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article.
For the long-term acute-care hospital segment, the =
days of=20
consolidation may be nearing an end as post-acute providers take on the=20
ambitious=97and uncertain=97task of adopting the new, favored model of =
delivery:=20
coordinated care.
Proof of this came in May when Louisville, =
Ky.-based=20
Kindred Healthcare shareholders agreed to buy RehabCare Group for $1.3 =
billion=20
in a deal that not only added to Kindred's LTAC hospital business, but =
also=20
expanded the company's reach in the full post-acute continuum through =
added=20
rehabilitative services.
=93The combination of Kindred and =
RehabCare will=20
provide more opportunities for our patients, employees and other =
stakeholders,=94=20
Kindred President and CEO Paul Diaz said in a statement to Modern =
Healthcare=20
last week.=20
![](3D"http://www.modernhealthcare.com/global/images/loader003.gif")
=20
=93Together, we will continue to deliver superior =
clinical=20
outcomes and expand our service offerings to better transition patients =
home=20
with a full and efficient recovery,=94 he said. =93The expansion of our =
size and=20
scale and the opportunities to integrate RehabCare's LTAC hospitals, =
IRFs=20
(inpatient rehabilitation facilities) and rehabilitation therapy =
contract=20
business with our operations will create a stronger company that is =
better=20
positioned to compete in an evolving and more integrated healthcare=20
environment.=94
Select Medical Holdings Corp., which =
purchased LTAC=20
hospital provider Regency Hospital Co. in 2010, has since concentrated =
on=20
growing its hospital business through partnerships with Baylor Health =
Care=20
System in Dallas as well as the Penn State Hershey (Pa.) health system.=20
=93The wave of mergers is less about market =
leverage and much=20
more about regulatory uncertainty and the lack of other options to =
pursue=20
growth,=94 says William Walters, CEO of the Acute Long Term Care =
Hospital=20
Association. =93Post-acute providers are really trying to position =
themselves for=20
the future: whether it's ACOs (accountable care organizations), bundled =
payments=20
or site-neutral payments, all of those scenarios envision post-acute =
providers=20
performing a wider range of services than the current silos they may be=20
in.=94
Walters' comment about a lack of other options for growth =
refers=20
primarily to a federal moratorium on new LTAC hospitals that will expire =
next=20
year. Any new LTAC hospitals during this time must have been planned for =
operation before the moratorium kicked in.
=93I think what has =
accelerated=20
the consolidation is the moratorium,=94 says Jason Healy, an attorney in =
private=20
practice who serves as ALTHA's general counsel.
=93We're in a five-year moratorium since 2007. =
Because of that,=20
we only have a set number of LTACs currently out there,=94 he says. =
=93And because=20
the sector isn't able to grow through new building, the only way to grow =
is=20
through acquisitions.=94
Healy cited LifeCare Hospitals' =
purchase of six=20
LTACs from Birmingham, Ala.-based rehab provider HealthSouth Corp. as =
another=20
example in addition to acquisitions by Kindred and Select=20
Medical.
Meanwhile, the Medicare Payment Advisory Commission's =
March 2011=20
report found that the number of LTAC hospitals has grown even with the=20
moratorium in place.
=93We examined Medicare cost report data to assess =
the number=20
of (LTACs) and found that, in spite of the moratorium, the number of =
(LTACs)=20
filing Medicare cost reports increased 6.6% between 2008 and 2009, the =
largest=20
growth seen since the period between 2004 and 2005,=94 according to the =
report.=20
Most LTAC hospitals were able to enter the Medicare program =
because they=20
met exceptions to the moratorium, the report stated. Most had begun =
their=20
qualifying period showing an average Medicare length of stay greater =
than 25=20
days before Dec. 30, 2007; had binding agreements for the construction,=20
renovation or lease of a new LTAC hospital; or had received a =
certificate of=20
need on or before Dec. 29, 2007.
=93A majority of the new (LTACs) filing cost =
reports were=20
for-profit facilities, and almost all of them were free-standing =
facilities.=20
Preliminary analysis of Medicare's Provider of Service data indicates =
that far=20
fewer (LTACs) opened in 2010,=94 according to the report. =
Looking ahead,=20
Healy says he thinks that while most of the consolidation is over, the =
lifting=20
of the moratorium could lead to new LTAC hospital =
construction.
=93When it=20
comes off, I think there will be interest in more LTACs,=94 Healy says =
of the=20
moratorium, adding later, =93Without any building in five years, I think =
that's a=20
reasonable assumption that there will be more growth.=94
Dr. =
William Kapp=20
is an orthopedic surgeon who serves as chairman of Landmark Hospitals, =
an LTAC=20
company that began in 2006 and has one facility in Athens, Ga., and =
three in=20
Missouri. Kapp cites a confluence of factors leading to the =
consolidation in the=20
LTAC segment.
