Financial impact of the Medicare prospective payment system on long term acute care hospitals

Objective. Long Term Acute Care Hospitals (LTACs) are subject to Medicare rules because they accept Medicare and Medicaid patients. In October 2002, Medicare changed the LTAC reimbursement formulas, from a cost basis system to a Prospective Payment System (PPS). This study examines whether the PPS has negatively affected the financial performance of the LTAC hospitals in the period following the reimbursement change (2003-2006), as compared to the period prior to the change (1999-2003), and if so, to what extent. This study will also examine whether the PPS has resulted in a decreased average patient length of stay (LOS) in the LTAC hospitals for the period of 2003-2006 as compared to the prior period of 1999-2003, and if so, to what extent. ^ Methods. The study group consists of two large LTAC hospital systems, Kindred Healthcare Inc. and Select Specialty Hospitals of Select Medical Corporation. Financial data and operational indicators were reviewed, tabulated and dichotomized into two groups, covering the two periods: 1999-2002 and 2003-2006. The financial data included net annual revenues, net income, revenue per patient per day and profit margins. It was hypothesized that the profit margins for the LTAC hospitals were reduced because of the new PPS. Operational indicators, such as annual admissions, annual patient days, and average LOS were analyzed. It was hypothesized that LOS for the LTAC hospitals would have decreased. Case mix index, defined as the weighted average of patients’ DRGs for each hospital system, was not available to cast more light on the direction of LOS. ^ Results. This assessment found that the negative financial impacts did not materialize; instead, financial performance improved during the PPS period (2003-2006). The income margin percentage under the PPS increased for Kindred by 24%, and for Select by 77%. Thus, the study’s working hypothesis of reduced income margins for the LTACs under the PPS was contradicted. As to the average patient length of stay, LOS decreased from 34.7 days to 29.4 days for Kindred, and from 30.5 days to 25.3 days for Select. Thus, on the issue of LTAC shorter length of stay, the study’s working hypothesis was confirmed. ^ Conclusion. Overall, there was no negative financial effect on the LTAC hospitals during the period of 2003-2006 following Medicare implementation of the PPS in October 2002. On the contrary, the income margins improved significantly. ^ During the same period, LOS decreased following the implementation of the PPS. This was consistent with the LTAC hospitals’ pursuit of financial incentives.^

Financial impact of the Medicare prospective payment system on long term acute care hospitals

Objective. Long Term Acute Care Hospitals (LTACs) are subject to Medicare rules because they accept Medicare and Medicaid patients. In October 2002, Medicare changed the LTAC reimbursement formulas, from a cost basis system to a Prospective Payment System (PPS). This study examines whether the PPS has negatively affected the financial performance of the LTAC hospitals in the period following the reimbursement change (2003–2006), as compared to the period prior to the change (1999–2003), and if so, to what extent. This study will also examine whether the PPS has resulted in a decreased average patient length of stay (LOS) in the LTAC hospitals for the period of 2003–2006 as compared to the prior period of 1999-2003, and if so, to what extent. ^ Methods. The study group consists of two large LTAC hospital systems, Kindred Healthcare Inc. and Select Specialty Hospitals of Select Medical Corporation. Financial data and operational indicators were reviewed, tabulated and dichotomized into two groups, covering the two periods: 1999–2002 and 2003–2006. The financial data included net annual revenues, net income, revenue per patient per day and profit margins. It was hypothesized that the profit margins for the LTAC hospitals were reduced because of the new PPS. Operational indicators, such as annual admissions, annual patient days, and average LOS were analyzed. It was hypothesized that LOS for the LTAC hospitals would have decreased. Case mix index, defined as the weighted average of patients’ DRGs for each hospital system, was not available to cast more light on the direction of LOS. ^ Results. This assessment found that the negative financial impacts did not materialize; instead, financial performance improved during the PPS period (2003–2006). The income margin percentage under the PPS increased for Kindred by 24%, and for Select by 77%. Thus, the study’s working hypothesis of reduced income margins for the LTACs under the PPS was contradicted. As to the average patient length of stay, LOS decreased from 34.7 days to 29.4 days for Kindred, and from 30.5 days to 25.3 days for Select. Thus, on the issue of LTAC shorter length of stay, the study’s working hypothesis was confirmed. ^ Conclusion. Overall, there was no negative financial effect on the LTAC hospitals during the period of 2003–2006 following Medicare implementation of the PPS in October 2002. On the contrary, the income margins improved significantly. ^ During the same period, LOS decreased following the implementation of the PPS. This was consistent with the LTAC hospitals’ pursuit of financial incentives. ^

AN ASSESSMENT OF THE RELATION OF CANCER MORTALITY RATES AND SOURCES OF DRINKING WATER IN TEXAS

The geographic distribution of average annual age-adjusted mortality rates (1964-1976) for four types of cancer (all cancer sites combined, gastrointestinal, urinary, and lung cancer) were compared by sources of drinking water for 254 Texas counties and county rural areas and 301 Texas cities. Exposure variables considered were surface versus ground water, public water supplies versus individuals wells, and trihalomethane levels in municipal water supplies. Each general source of "surface" and "ground" water was further divided by aggregating ground water using areas by aquifers and surface water using study areas by river basins. Potential confounding variables taken into account included median education, employment in cancer risk industries, population mobility, ethnicity, and urbanicity. A pattern of higher and lower cancer mortality rates was found for populations using some aquifers and river basins. Further study is required to determine whether the differences in cancer mortality rates that were observed are related to drinking water content or are coincidental with differences in personal characteristics which could not be taken into account in this ecologic study design. ^