One billing and coding expert explains her concerns about CMS’s proposed changes to the two-midnight rule for hospital short stays.

The Centers for Medicare and Medicaid Services (CMS) recently proposed changes to Medicare’s controversial two-midnight rule governing short hospital stays. The proposed changes, which were prompted by feedback from hospitals and physicians and are meant to emphasize the role of physician judgment, were reported in the July 3, 2015, HFMA Weekly News . Highlights of the changes are as follows:

  • For stays that are expected not to span two midnights, an inpatient admission would be payable under Medicare Part A on a case-by-case basis depending on the judgment of the admitting physician.
  • The documentation in the medical record must support that an inpatient admission is necessary and is subject to medical review. 
  • It is expected that it would be “rare and unusual” for a beneficiary to require an inpatient admission only for a few hours and not at least an overnight.
  • CMS will monitor the number of these types of admissions and plans to prioritize them for medical review. 

For hospital stays that are expected to be two midnights or longer, the CMS policy is unchanged: If the admitting physician expects the patient to require hospital care that spans at least two midnights, the services are usually appropriate for Medicare Part A payment. The changes do not apply to procedures on the “inpatient-only” list or those that are otherwise listed as a national exception.

Concerns Raised and Education Needed

This “new” standard merely brings back an old, vague definition of inpatient and recasts it as “rare and unusual,” says Day Egusquiza, president of AR Systems, Inc., Twin Falls, Idaho. It will require serious re-education of clinicians and UR and PFS staff, she says.

Hospitals will need to be vigilant in their front-end screening of “patient type” to see whether patients’ care will necessarily span two midnights; if so, they should be admitted as inpatients. But if the individual is the “rare and unusual case” who doesn’t require two midnights but needs to be an inpatient anyway rather than in an observation bed, the record will have to clearly support why inpatient status is necessary based on severity of illness, intensity of service, and clinical guidelines.

“Why would a hospital want to go back to the documentation challenges that created the massive RAC recoupments of recent years? This change just opened the floodgates again,” Egusquiza says.

She points out that the two-midnight rule is still being used, but it is overlaid with this “rare and unusual” exception. “If the industry would use the current two-midnight rule correctly—both its presumption and benchmark—rather than continue to ask for changes, we would not be seeing a loss of patients classified as inpatients, and life would be easier. Instead, I expect that the mess we wanted to avoid will explode again.”

CMS Seeks Comments

The proposed two-midnight changes are included in the Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System proposed rule. Hospitals and health systems interested in submitting comments on the two-midnight portion of the proposed rule should do so by Aug. 31, 2015. CMS will respond to comments in a final rule to be issued on or around Nov. 1, 2015.

Related articles and resources:

J. Stuart Showalter, JD, MFS, is a contributing editor for HFMA.

Interviewed for this article: Day Egusquiza is president, AR Systems, Inc., Twin Falls, Idaho, and a member of HFMA’s Idaho Chapter.

Discussion Starters

Forum members: What do you think? Please share your thoughts in the comments section below.

  • Do you believe the proposed changes to the two-midnight rule will help your hospitals comply with the rule or are they a hindrance to compliance?
  • What are some of your most effective strategies for managing the two-midnight rule?

Publication Date: Tuesday, July 21, 2015