Dawn of CMS' Two-Midnight Rule Delayed Again

14 February 2014 Health Care Law Today Blog

The Centers for Medicare & Medicaid Services (CMS) announced that it has again delayed the implementation of the Two-Midnight Rule. Shortly after the delay announcement on February 2, 2014, CMS officials specified on a Special Open Door Forum Call new clarifications regarding the Rule. Enforcement was initially scheduled to begin October 1, 2013.  A prior delay extended the deadline until March 31, 2014 to allow hospitals time for education and adjustment to the new standards. Enforcement is now scheduled to begin October 1, 2014. A few days prior to CMS’ latest delay announcement, the American Hospital Association sponsored a briefing on Capitol Hill with representatives from Cleveland Clinic, Mayo Clinic, and Johns Hopkins Hospital, who urged support for the Two Midnight Rule Delay Act, which extended CMS’ enforcement moratorium through September 30, 2014. 

As set forth in the FY 2014 IPPS Rule, the Two-Midnight Rule imposes financial penalties for services that recovery auditors deem should have been documented as outpatient services. The Two-Midnight Rule directs reviewers to presume that hospital stays of two consecutive midnights after admission indicate appropriate inpatient status for Part A claims, and that stays extending less than two midnights should be billed as outpatient observation stays. CMS indicated that the Two-Midnight Rule will result in higher inpatient expenditures due to increased admissions and therefore proposed reducing the hospital payment rate by 0.2%.

The Two-Midnight Rule was introduced to clarify when a patient should be treated as an inpatient and not an outpatient observation status, but varying subregulatory guidance issued while implementation of the Rule has been delayed has resulted in frustrations for hospitals preparing  to implement the new standard. Additionally, the American Hospital Association (AHA), regional hospital associations, and health systems are challenging the Two-Midnight Rule in federal court and through the Provider Reimbursement Review Board, including review of the validity of the 0.2% reduction. The challengers contend, among other things, that the inpatient payment reduction is arbitrary and capricious and fails to comply with the Administrative Procedure Act’s requirements. 

While the implementation of the Two-Midnight Rule may now seem distant (and perhaps uncertain), hospitals are well-advised to use the additional six months to prepare for operationalizing the newly clarified standards. According to CMS officials, physicians must sign off on admitting orders prior to the patient’s discharge. Documentation of admitting physician certification appears required even if nurse practitioners, residents, or physician assistants have legal authority to write admitting orders. If there is no admitting physician signature, then hospitals are to treat the care as Part B outpatient care and receive lower reimbursement.

CMS to Host MLN Connects National Provider Call

CMS will be hosting an MLN Connects National Provider Call on February 27, 2014 from 2:30 to 4 p.m. EST during which time CMS will be addressing frequently asked questions and answering questions from the public regarding the Two-Midnight Rule. 

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