Medicare's Site-Neutral Payment Policy: Will It Limit Access to Long-Term Acute Care?
"A new study examines how Medicare's payment policy affects long-term acute care hospitals and access for older adults."
Long-term acute care hospitals (LTACHs) play a vital role in the healthcare system, providing specialized care for patients with complex medical needs. However, concerns about unnecessary admissions and rising costs have led to the implementation of new policies aimed at optimizing resource allocation. One such policy is the Centers for Medicare and Medicaid Services (CMS) site-neutral payment policy, designed to reduce reimbursements for less-ill individuals admitted to LTACHs.
A recent observational study delved into the potential effects of this site-neutral payment policy, focusing on its impact on LTACH admissions and access to care for older adults. By analyzing national Medicare data from 2011-2012, researchers sought to understand how the policy might affect different regions and hospitals with varying LTACH utilization rates.
The study's findings shed light on the proportion of LTACH admissions subject to site-neutral payment and the potential consequences for both high- and low-use regions and hospitals. The results offer valuable insights for healthcare providers, policymakers, and patients alike, as the industry navigates the evolving landscape of post-acute care.
Measuring LTCH Use and Impact
The study "Effect of Site-Neutral Payment Policy on Long-Term Acute Care Hospital Use" analyzed national 5% Medicare data from 2011-12. The CDC's National Health Statistics Reports, Number 208, used data from the 2020 National Post-acute and Long-term Care Study, including CMS administrative data on long-term care hospitals. CMS reports that more than 420 long-term care hospitals submit data through its Long-Term Care Hospital Quality Reporting Program.
Medicare's Foundational Structure
Medicare and Medicaid were enacted in 1965 as Title XVIII and Title XIX of the Social Security Act. The milestone expanded health coverage to almost all Americans aged 65 or older and provided health care services to specified low-income populations. Today, Original Medicare consists of Part A and Part B: Part A covers inpatient hospital, skilled nursing facility, hospice, and some home health care, while Part B covers physician and outpatient services, durable medical equipment, and many preventive services.
Site-Neutral Payment: A Double-Edged Sword?
The study revealed that a significant 41% of LTACH admissions would be subject to the site-neutral payment policy. This considerable proportion suggests a broad impact across the LTACH sector. However, the effect varies greatly among individual LTACHs, with a median of 40% of admissions potentially affected (ranging from 22% to 60%).
- High-Supply Regions: LTACHs in areas with greater market supply (more beds per capita) could see a greater impact, with approximately 47% of admissions affected.
- High-Use Hospitals: Facilities with higher LTACH utilization rates might also experience a larger impact, potentially affecting 43% of their admissions.
- Low-Supply Regions and Hospitals: Despite the policy's focus on high-use areas, nearly one-third of admissions in low-supply regions and hospitals could still be subject to lower payments.
Current LTCH Research
Research on the clinical course after LTAC admission among older Medicare beneficiaries reported that these patients were anticipated to have lower LTAC access starting in 2020. MedPAC identifies long-term care hospitals as part of its research on post-acute care, Medicare spending and financing, and beneficiaries and coverage. CMS provides LTCH prospective payment system reports, data files, and documentation for Medicare payment and quality reporting.
Coverage and Access Concerns
A 2026 analysis described Medicare's impact and limitations while comparing it with other health care plans. A June 11, 2026 report by the HHS Office of Inspector General examined denials of requests for long-term acute care and inpatient rehabilitation among 19 Medicare Advantage plans. The report identified prior authorization denials for post-acute care after a hospital stay as an area of concern and highlighted variation in denial and overturn rates.
LTACHs and Alternative Settings
Medicare.gov describes long-term care hospitals as facilities for critically ill and medically complex patients who require extended hospital care, with many patients transferred after time in intensive or critical care. Research comparing LTACHs with skilled nursing facilities notes that LTACH use varies considerably across the United States and that skilled nursing facilities are the principal post-acute alternative. The same study reports that LTACHs provide more intensive care and receive over triple the reimbursement of skilled nursing facilities for comparable diagnoses.
Navigating the Future of Long-Term Acute Care
The site-neutral payment policy presents both opportunities and challenges for the LTACH sector. While it may help reduce unnecessary admissions and control costs, it also carries the risk of limiting access to care, particularly in underserved regions.
Payment Protections for Complex Care
The American Hospital Association describes LTCHs as serving Medicare beneficiaries with complex conditions who require extended hospitalization. Traditional Medicare reimburses this care through the LTCH prospective payment system. That system includes a high-cost outlier policy intended to help ensure payment for exceptionally costly cases.
A Coordinated Long-Term Care Future
MedPAC's March 2026 chapter on post-acute care provides analysis and policy advice on the Medicare program. The 2026 Long-Term Care Market Outlook identifies aging, caregiver shortages, rising costs, and increasing consumer expectations as pressures requiring an interconnected response. It argues that families remain central to care but cannot carry the responsibility alone, pointing toward coordination among insurers, providers, researchers, government agencies, employers, and technology organizations.
Care Beyond the Hospital
PAM Health is described in an AHA case study as a provider of long-term acute care, inpatient rehabilitation, and behavioral health. The organization serves more than 70 communities across the country and has operated for more than 20 years. A separate collection of long-term care case studies frames long-term care planning as an ongoing journey intended to help families and professionals prioritize quality of life and well-being.
It's essential to monitor the policy's impact on LTACH access, patient outcomes, and healthcare costs. Further research is needed to determine whether individuals diverted from LTACHs can be effectively cared for in alternative settings, such as skilled nursing facilities (SNFs), without compromising their recovery.
As the healthcare landscape continues to evolve, stakeholders must work together to ensure that older adults receive the appropriate level of care in the most cost-effective setting. This requires a nuanced approach that balances the need for fiscal responsibility with the importance of maintaining access to high-quality post-acute care services.