Section 123 of Public Law 106-113, the Balanced Budget Refinement Act of 1999 (BBRA), as amended by section 307 of Public Law 106-554, the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), directs the Secretary to develop and implement a per discharge, diagnosis related group (DRG)-based prospective payment system (PPS) for long-term care hospitals (LTCHs) for cost reporting periods beginning on or after October 1, 2002. Section 307(b)(1) of BIPA modified the BBRA's requirements for the PPS for LTCHs by mandating that the Secretary examine the use of existing (or refined) hospital DRGs that have been modified to account for different resource use of LTCH patients as well as the use of the most recently available hospital discharge data. Furthermore, section 307(b)(1) of BIPA provided that the Secretary shall examine and may provide for appropriate adjustments to the LTCH PPS, including adjustments to DRG weights, area wage adjustments, geographic reclassification, outliers, updates, and a disproportionate share adjustment.
LTCHs which have been excluded from the inpatient prospective payment system under section 1886(d)((1)(B)(iv) of the Social Security Act, are certified under Medicare as short-term acute-care hospitals and for the purpose of Medicare payments in general, are defined as having an average inpatient length of stay of greater than 25 days. This new prospective payment system will replace the existing reasonable cost-based payment system under which LTCHs are currently paid.
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