How LTACHs are reimbursed
During the first six months in its initial data collection period, a long-term acute care hospital, LTACH, is paid under short-term DRG’s. This period of time is generally referred to as the “penalty period” because LTACHs experience a significant revenue loss due to the fact that all Medicare patients must have an aggregate length of stay of more than 25 days while payments under short-term DRGs are typically based on a length of stay between four to seven days.
Once the hospital has completed its six-month data collection period and has met the greater than the 25-day length of stay requirement for its Medicare patients, the facility is reclassified as a LTACH. Once so designated, LTACHs are reimbursed through specific long-term care DRGs (LTC-DRGs).
These LTC-DRGs have the same definitions as the short-term acute DRGs but, to compensate for longer staying patients, these facilities have much higher relative weights applied to a higher base rate payment.