Medicare: Payments for Certain Long-Term Care Hospitals that Specialize in Spinal Cord Treatment

The Centers for Medicare & Medicaid Services pays LTCHs for care provided to Medicare beneficiaries. There were about 400 LTCHs across the nation in 2016.

The 21st Century Cures Act included a provision for GAO to examine certain issues pertaining to LTCHs. This report examines (1) the health care needs of Medicare beneficiaries who receive services from the two qualifying hospitals; (2) how Medicare LTCH payment polices could affect the two qualifying hospitals; and (3) how the two qualifying hospitals compare with other LTCHs and other facilities that may treat Medicare patients with similar conditions.

GAO analyzed the most recently available Medicare claims and other data for the two qualifying hospitals and other facilities that treat patients with spinal cord injuries. GAO also interviewed HHS officials and stakeholders from the qualifying hospitals, other facilities that treat spinal cord patients, specialty associations, and others.

GAO provided a draft of this report to HHS. HHS provided technical comments, which were incorporated as appropriate. We also provided the two qualifying hospitals summaries of information we collected from them, to confirm the accuracy of statements included in our draft report. We incorporated their comments, as appropriate.

Spinal cord injuries may result in secondary complications that often lead to decreased functional independence and quality of life. The 21st Century Cures Act changed how Medicare pays certain long-term care hospitals (LTCH) that provide spinal cord specialty treatment. For these hospitals, the act included a temporary exception from how Medicare pays other LTCHs. Two LTCHs—Craig Hospital in Englewood, Colorado and Shepherd Center in Atlanta, Georgia—have qualified for this exception. GAO found that most Medicare beneficiaries treated at these two hospitals typically receive specialized care for multiple chronic conditions and other long-term complications that develop after initial injuries, such as pressure ulcers that can result in life-threatening infection. The two hospitals also provide specialty care for acquired brain injuries, such as traumatic brain injuries.

GAO's simulations of Medicare payments to these two hospitals using claims data from two baseline years—fiscal years 2013 and 2016—illustrate potential effects of payment policies. LTCHs are paid under a two-tiered system for care provided to beneficiaries: they receive the LTCH standard federal payment rate—or standard rate—for certain patients discharged from the LTCH, and a generally lower rate—known as a “site-neutral” rate—for all other discharges. Under the temporary exception, Craig Hospital and Shepherd Center receive the standard rate for all discharges during fiscal years 2018 and 2019. Assuming their types of discharges remain the same as in fiscal years 2013 and 2016, GAO's simulations of Medicare payments in the baseline years indicate:

Most of the discharges we examined would not qualify for the standard rate, if the exception did not apply.

Medicare payments would generally decrease under fiscal year 2020 payment policy, once the exception expires.

However, the actual effects of Medicare's payment policies on these two hospitals could vary based on factors, including the severity of patient conditions (e.g., Medicare payment is typically higher for more severe injuries), and whether hospitals' discharges meet criteria for the standard rate.

Similarities and differences may exist between the two qualifying hospitals and other facilities that treat Medicare patients with spinal cord and brain injuries. Patients with spinal cord and brain injuries may receive care in other LTCHs, but GAO found that most Medicare beneficiaries at these other LTCHs are treated for conditions other than spinal cord and brain injuries. Certain inpatient rehabilitation facilities (IRF) also provide post-acute rehabilitation services to patients with spinal cord and brain injuries. While data limitations make a direct comparison between these facilities and the two qualifying hospitals difficult, GAO identified some similarities and differences. For example, officials from some IRFs we interviewed reported providing several of the same programs and services as the two qualifying hospitals to medically complex patients, but the availability of services and complexity of patients varied. Among other reasons, the different Medicare payment requirements that apply to LTCHs and IRFs affect the types of services they provide and the patients they treat.

Long-term care hospitals (LTCHs) provide care to individuals, including  Medicare beneficiaries, who receive hospital services that require  inpatient lengths of stay greater than 25 days, on average. The Medicare  Payment Advisory Commission (MedPAC) estimates that Medicare spent  approximately $5.1 billion on care provided to beneficiaries at 407 LTCHs  nationwide in 2016. Traditionally, LTCHs have been paid by Medicare  under the LTCH prospective payment system (PPS) at the LTCH PPS  standard federal payment rate (hereafter standard rate). However, the  Pathway for SGR Reform Act of 2013 introduced site-neutral payment  policy, which changed Medicare’s payment for services that could be  provided in other less costly settings, beginning in fiscal year (FY) 2016.  As a result, LTCH PPS is now a two-tiered payment system under which  certain LTCH discharges continue to be paid at the standard rate, while  other discharges are paid at a generally lower site-neutral rate. Site- neutral payment policy is being phased into the LTCH PPS over five  years, with certain exceptions. In addition, statute provides that by fiscal  year 2021 LTCHs will no longer receive the standard rate if they fail to  meet certain requirements, raising concerns that some LTCHs may no  longer provide care to certain patients if they are paid at the site-neutral  rate.

The 21st Century Cures Act provided a temporary exception to this two- tiered approach for certain LTCHs that provide spinal cord specialty  treatment for cost reporting periods beginning during fiscal years 2018  and 2019. To qualify for this exception, LTCHs must meet three criteria  and according to Centers for Medicare & Medicaid Services’ (CMS)  officials, two LTCHs did so—Craig Hospital in Englewood, Colorado, and  Shepherd Center in Atlanta, Georgia. Under current law, the LTCH PPS  two-tiered payment system will apply to these hospitals after the  exception expires, in fiscal year 2020 and beyond.

The 21st Century Cures Act also included a provision for us to examine  the LTCHs that qualify for this exception. In this report we describe:  1.  the health care needs of Medicare beneficiaries who receive services  from the two qualifying hospitals;  2.  how Medicare LTCH payment policies could affect the two qualifying  3.  how the two qualifying hospitals compare with other LTCHs and other  facilities that may treat Medicare patients with similar conditions.

To determine the health care needs of Medicare beneficiaries who  receive services from the two qualifying hospitals, we reviewed  documentation, analyzed Medicare claims data, and conducted  interviews. Specifically, we reviewed documentation from the qualifying  hospitals that describes the health care needs of their Medicare  beneficiaries, including those beneficiaries receiving services for spinal  cord injury, and acquired brain injuries, such as traumatic brain injury. We  also analyzed Medicare claims data for federal fiscal years 2013 through  2016—the most recent data available at the time of our analysis—to  identify commonly charged Medicare severity long term care diagnosis- related group (MS-LTC-DRG) codes at both hospitals. Finally, we  interviewed representatives from the two qualifying hospitals; Department  of Health and Human Services (HHS) officials, including officials from  CMS, the National Institutes of Health, and the Administration for  Community Living; as well as other selected stakeholders on the health  care needs of these beneficiaries and the services they may receive from  the qualifying hospitals. We selected these other stakeholders based on  their relevant experience to cover a range of perspectives on the health  care needs of patients with spinal cord injury or traumatic brain injury. We  identified these stakeholders by conducting Internet searches on  organizations that work with patients or conduct research on spinal cord  and traumatic brain injuries, through analysis of Medicare claims data, or  through referrals from agency officials and other stakeholders we  interviewed. These stakeholders included: (1) health care providers with  experience treating spinal cord or acquired brain injury patients, including  providers from facilities that are among the National Institute on Disability,  Independent, Living, and Rehabilitation Research (NIDILRR) Spinal Cord  Injury and Traumatic Brain Injury Model Systems; (2) representatives  from specialty associations, such as the National Association of Long- Term Hospitals and the American Academy of Physical Medicine and  Rehabilitation; and (3) representatives from patient advocacy  organizations, including the Christopher & Dana Reeve Foundation and  the Brain Injury Association of America.

