LTACHs it’s all about the Magic Day

Keeping patients in LTACHs longer than necessary can increase reimbursement.

Two years ago, on Monitor Mondays and in the RACmonitor eNews, Ronald Hirsch, MD told the story of one of his patients, Carl, whose stay at a skilled nursing facility (SNF) seemed to be stretched to 20 days to maximize the revenue to the facility. For those who are not familiar with SNF payment, Medicare covers the first 20 days of a Part A SNF stay at 100 percent of approved charges, and days 21 to 100 are covered at 80 percent, requiring the SNF to collect from the patient or secondary insurer.

On this week’s Monitor Mondays, Hirsch, a permanent panelist on the long-running Internet broadcast, reported on a recent publication in the American Economic Review that suggests a similar phenomenon happens at long-term acute-care hospitals (LTACHs). In this article, the authors analyzed data on every Medicare patient hospitalized in a long-term acute-care hospital from 2004 to 2013. It ultimately revealed that patients seem to be kept in LTACHs to the point of maximal financial benefit for the facility, a day the authors deemed the “magic day.”

LTACHs are paid similarly to hospitals, with a diagnosis-related grouping-based payment system based on the diagnoses. Each MS-LTC-DRG has an associated average length of stay. But in order to get that full DRG payment, the patient’s length of stay must be at least five-sixth of the average length of stay. If it is less than that, then the hospital is paid a daily rate. For example, MS-LTC-DRG 207, Respiratory system diagnosis with ventilator support of greater than 96 hours, the most common MS-LTC-DRG billed, has an average length of stay of 31.8 days. The short stay outlier payment would be applicable until the patient’s stay exceeds 26.5 days.

The author’s complex analysis demonstrated that there is a large number of discharges from LTACHs that occur at this “magic day,” and it is suggested that it is not due to mere chance, but rather a systematic effort. In the article’s introduction, they reference a Wall Street Journal article from 2015 in which administrators were reportedly incentivized to get patients to reach that day. The authors even looked at data from prior to the implementation of the MS-LTC-DRG system and demonstrated a drastic shift in discharge patterns since that time – going from a normal distribution to one in which discharges appear to peak on the “magic day” (see page 3245).

Payment to LTACHs has received a lot of attention in the past few years. In 2016, the Centers for Medicare & Medicaid Services (CMS) added a site-neutral payment system to LTACHs, reducing payments for patients who had not spent three days in an intensive care unit or received mechanical ventilation for 96 or more hours. MedPAC has also been pushing for payment changes, even suggesting in 2016 that LTACHs get no payment updates.

This issue is certain to raise a few eyebrows in Congress and at CMS. The editors here at RACmonitor eNews and its contributors will be closely monitoring the response.


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