal payment rate cases).
ICD-10-CM
PR page 49625
CMS will use the ICD–10 MS–LTC–DRGs Version 33 beginning October 1, 2015.
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HCO Payments
FR pages 49617-49623, 49801-49806, 49831-49834
High cost outlier (HCO) payments were established under the LTCH PPS to provide additional payments for very
costly cases. Outlier payments are made if the estimated cost of the case exceeds the payment for the case
plus a fixed-loss amount. Costs are determined by multiplying the facility’s overall cost-to-charge ratio (CCR) by
the allowable charges for the case. When a case qualifies for an outlier payment, CMS pays 80% of the
difference between the estimated cost of the case and the fixed-loss amount as a separate outlier payment, in
addition to the traditional DRG payment.
CMS is adopting two separate high-cost outlier targets – one for LTCH PPS standard Federal payment rate cases
and one for site neutral payment rate cases. CMS finalized a fixed-loss amount of $16,423 for LTCH PPS
standard Federal payment rate cases, lower than the proposed $18,768 amount. The applicable HCO threshold
for site neutral payment rate cases is the sum of the site neutral payment rate for the case and the IPPS fixedloss amount of $22,539 (changed from $22,544 in the October CMS IPPS correction notice) under the IPPS,
which is lower than the proposed amount of $24,485. CMS is adopting an approach under which the budget
neutrality adjustment of 0.949 for estimated HCO payments to site neutral payment rate cases will be applied
to the site neutral payment rate portion of the transitional blended rate payment in FFY 2016 (and will not be
applied to the LTCH PPS standard Federal payment rate portion of the transitional blended rate payment).
SSO Payments
FR pages 49612
Short-stay outlier (SSO) payments were established under the LTCH PPS to ensure that LTCH payments, which
are predicated on long lengths of stay (LOS), are not applied to cases where the patient may have received only
partial treatment at a LTCH. Currently, the SSO outlier policy applies to cases with a covered LOS of less than or
equal to 5/6 of the average LOS for the MS-LTC-DRG. Payments for SSO cases will continue to be based on the
lowest of four calculated amounts:
1) the full MS-LTC-DRG amount;
2) 120% of the MS-LTC-DRG per diem;
3) 100% of cost; or
4) Depending on the LOS of the SSO case relative to the “IPPS comparable threshold”: 100% of the
comparable inpatient PPS (IPPS) MS-DRG per diem or a blend of that amount and 120% of the MS-LTC-DRG
per diem. The IPPS comparable threshold is defined as the geometric ALOS for the same DRG under the
IPPS.
CMS is not applying the SSO policy to site neutral payment rates at this time.
Interrupted Stay Policy
FR pages 49605-49607
Under the LTCH PPS, an “interrupted stay” occurs when a patient is discharged from an LTCH—to an acute care
hospital, Inpatient Rehabilitation Facility (IRF), or Skilled Nursing Facility (SNF) for treatment/services not
available in the LTCH—and subsequently readmitted to the same LTCH for continued treatment. When an
interrupted stay occurs, the LTCH is paid a single payment for both stays.
CMS finalized its proposal to apply the interrupted-stay policy to site-neutral LTCH cases. CMS did not finalize
its proposal regarding the discharge status codes as reported on the preceding hospital’s claim.
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An LTCH discharge will be considered to have been immediately preceded by a discharge from a hospital if
there was a direct admission from such a hospital, as evidenced by the dates of discharge and admission, to the
LTCH.
Updates to the LTCH Quality Reporting Program (LTCH QRP)
FR pages 49723-49756, 49764-49766
Beginning in FFY 2014, the applicable annual update for any LTCH that does not submit the required data to
CMS is reduced by two percentage points. The IMPACT Act of 2014 requires the specification of quality
measures for the LTCH QRP, including such areas as medication reconciliation, skin integrity, functional status,
such as mobility and self-care, as well as incidence of major falls. Also the IMPACT Act stipulates that measures
must be standardized so they can be applied across post acute care settings.
The following lists the LTCHQRP measures and applicable payment determination years. CMS is focusing
initially on measures that can achieve the standardization across settings over time, and minimize or avoid
duplication of existing assessment items. CMS has not yet proposed any additional LTCH QRP quality measures
for the FY 2019 payment determination and subsequent years.
Finalized
CrossSetting
Measure
Payment
Determination
Year
Measure
NQF #
NHSN Catheter-Associated Urinary Tract Infection (CAUTI) Outcome
Measure
#0138
FFY 2015 and
beyond
NHSN Central Line-Associated Blood Stream Infection (CLABSI)
Outcome Measure
#0139
FFY 2015 and
beyond
Percent of Residents or Patients with Pressure Ulcers That Are New
or Worsened (Short-Stay)
#0678
Percent of Residents or Patients Who Were Assessed and
Appropriately Given the Seasonal Influenza Vaccine (Short-Stay)
#0680
FFY 2016 and
beyond
#0431
FFY 2016 and
beyond
NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant
Staphylococcus aureus (MRSA) Bacteremia Outcome Measure
#1716
FFY 2017 and
beyond
NHSN Facility-Wide Inpatient Hospital-Onset Clostridium difficile
Infection (CDI) Outcome Measure
#1717
FFY 2017 and
beyond
All-cause Unplanned Readmission Measure for 30 Days PostDischarge from Long-Term Care Hospitals FY 2017 and Subsequent
#2512
Yes
FFY 2018 and
beyond
Percent of Residents Experiencing One or More Falls with Major
Injury (Long-Stay)
#0674
Yes
FFY 2018 and
beyond
#2631
Yes
FFY 2018 and
beyond
Influenza Vaccination Coverage among Healthcare Personnel
Percent of LTCH Patients with an Admission and Discharge
Functional Assessment and a Care Plan That Addresses Function
(endorsed
7/23/15)
#2632
Change in Mobility among Patients Requiring Ventilator Support
NHSN Ventilator-Associated Event (VAE) Outcome Measure
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(endorsed
7/23/15)
N/A
Yes
FFY 2015 and
beyond
FFY 2018 and
beyond
FFY 2018 and
beyond
CMS will publicly report LTCH quality data on four quality measures beginning in Fall 2016 on a CMS website,
such as Hospital Compare. CMS will lengthen the quarterly data submission deadlines from 45 days to 135 days
beyond the end of each calendar year quarter beginning with quarter four (4) 2015 quality data in order to
align with other quality programs and to allow time for LTCHs to review and correct quality data prior to
posting.
Future Measure Concepts Under Consideration for the LTCH QRP
FR Page 49747-49748
CMS is reviewing comments on the following measures that remain under consideration for future years (those
with an * are cross-setting measures):
 Patient Safety: Ventilator Weaning (Liberation) Rate; Compliance with ventilator process Elements
during LTCH Stay; Venous Thromboembolism Prophylaxis; Medication Reconciliation.*;
 Effective Communication and Coordination of Care: Transfer of health information and care
preferences when an individual transitions.*; All-Condition Risk-Adjusted Potentially Preventable
Hospital Readmission Rate.*;
 Patient- and Caregiver-Centered Care: Discharge to community.*; Patient Experience of Care; Percent
of Patients with Moderate to Severe Pain; Advance Care Plan;
 Affordable Care: Medicare Spending per Beneficiary.*
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