To determine how Medicare LTCH payment policies could affect the two  qualifying hospitals, we reviewed relevant laws and regulations, analyzed  Medicare claims data, and interviewed officials and stakeholders.  Specifically, we reviewed Medicare laws and regulations providing for  payments to acute care hospitals and LTCHs from fiscal years 2016  through 2018. We also analyzed Medicare claims data for federal fiscal  years 2013 through 2016 to determine the payments made to the two  qualifying hospitals prior to the temporary exception. We then conducted  simulations of Medicare payments to calculate what the two qualifying  hospitals would have been paid for patient discharges that occurred in  two baseline years—fiscal years 2013 and 2016—if applicable payment  rules from future years were applied to those discharges. See appendix I  for more information on how we conducted these simulations. In addition,  we interviewed officials from HHS, including CMS, to gather information  on how payment policies are being implemented. Lastly, we interviewed  representatives from the two qualifying hospitals and some of the other  stakeholder groups, officials from MedPAC, and state officials from  Georgia and Colorado to determine how LTCH payment policies have, or  are expected to, affect the two qualifying hospitals and other LTCHs.

To describe how the two qualifying hospitals compare with other LTCHs  and other facilities that may treat Medicare patients with similar  conditions, we analyzed Medicare claims data for federal fiscal years  2013 through 2016, reviewed information provided by the qualifying  hospitals and other stakeholders, and conducted interviews. Specifically,  we reviewed Medicare claims data for LTCHs—including the two  qualifying hospitals—and inpatient rehabilitation facilities (IRF), which  provide intensive rehabilitation services to patients after illness, injury, or  surgery. We reviewed information provided by selected facilities—to  identify similarities and differences in the types of patients treated and  services provided, such as information on patient characteristics, clinical  services provided, and staffing levels. Selected facilities included those  designated as NIDILRR model systems for spinal cord injury and other  facilities that treat high volumes of patients with similar conditions, as  identified through our data analysis. In addition, we interviewed officials  from HHS—including CMS, the Office of the Assistant Secretary for  Planning and Evaluation, and the Administration for Community Living— to gather information on what other types of facilities may treat patients  with conditions similar to those treated at the qualifying hospitals, current  work underway related to post-acute care, and the NIDILRR model  systems program, respectively. In addition to the two qualifying hospitals  and stakeholders previously noted for other components of our work, we  also interviewed officials from certain accrediting organizations—the Joint  Commission and the Commission on Accreditation of Rehabilitation  Facilities (CARF) International—to discuss their accreditation standards  and obtain their perspectives on similarities and differences in the types  of patients treated and services provided at the two qualifying hospitals  and other facilities.

We assessed the reliability of the Medicare claims data used in this report  by reviewing relevant documentation and interviewing officials and  representatives knowledgeable about the data. Based on these steps, we  found the data were sufficiently reliable for the purpose of our reporting  objectives.

We conducted this performance audit from October 2017 through  December 2018 in accordance with generally accepted government  auditing standards. Those standards require that we plan and perform the  audit to obtain sufficient, appropriate evidence to provide a reasonable  basis for our findings and conclusions based on audit objectives. We  believe that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objectives.

Spinal cord injuries are complex, lifelong injuries that typically result from  acute traumatic damage to the spinal cord or nerves within the spinal  column. In spinal cord injury patients, certain nervous system functions  may be impaired temporarily or permanently lost, depending on the level  and severity of the patient’s injury. In addition to lower level nervous  system functioning, spinal cord injury patients may develop secondary  medical complications that can further decrease functional independence  and quality of life, including, but not limited to:

Autonomic dysreflexia: a condition that may result in life threatening  hypertension—high blood pressure—due to impaired nervous system  response, below the level of spinal cord injury.

Depression: a medical mood disorder—commonly affecting about one  in five spinal cord injury patients—that can cause physical and  psychological symptoms (including changes in sleep and appetite,  and thoughts of death or suicide).

Impaired bowel and bladder functioning: potential inability to move  waste through the colon and control, stop or release, urine—which  can lead to other life-threatening illnesses (such as autonomic  dysreflexia) and/or infections.

Pressure ulcers: a common complication affecting up to 80 percent of  spinal cord injury patients that results from an area of the skin or  underlying tissue that is damaged due to decreased blood flow, which  can occur after extended periods of inactive sitting or lying, among  other ways. Pressure ulcers—also known as pressure sores or  wounds—can occur years after initial injury and may also result in life- threatening infections or amputation.

Spasticity: a common condition that affects 65 to 78 percent of spinal  cord injury patients and can result in symptoms ranging from mild  muscle stiffness to severe, uncontrollable leg movements.

Syringomyelia: a rare disorder that occurs when cerebrospinal fluid— normally found outside of the spinal cord and brain—enters the  interior of the spinal cord to form a cyst known as a syrinx. This cyst  expands and elongates over time, destroying the center of the spinal  cord. Symptoms can develop slowly and can include numbness, pain,  effects on bowel and bladder function, or paralysis. While this  condition can occur as a result of a trauma, such as a spinal cord  injury, the majority of cases are associated with a complex brain  abnormality.

Acquired brain injuries occur after birth and are not hereditary, congenital,  degenerative, or a result of birth trauma. Acquired brain injuries result in  changes to the brain’s neuronal activity, which can affect the physical  integrity, metabolic activity, or functional ability of nerve cells in the brain.  Acquired brain injuries can be either non-traumatic or traumatic in nature:  non-traumatic brain injuries are caused by an internal force—such as in  the case of stroke, tumors, or drowning—and traumatic brain injuries are  caused by an external force—such as in the case of car accidents,  gunshot wounds, or falls. The severity of brain injury can often result in  changes to physical, behavioral, and/or cognitive functioning. For  example, according to one source, nearly 50 percent of all people with a  traumatic brain injury experience depression within the first year after  injury, and nearly two-thirds experience depression within 7 years post- injury. Depression can develop as a result of physical changes in the  brain, emotional response to the injury, and other unrelated factors—such  as family history. Due to impaired cognitive functioning, traumatic brain  injury patients may also experience difficulty communicating,  concentrating, and processing and understanding information.

Acute care hospitals and LTCHs are paid under different Medicare  payment systems by law. Acute care hospitals are paid under the  inpatient prospective payment system (IPPS). LTCHs are paid under  the LTCH PPS. Under both systems, Medicare classifies patients based  on Medicare diagnosis groups, which organize patients based on their  conditions and the care they receive. Medicare payments for LTCHs are  typically higher than payments for acute care hospitals, to reflect the  average resources required to treat Medicare beneficiaries who need  long-term care.

