DEPARTMENT OF HEALTH &. HUMAN SERVICES	 Office of Inspector General 

Washington, D.C. 20201 

MAR 2 1 2008
 

TO:	 Kerry Weems 

Acting Administrator 

Centers for Medicare & Medicaid Services 

FROM:	 Daniel R. Levinson t. 

Inspector General 

SUBJECT:	 Memorandum Report: "Long Term Care Hospitals Short-Stay Outliers," 

OEI-OI-07-00290 

This memorandum report provides information on long term care hospitals (LTCH) short-stay 

outliers. Short-stay outliers are LTCH stays that end before they reach five-sixths of the average 

length of stay for the patient's diagnosis (LTC-DRG). Specifically, we reviewed LTCH claims 

for fiscal years (FY) 2003 to 2006 to determine the extent and nature of short-stay outliers in 

LTCHs. We also reviewed data from the Quality Improvement Organization (QIO) medical 

record reviews of LTCH claims for FYs 2005 and 2006 to analyze the payment error rates for 

short-stay outliers. 

Short-stay outliers decreased annually from 40 percent of LTCH stays discharged in 

FY 2003 to 27 percent of stays discharged in FY 2006. Despite the decline in short-stay outliers, 

some discharge patterns raise questions. From FY 2003 through FY 2006, LTCHs discharged 

over a third of short-stay outlier patients at least 10 days before they reached the short-stay 

outlier threshold. During this period, LTCHs increasingly discharged patients within 2 days after 

the patients qualified for fullLTC-DRG payments. The discharge patterns to post-acute care 

facilities for short-stay outlier patients differed from discharge patterns of other LTCH patients. 

However, for FYs 2005 and 2006, short-stay outlier payment errors mirror those of all other 

LTCH claims. Almost aU of the payment errors that QIOs identified with LTCH claims were 

inaccurate LTC-DRGs and inappropriate LTCH admissions. 

BACKGROUND 

Over the past decade, the number of LTCHs has increased rapidly. Between 1995 and 2005, the 

number of LTCHs more than doubled, increasing from 178 to 383. During this period, Medicare 

payments to LTCHs increased from $836 million to $4.6 billion. t 

t Medicare Payment Advisory Commission. "Long-Term Care Hospitals Payment System." September 2006. 

OEI-Ol·07.o0290 Long Term Care Hospital Short·Stay Outliers 
 

 

 

 

 

 

 

Page 2 – Kerry Weems 

Long Term Care Hospital Characteristics 

LTCHs treat patients with complex medical conditions that require prolonged post-acute 

hospital-level care. Common LTCH treatments include comprehensive rehabilitation, respiratory 

therapy, head trauma treatment, and pain management. 

Pursuant to Federal law, LTCHs must have an average inpatient length of stay greater than 

25 days.2 Federal regulations identify no additional requirements to distinguish LTCHs from 

general acute care hospitals. LTCHs can be freestanding facilities or hospitals-within-hospitals 

(HwH).3 A freestanding LTCH occupies an entire building or campus. HwHs are colocated with 

another hospital-level provider (referred to as the host hospital), either sharing a building or on the 

campus of its host.4 The Centers for Medicare & Medicaid Services (CMS) reduces payments to 

HwHs that readmit more than 5 percent of the patients they discharge to their host hospitals in a 

fiscal year.5 CMS applies an additional payment adjustment if the LTCH HwH admits patients in 

excess of a specified threshold from its host hospital.6 

A 2004 Medicare Payment Advisory Commission (MedPAC) report found that LTCHs are usually 

the most costly post-acute care setting. For patients with the most common LTCH diagnoses, 

MedPAC found that LTCHs have reimbursement rates that are up to 4.4 times higher than 

estimated rates for inpatient rehabilitation facilities and up to 12 times higher than estimated rates 

for skilled nursing facilities.7 Furthermore, CMS found that LTCH Medicare payments for 

FY 2003 were about 8 percent higher than LTCHs’ Medicare costs.8 

LTCH Payment 

In FY 2003, CMS implemented a prospective payment system for LTCHs.9 In this system, LTCHs 

classify patients into LTC-DRGs based on the clinical characteristics of the patient. CMS assigns 

relative weights to each LTC-DRG that reflect the typical cost associated with treating patients with 

2 Section 1886(d)(1)(B)(iv) of the Social Security Act defines a long term care hospital (LTCH) as “a hospital which has an average inpatient 

length of stay (as determined by the Secretary of the Department of Health and Human Services) of greater than 25 days.” See also 

42 CFR § 412.23(e)(3)(iii), which states that facilities seeking to convert to LTCHs must submit Medicare discharge data related to average 

length of stay gathered during 5 of the 6 months immediately preceding the conversion. 

