Glen ReinerCinderella's coach turned into a pumpkin at the stroke of midnight—and your hospital's revenue could likewise be in for a rough ride if you don't pay special heed to the new "two midnights" rule recently issued by the Centers for Medicare & Medicaid Services (CMS).

In August, CMS released its final rule for the hospital inpatient prospective payment system, which goes into effect Oct. 1. A key part of that rule is the new "two midnights" presumption for hospital inpatient admissions, which replaces the 24-hour presumption that has long guided physicians. CMS's criteria for inpatient status now include a valid physician's order, documentation of the patient's medical need for admission, and information supporting the physician's expectation that the patient will require a stay lasting at least two midnights.

CMS has a good reason for changing the timeframe: The agency's researchers determined that 36 percent of payments for inpatient one-day stays are inappropriate, but that the number drops to just 13 percent for two-day stays.

As with any major change in Medicare policies, the two midnights rule is likely to cause a major spike in denials. Here are some ways to prepare for the new rule and avoid getting blindsided by a flurry of recovery audit contractor (RAC) activity and/or additional documentation requests (ADRs).

Liberate your docs from the clocks. Physicians need to focus on their patients' well-being without worrying about timetables. They can benefit from receiving real-time guidance from physicians who are already well versed in the implications of the two midnights rule. Ensuring physicians get timely peer-to-peer advice on how to improve documentation can prevent denials from happening in the first place.

Help educate physicians most affected by the new rule. Emergency department physicians and interventional cardiologists are among those who will be heavily impacted by the two midnights rule. These physicians should be given pointers on how to make admission documentation more thorough and airtight. For example, stent patients with documented risks of a bleed are not "automatic" candidates for two midnight stays anymore because signs of bleeding would likely be evident after just one midnight.

Let physicians know that observation time helps meet the requirement. A patient who spends the first night in observation and the second night as inpatient satisfies the two midnights requirement. Failure to properly document the patient's status on each night, however, can result in significantly reduced payment.

Stay on the lookout for CMS clarification. Because the new rule is a sea change in inpatient admissions, CMS has been actively clarifying its implementation. Hospital leaders should stay tuned to the FAQs on the agency's website to ensure their organizations' documentation remains flawless. For now, CMS has made it clear that there are still legitimate reasons for negative early discharge before two midnights have passed, including the obvious reasons, where a patient worsens and must transfer to another facility, unwisely leaves the hospital against medical advice, or dies. The agency's guidance on positive early discharge—those instances when a patient unexpectedly gets better rapidly—is still a bit sketchy. But that can change quickly, so it is important to keep apprised of all CMS clarifications.

Most hospitals are actively preparing for the revenue cycle impact of ICD-10, but comparatively few hospitals have given sufficient attention to preparing for the two midnights rule, even though, ironically, it takes effect a full year earlier. By proactively dealing with the new documentation standards, your revenue cycle saga will continue to be a Cinderella story.

Glen Reiner is clinical practice leader for Adreima, Chicago, and a member of HFMA's Arizona Chapter. 


Publication Date: Wednesday, September 25, 2013