Traditionally, all LTCH discharges were paid at the LTCH PPS standard  federal payment rate. The Pathway for SGR Reform Act of 2013  modified the LTCH PPS by establishing a two-tiered payment system— such that certain LTCH discharges continue to be paid at the standard  rate and others are paid at a generally lower, site-neutral rate. In its  March 2013 report, MedPAC described concerns regarding growth in the  number of LTCHs and the extent to which some of their patients may  otherwise be treated appropriately in less costly settings. To continue to  be eligible for the standard rate, the discharge must generally have a  preceding acute care hospital stay with either an intensive care unit stay  of at least 3 days or an assigned diagnosis group based on the receipt of  at least 96 hours of mechanical ventilation services in the LTCH, unless  an exception applies. Discharges that do not qualify for the standard  rate are to receive a blended site-neutral rate—equal to 50 percent of the  site-neutral rate and 50 percent of the standard rate—for discharges in  cost reporting periods beginning in fiscal years 2016 through 2019, and  the full site-neutral rate for discharges in cost reporting periods beginning  in fiscal year 2020.

Beginning with cost reporting periods in fiscal year 2020, if fewer than half  of an LTCH’s discharges meet the statutory requirements to be paid at  the standard rate, the LTCH will no longer receive any payments at that  rate for discharges in future cost reporting periods until eligibility for  receiving payments under that rate is reinstated. Under this scenario, all  discharges in succeeding cost reporting periods would be paid at the  generally lower rate that an acute care hospital would receive for  providing comparable care until eligibility for receiving payments at the  standard rate is reinstated. According to officials from HHS, the  department intends to establish a process for how hospitals would have  their eligibility for receiving payments at the standard rate reinstated as  part of the fiscal year 2020 rule-making cycle. Since the two qualifying  hospitals are currently only excepted from the statutory two-tiered  payment structure for cost reporting periods beginning during fiscal years  2018 and 2019, these two hospitals must also meet the statutory 50  percent threshold in fiscal year 2020 and beyond in order to receive the  standard rate for any future discharges until reinstated. See table 1 for  more information on Medicare’s LTCH PPS payment policies.

The Two Qualifying Hospitals: Craig Hospital and Shepherd Center

Two LTCHs have qualified for the temporary exception to site-neutral  payments, according to CMS officials. Craig Hospital is a private, not-for- profit facility that has specialized in medical treatment, research, and  rehabilitation for patients with spinal cord and brain injury since 1956.  Craig Hospital is classified as an LTCH for the purposes of Medicare  payment, and is licensed as a general hospital by the state of Colorado— which does not have separate designations for LTCHs. Craig Hospital  has been selected as one of 14 NIDILRR Spinal Cord Injury Model  Systems and one of 16 Traumatic Brain Injury Model Systems and is  accredited by the Joint Commission.

Shepherd Center is a private, not-for-profit facility that specializes in  medical treatment, research, and rehabilitation for people with traumatic  spinal cord injury and brain injury—as well as neuromuscular disorders,  including multiple sclerosis. Shepherd Center is classified as an LTCH for  the purposes of Medicare payment, and as a specialty hospital—which  includes LTCHs—by the state of Georgia. Shepherd Center is also  currently designated as a NIDILRR Spinal Cord Injury Model System and  is accredited by the Joint Commission. Shepherd Center also has several  CARF International accredited specialty programs. Specifically, it has  CARF-accredited inpatient rehabilitation specialty programs in spinal cord  injury and brain injury—for adults, children, and adolescents; and  interdisciplinary outpatient medical rehabilitation specialty programs in  spinal cord injury and brain injury—for adults, children, and adolescents,  among others.

More than half of the Medicare discharges in fiscal year 2013 at the two  qualifying hospitals—43 of 75 at Craig Hospital and 47 of 88 at Shepherd  Center—were within the diagnosis groups designated in section 15009(a)  of the 21st Century Cures Act. (See table 2 below for more information.)  Patients treated for these diagnosis groups may receive treatment for  spinal disorders and injuries; medical back problems; degenerative  nervous system disorders; skin grafts for skin ulcers; acquired brain  injuries, such as traumatic brain injuries; or other significant traumas with  major complicating and comorbid (simultaneous) conditions.

Both qualifying hospitals have a variety of specialized inpatient and  outpatient programs to help treat the complex health care needs of their  patients, including those covered by Medicare. For example, both  hospitals have wheelchair positioning clinics that can help prevent skin  complications, such as pressure ulcers, that can occur in spinal cord  patients. Both hospitals also have programs for those patients who need  ventilator support such as diaphragmatic pacing—support for patients  with respiratory problems whose diaphragm, lungs, and nerves have  limited function—and ventilator weaning programs. In addition to clinical  programs, both qualifying hospitals also provide transitional support, such  as providing counseling and education to families of patients with these  injuries.

Most Medicare Beneficiaries Who Receive Services at the Two Qualifying Hospitals Need Specialized Follow- Up Care to Manage Long-Term Effects of Catastrophic Injury

We found that most Medicare beneficiaries at the two qualifying hospitals  need specialized services to manage the chronic, long-term effects of a  catastrophic spinal cord or brain injury. Most of these patients are  younger than 65 and ineligible for Medicare at the time of their initial  injury, according to officials from the qualifying hospitals. Instead,  according to officials, these patients typically become eligible for  Medicare 2 years or more after their initial injury due to disability.  Medicare beneficiaries at the two qualifying hospitals typically need care  to manage comorbidities or the associated long-term complications of  their injury. Officials from Craig Hospital said a significant number of their  Medicare beneficiaries have comorbid conditions—such as diabetes or  cardiac problems—upon admission, that can be further complicated by  their injury. The officials said managing these comorbidities is as much of  a medical challenge as managing the spinal or brain injury. Officials from  both qualifying hospitals noted their Medicare beneficiaries who have a  spinal cord or brain injury also frequently seek care after initial injury to  address secondary complications resulting from their injury, including  urinary tract infections; respiratory problems; and pressure ulcers.

While the qualifying hospitals primarily treated traumatic spinal cord or  brain injuries, we found that their Medicare populations differed from each  other during the period from fiscal year 2013 to 2016. Specifically,

Craig Hospital. Our review of Medicare claims data indicates more  than 50 percent of the 246 Medicare discharges during this time were  associated with Medicare diagnosis groups for spinal cord conditions.  Specifically, during this time, Craig Hospital’s Medicare discharges  were commonly assigned to three diagnosis groups covering spinal  procedures and spinal disorders and injuries. For example, officials  from Craig Hospital told us that about 60 percent of Medicare  beneficiaries in fiscal year 2016 required surgical care for a spinal  cord injury. According to officials, most of these patients received  surgery for syringomyelia—a complication in spinal cord patients that  generally develops years after their initial injury. These officials told us  that Craig Hospital provided the pre- and post-operative care for those  patients in fiscal year 2016; however, currently, Craig Hospital is only  responsible for pre-operative assessments. The remaining 40  percent of their Medicare beneficiaries in fiscal year 2016 received  care for new spinal cord injuries.

Shepherd Center. Our review of Medicare claims data indicates the  most common diagnosis group of the 365 Medicare discharges during  this time—fiscal year 2013 to fiscal year 2016—related to treatment  for skin grafts that can be associated with pressure ulcers, among  other things. Shepherd Center officials confirmed that most of their  Medicare beneficiaries received treatment for a pressure ulcer that  occurred after initial injury which, as previously noted, can be so  severe as to result in life-threatening infections. According to officials,  most of their post-injury Medicare beneficiaries receive post-operative  care and other wound management services following surgery to treat  pressure ulcers, to ensure that the site will not tear again and to avoid  reoccurrence. Other diagnosis groups for Medicare patients at  Shepherd Center included those for spinal disorders and injuries and  extensive operating room procedures unrelated to principal  diagnosis. According to officials, beneficiaries in these diagnosis  groups received treatment for a range of conditions, including  traumatic injuries, urinary tract infections, neurogenic bladder and  bowel or respiratory complications. Officials told us the hospital also  served Medicare beneficiaries recovering from other acquired brain  injuries, such as stroke, and paralyzing neuromuscular conditions,  such as multiple sclerosis.

