Protecting Access to Care for Our Most Severely Ill Patients

Why It Matters

LTCHs are critical for managing complex, high‑cost cases; their erosion jeopardizes access to essential care and amplifies pressure on the broader health system, driving up overall costs.

Key Takeaways

• Dual-rate payment cuts LTCH Medicare spending by 45% since 2016.
• Over 25% of LTCHs have closed in the past decade.
• Proposed reforms aim to expand payment criteria and length‑of‑stay rules.
• Rural access and Medicare Advantage practices are targeted for improvement.
• AHA coalition urges Congress to enact LTCH policy changes.

Pulse Analysis

Long‑term care hospitals occupy a niche in the U.S. health ecosystem, caring for Medicare patients with multiple organ failure, ventilator dependence, and extensive comorbidities. Unlike traditional acute facilities, LTCHs provide a higher intensity of services over longer stays, enabling smoother transitions from acute hospitals and reducing readmission rates. Their specialized capabilities make them indispensable for the nation’s most vulnerable patients, yet they remain under‑recognized in policy discussions despite handling a disproportionate share of high‑cost care.

The 2016 introduction of a dual‑rate payment system dramatically altered LTCH economics. By reimbursing hospitals at rates far below actual care costs, Medicare spending on LTCH services fell about 45%, prompting more than a quarter of these facilities to shut down in ten years. This contraction not only limits bed availability for high‑acuity patients but also forces acute hospitals to absorb complex cases they are ill‑equipped to manage, inflating overall system expenditures. Moreover, the current prospective payment model struggles to capture the variability of patient severity, further eroding financial viability.

In response, the American Hospital Association and a coalition of long‑term care advocates have outlined a suite of policy reforms. Key proposals include widening payment eligibility, revising the 25‑day average length‑of‑stay threshold, overhauling the outlier payment structure, and expanding rural LTCH access. Addressing Medicare Advantage practices that divert patients away from appropriate settings is also on the agenda. If enacted, these changes could stabilize LTCH finances, preserve critical care capacity, and ultimately lower costs by keeping the sickest patients in the most suitable environment. The reforms represent a pivotal opportunity to reinforce a fragile but essential segment of the health care continuum.