To amend title XVIII of the Social Security Act to ensure and foster continued patient quality of care by establishing facility and patient criteria for long-term care hospitals and related improvements under the Medicare Program.

Summary: Medicare Long-Term Care Patient Safety and Improvement Act of 2007 - Amends title XVIII (Medicare) of the Social Security Act (SSA) to define "long-term care hospital" and establish new patient criteria for long-term care hospital prospective payments.

Requires the Secretary of Health and Human Services to approve under Medicare distinct part inpatient rehabilitation hospital units in long-term care hospitals, if rehabilitation services are not included within a major diagnostic category.

Directs the Secretary to: (1) report to the appropriate congressional committees recommendations on the promulgation of national long-term care hospital facility and patient criteria; and (2), after rulemaking, implement them.

Amends SSA title XI to require a peer review organization to review on a hospital-specific basis the medical necessity of admissions to, and continued stay at, long-term care hospitals of Medicare part A (Hospital Insurance) patients.

Directs the Secretary, with certain exceptions, to impose a temporary moratorium on the Medicare certification of new long-term care hospitals (and satellite facilities).

Directs the Secretary not to apply the 25% patient threshold payment adjustment to freestanding and grandfathered long-term hospitals.

States that payments to an applicable long-term care hospital or satellite facility, located in a rural area or co-located with an urban single or MSA dominant hospital, shall not be subject to any payment adjustment if no more than 75% percent of its Medicare discharges are admitted from a co-located hospital.

Provides that payment to an applicable long-term care hospital or satellite facility co-located with another hospital shall not be subject to such payment adjustments, if no more than 50% of its Medicare discharges are admitted from a co-located hospital.

Prohibits the Secretary from applying certain proposed amendments to the short-stay outlier payment policy for certain long-term care hospitals.

Prohibits the Secretary from making a certain one-time prospective adjustment to long-term care hospital prospective payment rates.

Directs the Secretary to study and report to the Congress on appropriate quality measures for Medicare patients receiving care in long-term care hospitals.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Medicare Long-Term 
Care Patient Safety and Improvement Act of 2007''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definition of long-term care hospital.
Sec. 3. Implementation of facility and patient criteria.
Sec. 4. Establishment of rehabilitation units within certain long-term 
                            care hospitals.
Sec. 5. Expanded review of medical necessity.
Sec. 6. Limited, qualified moratorium of long-term care hospitals.
Sec. 7. No application of 25 percent patient threshold payment 
                            adjustment to freestanding and 
                            grandfathered LTCHS.
Sec. 8. Payment for hospitals-within-hospitals.
Sec. 9. No application of very short-stay outlier policy.
Sec. 10. No application of one time adjustment to standard amount.
Sec. 11. Long-term care hospital quality improvement initiative.

SEC. 2. DEFINITION OF LONG-TERM CARE HOSPITAL.

    (a) Definition.--Section 1861 of the Social Security Act (42 U.S.C. 
1395x) is amended by adding at the end the following new subsection:

                       ``Long-Term Care Hospital

    ``(ccc) The term `long-term care hospital' means an institution 
which--
            ``(1) is primarily engaged in providing inpatient services, 
        by or under the supervision of a physician, to Medicare 
        beneficiaries whose medically complex conditions require a long 
        hospital stay and programs of care provided by a long-term care 
        hospital;
            ``(2) has an average inpatient length of stay (as 
        determined by the Secretary) for Medicare beneficiaries of 
        greater than 25 days, or as otherwise defined in section 
        1886(d)(1)(B)(iv);
            ``(3) satisfies the requirements of subsection (e);
            ``(4) meets the following facility criteria:
                    ``(A) the institution has a patient review process, 
                documented in the patient medical record, that screens 
                patients prior to admission, validates within 48 hours 
                of admission that patients meet admission criteria, 
                regularly evaluates patients throughout their stay, and 
                assesses the available discharge options when patients 
                no longer meet the continued stay criteria;
                    ``(B) the institution has active physician 
                involvement with patients during their treatment 
                through an organized medical staff, physician-directed 
                treatment with physician on-site availability on a 
                daily basis to review patient progress, and consulting 
                physicians on call and capable of being at the 
                patient's side within a moderate period of time, as 
                determined by the Secretary;
                    ``(C) the institution has interdisciplinary team 
                treatment for patients, requiring interdisciplinary 
                teams of health care professionals, including 
                physicians, to prepare and carry out an individualized 
                treatment plan for each patient; and
            ``(5) meets patient criteria relating to patient mix and 
        severity appropriate to the medically complex cases that long-
        term care hospitals are designed to treat, as measured under 
        section 1886(m).''.
    (b) New Patient Criteria for Long-Term Care Hospital Prospective 
Payment.--Section 1886 of such Act (42 U.S.C. 1395ww) is amended by 
adding at the end the following new subsection:
    ``(m) Patient Criteria for Prospective Payment to Long-Term Care 
Hospitals.--
            ``(1) In general.--To be eligible for prospective payment 
        under this section as a long-term care hospital, a long-term 
        care hospital must admit not less than a majority of patients 
        who have a high level of severity and who are assigned to one 
        or more of the following major diagnostic categories:
                    ``(A) Circulatory diagnoses.
                    ``(B) Digestive, endocrine, and metabolic 
                diagnoses.
                    ``(C) Infection disease diagnoses.
                    ``(D) Neurological diagnoses.
                    ``(E) Renal diagnoses.
                    ``(F) Respiratory diagnoses.
                    ``(G) Skin diagnoses.
                    ``(H) Other major diagnostic categories as selected 
                by the Secretary.
            ``(2) Major diagnostic category defined.--In paragraph (1), 
        the term `major diagnostic category' means the medical 
        categories formed by dividing all possible principle diagnosis 
        into mutually exclusive diagnosis areas which are referred to 
        in 67 Federal Register 49,985 (August 1, 2002).''.
    (c) Establishment of Rehabilitation Units Within Certain Long-Term 
Care Hospitals.--If the Secretary of Health and Human Services does not 
include rehabilitation services within a major diagnostic category 
under section 1886(m)(2) of the Social Security Act, as added by 
subsection (b), the Secretary shall approve for purposes of title XVIII 
of such Act distinct part inpatient rehabilitation hospital units in 
long-term care hospitals consistent with the following:
            (1) A hospital that, on or before October 1, 2004, was 
        classified by the Secretary as a long-term care hospital, as 
        described in section 1886(d)(1)(B)(iv)(I) of such Act (42 
        U.S.C. 1395ww(d)(1)(V)(iv)(I)), and was accredited by the 
        Commission on Accreditation of Rehabilitation Facilities, may 
        establish a hospital rehabilitation unit that is a distinct 
        part of the long-term care hospital, if the distinct part meets 
        the requirements (including conditions of participation) that 
        would otherwise apply to a distinct-part rehabilitation unit if 
        the distinct part were established by a subsection (d) hospital 
        in accordance with the matter following clause (v) of section 
        1886(d)(1)(B) of such Act, including any regulations adopted by 
        the Secretary in accordance with this section, except that the 
        one-year waiting period described in section 412.30(c) of title 
        42, Code of Federal Regulations, applicable to the conversion 
        of hospital beds into a distinct-part rehabilitation unit shall 
        not apply to such units.
            (2) Services provided in inpatient rehabilitation units 
        established under paragraph (1) shall not be reimbursed as 
        long-term care hospital services under section 1886 of such Act 
        and shall be subject to payment policies established by the 
        Secretary to reimburse services provided by inpatient hospital 
        rehabilitation units.
    (d) Effective Date.--The amendments made by subsections (a) and 
(b), and subsection (c), shall apply to discharges occurring on or 
after January 1, 2008.

SEC. 3. IMPLEMENTATION OF FACILITY AND PATIENT CRITERIA.

    (a) Report.--No later than 1 year after the date of the enactment 
of this Act, the Secretary of Health and Human Services (in this Act 
referred to as the ``Secretary'') shall submit to the appropriate 
committees of Congress a report containing recommendations regarding 
the promulgation of the national long-term care hospital facility and 
patient criteria for application under paragraphs (4) and (5) of 
section 1861(ccc) and section 1886(m) of the Social Security Act, as 
added by section 2. In the report, the Secretary shall consider 
recommendations contained in a report to Congress by the Medicare 
Payment Advisory Commission in June 2004 for long-term care hospital-
specific facility and patient criteria to ensure that patients admitted 
to long-term care hospitals are medically complex and appropriate to 
receive long-term care hospital services.
    (b) Implementation.--No later than 1 year after the date of 
submittal of the report under subsection (a), the Secretary shall, 
after rulemaking, implement the national long-term care hospital 
facility and patient criteria referred to in such subsection. Such 
long-term care hospital facility and patient criteria shall be used to 
screen patients in determining the medical necessity and 
appropriateness of a Medicare beneficiary's admission to, continued 
stay at, and discharge from, long-term care hospitals under the 
Medicare program and shall take into account the medical judgment of 
the patient's physician, as provided for under sections 1814(a)(3) and 
1835(a)(2)(B) of the Social Security Act (42 U.S.C. 1395f(a)(3), 
1395n(a)(2)(B)).