Stakeholders we interviewed—including providers at other facilities— noted that traumatic spinal cord and brain injury patients—including those  covered by Medicare—require significant levels of care due to the  complexity of their injuries as well as the immediate and long-term  complications that can occur from the injuries. For example, most  stakeholders told us these patients often require lifelong care due to the  complexity and reoccurrence of comorbidities or secondary  complications. Some of these stakeholders noted, for example, spinal  cord and brain injury patients often face mental health or psychosocial  conditions, such as depression or anxiety. Some stakeholders also  emphasized that many spinal cord injury patients risk secondary  complications that may not occur until years after injury, such as  pneumonia, pressure ulcers, and other infections. A few stakeholders told  us spinal cord and brain injury patients are often among the most  complex patients they treat. As such, patients with spinal cord or brain  injuries often require interdisciplinary care that covers a wide range of  specialties—including physiatry (rehabilitation medicine), neurology,  cardiology, and pulmonology—as well as specialized equipment or  technology, such as eye glance tools to control call systems or the  television.

Medicare Policies May Have Modest Effects on Payments to the Two Qualifying Hospitals Depending on the Types of Patients Treated and Other Factors

Simulations of Medicare Payments to Qualifying Hospitals Illustrate Potential Effects of Payment Policies

Simulations of Medicare payments illustrate the potential effects of  Medicare’s site-neutral payment policies, which were required by law, on  the qualifying hospitals. Specifically, our simulations calculated what the  qualifying hospitals would have been paid for Medicare patient discharges  that occurred in two baseline years—fiscal year 2013 (baseline year 1)  and fiscal year 2016 (baseline year 2)—if applicable payment policies  from future years (2017 through 2021) were applied to those  discharges. We selected two baseline years to account for differences  in data, such as the number of discharges, between fiscal year 2016—the  most recent year of complete data available at the time we began our  analysis—and fiscal year 2013. Table 3 below provides a summary of  Medicare discharges and payments to the qualifying hospitals during  these two baseline years. Variation in utilization and patient mix across  the baseline years allows the simulations to cover a range of possible  changes in payments for the two hospitals.

Our simulations indicated how Medicare’s payment policies could have  affected these baseline payments to each qualifying hospital:

Fiscal Year 2017 Blended Site-Neutral Rate Policy: Discharges that  do not meet criteria to receive the standard rate are to receive a  blended site-neutral rate—equal to 50 percent of the site-neutral rate  and 50 percent of the standard rate. We found that while some of the  baseline discharges would qualify for the standard rate, most  discharges would have been paid at the blended site-neutral rate.  Specifically, 8 to 20 percent of Craig Hospital’s baseline Medicare  discharges would have qualified for the standard rate, resulting in  simulated payments of about $3.86 million (baseline year 1) and  $3.22 million (baseline year 2) under blended site-neutral rate policy.

For Shepherd Center, between 23 percent and 40 percent of baseline  Medicare discharges would have qualified for the standard rate,  resulting in simulated payments of about $5.16 million (baseline year  1) and $5.31 million (baseline year 2). Each of these simulated  payments is an increase compared to actual payments made in the  baseline years.

Fiscal Years 2018 and 2019 Temporary Exception: The qualifying  hospitals are receiving the standard rate for all discharges, due to the  temporary exception. As a result, simulated payments under the  temporary exception are about $3.74 million (baseline year 1) and  $3.18 million (baseline year 2) for Craig Hospital and about $5.64  million (baseline year 1) and $5.75 million (baseline year 2) for  Shepherd Center, which is an increase compared to actual payments  made in the baseline years.

Fiscal Year 2020 Two-Tiered Payment Rate: The temporary exception  for the qualifying hospitals no longer applies; therefore, the site- neutral rate will apply to discharges not qualifying for the standard  rate. We found that both qualifying hospitals would receive some  payments at the standard rate, but that most of their discharges would  be paid at the lower, site-neutral rate—assuming similar caseloads  (e.g., patient mix). As a result, simulated baseline year payments at  Craig Hospital are about $3.47 million (baseline year 1) and $3.03  million (baseline year 2), and simulated baseline payments to  Shepherd are about $4.42 million (baseline year 1) and $4.55 million  (baseline year 2). The simulated payments therefore decrease  compared to those in fiscal year 2019, and also generally decrease  compared to actual payments made in the baseline years.

Future Years Under 50 Percent Threshold: Under statute, unless 50  percent or more of the hospital’s discharges in cost reporting periods  beginning during or after fiscal year 2020 qualify for the standard rate,  no subsequent payments will be made to a hospital at that rate in  each succeeding cost reporting period. Most of the baseline year  discharges did not qualify for the standard rate, and therefore  simulated payments are based on the generally lower comparable  acute care rate. However, simulated payments stayed about the same  between fiscal year 2020 and 2021, in part due to differences in  calculations for high-cost outlier payments. A high-cost outlier  payment is made to hospitals for those cases that are extraordinarily  costly, which can occur because of the severity of the case and/or a  particularly long length of stay. Specifically, simulated payments  were about $3.49 million (baseline year 1) and $3.02 million (baseline  year 2) for Craig Hospital and about $4.24 million (baseline year 1)  and $4.16 million (baseline year 2) for Shepherd Center. Without the  high-cost outlier payments, the simulated payments would have  decreased by at least $2 million. If the mix of patients at Craig  Hospital and Shepherd Center changes so that they meet the 50  percent threshold in fiscal year 2020, then simulated payments for  fiscal year 2021 could be higher. As of September 2018, Craig  Hospital officials told us that they expect to meet the 50 percent  threshold with their current patient mix. Shepherd Center officials told  us they do not expect to meet the 50 percent threshold.

See figures 1 and 2 below for the results of our simulations.

Our simulations of payments assume the number and type of Medicare  discharges at the two qualifying hospitals remain the same as those in  fiscal years 2013 and 2016. However, the full effect of payment policy on  future Medicare payments to the qualifying hospitals will depend on three  key factors that are subject to change:  1.  Severity of patient conditions: Medicare payment is typically higher  for more severe injuries, such as a traumatic injury with major  comorbidities or complications, relative to less severe injuries. In the  two baseline years we used for our simulations—fiscal year 2013 and  fiscal year 2016—more than half of the Medicare discharges at the  qualifying hospitals were associated with conditions with multiple  comorbidities and complications, as indicated by the diagnosis  groups, and this level of severity is reflected in the simulation results.  Future payments to qualifying hospitals will depend on the extent to  which the severity of patient conditions changes over time.  2.  Volume of discharges meeting criteria for the standard rate: As  previously noted, for a hospital to receive the standard rate for a  discharge, the discharge must meet certain criteria, such as having a  preceding acute care hospital stay with either an intensive care unit  stay of at least 3 days or an assigned diagnosis group based on the  receipt of at least 96 hours of mechanical ventilation services in the  LTCH. Our simulations reflect that in the two baseline years, about  23 percent of the fiscal year 2013 discharges and about 40 percent of  the fiscal year 2016 discharges met the criteria to receive the  standard rate for Shepherd Center; and about 8 percent of the fiscal  year 2013 discharges and about 20 percent of the fiscal year 2016  discharges met the criteria for Craig Hospital. Changes to these  amounts could affect future payments to the qualifying hospitals. In  particular, if 50 percent or more of either hospital’s discharges  beginning in fiscal year 2020 meet the standard rate criteria, then the  hospitals would be eligible for payments at the standard rate in fiscal  year 2021, which may result in higher payments compared to our  simulations.  3.  Payment adjustments: LTCHs may receive a payment adjustment  for certain types of discharges, such as short-stay outliers, interrupted  stays, or high-cost outliers. In particular, most discharges at Craig  Hospital received high-cost outlier payments (additional payments for  extraordinarily costly cases) during the two baseline years—76  percent in fiscal year 2013 and 85 percent in fiscal year 2016. At  Shepherd Center, at least 40 percent of discharges during the two  baseline years received high-cost outlier payments—about 42 percent  in fiscal year 2013 and about 58 percent in fiscal year 2016. The  amount of future payments to qualifying hospitals will depend on the  extent to which they continue to have a high proportion of discharges  with high-cost outlier payments.

