MedPAC approves draft proposal to get rid of the two-midnight rule

Group also recommends notifying patients when they are in observation status

The Medicare Payment Advisory Commission (MedPAC) last week voted to approve a set of draft recommendations to revamp payment policies for short hospital stays and end Medicare's controversial "two-midnight" rule.

How is the two-midnight rule affecting your bottom line?

Background on the rules

CMS in a final rule for the fiscal year 2014 Inpatient Prospective Payment System 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 patient's treatment to require a two-night hospital stay and admits him or her under that assumption. Beneficiaries who are under observation—which is considered outpatient care—face higher out-of-pocket costs, including higher copayments and charges for drugs that are not covered for outpatient stays. Inpatient care is billed to Medicare Part A, while outpatient care is billed to Medicare Part B.

In January 2014, CMS announced it was instructing auditors to wait until Oct. 1, 2014, to begin scrutinizing short inpatients stays, following several other enforcement delays. Meanwhile, Congress is mulling a bill aimed at permanently replacing Medicare's sustainable growth rate formula that includes a provision to delay enforcement of the two-midnight rule for six months.

Two-midnight rule resurrects age-old question: Can observation care be profitable?

MedPAC recommendations

In the draft recommendations, MedPAC advised CMS to end the two-midnight rule. MedPAC Chair Glenn Hackbarth said the rule "creates the potential for an incentive to inappropriately hospitalize patients."

The new recommendations also would:

  • Update government auditing programs to target reviews at hospitals that have a high number of short patient stays; and
  • Suggest notifying patients when they are kept in observation status and not admitted for inpatient status (Young, CQ HealthBeat News, 4/2 [subscription required]).

The takeaway: In draft recommendations, MedPAC advised CMS to end the two-midnight rule, noting that it "creates the potential for an incentive to inappropriately hospitalize patients."

Delve deeper into the two-midnight rule

Check out our white paper, Responding to the Two-Midnight Rule, to explore the rule more as it relates to your CV organization.

DOWNLOAD THE WHITE PAPER


Next in the Daily Briefing

State legislators proposed 300+ anti-abortion bills in Q1 2015

Read now