Policy & Regulation News

CMS Delays Two-Midnight Rule, Medicare Claims Now Pending

By Jacqueline DiChiara

- The ongoing financial debate between hospitals and physicians about what differentiates an inpatient from an outpatient in terms of administered payment after the stroke of midnight (or two) continues to evolve.

The Centers for Medicare & Medicaid Services (CMS) announced on April 1, 2015 to continue the Impact Probe and Educate process until April 30, 2015 in light of undeveloped Congressional action on H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015. CMS confirmed an extension promoted continued education and a greater understanding of the policy overall. CMS is halting review of inpatient claims submitted by hospitals to the Medicare program between October 1, 2013 and April 30, 2015, prohibiting recovery auditor inpatient hospital status review until a later date.

In association with the recent passing of the repeal of the Sustainable Growth Rate formula (SGR), CMS further delayed implementation of the two-midnight rule until the end of April. The postponement intends to more clearly define how hospitals are paid for the types of services they render and to define the minimum stay length for overnight stays, says CMS. It will also allow Congress until mid-April to help prevent Medicare payment cuts to physicians.

According to the two-midnight rule, originally implemented to address a rise in observation stays, if inpatient rates for treatment fail to span the course of two midnights, hospitals will not be reimbursed by Medicare. 

Hospitals claim the policy is especially problematic as it weakens their professional judgement for patient admittance.

“When the patient walks in the door, you can’t have a crystal ball and know how long the patient will be there,” explains Amy Deutschendorf, MS, R.N, Senior Director of Utilization and Clinical Resource Management at Johns Hopkins Health System.

Deutschendorf adds patients with similar symptoms can quite easily require very different lengths of stay, making policy enforcement a challenge. A forty year old with chest pain and no other risk factors might require brief observation, whereas a diabetic eighty-six year-old with a history of coronary interventions is “a whole different ballgame," she confirms.

Many hospitals additionally object to the actions of recovery audit contractors (RACs) dictating what exactly defines the need for inpatient or outpatient treatment.

According to Deutschendorf, “Patients either need the services that only a hospital can provide, or they don’t. If they need to be in a bed overnight, and we need that time to take care of them, it should be an admission."

The vague definition of inpatient care is especially problematic regarding deductibles, copayments, and a beneficiary’s eligibility. Medicare payment and cost-sharing implications have varied depending on whether a patient was treated on an outpatient basis without hospital admission or an inpatient basis and expected to occupy a hospital bed. A beneficiary’s status is often blurred depending on a facility’s resources, type of care administered, and if he or she transitions between inpatient or outpatient setting.

In relation to this, hospitals reportedly appealed almost half of claims denied by RACs.

CMS sought to answer such concerns and address inquiries accordingly. On August 2, 2013 CMS issued a final rule, CMS-1599-F, updating Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital Prospective Payment System (LTCH PPS). This final rule provided further needed clarification about how Medicare contractors can best review inpatient hospital and critical access hospital (CAH) admissions for payment purposes.

CMS has encouraged physicians to generally admit patients anticipated to require hospital care for more than twenty-four hours. CMS emphasized the admission of a patient would not be covered “solely on the basis of the length of time the patient actually spends in the hospital.”

CMS emphasized a medical decision to admit a patient involves complicated judgment which can be made after a physician has considered a wide variety of independent factors, “including the patient's medical history and current medical needs, the types of facilities available to inpatients and to outpatients, the hospital's by-laws and admissions policies, and the relative appropriateness of treatment in each setting.”

Additionally, CMS stated there is flexibility involved with decisions from hospitals and physicians to admit or discharge a patient. According to CMS, such a choice can be generally determined within twenty-four hours and would take longer than forty-hours only in circumstances deemed rare and exceptional.

“The assumption is we’re not delivering significant or complicated care, and that’s incorrect,” explains Kate Rose, MPH, Assistant Vice President of Public Policy and Government Relations. “We are; we’re simply able to do it very quickly because of the 24/7 resources that exist in an academic medical center, as well as the incentives enabled by value-based arrangements to stabilize patients quickly and effectively.” 

The push for value-based reimbursement continues as legislative decisions regarding the SGR repeal continue next week.