LTACHs and MA Plans – Understanding Why The Rules Are Different

In a recent final rule, CMS-4201-F, the Centers for Medicare & Medicaid Services (CMS) went to great lengths to specify that Medicare Advantage (MA) plans must provide MA beneficiaries access to care at inpatient rehabilitation facilities (IRFs), skilled nursing facilities (SNFs), and by home care agencies (HHAs) if the criteria for traditional Medicare access are met. This requirement was codified in 42 § CFR 422.101(b)(2).

Much of this attention by CMS was created by the 2022 report from the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG), which found that a significant percentage of denials of requests for IRF, SNF, and even home care by MA plans would have been permitted under traditional Medicare.

Notably absent from the list of providers for which MA plans must follow the same guidelines as traditional Medicare are long-term acute-care hospitals (LTACHs). A review of the database of denials appealed to the Qualified Independent Contractor (QIC) by the patient or an authorized representative found that from 2020 to the present, 18,266 appeals for denial of access to LTACHs were filed, and only 74, or 0.4 percent of appeals, were ruled in favor of the patient.

While CMS does not give an explanation for not including access to LTACHs in CMS-4201-F, it should be remembered that LTACHs are licensed as acute-care hospitals, differing from short-term acute-care hospitals in that they care for a patient population that consists of patients who have longer lengths of stay and complex medical needs. They provide the same basic services that “regular” acute-care hospitals perform, with medical units, surgical suites, intensive care units, and so on, but are paid differently.

The LTACH payment system from Medicare underwent a change in 2015, with the addition of a site-neutral policy, paying LTACHs at a lower rate, comparable to short-term acute-care hospitals for patients who had not spent at least three days in an intensive care unit or require at least 96 hours of mechanical ventilation. It was thought that this was to deter LTACHs from accepting patients who could be adequately cared for in a SNF, at lower cost to the Medicare Trust Fund.

A study in 2018, looking retrospectively at LTACH admissions in 2012, found that 41 percent of those admissions would have been subjected to a site-neutral adjustment. In 2022, a total of 28 percent of LTACH admissions were paid at the site-neutral rate. This decline reflects what many hospital case managers have anecdotally noted when LTACHs have refused to accept patients who do not meet the criteria for the LTACH payment rate.  

In some instances, patients are transferred to LTACHs for care that could be provided at an acute-care hospital, such as long-term IV medication administration. That transfer may be desired to create capacity for the acute-care facility, especially in the intensive care unit, where resources are often limited. But some have suggested that hospitals seek LTACH transfers because they get paid a fixed DRG for their admission, with perhaps some additional outlier reimbursement, and the shorter they can make the inpatient admission, the more money they make (or lessen their losses).

On the other hand, there are clearly cases for which LTACHs do provide specialized care that is not available at the acute-care facility, such as complex wound care, long-term ventilator weaning, or complex medical management, along with intensive rehabilitation care. In these cases, the transfer to the LTACH should be viewed as no different than a transfer to a tertiary or quaternary care facility, and the discussion with the MA plan should focus on those specialized services – and not on payment.

While the disagreements with MA plans over inpatient admission versus outpatient care with observation services is certain to change in 2024, the ability to transfer patients to LTACHs will remain an obstacle. Understanding the why and how may help guide providers in doing what is best.