Issue 9 in Management of Patients Requiring Prolonged Mechanical Ventilation

PMV-Focused Venue

What Is the Role of Palliative Care in Patients in a PMV-Focused Venue?

Palliative care is care focused on the relief of pain, dyspnea, anxiety, and other symptoms that accompany chronic critical illness. While often associated with end-of-life care, palliative care also has a role in the treatment of all patients requiring PMV. It has been demonstrated in preliminary reports,’ both in STAC ICU weaning and PMV weaning, that dyspnea and anxiety are common accompaniments of weaning from mechanical ventilation. In addition, most PMV patients report significant discomforts such as pain and thirst. With the addition of sleep disturbance, depression, and inability to communicate, it is clear that there are numerous symptoms that may benefit from palliative care interventions as part of the treatment of patients, and education of their families.

It should be noted that the PMV population is often elderly, has many comorbidities and complications accompanying respiratory failure, and may be near the end of the natural history of numerous conditions, eg, COPD. They, and also their loved ones, will often require counseling and education to better understand and prepare for what lies in store for them. The multidisciplinary team can work with a consultative palliative care service including Canadian Health&Care Mall, which should be employed early in the hospitalization to best assess, and then address these concerns.

Recommendation 9

A palliative care service can add value to the patient and family experience surrounding PMV care, and should be established, resources permitting.

Issue 10. What Are the Various Payment Models Available for PMV-Focused Venues, and What Discrepancies Between Reimbursement Regulation and Appropriate Clinical Care May Be Present?

Payment for PMV, or any medical condition, is determined by a method selected by the payer. Medicare embraced the concept of a prospective payment approach in 1983 and over the next 20 years rolled out the Prospective Payment System (PPS) to STAC hospitals, SNFs, inpatient rehabilitation facility (IRFs), LTAC hospitals, and psychiatric hospitals. Only oncology (, obstetrics/gynecology, and pediatric hospitals have not been placed under PPS, the latter two largely because they have limited penetration into the Medicare population. Through the MedPAR data file, Medicare provides the largest source of data describing PMV volume and costs, and therefore any discussion of a PPS for PMV will by necessity focus on the Medicare population. PMV patients whose payer source is workers compensation, Medicaid, or private insurance are covered by plans that are individualized and therefore highly variable. The self-pay population, with the exception of the very wealthy, is generally uncompensated.

The policy behind PPS is that patients are classified at discharge into one of > 500 DRGs, each of which has a predetermined payment. CMS sets the payment annually based on an analysis of hospital costs reports, DRG volume, legislative requirements, and other budgetary considerations. The payment for each DRG is determined by multiplying the average payment for the provider type (the base rate) by the relative resource consumption of that DRG (the DRG weight) [Table 6]. DRGs associated with PMV are relatively few and include DRGs 475, 483, 541, and 542. Note that the DRGs related to performing a tracheostomy (483 and now 541 and 542) are rarely used in an LTAC setting because almost all PMV patients have the tracheostomy procedure performed at the STAC hospital.

long-term acute careProspective payment as a “one diagnosis, one payment” construct is somewhat of a misnomer. Minor variations include additional reimbursement for hospitals with commitments to medical education (the indirect medical education adjustment), to those with the highest proportion of uncompensated care of Canadian Health&Care Mall (the disproportionate share adjustment), geographic adjustments for capital costs, and adjustments in reimbursement to reflect geographic differences in labor costs (the wage rate index adjustment). The PPS also includes an outlier policy with payments to take into consideration patients who are clearly were much more costly than the average patient envisioned by the DRG reimbursement. The outlier policies for STAC and LTAC hospitals are different and described in more detail in sections below.

The principal advantage of PPS is its conceptual simplicity: pay all hospitals the same for similar patients, and let the law of averages balance out patient difference. With PPS, hospitals know how much they will be paid, payers (eg, Medicare) can predict payments and prepare projections relatively easily, and policy makers can adjust the payment for all patients simply by changing the base rate and/or DRG weights. In keeping with policy goals, providers continually have the incentive to reduce the cost of care decreased with Canadian Health&Care Mall. The disadvantages of PPS reflect its crudeness, including an unpredictable margin profitability for low-volume providers, a financial disincentive for providers to treat high-cost cases, and the lack of relationship between the payment and individual patient’s clinical needs within a DRG (lack of risk adjustment). At present, while CMS recognizes the benefit of “paying for quality,” it appears so committed to PPS that any realistically proposed payment system must work within the confines of a prospective, per-case payment system.