Qualifying Hospitals and Some Stakeholders Reported that Payment Policies May Result in Fewer Services Provided and Fewer Patients Served by LTCHs

In addition to the effect on payments, officials from both qualifying  hospitals and some stakeholders we interviewed noted that the LTCH  site-neutral payment policies may result in fewer services provided and  fewer patients served by the qualifying hospitals and other LTCHs. For  example, officials from Craig Hospital told us they stopped providing post- operative care to patients requiring spinal surgery, such as patients with  syringomyelia, in 2016—instead referring them to other facilities—in part  because these discharges do not meet the criteria for the standard rate.  As of September 2018, they told us they do not plan to provide this care  in the future unless the temporary exception is extended. Officials from  Shepherd Center told us while they have not yet made changes to  services they offer to Medicare patients, they may limit which Medicare  beneficiaries they serve in the future. For example, they told us that most  of their Medicare beneficiaries were admitted from home or sought care in  their outpatient clinic. When the temporary exception expires after fiscal  year 2019, hospital officials expected that these patients will not qualify  for the standard rate. Shepherd Center officials said they may not be able  to serve similar patients in future years.

MedPAC officials and some stakeholders—a specialty association and  health care providers with experience treating patients with similar  conditions at other LTCHs—told us that some LTCHs have changed the  services they offer and the patients they treat to increase the proportion of  discharges that qualify for the standard rate. For example,

MedPAC officials cited reports that indicate how some LTCHs have  adjusted to the site-neutral policies. For example, a 2018 MedPAC  report indicated that LTCHs in one large for-profit chain were able to  make adjustments so that, as of September 30, 2016, close to 100  percent of their Medicare discharges met the criteria to receive the  standard rate.

A representative from an LTCH association told us that many LTCHs  have adjusted their patient mix by increasing the number of  discharges that meet criteria for the standard rate and turning away  some Medicare beneficiaries to reduce the number of discharges  subject to the site-neutral rate. The representative noted that certain  LTCHs have already been able to adjust their patient mix because  they have existing programs in place that focus on chronic, critically ill  patients who would have a preceding acute care hospital stay. The  representative told us that some LTCHs specialize in care for patients  who do not meet the criteria to receive the standard rate and would  generally be paid at the site-neutral rate; therefore, changing their  patient mix is not a viable strategy for these LTCHs. According to the  stakeholder, as of February 2018, about two-thirds of all LTCHs are  above the 50 percent threshold.

Providers from another LTCH told us that before the site-neutral  payment policy went into effect, only about 40 to 45 percent of its  discharges met criteria for the standard rate. However, they worked to  ensure most patients referred to the LTCH would qualify for the  standard rate. Officials told us patients who do not meet the criteria for  that rate typically either stay longer in the acute care hospital or are  transferred to a different post-acute care setting, such as a skilled  nursing facility. Officials noted that, in both cases, the patient may not  receive the specialized services often required for their injuries,  including those patients with spinal cord or brain injuries.

A provider we interviewed from another LTCH said that, historically,  the LTCH has accepted patients who acquire pressure ulcers at home  following discharge, but they may choose not to continue this practice  because the patients’ discharges would not meet the criteria to  receive the standard rate.

A few of these stakeholders told us some LTCHs are in markets that do  not have alternative providers of care, such as skilled nursing facilities, for  patients who do not meet the criteria. These LTCHs may have difficulty  adjusting their patient mix to avoid site-neutral payments. For example, a  provider from one LTCH said his facility continues to take “site-neutral  patients” because those patients often do not have another option to  receive the specialized services they need. The provider emphasized  concerns about the long-term viability of caring for those patients at the  facility, because their care is paid at lower rates.

Similarities and Differences May Exist Between the Two Qualifying Hospitals and Other Facilities that Treat Medicare Patients with Spinal Cord and Brain Injuries

The Two Qualifying Hospitals Treat Patients with Conditions Different Than Those at Most Other LTCHs, and Treat Fewer Medicare Patients

Our review of Medicare claims data, other information, and interviews  with stakeholders indicated the two qualifying hospitals treated Medicare  beneficiaries with different conditions than most of those treated at other  LTCHs. Our analysis of Medicare claims data indicates Craig Hospital  and Shepherd Center treat very few patients in the Medicare diagnosis  groups that are most common to other LTCHs. Specifically, for several  years, MedPAC has reported that LTCH patient discharges are  concentrated in a relatively small number of diagnosis groups. For  example, in March 2018, MedPAC reported that 20 diagnosis groups  accounted for over 61 percent of LTCH discharges at both for-profit and  not-for-profit facilities, in fiscal year 2016. However, in fiscal year 2016,  these diagnosis groups accounted for approximately 30 percent of  Medicare discharges—26 out of 88—at Shepherd Center, and most of  these discharges fell within a single diagnosis group which covers a  range of conditions. Craig Hospital did not discharge any Medicare  beneficiaries assigned to these 20 diagnosis groups, in fiscal year 2016.  The seven diagnosis groups that were used in the statutory criteria to  except Craig Hospital and Shepherd Center from site-neutral payments  were also not among these 20 diagnosis groups. For more information on  the 20 diagnosis groups common to LTCHs in fiscal year 2016, see  Appendix III, table 5.

Our review of Medicare claims data and other information indicates the  two qualifying hospitals also treat a relatively small number of Medicare  beneficiaries, a key distinguishing factor from most other LTCHs. In  March 2018, MedPAC reported that, on average, Medicare beneficiaries  account for about two-thirds of LTCH discharges. However, Medicare  claims data and other information provided by the two qualifying hospitals  indicate Medicare beneficiaries account for a significantly smaller  proportion (about 8 percent) of patients discharged from Craig Hospital  and Shepherd Center in 2016. Specifically, 40 of the 486 patients  discharged from Craig Hospital in fiscal year 2016 and 75 of the 912  patients discharged from Shepherd Center in calendar year 2016, were  Medicare beneficiaries. Officials from the qualifying hospitals told us  they treat few Medicare patients primarily because of the younger  average age of persons with spinal cord injuries and acquired brain  injuries.