SEC. 4. EXPANDED REVIEW OF MEDICAL NECESSITY.

    (a) Expanded Duties of QIOs.--Section 1154(a) of the Social 
Security Act (42 U.S.C. 1320c-3(a)) is amended by adding at the end the 
following new paragraph:
            ``(18)(A) The organization shall review the medical 
        necessity of admissions to long-term care hospitals (described 
        in section 1886(d)(1)(B)(iv)(I)) and continued stay at such 
        hospitals, of individuals entitled to, or enrolled for, 
        benefits under part A of title XVIII, on a hospital-specific 
        basis.
            ``(B) The medical necessity reviews under subparagraph (A) 
        shall be conducted for each such long-term care hospital on an 
        annual basis in accordance with rules (including a sample 
        methodology) specified by the Secretary. Such sample 
        methodology shall--
                    ``(i) provide for a statistically valid and 
                representative sample of admissions of such individuals 
                sufficient to provide results at a 95 percent 
                confidence interval; and
                    ``(ii) guarantee that no less than 65 percent of 
                overpayments received by long-term care hospitals for 
                medically unnecessary admissions and continued stays of 
                individuals in long-term care hospitals will be 
                identified and recovered and that related days of care 
                will not be counted toward the length of stay 
                requirement contained in section 1886(d)(i)(B)(iv)(I).
            ``(C) The Secretary shall establish a denial rate with 
        respect to such reviews that, if exceeded, could require 
        further review of the medical necessity of admissions and 
        continued stay in the hospital involved.
            ``(D)(i) Subject to clause (iii), the previous provisions 
        of this paragraph shall cease to apply as of the date specified 
        in clause (ii).
            ``(ii) The date specified in this clause is the later of 
        January 1, 2013, or the date of implementation of national 
        long-term care hospital facility and patient criteria under 
        section 3 of the Medicare Long-Term Care Patient Safety and 
        Improvement Act of 2007.
            ``(iii) As of the date specified in clause (ii), the 
        Secretary shall determine whether to continue to guarantee, 
        through continued medical review and sampling under this 
        paragraph, recovery of no less than 65 percent of overpayments 
        received by long-term care hospitals due to medically 
        unnecessary admissions and continued stays.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to discharges occurring on or after October 1, 2007.

SEC. 5. LIMITED, QUALIFIED MORATORIUM OF LONG-TERM CARE HOSPITALS.

    (a) In General.--Subject to subsection (b), the Secretary shall 
impose a temporary moratorium on the certification of new long-term 
care hospitals (and satellite facilities) for purposes of the Medicare 
program under title XVIII of the Social Security Act. The moratorium 
shall terminate at the end of the 3-year period beginning on the date 
of the enactment of this Act.
    (b) Exceptions.--
            (1) In general.--The moratorium under subsection (a) shall 
        not apply--
                    (A) to a long-term care hospital or satellite 
                facility that is under development as of the date of 
                the enactment of this Act; or
                    (B) to a long-term care hospital in an area in 
                which there is not a long-term care hospital, if the 
                Secretary determines it to be in the best interest to 
                provide access to long-term care hospital services to 
                Medicare beneficiaries residing in such area.
        There shall be no administrative or judicial review from a 
        decision of the Secretary under this paragraph. Where there is 
        no long-term care hospital in a rural area or metropolitan 
        statistical area, the Secretary shall provide a presumption 
        that the establishment of a new long-term care hospital is in 
        the best interest of Medicare program beneficiaries.
            (2) ``Under development'' defined.--For purposes of 
        paragraph (1)(A), a long-term care hospital or satellite 
        facility is considered to be ``under development'' as of a date 
        if any of the following have occurred on or before such date:
                    (A) All or substantially all funding has been 
                committed or received for development of the hospital 
                or facility.
                    (B) Zoning requirements have been met for the 
                construction of the hospital or facility.
                    (C) Necessary approvals from appropriate State 
                agencies have been received for the operation of the 
                hospital or facility.
                    (D) The hospital documents that it is within a 6-
                month long-term care hospital demonstration period 
                required by section 412.23(e)(1)-(3) of title 42, Code 
                of Federal Regulations, to demonstrate that it has a 
                greater than 25 day average length of stay.
                    (E) There is other evidence presented that the 
                Secretary determines would indicate that the hospital 
                or satellite is under development.

SEC. 6. NO APPLICATION OF 25 PERCENT PATIENT THRESHOLD PAYMENT 
              ADJUSTMENT TO FREESTANDING AND GRANDFATHERED LTCHS.

