How two senators hope to fix the two-midnight rule

Senate bill more forceful than proposed House legislation

Two senators introduced a bipartisan bill Thursday that would establish new guidelines for the controversial "two-midnight" rule on Medicare inpatient admissions, Modern Healthcare's Jessica Zigmond reports.

The controversial two-midnight policy—included in Medicare's inpatient payment rule for 2014—assumes a hospital admission to be admissible for payment if a physician expects a beneficiary's treatment to require a two-night hospital stay and admits the patient under that assumption. Shorter inpatient stays are deemed legitimate if they are coded as outpatient observation stays.

The rule aims to limit the growth in extended observation stays at hospitals, which have skyrocketed in recent years. Although the rule was set to take effect Oct. 1, 2013, pushback from health care providers prompted CMS to delay enforcement a few times. Under the latest delay, Medicare's recovery auditors (RACs)—who locate suspicious admissions—must wait until after Sept. 30 of this year to begin using the rule during audits.

Thursday's legislation

Sens. Robert Menendez (D-N.J.) and Deb Fischer (R-Neb.) are co-sponsoring the Two-Midnight Rule Coordination and Improvement Act of 2014, which has already won the support of the American Hospital Association, America's Essential Hospitals (AEH), the Association of American Medical Colleges, and various state hospital associations. The legislation calls for:

  • HHS to include input from health care stakeholders—including hospitals, physicians, Medicare administrative contractors, recovery audit contractors, and other vested parties—to define new criteria for short inpatient stays;
  • The development of a payment methodology for short inpatient stays based on the newly structured criteria;
  • RACs to begin their work on or after Oct. 1, 2014 if CMS implements criteria in the fiscal year (FY) 2015 rulemaking process, but to add a yearlong delay if rulemaking does not occur before this deadline.

Xiaoyi Huang—director of policy at AEH, which represents the nation's safety-net hospitals—says the group supports the provision extending the two-midnight rule delay until CMS "gets this policy right." She adds, "There are short inpatient stays that may not last two midnights, but should still be treated in an inpatient setting."

Meanwhile, Reps. Jim Gerlach (R) and Jim Crowley (D) have introduced similar legislation in the House that calls for implementing a new payment policy for short inpatient stays in 2015. According to Huang, both bills call on HHS to include new short-stay criteria in the FY 2015 rulemaking process, but the Senate bill goes further by mandating the inclusion of input from various stakeholders (Zigmond, Modern Healthcare, 3/6 [subscription required]).

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