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Two-Midnight Rule Creates Financial Hurdles, Perverse Incentives

Rene Letourneau, for HealthLeaders Media, September 30, 2013

Carnevale expects the two-midnight rule to also have a negative impact on patient satisfaction, because patients will not understand the difference between inpatient and observation status. Patients will assume that because they are in a hospital bed that Medicare is covering the costs under Part A and will not be happy when they receive their bill.

"It will absolutely result in more patient complaints and lower patient satisfaction," she says. "For example, if a patient status is changed from inpatient to outpatient under Medicare regulations, the patient coverage is now under Part B. Items and services that are covered under inpatient may not be covered under outpatient. The regulations require that the hospital inform patients of this while they are still in the hospital and before discharge. This translates into confusion and frustration for the patient. Someone is going to have to educate these patients, and it is most likely going to be us."

Greater Clarity, Reduced Payments
Greg Pagliuzza, CFO at Trinity Regional Health System, a 584-bed integrated delivery system based in Rock Island, IL, that is part of the UnityPoint Health system, says that while the new rule provides greater clarity to help determine the difference between observation and inpatient status, it will likely result in lower overall Medicare payments for his organization.

"The challenge for us is the timeframe to train and permanently make changes to the documentation by the physician," he says. "[W]e are projecting a significant reduction in reimbursement."

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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.