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Two-Midnights Rule Spells Grim Financial Forecast for Hospitals



Hospitals will take a financial hit this year as a result of the new federal rule that cuts the Medicare payment rate for most patient stays that span less than two midnights, Moody's predicts.



1 comments on "Two-Midnights Rule Spells Grim Financial Forecast for Hospitals"
Vicky Mahn-DiNicola (3/20/2014 at 7:56 PM)

The comment from CMS that they do not agree with the assertion that the two-midnight rule will accelerate the trend of inpatient care shifting to outpatient is almost laughable. For hospitals that have had very [INVALID]nt and mature medical necessity and utilization management protocols in place, it could theoretically increase inpatient volume slightly because hospitals will feel more confident about admitting to inpatient status those patients who meet medical necessity and are also expected to stay over 2 midnights. Its just another data point to validate their decision. Before they were more likely to admit as observation status if there was any doubt at all about medical necessity just so they could avoid the administrivia associated with the denials and appeals. But face it, MOST hospitals still struggle to keep up with the complexities of ensuring medical necessity and haven't [INVALID]d strong internal physician advisors to support their efforts. For those hospitals, I think we may well see shifts towards increasing outpatient volumes; and especially in those hospitals that are building dedicated observation units. Of course they'll want to fill up these beds! But the driver for this shift isn't the two-midnight rule alone! Add in Medicare Shared Savings ACO incentives, readmission reduction penalties, quality reporting initiatives and RAC Audits and we have the perfect storm to start shifting inpatient claims to lower reimbursing outpatient claims. We need to recognize that we are all shifting from "pay for volume" to "pay for value". The only question that remains is how we define value in the new paradigm.