3 An LTCH may also establish a “satellite facility,” which is part of a hospital located within or on the campus of another hospital-level provider.
 

42 CFR § 412.22(h).

4 42 CFR § 412.22(e).
 5 42 CFR § 412.532.
 

6 42 CFR § 412.534.
 

7 Medicare Payment Advisory Commission. June 2004. “Report to the Congress: New Approaches in Medicare.” Chapter 5: “Defining Long 

Term Care Hospitals,” p. 122.

8 Preliminary data for fiscal year (FY) 2004 revealed an even higher margin of about 13 percent for that year. Testimony of Herb Kuhn, Deputy
 

Administrator for the Centers for Medicare & Medicaid Services (CMS) before the Committee on Ways and Means, Subcommittee on Health, 

U.S. House of Representatives, 110th Cong., March 15, 2006. Available online at 

http://waysandmeans.house.gov/hearings.asp?formode=view&id=5262. Accessed December 31, 2007. 

9 Before FY 2003, Medicare paid LTCHs based on the average cost per discharge. 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers 
 

 

 

 

 

 

 

Page 3 – Kerry Weems 

that diagnosis. For each patient, CMS pays LTCHs an annually adjusted base payment that is 

multiplied by the LTC-DRG relative weight. 

Although LTC-DRGs are identical to the DRGs that Medicare uses to pay general acute care 

hospitals, CMS applies a larger standard Federal payment rate to LTC-DRGs based upon the 

resources typically required to treat patients with an average length of stay greater than 

25 days.10 In FY 2007, the base payment for LTCHs was $38,086, compared to a standard base 

payment of $5,309 for general acute care hospitals.11 

Short-Stay Outliers 

When CMS applied prospective payment to LTCHs, it reduced payment rates for LTCH stays 

that end on or before five-sixths of the average length of stay for an LTC-DRG (short-stay 

outliers).12 CMS pays less than the full LTC-DRG payment for these stays because they 

typically require fewer resources than longer stays. 

For short-stay outlier patients discharged from FY 2003 through June 30, 2006, CMS paid 

LTCHs the least of three payment amounts: 

• the full payment for the patient’s LTC-DRG, 

• 120 percent of the LTC-DRG per diem, or 

• 120 percent of the cost of the stay.13 

For patients discharged on or after July 1, 2006, CMS reduced short-stay outlier payments. In the 

LTCH payment update, CMS explained that some short-stay outlier patients could more 

appropriately receive treatment in general acute care hospitals.14 To discourage LTCHs from 

admitting patients whom general acute care hospitals can treat, CMS revised the payment formulas 

for short-stay outliers by:15 

• reducing the third payment option to 100 percent of the cost of the stay, and 

10 Social Security Act § 1886(d)(1)(B)(iv)(I).
 

11 42 CFR Parts 405, 412, and 413. The general acute care hospital base rate is the rate for large urban hospitals. The LTCH base rate varies 

depending on the payment adjustments for a patient’s primary diagnosis, the procedures performed on the patient, patient characteristics, and 

facility characteristics (such as labor wages). 

12 42 CFR § 412.529.
 

13 CMS calculates the per diem by dividing the full diagnosis-related groups (LTC-DRG) payment by the average length of stay and then 

multiplying by the actual length of stay. See 42 CFR § 412.529(c)(1). 

