Hospitals given a reprieve from two-midnight rule

Hospitals can take a deep breath, and rest easier for at least for six months. The Centers for Medicare & Medicaid Services is delaying enforcement of its “two-midnight” policy for inpatient admission and medical review criteria.

No official reason was provided for the delay, but CMS was likely responding to aggressive lobbying from hospitals against the rule.

The delay puts off any CMS enforcement action until after Sept. 30, 2014.  Thus, hospitals should expect no post-payment patient status reviews of inpatient hospital claims with dates of admission between Oct. 1, 2013 and Oct. 1, 2014.

However, Medicare Administrative Contractors (MACs) will continue to select claims for review with dates of admission between March 31, 2014 and Sept. 30, 2014. And MACs will continue to review and deny claims found not in compliance with the two-midnight rule (officially CMS-1599-F).

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.

Hospital advocacy groups contend that reduced inpatient payment hospitals 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 was not codified in regulation, as the law requires.

CMS has also clarified its physician certification and order requirements under the two-midnight policy.