Medicare Payment and Reimbursement

CMS Open Door Forum: 2-Midnight Rule

October 2, 2013 12:05 pm

On Tuesday, Sept. 26, 2013, CMS hosted a second, much anticipated, follow-up call to allow providers and other interested parties to ask questions pertaining to those areas of the two-midnight provision contained in the FY14 inpatient PPS final rule, which pertains to physician order and certification, inpatient hospital admission, and medical review criteria. 


CMS made changes to the rules regarding inpatient admission order and certification in response to: 

  • Tremendous concern about increased Medicare beneficiary observation stays (both duration and number of cases);
  • Rapid increase in the number of RAC reviews involving hospitals irate because they could not rebill Medicare and get a status change from inpatient to outpatient for payment;
  • Need for greater clarity around outpatient vs. inpatient and what constitutes this patient status for payment purposes.

Discussion Highlights

This new regulatory framework will require some flexibility to put into place. In spite of requests by the public to delay implementation, CMS feels that it is very important to move forward with the regulations, and therefore, will not delay the rule. However, they did assure listeners that providers will be given leeway over the next three months to adjust to these new requirements. CMS will continue to monitor, evaluate, and be open to further changes to provide even more comfort during this period. CMS staff also noted that it would be open to longer transition periods if the data warrants such. 

Probe & Review Period
From October 1 through December 31, 2013, MACs will focus their reviews on samples of one-night inpatient claims; two-midnight claim reviews will not be conducted. However, physicians should make inpatient admission decisions in accordance with the two-midnight provisions in the final rule. These samples will consist of 10 claims for hospitals, and 25 claims for large health systems. At the conclusion of this review period, CMS will hear back from the MACs, determine where more clarity is needed, and decide how to proceed. RACs will not review claims during this 90-day period, nor will they conduct any post-payment reviews. Also, MACs and Recovery Auditors will not review any CAH claims during this period. However, CERT reviews and OIG fraud and abuse investigations will continue. Should the MACs suspect any incidents of “gaming,” those claims will be subject to review. Hospitals can rebill denied inpatient admission claims, since the probe will be conducted on a pre-payment basis. 

Physician Documentation, Certification, & Authentication

  • “Expectation” is rooted in good medical practices.
  • Decision to admit must be based on the physician’s expectation of a two-midnight required hospital stay.
  • The entire medical record must clearly support the physician’s decision that a two-midnight stay was necessary. Documentation of this is critical, and must be included.
  • On the first day of care, if the physician is not able to determine that the patient will need care spanning two midnights, she should bill as observation until the next day, or until she expects that a two-midnight stay is necessary for care.
  • Time in observation, ER, OR, and other treatment areas, can be counted toward the time the physician uses to reach the expectation that the patient will require hospital care spanning the course of two midnights.
  • CMS is working on FAQs for certification and recertification.
  • The timeframe used in determining the expectation of a two-midnight stay begins when care in the hospital begins.
  • If it turns out that the patient did not need a two-night hospital stay, this also must be clearly documented in the medical record.
  • Patient admission formally begins following the documentation of the physician’s order. 
  • The practitioner’s order and the physician’s decision is considered, along with other documentation in the medical record, as evidence that hospital inpatient service(s) were reasonable and necessary.
  • Regarding CAHs: There is a 96-hour certification requirement. For inpatient CAH services, the physician must certify that the beneficiary may reasonably be expected to be discharged or transferred to a hospital within 96 hours after admission to the CAH.

CMS cautioned that the circumstances of certain cases may vary, and will each have to be addressed individually. Therefore, it was impossible to address every case on a national call.

More Information

  • CMS advised listeners to refer to the Sept. 5, 2013, guidance that it released on this subject.
  • The designated CMS email address for questions relating to the new patient status regulations is [email protected].
  • CMS directed participants to its website for Q&As, which are located under the “Inpatient Hospital Reviews.” CMS will be updating this page with additional medical review information.

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