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Two-Midnight Rule Creates Financial Hurdles, Perverse Incentives

Rene Letourneau, for HealthLeaders Media, September 30, 2013

To Jerry Arndt, senior vice president for business services at Gundersen Lutheran, a 325-bed integrated healthcare organization based in La Crosse, WI, the two-midnight rule feels like a punishment for running a competent, well-managed shop.

"It's just another one of those absolutely classic examples of being penalized for being efficient. If you can discharge somebody with a one-night stay, then it will get paid as an observation as opposed to discharging them at 12:05 a.m.," he says. "It's another example of having to choose between doing what is right and what maximizes revenue, and this is really, really getting to be a difficult situation."

Lower Reimbursements for Same Care
Elizabeth Carnevale, assistant vice president, revenue cycle at South Nassau Communities Hospital, a 435-bed independent hospital in Oceanside, NY, says her organization may be denied or paid less for medically necessary inpatient admissions that do not meet the two-midnight rule, even though patients are receiving the exact same level of care.

"We are still using the same amount of resources. We are using the same amount of nursing care, the same overhead, everything is the same. It will definitely affect our revenue," she says.

Additionally, providers will now have to invest greater resources to collect the co-pay, and it's possible they won't get paid at all, Carnevale says. "Those patients that are deemed as outpatients are going to have a higher amount to pay out of pocket, and that will hurt our ability to collect."

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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.