CMS cements 'physician judgment' exception in two-midnight policy

The Centers for Medicare and Medicaid Services will not change its policy regarding the two-midnight inpatient rule but will allow greater flexibility for physician judgment in cases that do not meet the two-midnight benchmark, the federal agency announced Friday.

CMS will also require Quality Improvement Organizations to conduct first-line medical reviews of the majority of patient status claims rather than Medicare Administrative Contractors or Recovery Audit Contractors, which it previously announced.

The move was celebrated by the American Hospital Association, with Executive Vice President of Government Relations and Public Policy Thomas Nickels calling Recovery Audit Contractors "bounty hunters."

[Also: CMS to soften two-midnight rule, allow for exceptions]

"Hospitals appreciate the certainty that stays of at least two midnights are inpatient, with stays of less than two midnights also considered inpatient based on physician judgment," Nickels said in a statement. "We look forward to working with the (Quality Improvement Organizations), which are not paid on a contingency fee basis like the bounty hunter RACs, and to a more fair auditing process."

CMS said the rule expands the "rare and unusual" exceptions policy to allow for Medicare Part A payment on a case-by-case basis for inpatient admissions that do not currently satisfy the two-midnight benchmark.

"These changes continue CMS' long-standing emphasis on the importance of a physician's medical judgment in meeting the needs of Medicare beneficiaries," CMS said.

Hospital stays that are expected to be two midnights or longer are eligible for Medicare Part A payment, a benchmark established by CMS in 2013.

This was due to CMS observing a higher frequency of beneficiaries being treated as hospital outpatients and receiving extended "observation" services.

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Healthcare providers expressed concern about this trend, especially since days spent as a hospital outpatient do not count towards the three-day inpatient hospital stay that is required before a beneficiary is eligible for Medicare coverage of skilled nursing facility services, according to CMS.

CMS rejected a proposal to create a one-midnight rule, saying it could lead to a major increase in Medicare spending.

CMS did not reverse a proposed .2 percent reduction in hospital payments to balance an expected hike in more expensive inpatient stays.

Twitter: @SusanJMorse