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.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Long-Term Care Hospital 
Improvement Act of 2006''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Long-term care hospitals (in this section referred to 
        as ``LTCHs'') serve a valuable role in the post-acute care 
        continuum by providing care to medically complex patients 
        needing long hospital stays.
            (2) The Medicare program should ensure that patients 
        receive post-acute care in the most appropriate setting. The 
        use of additional certification criteria for LTCHs, including 
        facility and patient criteria, will promote the appropriate 
        placement of severely ill patients into LTCHs. Further, patient 
        admission screening tools and continued stay and discharge 
        assessment tools can guide appropriate patient placement.
            (3) Certain long-term care diagnosis related groups (LTC-
        DRGs) are associated with higher severity of illness levels, as 
        measured by the APR-DRG system, and that patients grouped into 
        those LTC-DRGs are predicted to be appropriate for LTCH 
        services.
            (4) Measuring and reporting on quality of care is an 
        important function of any Medicare provider and that a national 
        quality initiative for LTCHs should be similar to short-term 
        general acute care hospitals in the Medicare program.
            (5) To conform the prospective payment system for LTCHs 
        with certain aspects of the prospective payment system for 
        short-term general acute care hospitals and promote payment 
        stability, the Secretary of Health and Human Services (in this 
        Act referred to as the ``Secretary'') should--
                    (A) perform an annual market basket update;
                    (B) conduct the LTC-DRG reweighting and wage level 
                adjustments in a budget neutral manner each year;
                    (C) not perform a proposed one-time budget 
                neutrality adjustment, and
                    (D) not extend the 25 percent limitation on 
                reimbursement of co-located hospital patient admissions 
                to freestanding LTCHs.

SEC. 3. NEW DEFINITION OF A LONG-TERM CARE HOSPITAL WITH FACILITY AND 
              PATIENT CRITERIA.

    (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 care, by 
        or under the supervision of a physician, to medically complex 
        patients needing long hospital stays;
            ``(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 paragraphs (2) through 
        (9) of subsection (e), except the first sentence of paragraph 
        (9);
            ``(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 applies a standard patient 
                assessment tool, as determined by the Secretary, that 
                is a valid clinical tool appropriate for this level of 
                care, uniformly used by all long-term care hospitals, 
                to measure the severity of illness and intensity of 
                service requirements for patients for the purposes of 
                making admission, continuing stay and discharge medical 
                necessity determinations taking into account the 
                medical judgment of the patient's physician, as 
                provided for under sections 1814(a)(3) and 
                1835(a)(2)(B);
                    ``(C) the institution has active physician 
                involvement with patients during their treatment 
                through an organized medical staff, on-site physician 
                presence and physician review of patient progress on a 
                daily basis, 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;
                    ``(D) 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
                    ``(E) the institution maintains a minimum staffing 
                level of licensed health care professionals, as 
                determined by the Secretary, to ensure that long-term 
                care hospitals provide an intensive level of care that 
                is sufficient to meet the needs of medically complex 
                patients needing long hospital stays; and
            ``(5) meets patient criteria relating to patient mix and 
        severity appropriate to the medically complex cases that long-
        term care hospitals are uniquely 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 
        as a long-term care hospital, a long-term care hospital must 
        discharge the percentage established in paragraph (4) of each 
        hospital's total patients who are entitled to benefits under 
        part A and who were admitted with one or more of the medical 
        conditions specified in paragraph (2).
            ``(2) Selection of ltc-drgs.--The Secretary shall determine 
        the long-term care diagnosis related groups (LTC-DRGs) under 
        section 307(b) of the Medicare, Medicaid, and SCHIP Benefits 
        Improvement and Protection Act of 2000, that are associated 
        with a high severity of illness for the following specified 
        medical conditions:
                    ``(A) Circulatory conditions.
                    ``(B) Digestive, endocrine, and metabolic 
                conditions.
                    ``(C) Infectious disease.
                    ``(D) Neurological conditions.
                    ``(E) Renal conditions.
                    ``(F) Respiratory conditions.
                    ``(G) Skin conditions.
                    ``(H) Other medically complex conditions as defined 
                by the Secretary.
            ``(3) Change to different patient classification system.--
        If the Secretary changes the patient classification system for 
        the long-term care hospital prospective payment system (LTCH 
        PPS) to a classification system other than the long-term care 
        diagnosis related group (LTC-DRG) system, the Secretary shall 
        determine the new patient classification categories that are 
        associated with a high severity of illness for the medical 
        conditions specified in paragraph (2) in a manner that 
        maintains the same proportion of Medicare discharges as the 
        long-term care diagnosis related groups (LTC-DRGs) in effect at 
        the time.
            ``(4) Percentage of medicare patient discharges.--
                    ``(A) In general.--Subject to subparagraph (B), for 
                each long-term care hospital, the proportion of 
                discharges from the long-term care diagnosis related 
                groups (LTC-DRGs) determined under paragraph (2), or 
                other patient classification categories designated 
                pursuant to paragraph (3) if applicable, in a cost 
                reporting year must be a percentage, as determined by 
                the Secretary, that is not less than 50 percent and not 
                greater than 75 percent.
                    ``(B) Transition period.--The Secretary shall 
                provide for a three-year transition period beginning on 
                October 1, 2007, for hospitals that were certified as 
                long-term care hospitals before such date. The 
                applicable proportion of cases in the first year of the 
                transition period shall be not less than 50 percent.
            ``(5) Noncompliance.--If a long-term care hospital in a 
        cost reporting year does not discharge more than the applicable 
        proportion of cases specified in paragraph (4), then the 
        hospital must demonstrate in a period of five out of six 
        consecutive months at the end of the hospital's next cost 
        reporting year that it meets the applicable proportion of cases 
        in paragraph (4). If the hospital cannot make such a 
        demonstration, then the hospital shall be paid for all cases 
        after the hospital's next cost reporting year as a subsection 
        (d) hospital under subsection (d).''.
    (c) Negotiated Rulemaking to Develop LTCH Facility and Patient 
Criteria.--The Secretary shall promulgate regulations to carry out the 
amendments made by this section on an expedited basis and using a 
negotiated rulemaking process under subchapter III of chapter 5 of 
title 5, United States Code.
    (d) Effective Date.--The amendments made by this section shall 
apply to discharges occurring on or after October 1, 2007.