    The Secretary shall not apply section 412.536 of title 42, Code of 
Federal Regulations, or any similar provision, to freestanding long-
term care hospitals and the Secretary shall not apply such section or 
section 412.534 of title 42, Code of Federal Regulations, or any 
similar provisions, to a long-term care hospital identified by section 
4417(a) of the Balanced Budget Act of 1997 (Public Law 105-33). A long-
term care hospital identified by such section 4417(a) shall be deemed 
to be a freestanding long-term care hospital for the purpose of this 
section. Section 412.536 of title 42, Code of Federal Regulations, 
shall be void and of no effect.

SEC. 7. PAYMENT FOR HOSPITALS-WITHIN-HOSPITALS.

    (a) In General.--Payments to an applicable long-term care hospital 
or satellite facility which is located in a rural area or which is co-
located with an urban single or MSA dominant hospital under paragraphs 
(d)(1), (e)(1), and (e)(4) of section 412.534 of title 42, Code of 
Federal Regulations, shall not be subject to any payment adjustment 
under such section if no more than 75 percent of the hospital's 
Medicare discharges (other than discharges described in paragraphs 
(d)(2) or (e)(3) of such section) are admitted from a co-located 
hospital.
    (b) Co-Located Long-Term Care Hospitals and Satellite Facilities.--
            (1) In general.--Payment to an applicable long-term care 
        hospital or satellite facility which is co-located with another 
        hospital shall not be subject to any payment adjustment under 
        section 412.534 of title 42, Code of Federal Regulations, if no 
        more than 50 percent of the hospital's Medicare discharges 
        (other than discharges described in section 412.534(c)(3) of 
        such title) are admitted from a collocated hospital.
            (2) Applicable long-term care hospital or satellite 
        facility defined.--In this section, the term ``applicable long-
        term care hospital or satellite facility'' means a hospital or 
        satellite facility that is subject to the transition rules 
        under section 412.534(g) of title 42, Code of Federal 
        Regulations.
    (c) Effective Date.--Subsections (a) and (b) shall apply to 
discharges occurring on or after October 1, 2007.

SEC. 8. NO APPLICATION OF VERY SHORT-STAY OUTLIER POLICY.

    The Secretary shall not apply amendments proposed on May 11, 2007 
(72 Federal Register 26870) to be made to the short-stay outlier 
payment provision for long-term care hospitals contained in section 
412.529(c)(3)(i) of title 42, Code of Federal Regulations, or any 
similar provision.

SEC. 9. NO APPLICATION OF ONE TIME ADJUSTMENT TO STANDARD AMOUNT.

    The Secretary shall not make the one-time prospective adjustment to 
long-term care hospital prospective payment rates provided for in 
section 412.523(d)(3) of title 42, Code of Federal Regulations, or any 
similar provision.

SEC. 10. LONG-TERM CARE HOSPITAL QUALITY IMPROVEMENT INITIATIVE.

    (a) Study To Establish Quality Measures.--
            (1) In general.--The Secretary shall conduct a study (in 
        this section referred to as the ``study'') to determine 
        appropriate quality measures for Medicare patients receiving 
        care in long-term care hospitals.
            (2) Report.--By not later than July 1, 2008, the Secretary 
        shall submit to Congress a report on the results of the study 
        under paragraph (1).
    (b) Selection of Quality Measures.--
            (1) In general.--After completion of the study under 
        subsection (a), subject to paragraph (2), the Secretary shall 
        choose 3 quality measures recommended in the study to be 
        reported by long-term care hospitals.
            (2) Expansion of quality measures.--The Secretary may 
        expand the number of quality measures required to be reported 
        by long-term care hospitals beyond those chosen under paragraph 
        (1). If the Secretary adds additional measures, the measures 
        shall reflect a consensus among the affected parties. The 
        Secretary may replace any measures in appropriate cases, such 
        as where all hospitals are effectively in compliance or where 
        measures have been shown not to represent the best clinical 
        practice.
    (c) Requirement for Submission of Data.--
            (1) In general.--Long-term care hospitals must collect data 
        on the three quality measures chosen under subsection (b) and 
        submit all required quality data to the Secretary.
            (2) Failure to submit data.--Any long-term care hospital 
        which does not submit the required quality data to the 
        Secretary in any fiscal year shall have the applicable 
        percentage increase applicable to such long-term care hospital 
        under section 1886(b)(3)(B)(ii)) of the Social Security Act (42 
        U.S.C. 1395ww(b)(3)(B)(ii)) reduced by not more than 0.4 
        percentage points.
    (d) Availability of Data to Public.--The Secretary shall establish 
procedures for making the quality data submitted under this section 
available to the public.