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Two-Midnight Rule Creates Financial Hurdles, Perverse Incentives

Rene Letourneau, for HealthLeaders Media, September 30, 2013

The controversial two-midnight rule has gone into effect, creating new economic challenges for hospitals and health systems. Reimbursements will drop for the same level of care, say healthcare leaders, who will be forced to choose between doing what's right and gaining revenue.

Despite heated opposition from several healthcare industry groups, the controversial two-midnight rule goes into effect tomorrow, creating new economic challenges for hospitals and health systems.

Issued by the Centers for Medicaid & Medicare on August 2, the rule states that if a patient is in the hospital for a stay that does not span at least two midnights, "the services are generally inappropriate for payment under Medicare Part A, regardless of the hour the patient came to the hospital or whether the patient used a bed."

Hospitals have been vocal in their opposition to the rule and, last week, 105 members of the House of Representatives sent a letter to CMS requesting a delay of its implementation. Although CMS is still moving forward to execute the rule as planned, it announced on Thursday that it will not allow recovery audit contractors to question the medical necessity of stays of one midnight or less from October 1 through December 31, thus giving hospitals three months to educate clinicians before the rule is enforced.

According to the new rule, providers will be reimbursed under Medicare Part B unless a patient is hospitalized for two nights or more. That's of great concern to hospital finance executives, who believe the rule will result in reduced reimbursements and unhappy patients, who will be responsible for a greater share of the bill. Medicare patients on observation status are typically responsible for a 20% co-pay and do not receive coverage for some medications administered in the hospital or for post-acute care.

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1 comments on "Two-Midnight Rule Creates Financial Hurdles, Perverse Incentives"


Myers Glower Michelle (10/1/2013 at 11:41 PM)
All the more reason for nursing care managers to review all admissions from the ED at point of entry to get the admission status correct. However, it cannot stop there. As the patient enters the system, further testing, may reveal more information resulting in a dx that converts to inpatient. In addition, patient objective symptoms may equate to conversion as well. It will take concurrent reviews at 100% through a time sensitive process. Physicians will need to be on board and hospitalist can no longer use two days as a work up for the what if's? Potentially this can have a huge impact on patient satisfaction scores and liability in discharging within the two day rule.