CMS Proposes Adjustment to Two-Midnight Rule

Hospitals may have some leeway with the controversial two-midnight rule. Buried in the Centers for Medicare and Medicaid (CMS) proposed rule to increase outpatient rates (reported here in last week’s newsletter blog) is a plan to alter the two-midnight inpatient admissions rule. The two-midnight rule requires physicians to document that they expect the patient must stay in the hospital over at least two midnights; admission is based on that expectation.


CMS proposed amending requirements for physicians to certify to the medical necessity of inpatient services for all inpatient admissions. Certification would be required only for long stays (defined in the proposed rule as 20 days or longer) or cost-outlier cases. CMS would continue to require a written inpatient order as a condition for Medicare payment. (“Medicare Proposes Tweaking Two-Midnight Rule in Pay Update,” HFMA Weekly News, July 10, 2014)


The two-midnight rule went into effect in October 2013, but enforcement was partially delayed in April. At that time, CMS directed contract auditors to conduct “probe and educate” audits to assess hospitals’ compliance with the rule.


Hospitals have repeatedly expressed their concerns about the two-midnight rule, asserting it places unnecessary burden on both the hospital and the patient. They have noted the lack of clarity in guidance about proper compliance with the new admissions policy, which replaces the use of medical necessity to decide on an inpatient admission.


Even if the proposed changes are adopted, they are not likely to satisfy provider concerns, according to the director of healthcare finance policy, strategy and development at the Healthcare Financial Management Association. “CMS needs to suspend the two-midnight rule until it can develop—in conjunction with providers—a workable, budget-neutral, short-stay payment policy that pays providers appropriately for the care provided to patients. The new short-stay policy should be designed to work with the two-midnight rule to address the outstanding operational issues that providers have with the two-midnight rule.” (“Medicare Proposes Tweaking Two-Midnight Rule in Pay Update,” HFMA Weekly News, July 10, 2014)


Moody’s Investors Service noted in an analysis of the rule in March that the two-midnight rule could reduce hospital revenue by up to $4,000 per case.



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