The Centers for Medicare & Medicaid Services late today issued its long-term care hospital prospective payment system proposed rule for fiscal year 2016. The rule proposes a 2.7% market-basket update, a 0.6% cut for productivity and an additional 0.2% cut as mandated by the Affordable Care Act. When accounting for all the rule’s provisions, CMS estimates a net decrease in LTCH payments of 4.6% over FY 2015 payment levels. The rule also sets forth the agency’s proposal to add a site-neutral payment component to the LTCH PPS beginning October 2015, as mandated by Congress. The AHA has estimated that under the new two-tiered payment system, approximately one-half of current LTCH cases would be paid the LTCH PPS rate, while the other half would be paid a lower site-neutral amount based on inpatient PPS rates. To be eligible for the higher LTCH PPS rate, a case must be “immediately discharged” from an inpatient PPS hospital to an LTCH; not have a principal LTCH diagnosis related to a psychiatric or rehabilitation condition; and receive at least three days of care in an intensive or critical care unit during the prior hospital stay or be assigned to an LTCH condition group for 96+ hours of ventilator care. Based on initial examination of the rule, it appears that CMS proposes to define the LTCH PPS-eligible cases using the full set of ICU and CCU revenue codes – a move urged by the AHA. In addition, CMS proposes two separate high-cost outlier target amounts and fixed-loss thresholds for LTCH PPS cases and site-neutral cases, which AHA also recommended. CMS proposes to define “immediate discharge” as a transfer to an LTCH within one day of discharge from the inpatient PPS hospital. As prescribed in statute, the new payment system will take effect with LTCH cost reporting periods beginning Oct. 1, 2015; for this and the subsequent cost-reporting period, payment for site-neutral cases will be a 50-50 blend of the lower site-neutral rate and the higher LTCH PPS rate. “It appears CMS’s proposals to implement changes to long-term care hospital payments are in line with congressional intent,” said AHA Executive Vice President Rick Pollack. “These facilities fill a critical role by treating more sick patients with extreme and major severity of illness than any other hospital or provider setting.” The proposed rule will be published in the April 30 Federal Register and comments will be accepted through June 16. AHA staff are reviewing the rule, and members will receive a Special Bulletin on Monday with further details.