Prospective payment system (PPS) for long-term care hospitals (LTCHs)

The Medicare prospective payment system (PPS) for LTCHs applies to hospitals described in section 1886(d)(1)(B)(iv) of the Social Security Act (the Act), effective for cost reporting periods beginning on or after October 1, 2002. Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as "a hospital which has an average inpatient length of stay (as determined by the Secretary of Health and Human Services) of greater than 25 days."

Under the LTCH PPS, payment for a Medicare patient will be made at a predetermined, per discharge amount for each Medicare severity long-term care diagnostic related group (MS-LTC-DRG). The system includes payment for all inpatient operating and capital costs of furnishing covered services (including routine and ancillary services), but not certain pass-through costs (i.e., bad debts, direct medical education, and blood clotting factors). The formula for an unadjusted LTCH PPS prospective payment is: Federal Prospective Payment = MS-LTC-DRG Relative Weight * Standard Federal Rate.

For more information regarding LTCHs please go to the CMS website.