While patients with spinal cord and brain injuries may receive care in  other LTCHs, most stakeholders we interviewed also suggested the two  qualifying hospitals treat patients that are different from those treated at  most other LTCHs, and can offer specialized care. Officials from the two  qualifying hospitals told us that, relative to most other facilities—including  most traditional LTCHs—they offer a more complete continuum of care to  meet the needs of patients at different stages of spinal cord and brain  injury treatment, without the need to transfer to different facilities. Officials  also stated that, unlike most traditional LTCHs, they are able to offer more  specialized care for patients with spinal cord and brain injuries, including  more comprehensive rehabilitation services. Stakeholders we interviewed  generally agreed that the two qualifying hospitals have developed  expertise in treating spinal cord and brain injury patients and offer  intensive rehabilitation services that are not provided in most other  LTCHs. In addition, officials from the Colorado Department of Health Care  Policy & Financing noted that Craig Hospital treats a patient population  that is different from most other LTCHs in the state of Colorado.  Specifically, according to officials, in comparison to other LTCHs in the  state, Craig Hospital treats: (1) a higher percentage of patients with more  severe conditions, (2) more patients from outside the state of Colorado,  (3) fewer patients requiring ventilator weaning or requiring wound care— conditions typically characteristic of LTCH patients—and (4) patients that  are, on average, younger than most other LTCHs in the state of Colorado.  In addition, a 2014 study of LTCHs conducted for the Georgia  Department of Community Health found Shepherd Center was “distinctly  different” from other LTCHs in the state of Georgia, and most LTCHs  nationwide.

Patients with Conditions Treated at Qualifying Hospitals Could Also Receive Care in IRFs, But Differences in Payment Systems and Data Limitations Make a Direct Comparison Difficult

Most stakeholders we interviewed suggested some IRFs provide  specialty care to patients with catastrophic spinal cord, acquired brain  injuries, or other paralyzing neuromuscular conditions. Most of the  stakeholders we interviewed noted that—like the two qualifying  hospitals—some IRFs have the expertise to treat patients with  catastrophic spinal cord, acquired brain injuries, or other paralyzing  neuromuscular conditions patients and thus, may also treat patients with  similar conditions. According to CMS officials, IRFs are specifically  designed to provide post-acute rehabilitation services to patients with  spinal cord injuries, brain injuries, and other neuromuscular conditions.  CMS officials noted that patients with these conditions typically respond  well to intensive rehabilitation therapy provided in a resource intensive  inpatient hospital environment and to the specific interdisciplinary  approach to care that is provided in the IRF setting. Stakeholders also  noted that patients with spinal cord injuries, brain injuries, and other  neuromuscular conditions may receive care in other settings. However,  some stakeholders noted that some of these providers—such as skilled  nursing facilities—generally do not offer the specialized care these  patients generally require.

Differences in payment systems and data limitations make it difficult to  directly compare the attributes of Medicare beneficiaries discharged from  the two qualifying hospitals and IRFs, including the costs of care they  receive. Medicare uses separate payment systems to pay LTCHs and  IRFs, for care provided to beneficiaries. LTCHs are paid pre-determined  fixed amounts for care provided to Medicare beneficiaries, under the  LTCH PPS. Medicare beneficiaries treated in LTCHs are assigned to  diagnosis groups (MS-LTC-DRGs) for each stay—based on the patient’s  primary and secondary diagnoses, age, gender, discharge status, and  procedures performed. IRFs are also paid pre-determined fixed amounts  for care provided to Medicare beneficiaries, but under a separate  system—IRF PPS. Medicare beneficiaries treated in IRFs are assigned to  case-mix groups—based on age, and level of motor and cognitive  function—and then further assigned to one of four tiers (within these  groups) based on the presence of specific comorbidities that may  increase their cost of care. According to CMS officials, because the  payment groups and assignments to those groups are different, it is  difficult to directly compare LTCH patients, classified in diagnosis groups,  with IRF patients, classified in case-mix groups. See Appendix II for more  information on these payment systems.

MedPAC has previously reported the differences in patient assessment  tools used by post-acute care providers undermines Medicare’s ability to  compare the patients admitted, costs of care, and outcomes beneficiaries  achieve in these settings, on a risk-adjusted basis. MedPAC has also  reported that while similar beneficiaries can receive care in each setting,  payments can differ considerably for comparable conditions, due to  differences in payment systems. It has made recommendations to address these issues. The Improving Medicare Post-Acute Care  Transformation Act of 2014 also requires the Secretary of HHS to collect  and analyze common patient assessment information and, in consultation  with MedPAC, submit a report to Congress recommending a post-acute  care PPS. Such efforts may make future comparison of beneficiaries,  costs of services, and outcomes of care across these settings possible.

Some Information Suggests Similarities and Differences Between Qualifying Hospitals and IRFs that Specialize in Spinal Cord and Brain Injuries

While data limitations make a direct comparison difficult, based on our  review of other data and information, and interviews with stakeholders,  we identified similarities and differences between the qualifying hospitals  and certain IRFs that provide specialty treatment for catastrophic spinal  cord injuries, acquired brain injuries, or other paralyzing neuromuscular  conditions. Key similarities and differences include the following:  Volume of services. Our review of Medicare claims data, other  information, and interviews with stakeholders indicate that—similar to the  two qualifying hospitals—some IRFs treat a high volume (at least 100) of  patients with complex spinal cord injury, brain injury, and other related  conditions. Officials from the two qualifying hospitals, as well as some  other stakeholders we interviewed—including officials from the  Christopher & Dana Reeve Foundation and the Brain Injury Association of  America—emphasized the importance of facilities treating a high volume  of patients with these specialized conditions, which can be an indicator of  expertise in treating these patients. Our review of Medicare claims data  for 1,148 IRFs in fiscal year 2016 identified 21 IRFs that treated at least  100 Medicare beneficiaries with non-traumatic and traumatic spinal cord  injuries and 109 IRFs that treated at least 100 Medicare beneficiaries with  non-traumatic and traumatic brain injuries.

Our review of Medicare claims data indicated that, similar to the two  qualifying hospitals—some IRFs also treat a high volume of patients with  “catastrophic” injuries—traumatic brain injury, traumatic spinal cord injury,  and major multiple traumas with brain or spinal cord injuries. Specifically,  we identified 25 IRFs that treated a high volume (at least 100) of  Medicare beneficiaries with catastrophic injuries, in fiscal year 2016. In  the absence of patient assessment data from the facilities, we did not  independently evaluate the level and severity of these patients’ injuries,  which can vary due to the presence of other co-morbid conditions. The  Medicare case mix indexes we reviewed for these 25 IRFs indicated that,  relative to other IRFs, most of these facilities treat patients who are more  resource intensive.

Specialty accreditation and designation as model systems. Like  Shepherd Center, some IRFs receive CARF-accreditation for specialty  programs to treat spinal cord and brain injuries. According to most  stakeholders, this accreditation indicates expertise in treating these  patients, as CARF International has established standards using  evidence-based practices, among other factors. Officials from the two  qualifying hospitals also noted CARF International has a specific focus on  quality and outcomes. However, officials from Shepherd Center noted  similarities in care and services offered at CARF-accredited facilities  would depend on the specialties for which they are certified.