SEC. 4. LTCH QUALITY IMPROVEMENT INITIATIVE.

    (a) Study to Establish Quality Measures.--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 LTCHs.
    (b) Report.--The Secretary shall report to Congress by October 1, 
2007, on the results of the study.
    (c) Selection of Quality Measures.--Subject to subsection (e), the 
Secretary shall choose 3 quality measures from the study to be reported 
by LTCHs.
    (d) Requirement for Submission of Data.--
            (1) In general.--LTCHs must collect data on the three 
        quality measures chosen under subsection (c) and submit all 
        required quality data to the Secretary.
            (2) Failure to submit data.--Any LTCH which does not submit 
        the required quality data to the Medicare program in any fiscal 
        year shall have the applicable LTCH market basket under section 
        1886 reduced by not more than 0.4 percent.
    (e) Expansion of Quality Measures.--The Secretary may expand the 
number of quality indicators required to be reported by LTCHs under the 
study. If the Secretary adds other measures, the measures shall reflect 
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.
    (f) Availability of Data to Public.--The Secretary shall establish 
procedures for making the quality data submitted under this section 
available to the public.

SEC. 5. CONFORMING LTCH PPS UPDATES TO THE INPATIENT PPS.

    (a) Requiring Annual Updates of Base Rates and Wage Indices and 
Annual Updates and Reweighting of LTC-DRGs.--The second sentence of 
section 307(b) of the Medicare, Medicaid, and SCHIP Benefits 
Improvement and Protection Act of 2000 is amended by inserting before 
the period at the end the following: ``, and shall provide (consistent 
with updating and reweighting provided for subsection (d) hospitals 
under paragraphs (2)(B)(ii), (3)(D)(iii), and (3)(E) of section 1886 of 
the Social Security Act) for an annual update under such system in 
payment rates, in the wage indices (in a budget neutral manner), in the 
classification and reweighting (in a budget neutral manner) of the 
diagnosis-related groups applied under such system''. Pursuant to the 
amendment made by paragraph (1), the Secretary shall provide annual 
updates to the LTCH base rate, as is specified for the IPPS at section 
1886(d)(2)(B)(ii) of the Social Security Act (42 U.S.C. 
1395ww(d)(2)(B)(ii)). The Secretary shall annually update and reweight 
the LTC-DRGs under section 307(b) of the Medicare, Medicaid, and SCHIP 
Benefits Improvement and Protection Act of 2000 or an alternative 
patient classification system in a budget neutral manner, consistent 
with such updating and reweighting applied under section 
1886(d)(3)(D)(iii) of the Social Security Act (42 U.S.C. 
1395ww(d)(3)(D)(iii)). The Secretary shall annually update wage levels 
for LTCHs in a budget neutral manner, consistent with such annual 
updating applied under section 1886(d)(3)(E) of the Social Security Act 
(42 U.S.C. 1395ww(d)(3)(E)).
    (b) Elimination of One-Time Budget Neutrality Adjustment.--The 
Secretary shall not make a one-time prospective adjustment to the LTCH 
PPS rates under section 412.523(d)(3) of title 42, Code of Federal 
Regulations, or otherwise conduct any budget neutrality adjustment to 
address such rates during the transition period specified in section 
412.533 of such title from cost-based payment to the prospective 
payment system for LTCHs.
    (c) No Application of 25 Percent Patient Threshold Payment 
Adjustment to Freestanding LTCHs.--The Secretary shall not extend the 
25 percent (or applicable percentage) patient threshold payment 
adjustment under section 412.534 of title 42, Code of Federal 
Regulations, or any similar provision, to freestanding LTCHs.

Summary: Medicare Long-Term Care Hospital Improvement Act of 2006 - Amends title XVIII (Medicare) of the Social Security Act to prescribe requirements for a long-term care hospital (LTCH) and patient criteria for prospective payment to an LTCH. Directs the Secretary of Health and Human Services to: (1) determine the LTCH diagnosis related groups (LTCH-DRGs) associated with a high severity of illness for specified medical conditions. And (2) study and report to Congress on appropriate quality measures for Medicare patients receiving care in LTCHs. Directs the Secretary to choose three quality measures from the study for LTCHs to report. Amends the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 to require annual updates of LTCH base rates and wage indices and the reweighting of LTCH-DRGs. Prohibits the Secretary from extending application of the 25 patient threshold payment adjustment to freestanding LTCHs.