Opinion: CMS's proposed changes to the two-midnight rule—Partial restoration of medical judgment

On July 1, 2015, the Centers for Medicare and Medicaid Services (CMS) announced proposed changes to the controversial Two-Midnight Rule. This payment rule clarifies the circumstances under which Medicare will consider a given hospital stay to be an inpatient service (and therefore reimbursable at a higher rate under Medicare Part A), versus an outpatient service (and therefore reimbursable at a lower rate under Part B). Before the rule, physicians generally were allowed to exercise professional judgment regarding the appropriate treatment setting, subject to Medicare's retrospective medical review. The Two-Midnight Rule largely replaced medical judgment with regulatory benchmarks for inpatient versus outpatient admissions.