March 21, 2008

Submitted electronically:
[http://www.regulations.gov](http://www.regulations.gov/)

Mr. Kerry Weems, Acting Administrator

Centers for Medicare & Medicaid Services

Department of Health & Human Services

Attention: CMS-1393-P

Post Office Box 8013

Baltimore, MD 21244-8013

**RE: (CMS-1393-P) Medicare Program; Prospective Payment System for
Long- Term Acute Care Hospitals; Proposed Annual Payment Rate Updates;
Policy Changes and Clarification**

Dear Mr. Weems:

On behalf of its 145 acute care hospital members and approximately 20
long-term acute care hospital (LTCH) members, the Michigan Health &
Hospital Association (MHA) appreciates the opportunity to submit
comments to the Centers for Medicare & Medicaid Services (CMS) regarding
the proposed rule published on Jan. 29, 2008, which would update the
LTCH prospective payment system (PPS) for Fiscal Year (FY) 2009.

LTCHs treat severely ill and medically complex patients, offering
specialized services and programs of care which are not otherwise
available, and serve a significant percentage of Medicare patients
residing in Michigan. As such, LTCHs play an integral role in the
continuum of care and in ensuring that patients receive the most
beneficial care and are able to return to a high quality of life in the
shortest timeframe. The MHA is concerned about the impact of several
provisions included in the proposed rule for FY 2009, primarily the:

-   Update for a 15-month rate year

-   6 percent increase to the outlier cost threshold

-   Description of one-time budget neutrality adjustment to the standard
    federal rate

**[Proposed Changes to LTCH PPS Rates for the 2009 LTCH PPS Rate
Year]{.underline}**

The Rehabilitation, Psychiatric and Long-Term Care (RPL) market basket
used for the LTCH PPS estimates that costs will increase by 3.5 percent
in 2009, compared to 2008 levels. However, for the 15-month rate year
for FY 2009, the CMS proposes to update the LTCH PPS rate by [only 2.6
percent]{.underline}. The CMS is proposing to offset the RPL market
basket with a 0.9 percent coding reduction, which is unwarranted since
any changes in case mix are reflective of patient severity and
complexity rather than coding changes. **As a result, the MHA recommends
that the CMS withdraw the proposed coding offset and provide the full
market basket update of 3.5 percent for the first twelve months of FY
2009.**

While the MHA is supportive of the CMS' proposal to modify the annual
update schedule to coincide with the hospital inpatient prospective
payment system (IPPS) update, the 15 month update should include a
factor to address the additional three months. The lack of a full
inflationary update violates the fundamental principle that at a
minimum, Medicare should cover the costs associated with caring for
patients, which in this instance are the program's most medically
complex patients.

The Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA) mandated
that, for the last three months of the 2008 rate year, the standard
federal rate for LTCH PPS be reduced to the 2007 rate for discharges
occurring between April 1 and June 30, 2008. This legislation does
**[not]{.underline}** reference discharges occurring in rate year 2009,
which begins July 1, 2008. However, in the proposed rule, the CMS used
the 2007 standard rate for calculating the 2009 update, a unilateral
move that is not authorized by Congress. Instead, the annual update to
the LTCH rate should be based on the most recent 2008 standard rates,
costs and other relevant input variables. **To accomplish this,** **the
MHA recommends that the CMS apply the full market basket rate update to
the 2008 standard federal rate, which is \$38, 356.45, rather than the
2007 standard federal rate of \$38,086.04, as this is inappropriate and
does not comply with legislative intent.** The CMS\' proposal would
jeopardize the ongoing operation of LTCHs in Michigan, reducing access
to these vital services for all citizens.

As a result, the MHA recommends that the CMS update the FY 2009 standard
federal rate for LTCHs as follows:

2008 Federal standard federal rate \$38,356.45

3.5% RPL Market basket increase [\$ 1, 342.48]{.underline}

2009 Rate for first 12 months \$39,698.93

Adjustment for July -- Sept 2009 [100.875\*\*]{.underline}

Adjusted Rate for July -- Sept 2009 \$40,046.30

> **\*\* .875 calculated based on 3/12 (.25) multiplied by 3.5 percent
> market basket increase**

**Furthermore, this higher update is required as LTCHs continue to
adjust to significant policy changes adopted by the CMS in the past few
years, including the short stay outlier (SSO) policy and the 25 percent
rule.**

**[One-Time Budget Neutrality Adjustment to the Standard Federal
Rate]{.underline}**

Since implementation of the LTCH PPS in 2002, the CMS has maintained
that it has the statutory authority to apply a one-time prospective
adjustment to the standard federal rate in order to neutralize for any
increase in LTCH payments that may have occurred due to the change in
payment methodology. In its final RY 2008 LTCH PPS rule, the CMS noted
that it has; ".. *provided for the possibility of making a one-time
prospective adjustment to the LTCH PPS rates by July 1, 2008, so that
the effect of any significant difference between actual payments and
estimated payments for the first year of the LTCH PPS would not be
perpetuated in the LTCH PPS rates for future years."* The MMSEA provides
that the CMS shall not apply any one-time adjustment to the LTCH PPS
rates for this purpose for the 3-year period that commenced on the date
of the enactment of the Act.

Although the CMS is precluded from implementing a one-time budget
neutrality adjustment for 2009, the proposed rule details a methodology
for determining whether a one-time budget neutrality adjustment may be
appropriate. According to this methodology and the estimates it
currently yields, the one-time adjustment, if applied in FY 2009, would
be negative 3.75 percent. The CMS notes that: "*. . We expect to address
the issue again when it is closer to the time section 114(c)(4) of the
MMSEA permit us to implement a one-time adjustment . . . .In the
meantime, we welcome comments on the methodology that we have
described."*

**The MHA strongly opposes the CMS' implementation of a budget
neutrality adjustment in future years as we believe this adjustment is
inappropriate since the agency has failed to provide evidence
demonstrating this change is warranted.**

**[Increase in Outlier Threshold]{.underline}**

The CMS is proposing a six percent increase in the cost outlier
threshold from the current \$20,738 to \$21,999 for FY 2009. The
rationale indicates that the current outlier payments exceed the outlier
payment pool of 8 percent. It appears that the increased threshold is
recommended based strictly on mathematics with no regard for the acuity
of the patients. **LTCHs only receive outlier payments when a patient's
acuity is so severe that charges and costs exceed the established
outlier threshold, which results in LTCHs absorbing significant losses
in many cases.** The proposed increase in the outlier threshold will
further increase the LTCH loss on each of these patients before the case
qualifies as a high-cost outlier.

**If the CMS deems an increase in the outlier threshold is warranted,
the MHA recommends that it be limited to the annual inflationary
increase.**

Please contact me at (517) 703-8603 or via e-mail at <mklein@mha.org> if
you have any questions or need further information regarding any of
these issues.

Sincerely,

![](media/image1.png)

Marilyn Litka-Klein

Senior Director, Health Finance