Many hospital-based post-acute services--subacute care units and home health agencies--ha ve self-destructed. And a Prospective Payment System for acute rehabilitation looms on the horizon on October 1, 2000.

But what happens to those patients who need special care programs and are too sick to leave the hospital environment? Enter the "hospital within a hospital," a long-term acute care hospital (LTACH) housed within an acute hospital. LTACHs are extended-stay specialty hospitals for chronically ill and rehabilitation patients whose average length of stay is 25 days or more. Patients in LTACHs typically require long acute stays for such diagnoses as pulmonary and/or tracheotomy care, ventilator weaning, critical care issues, infectious diseases, medically complex care and extensive wound management.

LTACHs fill an important role in the continuum of care because they address the needs of a small, but growing, patient population who cannot be effectively treated in the conventional health care setting. This patient population is thought to represent 2-3 percent of the total patient population, and can represent as much as 40 percent of the critical care dollars spent by acute hospitals. Many of these are elderly, medically complex patients who are dependent on life support systems such as ventilators, parenteral nutrition, respiratory and cardiac monitoring, and dialysis due to trauma, extensive surgery, or disease.

By focusing their resources on clinical programs that treat critically ill or injured patients, LTACHs incur fewer overhead costs than general acute care hospitals treating the same patients and, therefore, treat these patients more cost
effectively.

LICENSING ISSUES

The LTACH, as a "hospital within a hospital," is an intriguing model for acute hospitals to consider. There is no such animal as an LTACH "unit." An LTACH is just that--a long-term acute care hospital. However, most states permit the hospital within a hospital model, allowing the LTACH to be licensed as a separate hospital, coexisting in appropriate space within another acute care hospital. The host acute hospital leases unused space to the LTACH.

Federal regulations require, however, that the LTACH have its own governing body independent from that of the acute hospital, maintain a separate administrative and employee structure and have a distinct medical staff. The LTACH may purchase ancillary services from the host hospital, but to accept unlimited patient referrals from the host hospital, no more than 15 percent of the operating expenses of the LTACH may be purchased from the host hospital.

Licensed as an acute hospital, LTACHs are PPS-exempt and reimbursed based on costs, in accordance with the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The BBA capped TEFRA payment; for existing LTACHs, the cap was established at the 75th percentile of target amounts for all LTACHs--$38,593 in 1999. New LTACHs have a lower payment cap, at $22,010 for 1999.

Even those acute hospitals that had not previously ventured into subacute care may find an LTACH valuable. Hospital case mix indices are on the rise, as managed care has limited hospital admissions to only the sickest patients. Fast-growing elderly populations often require lengthy acute care stays. Finally, certain nursing facilities that accepted high-acuity patients prior to PPS have discontinued their subacute programs because of reimbursement shortfalls.

KEYS TO SUCCESS

A few things are paramount to the success of the LTACH in the "hospital within the hospital" model: a sufficient volume of patients whose average hospital length of stay is 25 days or more; an appropriate location within the host hospital; strong recognition of value by managed care plans; and the ability to assemble a team of physician intensivists acceptable to the general medical community.

Below is an overview of each area.

1. Patient volume. Although demand studies use sophisticated DRG data analyses, potential admissions to an LTACH can be grossly estimated at 2-3 percent of medical surgical inpatient admissions. At least two-thirds of LTACH patients will eventually be classified in one of the DRG groups shown in the Table. Rehabilitation patients found in an LTACH typically have additional medical conditions that require a length of stay longer than the normal acute rehabilitation stay. Most LTACH patients also have multiple secondary diagnoses.

2. Location. The hospital within a hospital must be located in an area of the host hospital that is convenient to attending medical staff and patient families. The majority of admissions will be derived from the host hospital. Other hospitals within a 15-25 mile radius may be sources for referral of patients to the LTACH.

3. Medical staff. The medical staff will include the usual complement of physicians found in the acute hospital. However, the typical attending staff will be a small number of pulmonologists, internists and other specialists. Therefore, the medical community must recognize the LTACH staff physicians as achieving good outcomes and being highly ethical in terms of communication with and referrals back to primary care physicians.

4. Payment. Approximately 80-85 percent of LTACH patients are covered by Medicare. The remaining 15-20 percent are private insurance, managed care and Medicaid patients. Discharge planners and case managers need to be educated about the benefits of an aggressive LTACH program with valuable outcomes, such as shorter lengths of stay in the acute hospital, fewer re-admissions to an acute hospital, and more discharges to home.

5. Physical plant requirements. The average LTACH will require approximately 550 square feet of space per bed. Forty beds will allow achievement of the appropriate economies of scale. The LTACH must meet hospital code requirements as required by the State.

LOOK BEFORE YOU LEAP

Acute hospitals must consider two major issues when thinking of leasing space to an LTACH. First, a report is due from the Health Care Financing Administration to Congress by October 1999 recommending a prospective payment methodology for LTACHs. A recent report from the Medicare Payment Advisory Commission (MedPAC) suggested that both a case mix per diem and a discharge-based DRG Prospective Payment System should be explored as options for LTACHs. However, Congress has not established an actual date for implementation of PPS for LTACHs.

A second issue that requires careful evaluation is the dynamics of the relationship between the LTACH owner and the host hospital. This relationship is material regardless of whether the LTACH ownership is for-profit or not-for-profit, but the issue becomes of greatest significance for not-for-profit, mission-driven acute hospitals. The LTACH and the acute hospital should share the same mission, vision and ethics, and both parties should discuss these issues in full during negotiations.

For acute hospitals with appropriate space and a significant volume of potential long-term hospital patients, an LTACH as a hospital within a hospital may be the right step, especially if the LTACH partner has a similar culture and mission. For such hospitals, the LTACH can be an important contributor to its post-acute care continuum.

Dr. Kathleen M. Griffin is national director of post-acute and senior services for Health Dimensions Consulting Group, Scottsdale, Ariz., a member organization of the Benedictine Health System. She also is an ADVANCE editorial advisor.

David LeBlanc is president of LifeCare Management Services, Dallas, Texas. Paul Eiseman is LifeCare's senior vice president of planning and development.