14 Medicare LTCH Payment Update for Rate Year 2007, 71 Fed. Reg. 27798, 27845 (May 12, 2006).
 

15 Medicare LTCH Payment Update for Rate Year 2007, 71 Fed. Reg. 27851 (May 12, 2006).
 

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Page 4 – Kerry Weems 

•	 adding a fourth payment option that blends the comparable general acute care hospital per 

diem amount and 120 percent of the LTC-DRG per diem amount.16 

Quality Improvement Organization Reviews 

As part of the Hospital Payment Monitoring Program, CMS selects a national random sample of 

116 LTCH claims each month for QIOs to review. QIOs are Medicare contractors in each State 

that conduct case reviews to oversee and enhance the quality of care provided to Medicare 

beneficiaries.17 CMS compiles the results of the QIO reviews to project annual national payment 

error rates. 

For each claim, QIO staff review medical records to evaluate whether the LTCH complied with 

Medicare coverage, coding, and billing rules.18 Payment errors that QIOs have identified for 

LTCH claims include: inaccurate LTC-DRGs, admissions of inappropriate patients, incomplete 

medical records, and technical errors. Based on QIO reviews for 2005, CMS estimated that 

nationally about 7 percent of its payments to LTCHs were in error.19 By comparison, CMS 

estimated that 5 percent of its payments to general acute care hospitals were in error. 

Seventy-five percent of the LTCH claims for which QIOs identified errors were for stays that 

lasted 25 days or less.20 

Related Office of Inspector General Work 

A 2004 Office of Inspector General (OIG) report identified shortcomings in CMS’s oversight of 

LTCHs.21 In that report, OIG found that 19 of the 87 HwHs exceeded the annual 5-percent limit 

for readmissions from their host hospitals at least once from September 2000 through December 

2002. OIG also found that CMS lacked a system to detect readmissions over the 5-percent limit. 

CMS also lacked a mechanism to determine whether HwHs were financially and organizationally 

separate from their host hospitals. In a December 2006 report, OIG identified and recommended 

recovery of overpayments to eight LTCHs in Massachusetts for claims totaling $936,418.22 

16 For each day, as the length of stay increases, the percentage based on the general acute care hospital amount decreases and the percentage 

based on 120 percent of the per diem LTC-DRG increases. This blend will pay longer stays an amount closer to the LTC-DRG rate, but shorter
 

stays will receive rates closer to the general acute care hospital payment rates.

17 Social Security Act, §§ 1862(g) and 1154(a)(1). Also see QIO Eighth Statement of Work, Task 3: Protecting Beneficiaries and the Medicare 

Program.

18 RTI International. “Long-Term Care Hospital (LTCH) Payment System Monitoring and Evaluation.” Phase II Report. January 2007, p. 64.
 

CMS requires QIOs to use written criteria when reviewing LTCH claims. However, CMS does not mandate which screening criteria the QIOs 

use. CMS, through the Iowa QIO, contracted with McKesson Health Solutions to give QIOs access to McKesson’s InterQualTM level of care 

assessment tools. All but the Massachusetts QIO use the InterQualTM criteria. 

19 CMS. “Improper Medicare Fee-for-Service Payments Report—November 2006 Long Report.” Table 10d: Error Rates and Improper
 

Payments by Provider Type: QIOs. November 15, 2006.
 

20 Communication with CMS officials who oversee QIO reviews of hospital claims. April 10, 2007.
 21 Office of Inspector General (OIG). “Long-Term Care Hospitals-Within-Hospitals” (OEI-01-02-00630), July 2004.
 

22 OIG. “Review of Associated Service Payments to Long-Term Care Hospitals in Massachusetts From January 1, 2003, Through April 30,
 

2004” (A-01-06-00506), December 2006.
 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers 
 

 

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METHODOLOGY 

Data Sources and Analysis 

We used two CMS data sources: the 100-percent Standard Analytic Files and data from medical 

record reviews that QIOs conduct as part of the Hospital Payment Monitoring Program. 

Standard Analytic Files 

CMS’s 100-percent Standard Analytic Files include 567,327 LTCH claims from FY 2003 through 

FY 2006. We identified long term care facility claims by extracting records with a 2 as the third 

digit of the provider number. Of these, we excluded records for patients who died while in the 

LTCH as well as records that lacked a valid LTC-DRG or discharge date. Our analysis includes 

408,289 records. These records include admission and discharge dates and LTC-DRG and LTCH 

provider numbers. To identify short-stay outliers, we matched LTCH claims with CMS’s annual 

updates of the short-stay outlier threshold, five-sixths of the average length of stay for each 

LTC-DRG.. 