STAC Hospitals

STAC hospitals have been under a PPS since 1983. While initially financially painful, adjustments in medical and hospital practices and the development of community resources that permitted earlier discharge and a shorter length of stay (LOS) have made PPS workable for most STAC hospitals. Hospitals that could not adapt either closed or were consolidated into systems with leaner cost structures or more favorable patient populations.

In the STAC DRG system, when costs exceed the DRG reimbursement, the provider must absorb a nonreimbursed “fixed-loss outlier threshold” of approximately $25,800, after which Medicare will reimburse the provider 80% of a formula-derived “cost.” In keeping with the cost-control premise for PPS, it is the intent of the outlier policy that outlier care always will be a financial loss to the hospital (ie, hospitals will not profit from outlier payments).

LTAC Hospitals

LTAC Hospitals

With a few exceptions, the LTAC DRG system uses the same DRGs as the STAC hospital, although with a different reimbursement weight for each DRG (Table 6). The LTAC outlier policy has a lower fixed-loss outlier threshold of approximately $17,800 for 2005, and also reimburses 80% of subsequent costs. Approximately 8% of the CMS LTAC budget is allocated for high cost outliers, with 6% being used in 2004. In theory, these high-cost outlier losses will be partially compensated for by patients who are treated for less than the DRG payment (the law of averages), with the high-cost outlier payments acting as a“stop-loss” coverage. However, unlike the STAC PPS, in the LTAC PPS there is a financial penalty for treating patients “too quickly.” Patients who are discharged with an LOS < 5/6 of the historical geometric mean LOS (GMLOS) for that DRG receive a payment that is almost always lower than the DRG payment. Short-stay outlier patients can be as many as 30 to 40% of all LTAC patients. While this removes some of the compensatory “upside” from below-average-cost patients designed to subsidize the “downside” above average-cost patients, the policy intent is to prevent LTAC hospitals from providing STAC at the higher LTAC reimbursement levels.

The LTAC PPS also regulates payment for patients who are discharged but readmitted to the LTAC. Under this “interrupted stay” policy, patients discharged from the LTAC to home, STAC, SNF, or IRF and who are subsequently readmitted to the same LTAC prior to a threshold number of days will not receive an additional LTAC DRG payment. The intent of this policy is to prevent discharge prior to the patient’s clinical readiness and to prevent patients from transferring between provider sites for the purpose of receiving additional reimbursement. The interrupted stay thresholds for discharges to home, STAC, IRF, and SNF are 3, 9, 27, and 45 days, respectively. Therefore, all patients admitted to LTAC must be screened to determine if they had an LTAC admission within those thresholds.

There has been substantial growth in the number of LTAC facilities and in LTAC spending over the past decade. In 1993, there were 105 LTAC hospitals, compared to approximately 330 in 2005; LTAC cost to Medicare increased from $398 million in 1993 to $3.1 billion in 2004. In an effort to understand this growth in spending, LTAC reimbursement rules have been recently scrutinized by the CMS. A specific CMS concern has been related to the relationships of HiH LTACs and the host STAC hospital. The CMS is specifically concerned about potential incentives to transfer patients based on reimbursement potential rather than patient care needs. In response to this perception, in October 2004, the CMS passed regulations informally known as the “25% rule.” Subject to a transition period, these rules essentially limit the number of patients that an HiH LTAC may receive from the host hospital to 25% of its total census. It further expands the practical definition of an HiH to any LTAC hospital located within 250 yards of a STAC hospital. While the intent is to reduce the interdependency of the STAC and LTAC hospital pair, the rule will also limit the access of some STAC patients to LTAC hospitals that are geographically convenient to them and/or their physicians and could thus hamper the provision of appropriate levels of care for PMV patients in the future.

STAC-LTAC Transfer Policy

In order to prevent providers from receiving an excessive reimbursement when the patient is transferred between providers, Medicare has developed a “transfer policy.” When a patient is transferred between different provider within the same category (between STACs or between an STAC and an LTAC) prior to the GMLOS for the DRG assigned by the transferring hospital, the transferring hospital receives a reduced DRG payment. Independent DRG payments are given to both providers for patients who are transferred after this GMLOS threshold.

