SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Medicare Long-Term Care Hospital 
Improvement Act of 2007''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Long-term care hospitals (in this Act 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, continued stay, and discharge screening tools can 
        guide appropriate patient placement.
            (3) Measuring and reporting on quality of care is an 
        important function of any Medicare provider and a national 
        quality initiative for LTCHs should be similar to short-term 
        general acute care hospitals in the Medicare program.
            (4) 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 long term care diagnosis related 
                groups (in this Act referred to as ``LTCDRGs'') 
                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.
            (5) LTCHs co-located with another hospital in underserved 
        areas, including rural areas and areas with an urban single or 
        MSA dominant hospital, should be afforded greater relief from 
        the 50 percent limitation on reimbursement of co-located 
        hospital patient admissions.

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, by or under the 
        supervision of physicians, to medically complex inpatients 
        needing long hospital stays--
                    ``(A) diagnostic services and therapeutic services 
                for medical diagnosis, treatment, and care of injured, 
                disabled, or sick persons; or
                    ``(B) rehabilitation services for the 
                rehabilitation of injured, disabled, or sick persons;
            ``(2) has an average inpatient length of stay (as 
        determined by the Secretary) for beneficiaries under this title 
        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);
            ``(4) meets the following additional 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 
                screening 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, 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 adequate staffing 
                levels of licensed health care professionals, as 
                determined by the Secretary, to ensure that long-term 
                care hospitals provide the 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 majority of the total number of 
        patients entitled to benefits under part A who are discharged 
        from a long-term care hospital must be medically complex 
        patients admitted with a high severity of illness, as that term 
        is defined by the Secretary for payment purposes, with 1 or 
        more enumerated medical conditions specified in paragraph (2).
            ``(2) Medically complex medical conditions.--The Secretary 
        shall determine a list of medical conditions associated with a 
        high severity of illness of patients who are appropriate for 
        treatment in long-term care hospitals, as indicated by the 
        presence of clinical comorbidities in accordance with a 
        methodology specified by the Secretary. Such list shall include 
        the following 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.''.
    (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 beneficiaries 
receiving care in LTCHs.
    (b) Report.--Not later than October 1, 2007, the Secretary shall 
submit to Congress a report 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 shall--
                    (A) collect data on the 3 quality measures chosen 
                under subsection (c); and
                    (B) 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 Secretary in any fiscal year 
        shall have the applicable LTCH market basket under section 1886 
        reduced by not more than 0.4 percent for such year.
    (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 LTCDRGs.--
            (1) In general.--The second sentence of section 307(b)(1) 
        of the Medicare, Medicaid, and SCHIP Benefits Improvement and 
        Protection Act of 2000 (114 Stat. 2763A-496), as enacted into 
        law by section 1(a)(6) of Public Law 106-554, 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), and in the classification and reweighting (in a budget 
        neutral manner) of the diagnosis-related groups applied under 
        such system''.
            (2) Application.--Pursuant to the amendment made by 
        paragraph (1), the Secretary shall provide annual updates to 
        the LTCH base rate, as is specified for the inpatient hospital 
        prospective payment system under 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 LTCDRGs 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 
prospective payment system 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.

SEC. 6. RELIEF FOR CERTAIN LONG-TERM CARE HOSPITALS AND SATELLITE 
              FACILITIES THAT ARE CO-LOCATED WITH OTHER HOSPITALS.

    (a) Urban Single and MSA Dominant Hospitals.--The Secretary shall 
permit up to 75 percent of the discharged Medicare impatient population 
of an applicable hospital to be admitted from a co-located urban single 
or co-located MSA dominant hospital (as defined in section 
412.534(e)(4) of title 42, Code of Federal Regulations) without 
adjustment to the hospital's LTCH prospective payment system payment in 
the manner described in section 412.534(e) of such title.
    (b) Rural Hospitals.--The Secretary shall permit up to 75 percent 
of the discharged Medicare impatient population of an applicable 
hospital which is located in a rural area (as defined in section 
412.64(b)(1)(ii)(C) of title 42, Code of Federal Regulations) to be 
admitted from a co-located hospital without adjustment to the 
hospital's LTCH prospective payment system payment in the manner 
described in section 412.534(d) of such title.
    (c) Applicable Long-Term Care Hospital Defined.--In this section, 
the term ``applicable long-term care hospital'' means--
            (1) a long-term care hospital that meets the criteria in 
        section 412.22(e) of title 42, Code of Federal Regulations; and
            (2) a satellite facility of a long-term care hospital that 
        meet the criteria in section 412.22(h) of such title.
Output: Medicare Long-Term Care Hospital Improvement Act of 2007 - 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 a list of medical conditions associated with a high severity of illness of patients who are appropriate for treatment in long-term care hospitals, as indicated by the presence of clinical comorbidities in accordance with a methodology specified by the Secretary; and (2) study and report to Congress on appropriate quality measures for Medicare beneficiaries 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% (or applicable percentage) patient threshold payment adjustment to freestanding LTCHs.

Directs the Secretary to permit up to 75% of the discharged Medicare inpatient population: (1) of an applicable hospital to be admitted from a co-located urban single or co-located MSA dominant hospital without adjustment to the hospital's LTCH prospective payment system payment in a specified manner; and (2) of an applicable hospital located in a rural area to be admitted from a co-located hospital without such an adjustment, either.