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Two-Midnight Rule Saga Lacks Happy Ending

By Christopher Cheney  
   November 09, 2015

Two of the country's largest hospital associations are applauding recent changes to the two-midnight rule, but they say the Medicare payment regulation for short hospital stays remains a work in progress.

The beginning of the end could be in sight.

Changes to the two-midnight rule announced Oct. 30 are welcomed, but fall short of fixing the Centers for Medicare & Medicaid Services' regulation, according to two hospital associations.

Controversy has swirled around the rule from the start, with many healthcare providers calling for the hospital admission guidelines to be significantly revised or scrapped.

Priya Bathija

"It's been a long process to get to this point, where CMS is making meaningful changes. It's a good first step and a move in the right direction," says Priya Bathija, senior associate director for policy at the American Hospital Association.

Two-Midnight Rule Changes Cemented by 2016 OPPS Final Rule

A bit of history before diving into the changes: In October 2013, CMS officials implemented new guidelines to determine when a short hospital stay qualifies for payment under Medicare Part A, which reimburses hospitals at a higher rate than Medicare Part B. Under the guidelines released two years ago, hospital stays spanning less than a period of two midnights were not considered appropriate for Medicare Part A reimbursement.

The original rule riled providers and presented hospitals with a revenue problem. CMS heard the discontent and in early 2014 announced that enforcement of the rule would be delayed while it sought to clarify admission guidelines.

The updated rule, set to go into effect Jan. 1, has two key elements.

First, hospital stays that span a period of less than two midnights could be eligible for reimbursement under Medicare Part A based on a physician's clinical judgment, which will be subject to review on a case-by-case basis. According to the changes announced Oct. 30 as part of the 2016 Outpatient Prospective Payment System final rule: "The physician's decision should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event," the 2016 OPPS final rule states. "The decision to admit the patient as an inpatient must be supported by the medical record."

Last week, a CMS spokesman told me that other factors will also be considered, including "the need for diagnostic studies that appropriately are outpatient services in rendering their payment determination. Additionally, CMS will examine and evaluate applicable claims data and any other data available in order to determine whether any patterns of case-by-case exceptions exist that may be adopted as national exceptions."

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.

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