Proposed Changes to Two-Midnight Rule Generate Optimism, Praise

CMS plans to tweak the two-midnight short hospital stay policy, according to its proposed rule issued last week. The proposed changes include “allowing hospitals to admit—and bill under Part A—Medicare patients whose stay is expected to last less than two midnights ‘on a case-by-case basis.’” (“Two-Midnight Rule Changes Proposed,” HFMA Weekly News, July 2, 2015)


CMS also proposed moving enforcement of the standard from the Recovery Audit Program to the Quality Improvement Organizations (QIOs). Recovery Audit Contractors (RACs) will focus only on those hospitals with consistently high denial rates. CMS noted that, “QIOs have a significant history of collaborating with hospitals and other stakeholders to ensure high-quality care for beneficiaries.” (From the CMS Fact Sheet: Two-Midnight Rule, July 1, 2015)




CMS adopted the two-midnight rule for admissions beginning on or after October 1, 2013. This rule established Medicare payment policy that should be used when determining whether inpatient admission is reasonable and payable under Medicare Part A. Implementation has been delayed because of industry pushback.


In general, the Two-Midnight rule stated that:

  • Inpatient admissions will generally be payable under Part A if the admitting practitioner expected the patient to require a hospital stay that crossed two midnights and the medical record supports that reasonable expectation.


  • Medicare Part A payment is generally not appropriate for hospital stays not expected to span at least two midnights.


The proposed CMS changes for stays expected to last less than two midnights are as follows:

  • For stays for which the physician expects the patient to need less than two midnights of hospital care (and the procedure is not on the inpatient only list or otherwise listed as a national exception), an inpatient admission would be payable under Medicare Part A on a case-by-case basis based on the judgment of the admitting physician. The documentation in the medical record must support that an inpatient admission is necessary, and is subject to medical review.


  • CMS is reiterating the expectation that it would be rare and unusual for a beneficiary to require inpatient hospital admission for a minor surgical procedure or other treatment in the hospital that is expected to keep him or her in the hospital for a period of time that is only for a few hours and does not span at least overnight. CMS will monitor the number of these types of admissions and plans to prioritize these types of cases for medical review.


For hospital stays that are expected to be two midnights or longer, CMS’s policy has not changed; that is, if the admitting physician expects the patient to require hospital care that spans at least two midnights, the services are generally appropriate for Medicare Part A payment. This policy applies to inpatient hospital admissions where the patient is reasonably expected to stay at least two midnights, and where the medical record supports that expectation that the patient would stay at least two midnights. This includes stays in which the physician’s expectation is supported, but the length of the actual stay was less than two midnights due to unforeseen circumstances such as unexpected patient death, transfer, clinical improvement or departure against medical advice.

(From the CMS Fact Sheet: Two-Midnight Rule, July 1, 2015)


Hospital and health policy analysts applauded the proposed changes, some noting that the shift in policy gives physicians decision-making authority over the best and most appropriate setting of care based on patient needs.


An executive from the Healthcare Financial Management Association said that the proposed switch to QIOs performing the first review of all cases of less than two midnights with RAC follow-up on hospitals with high denial rates is “an improvement” and “generally favorable.”


CMS intends to keep a 0.2 percent cut to inpatient payments as well as a 0.2 percent net decrease in outpatient prospective payments as part of the two-midnight policy.


Comments on the proposed changes will be accepted by CMS until August 31. A final rule is expected around November 1.


You can read the CMS fact sheet here.



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