California Healthline: Hospitals Call for Another Delay of Enforcing ‘Two-Midnight’ Rule

Hospitals Call for Another Delay of Enforcing ‘Two-Midnight’ Rule

Hospitals are pushing for an extension of an enforcement moratorium on recovery auditors scrutinizing short inpatient stays under the Medicare “two-midnight” rule, Modern Healthcare reports (Demko, Modern Healthcare, 3/17).


CMS in a final rule for the fiscal year 2014 Inpatient Prospective Payment System instituted a time-based presumption period for medically necessary inpatient care. Under the “two-midnight” rule, an admission is assumed to be appropriate for a Medicare Part A payment if a physician expects a patient’s treatment to require a two-night hospital stay and admits him or her under that assumption.

In January 2014, CMS announced it was instructing auditors to wait until Oct. 1, 2014, to begin scrutinizing short inpatients stays, following several other enforcement delays (California Healthline, 9/2/14). Congress further delayed enforcement of the two-midnight rule until the end of March 2015 as part of a bill (HR 4302) to delay scheduled reductions to Medicare physician reimbursement rates called for by the sustainable growth rate formula (California Healthline, 4/1/14).

Hospitals Urge Regulatory Action

According to Modern Healthcare, hospital officials are recommending that the moratorium be extended until at least Oct. 1 to allow for CMS to provide more guidance on the issue. CMS is expected to release proposed rules for the FY 2016 Inpatient Prospective Payment System by the end of April, which would take effect on Oct. 1, and could provide further clarity on the two-midnight policy.

For example, the American Hospital Association last month sent a letter to CMS Deputy Administrator Sean Cavanaugh urging the agency to extend the moratorium and offering recommendations on how to “reimburse hospitals more accurately for the resources used to treat patients who stay in the hospital less than two midnights.”

Priya Bathija, AHA’s senior associate director of inpatient payment policy, said, “It’s fundamentally unfair to audit (hospitals) on rules when CMS hasn’t given them or the contractors appropriate direction on how to implement the rule.”

Similarly, Federation of American Hospitals President Chip Kahn said that FHA’s “preference would be to have this settled” through regulation.

Hospitals Also Favor Possible Extension in SGR Bill

According to Modern Healthcare, hospital officials also are supportive of including an extension of the moratorium in a bill that would either permanently replace the SGR or temporarily delay scheduled reductions to Medicare physician reimbursement rates.

However, whether such an extension would be included in an SGR-related measure is unclear,Modern Healthcare reports. Kahn said, “This is a very closely held process,” adding, “We get little hints here and there, but I just don’t know on this issue quite frankly.”

Contractors Urge End to Moratorium

Meanwhile, Medicare audit contractors believe that the enforcement moratorium should end, according to Modern Healthcare.

The auditors noted that they recovered only $48 million in misused funds in the fourth quarter of 2014, the lowest quarterly total during the program’s five-year existence. Further, auditors also cited a recent Government Accountability Office report that found that Medicare accounted for $60 billion in improper payments in FY 2014, representing nearly 50% of federal funds that were not properly disbursed over that time period.

Kristin Walter, a spokesperson for the Council for Medicare Integrity, said, “It’s really concerning to see report after report showing the error rate increasing. We’re talking about billions of dollars that are lost every year” (Modern Healthcare, 3/17).

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