Two-Midnight Rule Will Cost Hospitals Big

Philip Betbeze, June 13, 2014

The simple demarcation between inpatient and outpatient status prodded by Medicare's proposed rule has the potential to turn into a big revenue problem. But good documentation can help.

The so-called "two midnight" rule has hospital and health system senior leaders extremely worried.

Although its enforcement by Medicare has been delayed a second time, hospitals and health systems still have to deal with it. In essence, the proposed rule calls on doctors, with the help of whatever decision-making staff the hospital has made available, to decide whether a patient is likely to need a stay in the hospital that extends over two midnights.

That essentially determines whether that patient, and his or her billing status, is designated as an inpatient or outpatient.

And that designation can mean a huge difference in reimbursement despite the fact that the inputs (bed occupancy, staff time) are largely the same. Some CFOs I've spoken with say reimbursement for outpatient status is as little as a third of what they would get for inpatient status.

Observation, Two-Midnight Rules Hit in Hearing

Observation status has many implications for patients' pocketbooks as well, but that is a topic for another day. There are plenty of land mines, however, for hospitals and health systems in this simple demarcation between inpatient and outpatient status.

Philip Betbeze

Philip Betbeze is the senior leadership editor at HealthLeaders Media.


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