To identify LTCH type (freestanding or HwH), we matched provider numbers in the LTCH records 

with a list of HwHs from CMS. If CMS’s list omitted information for a hospital from our claims 

database, we called the facility and asked if the LTCH was located in the same building as another 

hospital. We found no contact information or received an out-of-business message for 14 hospitals, 

representing 3,201 LTCH claims. 

Quality Improvement Organization Medical Record Review Data 

We obtained QIO medical record review data for all LTCH claims that QIOs reviewed in FYs 

2005 and 2006, the first complete years for which QIOs reviewed LTCH claims. QIOs reviewed 

2,784 total claims, or 1,392 claims from each year. The records include the types of errors, if any, 

that QIOs identified as well as the amounts of payment errors. We used the data to identify 

patterns related to payment errors for LTCH claims. 

We projected payment errors to the population of LTCH claims from the sample of LTCH claims 

that QIOs reviewed during FYs 2005 and 2006. Each month, CMS selects a random sample of 

LTCH claims. We weighted the claims for each month based on the total population of claims 

from that month. 

Standards 

We conducted this review in accordance with the “Quality Standards for Inspections” issued by the 

President’s Council on Integrity and Efficiency and the Executive Council on Integrity and Efficiency. 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers 
 

 

 

Page 6 – Kerry Weems 

RESULTS 

Short-Stay Outliers Decreased Annually From Fiscal Years 2003 Through 2006 

CMS reduces payments for short-stay outliers in LTCHs because these stays typically require 

fewer resources than longer stays. When CMS reduced payments for short-stay outliers in 

FY 2003, it predicted that these stays would decline. At that time, CMS estimated that 

48 percent of LTCH stays were short-stay outliers.23 Our analysis of LTCH claims shows that 

the number of short-stay outliers has declined annually since CMS introduced reduced payments, 

from 40 percent of LTCH stays discharged in FY 2003 to 27 percent of stays discharged in 

FY 2006. (See Chart 1 below.) That decline was the same for both HwHs and freestanding 

facilities. 

Chart 1: Percentage of Short-Stay Outliers by Fiscal Year of Discharge 

Percentage of LTCH Stays 45% 

40% 

35% 

30% 

25% 

20% 

27% 

31% 

33% 

40% 

2003 2004 2005 2006 

Source: Office of Inspector General analysis of Standard Analytic Files, 2007. 

The decline in short-stay outliers is also consistent across geographic location. Although the 

percentage of short-stay outliers varied slightly geographically, the number of short-stay outliers 

declined in every geographic area we reviewed. (See Appendix A for short-stay outlier trend details.) 

23 71 Fed. Reg. 27846 (May 12, 2006). 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers 
 

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Page 7 – Kerry Weems 

Despite the Overall Decline in Short-Stay Outliers, Discharge Patterns Raise Questions 

One question relates to whether these patients are appropriately placed in LTCHs given their short 

lengths of stay. From FYs 2003 through 2006, LTCHs discharged over a third of short-stay outlier 

patients at least 10 days before they reached the short-stay outlier threshold (five-sixths of the average 

length of stay for each LTC-DRG). The LTCH stays that ended at least 10 days before the short-stay 

outlier threshold (very short stays) accounted for 36 percent to 41 percent of short-stay outliers 

throughout the 4-year period we reviewed. (See Table 1 on the following page.) 

Table 1: Lengths of Stay for Short Stay Outliers, Fiscal Years 2003 to 2006 

Length of Stay FY 2003 FY 2004 FY 2005 FY 2006 

Discharged at Least 10 Days Before the Short-Stay Outlier Threshold 41% 39% 37% 36% 

Discharged 5 to 9 Days Before the Short-Stay Outlier Threshold 31% 31% 32% 32% 

Discharged 3 to 4 Days Before the Short-Stay Outlier Threshold 13% 14% 15% 14% 

Discharged up to 2 Days Before the Short-Stay Outlier Threshold 14% 16% 16% 17% 

 Total 99% 100% 100% 99% 

Source: Office of Inspector General analysis of Standard Analytic Files, 2007. 

