AHA initiates assault on 2-midnight rule

Yesterday the American Hospital Association, four regional hospital associations and four health systems launched a federal court challenge to the controversial two-midnight inpatient admissions policy established by the Centers for Medicare & Medicaid Services.

Along with the AHA, the hospital associations (Greater New York, New York State, New Jersey and Pennsylvania) and the health systems (Banner Health (Ariz.), Einstein Healthcare Network (Pa.) and Wake Forest University Baptist Medical Center (N.C.) and The Mount Sinai Hospital (N.Y.) filed appeals asking the Provider Reimbursement Review Board to grant expedited judicial review for the hospitals’ claims that the two-midnight rule’s 0.2 percent payment cut for Fiscal Year 2014 inpatient prospective payment system hospitals is unlawful.

According to the AHA, the hospital appeals state: “The Providers seek judicial review of pure questions of law regarding the substantive and procedural validity of the 0.2% reduction. Because the [PRRB] lacks the power to grant the Providers’ requested relief, it should grant expedited judicial review.”

CMS' two-midnight regulations are meant to outline and clarify the difference between hospital inpatient and outpatient stays. While medical necessity will still be taken into account, the rule says, if a patient’s stay is fewer than two midnights, the hospital will be paid on observation status instead of inpatient status.

The hospitals contend that the reduced inpatient payment they receive under the final rule is arbitrary and capricious because CMS relied on indefensible assumptions and offered no reasoned explanation for them. They also argue that the payment cut fails to comply with Administrative Procedure Act’s requirements for proper notice and comment and was not codified in regulation as the law requires.