![3D"A](3D"http://www.modernhealthcare.com/apps/pbcsi.dll/storyimage/CH/20110=) =20
A patient receives rehab =
therapy at=20
Landmark Hospitals' LTAC in Athens, Ga., one of the company's four =
facilities. |
First, he =
says, some=20
companies were in a weakened position that was driven largely by cuts in =
federal=20
reimbursement in the past three to five years. Another reason is some=20
private-equity firms that invested in this segment in 2002 and 2003 were =
looking=20
to exit. And he also echoed Walters' comment about the segment's future. =
=93I think there has also been some consolidation particularly =
trying to=20
meld LTAC and rehab hospitals in certain markets so they can offer the =
full=20
post-acute continuum,=94 Kapp says.
As post-acute providers move =
toward=20
the goal of coordinated care, they do so during a very strained =
reimbursement=20
environment that also includes uncertainty about the future operating=20
environment.
In July, the CMS issued a final rule that will cut =
payments=20
to the skilled-nursing-facility segment by 11%, or roughly $3.87 =
billion, for=20
next year. The CMS noted that it has recalibrated its payment structure =
through=20
its resource utilization groups, or RUGs, to correct incentives for =
higher-cost=20
therapies. As a result of the rule, Kindred reported that it expects the =
change=20
to cost the company between $95 million and $110 million in annual=20
revenue.
Meanwhile, last week, shares of HealthSouth fell =
sharply=97by=20
30%=97following news of President Barack Obama's $3 trillion =
deficit-reduction=20
proposal for the next 10 years.
A potentially damaging issue for inpatient =
rehabilitation=20
facilities is a provision in Obama's plan to reinstate the =9375% =
rule,=94 which=20
would require that 75% of patients at IRFs have at least one of 13 =
medical=20
conditions. That would increase the threshold from its current 60%, and =
caused=20
HealthSouth President and CEO Jay Grinney to report during a conference =
call=20
that it could lead to the closure of a small number of hospitals. The =
company=20
also reported that the measure could lead to a loss of about $26 million =
in its=20
annual adjusted income.
In the latest round of federal payment =
updates,=20
LTAC operators weren't hit as hard as other sectors. An August rule from =
the CMS=20
called for a 1.8% payment increase for 2012, which the agency says =
should raise=20
LTAC payments by about $126 million.
A more significant development for the sector, =
however, was=20
a bill introduced this summer by Sen. Pat Roberts (R-Kan.) that would =
create=20
some stability that the segment has sought. The bill, called the =
Long-Term Care=20
Hospital Improvement Act of 2011, has bipartisan support.
=93The =
purpose is=20
to make sure LTACs function as LTACs; SNFs function as SNFs and IRFs =
function as=20
IRFs,=94 says Landmark's Kapp.
Endorsed by ALTHA and the =
American Hospital=20
Association, the legislation would establish certain criteria for =
patient=20
pre-admission, admission and continuing-stay assessments and specifies =
core=20
services and patient-care requirements for LTACs.
In a statement last month, AHA President and CEO =
Richard=20
Umbdenstock heralded the bill, saying that Congress, MedPAC and other=20
stakeholders have called for developing patient and facility criteria =
since=20
2004=97and this legislation attempts to do just that.
=93The =
bill also=20
eliminates the 25% rule, a policy implemented by (the CMS) in 2004 to =
limit=20
patient access to (LTAC) services,=94 Umbdenstock said in his statement. =
=93Eliminating the 25% rule will ensure that patients are not prohibited =
arbitrarily from receiving the needed care in (LTACs). This bill will =
replace=20
blunt payment policies with comprehensive clinical criteria to ensure =
that=20
(LTACs) uniformly serve high-acuity patients.=94
The =9325% rule,=94 which was expanded in 2007, =
caps patient=20
admission referrals from a host hospital at 25%, at which point the CMS=20
reimburses facilities at a lower rate.
According to Healy, ALTHA =
hopes=20
the bill will be introduced in the House =93in the near future=94 and =
would like to=20
see it included in one of the larger Medicare bills=97such as a bill to =
fix the=20
physician payment formula=97by year's end.
=93I think because it =
has solidly=20
good consensus and the backing of the AHA that it would advance in =
Congress,=94=20
Healy says.
While LTAC providers support this legislation, =
they=97like=20
their acute-care counterparts=97are finding new ways to adapt to a =
healthcare=20
system that is more patient-centered and less fragmented.
=93It =
is=20
difficult to test and deploy integrated care models in the face of =
short-term=20
reimbursement pressures that can undermine investments in infrastructure =
and=20
health technology that are critical to improving transitions in care and =
reducing rehospitalizations,=94 Kindred's Diaz said in a statement. =
=93We have been=20
encouraging policymakers in this time of intense deficit reduction =
pressures to=20
avoid short-term payment cuts that inhibit innovation to transform the=20
healthcare system in the long term.=94
ALTHA's Walters echoed =
that=20
sentiment as he reflected on the future of LTACs and the post-acute =
sector.=20
=93Probably the greatest single challenge coming down the road for =
post-acute=20
providers is who, if anyone, can bear financial risk and coordinate care =
for a=20
population of medically complex patients,=94 Walters says. =93Whoever =
cracks that=20
code will be well-positioned for the next 30 years.=94
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