Medicare scrutinizes long-term care hospitals

January 12, 2009
| By Pete Daly |
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Long-term care hospitals are common in some areas of the U.S. and rare or non-existent in others. Because of the way they proliferated in selected regions in recent years, they are now being studied by Medicare, but the CEO of an LTCH located within Hackley Hospital in Muskegon said he has no worries about the future of his hospital.

"CMS — CMS being Medicare — is currently studying the LTCH industry and those LTCHs that have demonstrated that they are taking care of the acutely chronically ill patients will be the LTCHs that probably long-term will be the successful, surviving LTCHs," said Brian Pangle, CEO of Select Specialty Hospital-Western Michigan.

"It certainly appears that with the shrinking health care dollar — or I should say, the pie remaining the same size and more services being required — something ultimately has got to give," he said. "I know that there are LTCHs out there in the United States that are more like rehab facilities or more like skilled nursing facilities. Our focus of Select Medical Corporation is to take care of that very sick, critically ill patient."

Indeed, a CMS (Centers for Medicare & Medicaid Services) official in Washington who asked not to be identified told the Business Journal that some long-term care hospitals do a great job, while “other ones look like nursing homes."

In 2006, Medicare paid $105 billion to more than 3,000 acute care hospitals, amounting to about 20 percent of the hospitals' overall revenues, according to the Medicare Payment Advisory Commission, an independent Congressional agency that advises Congress on issues affecting Medicare. Medicare payments to about 400 long-term care hospitals totaled about $4.5 billion in 2007, about 70 percent of those hospitals’ revenues.

Long-term care patients, who by CMS definition are hospitalized an average of 25 days or more, are individuals with many more medical needs than the average acute care hospital patient, and their hospital stay is usually much more expensive. There is another level of Medicare payments for those patients.

Patients in acute care hospitals normally only stay for two to five days. The Medicare payment system is structured so that patients requiring longer acute care are generally transferred to an long-term care hospital, if one is available.

Due apparently to differing state laws pertaining to for-profit versus nonprofit hospitals, some states have no long-term care hospitals while a few states have most. Texas has 71 of the 392 Medicare-certified long-term care hospitals; most are for-profit. Louisiana has 40 LTCHs, Ohio 21 and Michigan about 14. New York State, on the other hand, has only four in spite of its large population, and those have been in operation for many years.

In a report to Congress in March, the Medicare Payment Advisory Commission stated that "CMS has long been concerned that incentives under the acute care hospital prospective payment system might encourage hospitals to make decisions about patient care on financial rather than clinical bases, resulting in inappropriate discharge of patients (from acute care hospitals) to LTCHs."

The commission’s report also stated that "frequently, LTCHs entering the program locate in market areas where LTCHs already exist, raising questions about whether there are sufficient numbers of very sick patients to support the number of LTCHs." The report further noted that a recent slowdown in the number of new long-term care hospitals "may indicate that the industry is approaching equilibrium after a period of explosive growth spurred by overpayment and inappropriate admissions."

CMS, the federal agency responsible for administering Medicare, Medicaid and other federal health care programs, was charged with Congress last year to undertake a study of LTCHs to determine "medical necessity, appropriateness of admission, and continued stay at and discharge from long term care hospitals." Its report to Congress is due in June 2009.

Select Medical Corp. has had a long-term care hospital "co-located" inside Hackley Hospital since 1996, the same year the corporation was founded in Mechanicsville, Penn., by father and son Rocco and Robert Ortenzio, both experienced health care executives. Select Medical is a privately held company with more than 21,000 employees throughout the U.S. at about 90 LTCHs plus outpatient rehabilitation clinics and rehab units within hospitals and other health care facilities. In addition to the Muskegon LTCH, Select has about six more in southeast Michigan.

A CMS official said about 60 percent of long-term care hospitals are "co-located" within acute care hospitals. Others are stand-alone facilities.

Pangle said of Select's 90 LTCHs, "probably 75 or 80 are hospitals-in-hospitals. That's our model."

CMS officials in Washington said Select Medical Corp. and another company, Kindred Healthcare, own close to half of all the LTCHs in the U.S.

Pangle said Select leases parts of two floors in one wing of Hackley and is certified for 31 beds. Select employs its own staff of 100, which includes nurses, pharmacy and therapists. The LTCH also purchases services from its host hospital, such as lab, radiology and patient meals. Doctors who work in Hackley can also treat patients in the LTCH, so Select Specialty Hospital-Western Michigan has physician coverage 24 hours a day, seven days a week.

"The benefit of being a hospital-in-a-hospital is that a surgeon or infectious disease physician can walk down the hall into our hospital and see our patient immediately after (seeing) a patient at Hackley," said Pangle. "We are a separate and distinct space within the hospital, but the physicians don't have to go outside to come to our hospital."

"Some people confuse (LTCHs) with long-term care nursing homes but we are far from that," said Pangle. "We actually take care of what is now becoming known as the chronically critically ill patient. Quite frankly, 15 or 20 years ago, the patients that we take care of today didn’t survive their acute illness."

Pangle explained that because of the advanced state of medical technology and the new drugs available today, "people are living, but they are still very, very sick. So they'll come to (an LTCH) for an extended stay — up to 25 or 30 days of additional intensive acute care services."

Pangle said about 60 percent of Select's patients eventually are discharged and go home. About 25 percent go to another level of care, which could be a skilled nursing facility, a nursing home or an acute rehab facility.

He said the national norm is that about 20 percent of LTCH patients die, but "our experience as an LTCH is around 15 percent."

"We are an economic boost to Hackley and Mercy in that we're taking care of a lot of people. We bring patients back into Muskegon that have been getting short -erm acute care in other places." The Select LTCH in Muskegon has even had patients transferred from hospitals as far away as the Mayo Clinic in Minnesota. Close proximity to family members is often the key to where those patients end up.

"For an extended stay like ours — 25 or 30 days — it's more convenient to be close to home," he said. HQ

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