On May 19, CMS released an interim final rule with comment period addressing certain Medicare long-term care hospital (LTCH) prospective payment system (PPS) policies mandated by the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA). This follows publication of a related rule May 6 implementing other MMSEA LTCH provisions and the May 9 annual payment rate update (both rules discussed previously in Washington Watch). Specifically, the new rule modifies the “25 percent threshold” payment policy by delaying for three years the extension of the 25 percent threshold payment adjustment to “grandfathered” LTCH hospitals-within-hospitals (HwH) and to freestanding LTCHs. In prior rulemakings, CMS extended a payment adjustment policy to patients admitted to an LTCH from another hospital in excess of a certain percentage threshold. Effective for cost reporting periods beginning on or after December 29, 2007 and before December 29, 2010, CMS delays the extension of the 25 percent threshold payment adjustment to “grandfathered” LTCH HwHs and freestanding LTCHs. The preamble to the new rule includes two tables illustrating the application of the percentage threshold policy to various types of LTCHs. In addition, CMS is increasing the patient percentage thresholds from 25 percent to 50 percent for certain LTCH HwH and satellite discharges admitted from a co-located hospital, and from 50 percent to 75 percent for certain LTCH HwH and satellite discharges admitted from a co-located rural, MSA-dominant, or urban single hospital. The rule also implements a three-year moratorium on new LTCHs, LTCH satellites, and LTCH beds. In the preamble to the rule, CMS discusses its interpretation of the various exceptions to the moratorium, including what qualifies as a binding written agreement for the construction, renovation, lease, or demolition of a new hospital. CMS provides no substantive discussion of MMSEA's requirement that the Secretary conduct an expanded review of the medical necessity for LTCH admission and continued stay. The rule is effective December 29, 2007 in conformance with the MMSEA, although CMS will accept comments on the rule until July 21 and will respond to comments in a future final rule. The regulation was published in the Federal Register May 22; the text is posted here.