Most of the stakeholders we interviewed also noted that designation as a  NIDILRR model system is an indicator of similar expertise in treating  patients with spinal cord and brain injuries. According to the Model  Systems Knowledge Translation Center, spinal cord injury and brain  injury model systems are recognized as national leaders in medical  research and patient care and provide the highest level of comprehensive  specialty services from the point of injury through eventual re-entry into  full community life. While stakeholders we interviewed from NIDILRR  model systems indicated the model system designation is focused  primarily on research, rather than clinical care, most noted that model  systems’ research often complements the facilities’ clinical efforts to  address the unique needs of these patients. Officials from HHS’s  Administration for Community Living also noted that all model system  grantees must provide a continuum of care—emergency care, acute  medical care, acute medical rehabilitation, and post-acute care—and that  can happen in various provider types. According to officials from the  qualifying hospitals and stakeholders from one other NIDILRR model  system we interviewed, Craig Hospital and Shepherd Center are the only  two LTCHs currently classified as spinal cord injury model systems; 12 of  14 spinal cord injury model systems are IRFs.

Specialized programs and services. Similar to the two qualifying  hospitals, some IRFs may also offer specialized programs and services  for patients with brain and spinal cord injuries, but the availability of these  programs and services may vary by facility. Officials from some of the  IRFs that responded to our information request—which included both  NIDILRR facilities and IRFs with CARF-accredited programs—told us  they provide specialized programs and services for patients with similar  conditions as those treated at two qualifying hospitals, and sometimes  compete with the two qualifying hospitals for the same patients. For  example, each IRF reported having interdisciplinary treatment teams; the  capacity to provide medical management of medically complex and high  acuity patients with spinal cord injury, traumatic brain injury, or other  major multiple traumas associated with a brain or spinal cord injury; family  education and training; and skin and wound programs or services, among  other services. However, the availability of certain services—including but  not limited to ventilator-dependent weaning programs, diaphragmatic  pacing, and outpatient programs for spinal cord and traumatic brain injury  patients—varied by facility.

Staff with specialized training and clinical expertise. Similar to the two  qualifying hospitals, most facilities that responded to our information  request also reported having physicians, nurses, and physical and  occupational therapists with specialty training in medical rehabilitation,  spinal cord, and/or brain injury. However, the number of staff with these  trainings, varied by facility. In comparison to the other facilities that  responded to our information request, the number of nurses and physical  and occupational therapists with these specialty trainings were generally  higher at Craig Hospital and Shepherd Center. According to an American  Spinal Injury Association consumer guideline that the Christopher & Dana  Reeve Foundation typically provides to spinal cord injury patients and  families, programs should regularly admit persons with spinal cord injury  each year, to develop and maintain the necessary skills to manage a  person with spinal cord injury, and a substantial portion of those admitted  should have traumatic injuries.

Out-of-state Admissions. Officials from the two qualifying hospitals  emphasized they admit a significant number of patients from out-of-state,  and our review of information provided by the qualifying hospitals and a  select group of IRFs indicated the qualifying hospitals admit a higher  percentage of patients from out-of-state. Specifically, information provided  by these IRFs indicates that less than a quarter of patients admitted to  these facilities, in 2016, were from out-of-state. Information provided by  Craig Hospital and Shepherd Center indicate that about half of their  patients were admitted from out-of-state in 2016. Officials from the  Colorado Department of Health Care Policy & Financing also noted Craig  Hospital treats a higher percentage of out-of-state patients, compared to  IRFs in the state.

Ability to treat medically complex patients. Officials from the two  qualifying hospitals told us they treat more medically complex patients  and provide a more complete range of medical services to spinal cord  and brain injury patients, not provided by most IRFs. Specifically, officials  from the two qualifying hospitals both noted they are able to treat patients  much sooner in their recovery process than most IRFs, due to their LTCH  status. Officials from the Shepherd Center noted that they have a 10-bed intensive care unit which allows them to take patients with certain injures  that some IRFs may not be equipped to admit—such as patients requiring  advance medical management and advanced level procedural services  and monitoring. Information provided by Shepherd Center indicated that,  in calendar year 2017, approximately 20 percent of all inpatients were  admitted to this unit and 13 percent of all inpatients were internally  transferred to this unit after developing medical complications. According  to officials, Craig Hospital does not have an intensive care unit, but noted  their ability to similarly care for medically complex patients—including  telemetry (e.g., specialized heart monitoring) and one-to-one nursing  care, if necessary. Most stakeholders we interviewed agreed that both  qualifying hospitals’ LTCH status provides certain advantages over IRFs,  such as the ability to admit some medically complex patients earlier in the  recovery process and longer lengths of stay. Stakeholders from most of  the IRFs we interviewed also reported having the flexibility to admit some  medically complex patients requiring more advanced level monitoring and  resources earlier in the recovery process—such as patients with  disorders of consciousness.

Officials from the two qualifying hospitals also said they offer a continuum  of care that can meet patient’s changing needs, without the need to  transfer them to different facilities. Information provided by Craig Hospital  indicated that 83 percent of patients treated at its facility, in 2016, were  discharged to home, 13 percent were discharged to another post-acute  care facility, and 3 percent were discharged to an acute care hospital. In  2016, approximately 91 percent of patients treated at Shepherd Center  were discharged to home, 7 percent were discharged to another post- acute care facility, and 2 percent were discharged to an acute care  hospital. Information provided by the IRFs that responded to our written  request varied by facility, but—similar to the two qualifying hospitals— each facility discharged more than 65 percent of patients to home.

IRF payment criteria. CMS and most other stakeholders we interviewed  noted that two Medicare payment policies applicable to IRFs, but not  LTCHs, may contribute to their different patient populations. Specifically,  to be classified for payment under Medicare’s IRF PPS, at least 60  percent of the IRF’s total inpatient population must require intensive  rehabilitative treatment for one or more of 13 conditions—which includes  both spinal cord and brain injury. To be admitted to an IRF, Medicare  beneficiaries must reasonably be expected to actively participate in and  benefit from the intensive rehabilitation therapy program, typically  provided in IRFs. According to HHS, per industry standard, the intensive  rehabilitation therapy program is often demonstrated by providing three  hours of rehabilitation services per day for at least five days per week, but  this is not the only way such intensity can be demonstrated. Officials  from the two qualifying hospitals told us they generally use Medicare’s  intensive rehabilitation requirement as a minimum standard for their  rehabilitation patients—even though they are not held to this requirement,  for the purposes of Medicare payment—but noted that some of their  patients may not meet this requirement, due to their medical complexity.

Length of stay and site-neutral payment requirements, for LTCHs. As  previously noted, LTCHs—including the two qualifying hospitals—must  have an average length of stay of greater than 25 days; IRFs are not  subject to this requirement. The average length of stay for patients  discharged from the Craig Hospital was about 60 days, in fiscal year  2016, and the average length of stay for patients discharged from  Shepherd Center was about 53 days, in calendar year 2016.

Stakeholders from the IRFs that responded to our information request  reported average lengths of stay ranging from 14 to 31 days, for patients  discharged in fiscal year 2016; the ranges of lengths of stay were slightly  higher for spinal cord injury and traumatic brain injury inpatients for the  IRFs, during the same period. LTCHs are also generally subject to site- neutral payment policy that is not applicable to IRFs and may decrease  LTCHs payments for certain discharges, under Medicare.

Other services provided. In addition to these Medicare specific  differences, a few stakeholders we interviewed also noted the two  qualifying hospitals receive additional funding from their strong  philanthropic donor base that may allow them to provide other services  and resources, not covered by Medicare or offered at some IRFs. For  example, while a few IRFs that responded to our information request  reported offering housing for families of injured patients, the two qualifying  hospitals offer up to 30 days of free housing to families of newly injured  rehabilitation patients, if both the family and patient live more than 60  miles from the hospital. Officials from Shepherd Center told us their  revenues are supplemented by investment income and donor funds.  Craig Hospital has also established a foundation that supports the  hospital in achieving its goals through philanthropy.