Very short stay patients usually had lengths of stay that were closer to the average length of stay for 

patients with similar DRGs at general acute care hospitals than the average length of stay for the 

diagnosis at LTCHs. (See Chart 2 on the following page for analysis by the 10 most common 

LTC-DRGs for very short stay patients in FY 2006.) For example, in FY 2006, the most common 

LTC-DRG for very short stay patients was “Respiratory system diagnosis with ventilator support” 

(LTC-DRG 475). In FY 2006, very short stays for this LTC-DRG lasted 19 days, at most. The 

average length of stay for this diagnosis in general acute care hospitals was 8 days, compared to an 

average length of stay of 35 days in LTCHs. 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers 
Page 8 – Kerry Weems 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers 

0 5 10 15 20 25 30 35 40 45

DEGENERATIVE NERVOUS

SYSTEM DISORDERS (12)

AFTERCARE,

MUSCULOSKELETAL SYSTEM &

CONNECTIVE TISSUE (249)

REHABILITATION (462)

SKIN GRAFT &/OR DEBRIDE

(263)

RESPIRATORY INFECTIONS &

INFLAMMATIONS (79)

AFTERCARE (466)

SEPTICEMIA (416)

PULMONARY EDEMA &

RESPIRATORY FAILURE (87)

SKIN ULCERS (271)

RESPIRATORY DIAGNOSIS

WITH VENTILATOR (475)

Number of Days

Average Length of

Stay at General Acute

Care Hospital

Maximum Length of

Very Short Stay at

LTCH

Average Length of

Stay at Long Term

Care Hospital

Another question relates to whether financial incentives trigger the discharge date rather than the 

patient condition. From FYs 2003 through 2006, LTCHs increasingly discharged patients within 

2 days after they qualified for full LTC-DRG payments. Throughout the FY 2003 to FY 2006 period, 

LTCHs discharged more patients in the 2 days after they passed the short-stay outlier threshold and 

qualified for full LTC-DRG payments than in the 2 days before. (See Chart 3 on the following page.) 

Each year, LTCHs discharged fewer patients on the day before they qualified for a full LTC-DRG 

payment than on any of the other 4 days before or after the short-stay outlier threshold. 

This pattern became more prominent from FYs 2003 to 2006. In FY 2003, LTCHs discharged 

4 percent of all patients in the 2 days before the threshold and 6 percent of patients in the 

Chart 2: Lengths of Very Short Stays Compared to Average Lengths of Stay at General 

Acute Care Hospitals and LTCHs for FY 2006, by Top 10 LTC-DRGs for Very Short 

Stays

Source: Office of Inspector General analysis of Standard Analytic Files, 2007.
 

 

 

 

 

Page 9 – Kerry Weems 

2 days after. By FY 2006, LTCHs discharged 4 percent of patients in the 2 days before the threshold 

and 10 percent of patients in the 2 days after the threshold.24 

Chart 3: Long Term Care Hospital Discharges Before and After the Short-Stay Outlier 

Threshold, FYs 2003 to 2006 

0% 

1% 

2% 

3% 

4% 

5% 

6% 

7% 

4 Days Before 

Full LTC-DRG 

3 Days Before 

Full LTC-DRG 

2 Days Before 

Full LTC-DRG 

1 Day Before 

Full LTC-DRG 

First Day of Full 

LTC-DRG 

2nd Day of Full 

LTC-DRG 

3rd Day of Full 

LTC-DRG 

4th Day of Full 

LTC-DRG 

Timing of LTCH Discharge 

Percentage of LTCH Discharges

2003 

2004 

2005 

2006 

Short-Stay Outlier Threshold 

Source: Office of Inspector General analysis of Standard Analytic Files, 2007. 

