Two Midnight rule helped slash improper payments for inpatient hospital claims by 58 percent, CMS says

CMS headquarters-Maryland

The Centers for Medicare and Medicaid Services is lauding two major policies, including the Two Midnight rule, as well as education and oversight, for a massive drop in improper payments for inpatient hospital claims, according to a post on the agency's blog.

The agency said the overall Medicare fee-for-service improper payment rate dropped from 12.1 percent in 2015 to 11.0 percent in 2016. Moreover, improper payments for inpatient hospital claims alone dipped by 58.3 percent, from 9.2 percent in 2014 to 3.8 percent in 2016.

Inpatient hospital claims accounted for $10.45 billion in improper payments during the 2014 report period, which ran from July 1, 2012 to June 30, 2013. That number was slashed to $4.42 billion during the 2016 report period, which ran from July 1, 2014 to June 30, 2015. The drop constitutes a decrease of $6.03 billion in improper payments, the blog said.

[Also: CMS finalizes Medicare quality measures under consideration]

CMS said two major policies helped fuel the reduction in improper payments for inpatient hospital claims. First, CMS changed its policy and allowed hospitals to bill for Part B services given during inpatient stays when a patient's admission was "found not to be reasonable and necessary".

Second, CMS established and then modified the Two Midnight rule, which said that inpatient admissions are generally payable under Part A if the admitting physician expected the patient would be in the hospital for a stay that "crossed two midnights," with medical record supporting that expectation.

CMS also credited provider education for the reduction. They probed a limited number of provider's short stay claims for Part A payment, and Medicare Administrative Contractors sent letters to the providers with the results of the audit, offering education opportunities to discuss the errors and potential changes to make in future billing.

[Also: CMS hospital overall star ratings methodology flawed, Health Affairs says]

"Providers with moderate or major error findings were engaged in up to three additional rounds of review and education to encourage greater accuracy with future claim submissions," the agency said.

CMS also said they are looking for ways to establish prior authorization and pre-claim review programs, and they will continue to monitor services whose 'vulnerabilities' fuel the improper payment rate, such as home health and inpatient rehabilitation claims.

Twitter: @BethJSanborn