CMS alters the 'two-midnight' timeline—again

Hospitals get some relief from controversial inpatient admissions policy

CMS for the second time has altered the timeline for financial penalties for inpatient services that recovery auditors determine could have been provided in an outpatient setting, Modern Healthcare's Joe Carlson reports.

The new policy included in Medicare's inpatient payment rule for 2014 instituted a time-based presumption period for medically necessary inpatient care. Under the "two-midnight" rule, an admission is assumed to be appropriate for a Medicare Part A payment if a physician expects a beneficiary's treatment to require a two-night hospital stay and admits the patient under that assumption.

The updated criteria was intended to assuage hospitals' complaints that Medicare's rules are too vague about when a patient should be admitted for more costly inpatient care rather than under observation status, which can result in  greater out-of-pocket expenses for beneficiaries. Hospitals have undergone heavy auditing for short patient stays in recent years, despite their protests that the rules were unclear.

However, hospitals and physicians also dislike the "two-midnight" rule because hospitals are presumed to have provided medically unnecessary care if an admitted patient does not require a two-night hospital stay.

Hospitals plan three-pronged attack on the 'two-midnight rule'

Hospitals get a grace period—of sorts

The deadline to begin enforcement of certain aspects of the "two-midnight" rule had already been delayed from Oct. 1, 2013, to March 31, 2014, after providers voiced their concerns. Friday's announcement pushes the deadline another six months, requiring recovery auditors—who use data-mining techniques to locate suspicious admissions—to wait until Sept. 30 to begin penalties for incorrect claims under the rule.

Medicare's administrative contractors, who process claims for payment, will still be permitted to review short inpatient stays and revoke payment if the clinical record doesn't support medical necessity. However, those reviews are intended to be instructional and must be limited to a sample of 10 to 25 claims per hospital.

Ken Raske, president and CEO of the Greater New York Hospital Association, applauded the "welcome news" in a letter to members. "The concerns expressed by all of you and our staunch collective advocacy on this issue have clearly influenced this delay," he wrote (Carlson, Modern Healthcare, 1/31 [subscription required]).

Editor's note: This story has been updated to better reflect how the change affects the timeline for financial penalties.

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