From FY 2003 to July 2006, LTCH payments increased sharply on the day patients qualified for 

full LTC-DRG payments. In the Medicare LTCH Payment Update for Rate Year 2007, CMS noted 

that the increase in payment for a full LTC-DRG stay encouraged LTCHs to retain patients just 

long enough to pass the short-stay outlier threshold and qualify for full LTC-DRG payments.25 

Analysis of claims from FYs 2003 through 2006 shows that LTCH discharges did systematically 

increase after this threshold. Accordingly, for LTCH discharges on or after July 1, 2006, CMS 

24 To estimate the percentage of patients discharged in the 2 days before and after the threshold, we combined the number of 

patients discharged each day. For example, we calculated that in 2006, LTCHs discharged 10 percent of patients in the 

2 days after the threshold by combining the 4 percent of patients discharged in the first day and 6 percent of patients 

discharged in the second day. Chart 3 presents the percentage of patients discharged each day. 

25 71 Fed. Reg. 27847 (May 12, 2006). 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers 
 

 

 

Page 10 – Kerry Weems 

revised the payment formula to remove the sharp increase in payment after the short-stay outlier 

threshold by incrementally increasing the LTCH’s payment rate as a patient’s stay lengthens.26 

The discharge patterns to post-acute care facilities for short-stay outlier patients differed from 

discharge patterns of other LTCH patients. From FYs 2003 to 2006, 74 percent of all LTCH patients 

came directly from general acute care hospitals. Yet, LTCHs had to return 25 percent of short-stay 

outlier patients to general acute care hospitals, compared to only 8 percent of all other LTCH patients. 

(See Table 2 below.) Although LTCHs discharged 36 percent of patients who stayed past the 

short-stay outlier threshold to skilled nursing facilities, they discharged only 15 percent of short-stay 

outlier patients to skilled nursing facilities, which provide less intense services. 

Table 2: Treatment After Discharge From Long Term Care 

Hospital, Fiscal Years 2003 to 2006* 

Treatment After LTCH Discharge 

Percentage of Short-Stay 

Outlier Patients 

Percentage of Other 

LTCH Patients 

Home Health Agency 

General Acute Care Hospital 

Home or Self Care 

Skilled Nursing Facility 

Other 

26% 

25% 

23% 

15% 

11% 

28% 

8% 

16% 

36% 

12% 

 Total 100% 100% 

Source: Office of Inspector General analysis of Standard Analytic Files, 2007. 

*Trends remain generally consistent throughout the FY 2003 to 2006 period. 

For Fiscal Years 2005 and 2006, Short-Stay Outlier Payment Errors Mirror Those of All 

Other LTCH Claims 

Inaccurate LTC-DRGs and inappropriate LTCH admissions account for almost all of the payment 

errors that QIO reviewers identified for LTCH claims during this period.27 (See Table 3 on the 

following page. See Appendix B for confidence intervals for all estimates.) QIO reviewers 

identified about the same percentage of payment errors in short-stay outlier claims as other LTCH 

claims. Error rates were also constant for LTCH stays that ended more than 10 days before the 

short-stay outlier threshold as well as stays that ended just after the threshold. 

26 Ibid.
 

27 We estimated these figures by projecting national estimates from the sample of LTCH claims that QIOs reviewed. 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers 
 

Page 11 – Kerry Weems 

Table 3: Payment Errors for Long Term Care Hospital 

Stays, Fiscal Years 2005 and 2006* 

Type of Payment Error 

Percentage of Short-Stay 

Outlier Claims 

Percentage of Other 

LTCH Claims 

No Error 

Inappropriate Admission 

Inaccurate DRG 

Other Errors 

83% 

9% 

7% 

1% 

85% 

6% 

8% 

1% 

Total 100% 100% 

*All estimates are projected to national population, based on a sample of LTCH 

claims. None of these estimates differs significantly at the 95-percent confidence 

level. 

Source: Office of Inspector General analysis of QIO Medical Record Reviews, 2007. 

Based on our analysis of QIO reviews of LTCH claims, we estimate that about $85 million, or 

6 percent, of CMS payments to LTCHs for short-stay outlier claims during the FY 2005 to 2006 

period were erroneous. This error rate was not statistically different from the error rate for other 

LTCH stays (4 percent). For short-stay outliers in FY 2005, the average net error for inappropriate 

admissions ($20,112) was higher than the average net error for DRG changes ($3,175). 

