Medicare made millions in inappropriate payments to long-term hospitals

Medicare inappropriately paid long-term care hospitals (LTCHs) millions of dollars due to problems in the program's pay system for LTCH readmissions, according to a new report from the Department of Health and Human Services' Office of Inspector General (OIG).

In 2010 and 2011, the program inappropriately paid LTCHs $4.3 million for interrupted stays, the report found, and $12 million to 59 LTCHs with high numbers of readmissions immediately following the fixed day period (the number of days after which Medicare pays LTCHs for a second stay for a returning beneficiary).

Moreover, the program paid $3.1 million to 24 LTCHs with high readmissions following numerous short stays at intervening facilities (providers that treat patients during disruptions of their LTCH stays), according to the report.

"While these readmissions may be appropriate, this raises concerns about whether financial incentives, rather than beneficiaries' medical conditions, may have influenced some LTCHs' readmission decisions," the report states. "Further, the Centers for Medicare & Medicaid Services (CMS) did not know the co-located [located in the same campus or building as another provider] status of most LTCHs, preventing it from applying a payment adjustment to the 35 percent of co-located LTCHs that exceeded the 5 percent readmissions threshold."

To correct the problem, the report recommends CMS should assess its current safeguards against inappropriate payments to determine whether there is need for additional action. Additionally, the agency should investigate "to determine the extent to which financial incentives influence LTCHs' readmission decisions," and create a system to enforce the 5 percent readmission threshold, which states that "if the number of discharges and readmissions between an LTCH and a co-located provider exceeds 5 percent of the LTCH's total Medicare discharges to that provider during a cost-reporting period, all readmissions from the co-located provider are to be paid for as interrupted stays, regardless of the number of days spent away from the LTCH."

CMS rejected several OIG suggestions, including further analysis of financial incentives, but agreed to take action on payments OIG identified.

To learn more:
- here's the report (.pdf)