Long-Term Acute Care Hospital (LTACH)

How It Works

Long-term acute care hospitals (LTACHs or LTCHs) are acute-care facilities certified by Medicare to treat medically complex patients with long expected stays, typically patients who need prolonged ventilator weaning, complex wound care, multi-system organ failure management, or intensive rehabilitation following critical illness. To maintain LTACH certification, a facility must have an average Medicare inpatient length of stay of 25 days or more. There are approximately 360 LTACHs nationwide, most operated by three large chains: Select Medical (about 100 facilities, often as "Select Specialty Hospitals" within host general hospitals), Kindred Healthcare/ScionHealth (about 60 facilities), and Ernest Health (smaller). LTACHs are paid under the LTCH Prospective Payment System (LTCH-PPS), distinct from the general IPPS. Payment is based on MS-LTC-DRGs (a modified DRG system with higher weights than MS-DRGs for the same conditions to reflect longer stays) with site-neutral payment rules that reduce payment to IPPS equivalent rates for cases that don't meet LTACH criteria (generally 3+ days in an acute-care ICU before LTACH admission, or principal diagnosis indicating extensive ventilator support). Typical LTACH per-discharge payments range from $25,000 for simpler respiratory failure cases to $150,000+ for complex ventilator weaning or severe wound care cases. The site-neutral payment policy, fully phased in by FY2020, cut LTACH Medicare revenue by approximately 25-40% and drove many smaller operators out of business. Clinical criteria for LTACH admission include extended ventilator dependence, complex wound care requiring daily specialty attention, ongoing need for intravenous antibiotics or nutritional support, and unresolved multi-system issues that would otherwise prolong acute-hospital stays. The original policy rationale was that LTACHs would be less expensive than prolonged acute-care ICU stays for suitable patients.

Related Terms

• Inpatient Rehabilitation Facility (IRF), A hospital or hospital unit specializing in intensive rehabilitation for patients recovering from stroke, joint replacement, spinal cord injury, and other conditions, paid under its own prospective payment system.
• Critical Access Hospital (CAH), A small, rural hospital (25 beds or fewer) designated by CMS to receive cost-based reimbursement at 101% of reasonable costs, ensuring rural communities maintain access to essential hospital services.
• Observation Status, A Medicare outpatient classification for short hospital stays where patients receive monitoring and treatment without being formally admitted as inpatients, billed under Medicare Part B rather than Part A.
• Inpatient Prospective Payment System (IPPS), Medicare's payment system for acute-care hospital inpatient stays, paying a fixed amount per MS-DRG rather than reimbursing each individual service.
• Two-Midnight Rule, A Medicare policy effective October 1, 2013 that presumptively classifies hospital stays spanning two midnights as inpatient and stays less than two midnights as outpatient observation, with significant payment and patient cost-sharing consequences.