CONCLUSION 

From FYs 2003 through 2006, short-stay outliers steadily declined. These declines coincided with 

CMS’s implementation of a prospective payment system that cut payments for these stays. Further, 

to remove incentives for LTCHs to admit patients inappropriately or keep them longer than 

necessary, CMS revised short-stay outlier payments for patients discharged on or after July 1, 2006. 

Despite the overall decline in short-stay outliers, some discharge patterns raise questions about the 

appropriateness of placements at LTCHs. Patients whom LTCHs discharged at least 10 days before 

the short-stay outlier threshold or who were readmitted to general acute care hospitals directly after 

LTCH stays could have more appropriately received treatment at a general acute care hospital. 

This memorandum report is being issued directly in final form because it contains no 

recommendations. If you have comments or questions about this report, please provide them 

within 60 days. Please refer to report number OEI-01-07-00290 in all correspondence. 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers 
 

Page 12 – Kerry Weems 

Δ APPENDIX ~ A 

Trends in Short-Stay Outliers 

Table 1: Percentage of Stays That Were Short-Stay Outliers, by Facility Type 

Facility Type FY 2003 FY 2004 FY 2005 FY 2006 

Hospital-within-Hospital 

Freestanding Hospital 

41% 

39% 

34% 

33% 

31% 

31% 

26% 

28% 

Source: Office of Inspector General analysis of Standard Analytic Files, 2007. 

Region FY 2003 FY 2004 FY 2005 FY 2006 

Midwest 41% 34% 31% 29% 

Northeast 43% 38% 35% 32% 

South 38% 32% 29% 25% 

West 43% 34% 31% 26% 

Source: Office of Inspector General analysis of Standard Analytic Files, 2007. 

Table 2: Percentage of Short-Stay Outliers, by U.S. Census Region 

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Page 13 – Kerry Weems 

Δ APPENDIX ~B 

Confidence Intervals for Payment Error Estimates 

Proportion of Long Term Care Hospital Claims With Payment Errors, Fiscal Years 

2005 and 2006 

Type of Payment Error 

Short-Stay Outlier Claims Other LTCH Claims 

Point Estimate 

95-Percent 

Confidence Interval Point Estimate 

95-Percent 

Confidence Interval 

No Error 

Inappropriate Admission 

Inaccurate Long Term CareDiagnosis Related Groups 

Other Errors 

83.4% 

8.5% 

7.2% 

0.8% 

81.1% – 85.8% 

6.7% – 10.3% 

5.6% – 8.9% 

0.3% – 1.4% 

85.3% 

5.7% 

7.8% 

1.2% 

83.7% – 86.9% 

4.6% – 6.7% 

6.6% – 9.1% 

0.7% – 1.7% 

Total 99.99% 100% 

Source: Office of Inspector General analysis of Quality Improvement Organization (QIO) medical record review data, 2007. 

Payment Error Amounts for LTCH Claims, Fiscal Years 2005 and 2006 

95-Percent 

Point Estimate Confidence Interval 

Average net error amounts for short-stay outlier claims with errors $5,687 $4,602 – $6,773 

Total payment error amounts for short-stay outlier claims $84,801,504 $64,192,183 – $105,410,822 

Percentage of payments for short-stay outlier claims in error 6.1% 4.6% – 7.6% 

4.3% 3.3% – 5.2% 

Average net error amounts for other long term care hospital (LTCH) 

claims with errors $11,884 $9,669 – $14,100 

Total payment error amounts for other LTCH claims $304,271,761 $237,958,404 – $370,585,118 

Percentage of payments for other LTCH claims in error 

Source: Office of Inspector General analysis of QIO medical record review data, 2007. 

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APPENDIX~B 

Average Net Payment Error Amount by Error Type, Fiscal Year 2005 

95-Percent 

Point Estimate Confidence Interval 

Average net error amount for admission denial errors $20,112 $17,699 – $22,525 

Average net error amount for admission denial errors $3,175 $1,296 – $5,054 

Source: Office of Inspector General analysis of QIO medical record review data, 2007. 

OEI-01-07-00290 Long Term Care Hospital Short-Stay Outliers