Dual Payment Model for Long Term Care Hospitals Could Boost Hospice Use

A dual payment model designed for long term care hospitals (LTCH) could increase hospice and other post-acute care service utilization rates, according to a report from the Medicare Payment Advisory Commission (MEDPAC).

The Pathway for [Sustainable Growth Rate] Reform Act of 2013 overhauled the payment structure for long term care hospitals. According to the new structure, LTCH cases that meet certain criteria qualify for the standard LTCH prospective payment system (PPS) rate (“cases meeting the criteria”), while cases that do not meet those criteria are paid a lower, “site-neutral” rate.  

Congress mandated that MEDPAC examine the impact of the dual payment model on long term care hospitals as well as any impact the changes had on hospice and other post-acute care providers.


“The dual payment rate structure provides a financial incentive for LTCHs to serve a larger share of beneficiaries who meet the criteria while reducing or eliminating admissions for beneficiaries who do not meet the criteria,” MEDPAC indicated in the report. “This incentive may result in increased use of other PAC or hospice services in place of LTCH services.”

Long-term care hospitals provide acute care for Medicare patients who need extended or more intensive care. They specialize in treating patients who need more time to recover, particularly patients suffering from more than one condition or who have complex illnesses. The average length of stay in an acute care hospital is more than 25 days, according to the U.S. Centers for Medicare & Medicaid Services (CMS).

The site-neutral rate that CMS pays to LTCHs for cases that do not meet the PPS criteria is 85% lower than the PPS payment, resulting in fewer admissions for patients who do not meet those criteria. This reduction could result in more patients being referred to hospice or other post acute care rather than being sent to an LTCH.


Hospice utilization has been steadily on the rise for the past several years, largely due to the aging population as well as greater awareness of hospice among the public. In 2018, a record 50% of hospice decedents passed away in hospice, according to the National Hospice & Palliative Care Organization. In its report, MEDPAC indicated that Medicare hospice spending rose 19% between 2012 and 2017, compared to a 2% rise in post-acute care spending.   

Due to relatively low rates of discharges to LTCH from acute care hospitals, MEDPAC was unable to estimate the potential size of any spikes in hospice utilization deriving from the dual payment model. CMS is implementing the model in phases, with full implementation expected to complete in 2020, meaning that more complete data could be available next year or in 2021.

“Because the phase-in of the dual payment-rate structure continues through 2020, our analyses and results reflect a partial phase-in of the policy. We expect that the magnitude of the policy’s effect will increase once the dual payment-rate structure is fully implemented,” MEDPAC’s report said.