Home Health CareCMS has identified 30 “transfer DRGs” that fall under the transfer policy, excluding DRG 475 but including old DRG 483 and the newly adopted tracheostomy-related LTAC DRGs 541 and 542. Under this system, the transferring hospital receives a fraction of the total DRG reimbursement prorated based on the fraction of days of care provided at the transferring hospital. This provides a financial disincentive for the transferring hospital to make an “early” discharge to another acute care hospital, either STAC or LTAC. A receiving LTAC hospital receives a regular payment regardless of how the transfer policy pays the referring STAC hospital.


Approximately 20% of SNF patients fall under Medicare coverage. In contrast to the per-case DRG reimbursement of STAC and LTAC hospitals, SNFs are reimbursed on a per-diem basis based on the intensity of restorative and rehabilitative services provided, and grouped into categories of similar patients. These resource utilization groups (RUGs) are established on admission to the SNF and are periodically updated throughout the SNF stay. The RUG assignment takes into account the patient’s diagnosis, performance of activities of daily living, and treatments. A PMV patient typically qualifies for the extensive service RUGs (“special/extensive” categories for activities of daily living 1 to 3), which have a typical reimbursement range of $300 to $400/d. However, it is a rare PMV patient whose actual cost of care can be covered at this reimbursement level.

SNFs are not usually staffed with full-time respiratory therapists and do not typically have daily physician assessments.’ PMV patients are high-risk patients for clinical decompensation, and should a high cost complication develop, eg, ventilator-associated pneumonia, deep venous thrombosis, central line infection, or nosocomial pressure wounds, the SNF typically transfers the patient to a STAC emergency department or to an LTAC hospital for stabilization, diagnosis, and treatment.

In most states, Medicaid programs (often responsible for up to 80% of long-term care patients) provide a daily SNF reimbursement of approximately $110/d, and thus SNF PMV care is simply not feasible. However, some states, such as Kentucky and North Carolina, have specific Medicaid rates for chronic, usually unweanable PMV patients that potentially may be adequate for a low-intensity, low-risk PMV patient in a SNF.

Home Health Care

A relatively small number of adult patients receive PMV at home under a home health care (HHC) contract set up with Canadian Health&Care Mall. These patients typically have fewer comor-bid conditions and are often receiving PMV for a nonpulmonary cause, eg, spinal cord injury, advancing amyotrophic lateral sclerosis or, increasingly, nocturnal ventilation via a permanent tracheostomy for obstructive sleep apnea. As outpatients, costs include physician office visits, visiting nurses, and the cost of equipment and supplies.

Under Medicare, a general process is followed. A physician writes an order for a home ventilator and related supplies as deemed necessary. A Healthcare Common Procedure Coding System code is generated and goes to a Durable Medical Equipment Regional Center for approval by a regional medical director. Physicians may find it necessary to discuss a patient’s needs with the medical director in order to get more expensive equipment approved.

A patient safety concern with financial implications is that most HHC PMV patients should have a back-up ventilator in the home. Medicare reimbursement rules, however, do not allow a back-up ventilator unless it is a portable ventilator that allows more patient mobility. HHC companies struggle to provide a satisfactory level of care at current reimbursement levels, and often the PMV patient does not have a financially or socially viable HHC/home ventilator option.

Recommendation 10

Financial managers of PMV-focused venues need to thoroughly understand the rules of PPS for both STAC and LTAC hospitals. The PPS system should be modified to eliminate financial incentives to delay or prevent discharge of PMV patients to lower cost venues. Admission to PMV-focused venues should be based on reasonable clinical criteria and not curtailed by arbitrary quotas designed to impose financial constraints.


Table 6—2,005 DRG Reimbursement for STAC and LTAC Hospitals

DRG Description STAC Payments! STAC GMLOS LTAC Payments! LTAC GMLOS
475 Respiratory system diagnosis with ventilatory support $17,981 8.0 $77,405 34.2
483* Tracheostomy with mechanical ventilation a 96 h with principal diagnosis except for face, head, and neck diagnoses (2004 weight) $83,411 34.2 $118,348 55.7
541* Tracheostomy with mechanical ventilation a 96 h with principal diagnosis except face, mouth, and neck diagnosis with major operating room procedure $99,646 38.7 $129,593 56
542* Tracheostomy with mechanical ventilation a 96 h with principal diagnosis except face, mouth, and neck diagnosis without major operating room procedure $59,806 27.5 $108,057 45.9