To amend title XVIII of the Social Security Act with respect to Medicare payment for long-term care hospital services.

Amends title XVIII (Medicare) of the Social Security Act to require the Secretary of Health and Human Services (HHS), in making payment under the prospective payment system (PPS) to certain long-term care (LTC) hospitals for discharges in rate years beginning on and after October 1, 2011, to make payment adjustments for cases identified as: (1) meeting or exceeding the fixed high episode efficient case threshold, and (2) meeting or below the episode outlier case threshold.

Directs the Secretary to adopt rules which identify the predicted probability of those Medicare beneficiaries admitted as inpatients to LTC hospitals from a subsection (d) hospital for whom the payment for services received during an episode of hospital care is predicted to be less than if they had remained in the subsection (d) hospital (episode efficient cases).

(Generally, a subsection [d] hospital is an acute care hospital particularly one that receives payments under Medicare's inpatient PPS when providing covered inpatient services to eligible beneficiaries.)

Directs the Secretary to: (1) establish separate thresholds for high episode efficient cases (Medicare beneficiary discharges with the highest 10% probability of being episode efficient cases) and episode outlier cases (Medicare beneficiary discharges with the lowest 10% probability of being episode efficient cases) for LTC hospitals located in a rural area, and (2) establish separate high episode efficient case and episode outlier case thresholds for LTC hospitals located in urban areas for beneficiaries discharged from a subsection (d) hospital which accounts for more than 25% of the Medicare beneficiaries discharged from subsection (d) hospitals in a Metropolitan Statistical Area.

Establishes a two-year moratorium, beginning December 29, 2012, on the establishment of new LTC hospitals and LTC satellite facilities and on the increase in beds in existing LTC hospitals or satellite facilities.