We provided a draft of this report to HHS. HHS provided technical  comments, which we incorporated as appropriate. We also provided the  two qualifying hospitals summaries of information we collected from them,  to confirm the accuracy of statements included in our draft report. We  incorporated their comments, as appropriate.

We are sending copies of this report to the Secretary of Health and  Human Services and other interested parties. In addition, the report will  be available at no charge on GAO’s website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-7114 or at farbj@gao.gov. Contact points for our Office  of Congressional Relations and Office of Public Affairs can be found on   the last page of this report. Other major contributors to this report are  listed in appendix IV.

Appendix I: Methodology for Simulating Payments to Qualifying Hospitals

This appendix describes our methodology for conducting simulations of  payments for the two qualifying hospitals.

We used Medicare claims data to conduct simulations of payments for the  two qualifying hospitals. We first identified discharges at each hospital in  two baseline years—federal fiscal years 2013 and 2016. We selected  fiscal year 2016 because it was the year with the most recent data  available at the time of our analysis, and we selected a second baseline  year because data for 2016 was different than data for other recent years.  For example, the number of discharges for one qualifying hospital  declined by nearly half between fiscal years 2013 and 2016. We chose  fiscal year 2013 because data from that year was used to help determine  which hospitals are subject to the temporary exception.

To identify how to appropriately calculate the long-term care hospital  (LTCH) payment for each of these discharges in future payment years,  we reviewed applicable federal regulation and documents from the  Centers for Medicare & Medicaid Services (CMS) and the Medicare  Payment Advisory Commission (MedPAC), and interviewed officials from  both organizations. See table 4 for the relevant components in the  formulas, such as Medicare severity long-term care diagnosis related  group (MS-LTC-DRG) weights, identified from final rule tables.

When conducting these simulations, we made the following assumptions:

For simulated payments for payment policies in effect for fiscal years  2017 and 2018, we used the base rates, relative weights (e.g., the  MS-LTC-DRG weights), geometric mean length of stay, wage index,  geographic adjustment factor, fixed-loss amounts, and outlier  thresholds that were published in the final rule tables for LTCH and  inpatient prospective payment system (IPPS) hospitals—also known  as acute care hospitals—for each respective year. At the time we  began our analysis, this information was not known for fiscal years  2019 through 2021. We chose to use the fiscal year 2018 rates when  conducting simulations for payment policies in those years because  historical trends showed that annual changes were minimal—about 1  percent. Therefore, to the extent that these values continue to change  over time, our findings may understate or overstate the amount that  the qualifying hospitals would have been paid in our baseline years  based on these future payment policies.

The site-neutral payment policy did not apply to discharges from the  fiscal year 2013 baseline year. Therefore, we examined Medicare  claims data to determine whether each discharge would have met the  criteria to receive the LTCH standard rate in that year. Specifically, we  determined whether each discharge had an acute care hospital stay  that immediately preceded their LTCH stay. We then determined  whether the time at the acute care hospital included three or more  days in the intensive care unit or whether there was a code on the  LTCH claim that indicated at least 96 hours of mechanical ventilation  services were provided. Per Medicare’s payment policy, we assumed  any discharge that met these two criteria would qualify for full LTCH  payment rate, unless the case was a psychiatric or rehabilitation stay,  as identified by the following MS-LTC-DRG codes: 876, 880, 881,  882, 883, 884, 885, 886, 887, 894, 895, 896, 897, 945, or 946.

Under statute, unless 50 percent or more of the hospital’s discharges  beginning during or after 2020 qualify for the standard rate, no  subsequent payments will be made to a hospital at that rate.  Therefore, when calculating simulated payments for fiscal year 2021,  we applied the 50 percent threshold. At the time of our analysis, CMS  had not yet finalized this policy through rule-making. As of November  2018, CMS officials told us that it is unlikely that any payment  adjustment under this provision would apply until 2022 because the  percentage cannot be determined until after an LTCH’s cost reporting  period has ended and data have been submitted.

Shepherd Center’s fiscal year is different than the federal fiscal year.

Therefore, the variables used to determine whether discharges in  federal fiscal year 2016 met criteria to receive the standard rate were  not available to use for some of the discharges that year. Of those  discharges, we assumed that the same percentage of discharges that  met the criteria to receive the standard rate in Shepherd’s fiscal  year—30 percent—met the criteria in federal fiscal year 2016.

When calculating site-neutral payments, we assumed that each  discharge would be paid at a rate comparable to that for acute care  hospitals—the IPPS comparable amount rate. Site-neutral payments  may also be based on the estimated cost-of-care, if it is lower than the  IPPS comparable amount rate. However, over 90 percent of  discharges at the qualifying hospitals were paid at the IPPS  comparable amount rate in fiscal year 2016.

Per CMS’s recommendation, we applied the cost-to-charge ratio that  was effective October 1, 2017, for each qualifying hospital, regardless  of discharge date. For Craig Hospital this value was 0.442 and for  Shepherd Center this value was 0.464. According to CMS officials, in  general, these values do not change significantly when they are  updated during the fiscal year. Therefore, they believe that using the  values effective at the start of the fiscal year is a reasonable  assumption.

We excluded indirect medical education adjustments and  disproportionate share hospital payments that are part of the IPPS  comparable amount rate because, according to CMS, they were  unlikely to have much impact for these hospitals.

CMS reviewed each of these assumptions and agreed they were  reasonable for purposes of our analysis. CMS also verified that we were  correctly applying the formulas for calculating these payments and using  the appropriate values from the final rules.

Appendix II: Calculating Medicare Payments for Long-Term Care Hospitals and Inpatient Rehabilitation Facilities

Figures 3 and 4 illustrate the methodology for calculating Medicare  payments under the long-term care hospital (LTCH) prospective payment  system (PPS) and the inpatient rehabilitation facility (IRF) PPS,  respectively, as reported by the Medicare Payment Advisory Commission  (MedPAC).

Appendix III: List of Common Diagnosis Groups for Long-Term Care Hospitals (LTCH)

Appendix III: List of Common Diagnosis  Groups for Long-Term Care Hospitals (LTCH)

In its March 2018 annual report to the Congress, the Medicare Payment  Advisory Commission (MedPAC) reported that 20 diagnosis groups  accounted for over 61 percent of LTCH discharges at both for-profit and  not-for-profit facilities, in fiscal year 2016. Table 5 provides a list of these  20 diagnosis groups.

Appendix IV: GAO Contact and Staff Acknowledgments

In addition to the contact named above, Will Simerl, Assistant Director;  Kathy King; Amy Leone, Analyst-in-Charge; Todd Anderson; Sam  Amrhein; LaKendra Beard; Rich Lipinski; Jennifer Rudisill; and Eric  Wedum made key contributions to this report. Also contributing were Leia  Dickerson, Diona Martyn, Vikki Porter, and Lisa Rogers.

After an injury or illness, Medicare patients who need long-term care may be able to get that care at different types of facilities.

Medicare payments to long-term care hospital facilities were typically higher than payments to other facilities because long-term care can take more resources, such as specialized equipment and staff.

A 2013 law phased in lower Medicare payments to long-term care hospitals for patients who could be treated in less costly facilities. Two hospitals focusing on spinal cord care qualified for an exception to the new payments in fiscal years 2018-19. We reviewed the effects of the exception.