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Modern Healthcare: Hospitals seek extension of moratorium on ‘two midnights’ enforcement

Hospitals seek extension of moratorium on ‘two midnights’ enforcement

Medicare’s temporary “doc fix” isn’t the only controversial healthcare policy that expires at the end of March. The moratorium on enforcement of the so-calledtwo-midnight policy for short hospital stays also runs out.

Hospitals want the enforcement moratorium extended and are also pressing the CMS to adopt additional guidance on paying for short hospital stays. Relief could come either through legislation or regulatory changes. The latest enforcement delay was included in last year’s legislation that delayed Medicare pay cuts to doctors under the sustainable growth-rate formula. But there’s little indication that Congress is focused on the two-midnight policy as it grapples with permanently scrapping the SGR.

The two-midnight policy essentially assumes an admission was appropriate if a patient’s stay spanned two midnights and that outpatient observation status was appropriate if it did not. The policy was conceived to address a spike in observation stays believed to be inspired by hospitals’ fear that Medicare’s audit contractors would challenge their admissions. The CMS delayed enforcement of the rule after hospitals complained that the policy actually undermines their clinical decisions.

The contractors that carry out audits of Medicare payments say it’s time for the moratorium to end. They argue that the lack of scrutiny has led to a spike in misused funds.

Last month, the American Hospital Association, which represents not-for-profit hospitals, sent a letter to CMS Deputy Administrator Sean Cavanaugh asking for the moratorium to be extended and suggesting other ways to “reimburse hospitals more accurately for the resources used to treat patients who stay in the hospital less than two midnights.”

A CMS spokesman indicated that the agency had received the letter, but had no further comment about what it plans to do. The CMS is slated to release proposed rules for the fiscal 2016 inpatient prospective payment system by the end of April. That could include further clarification of payment policies for short hospital stays. Those rules would take effect on Oct. 1.

Hospital officials say it makes sense to extend the moratorium until at least that time, giving the CMS a chance to provide additional clarity on the policy. “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,” said Priya Bathija, the AHA’s senior associate director of inpatient payment policy.

Chip Kahn, president of the Federation of American Hospitals, which represents investor-owned facilities, also wants the Obama administration to deal with the issue. “CMS is grappling with this,” Kahn said. “Our preference would be to have this settled” through regulation.

But contractors that audit Medicare payments think it’s time to end the enforcement moratorium, even if the CMS plans to amend payment policies for short hospital stays. They point out that enforcement actions have plummeted in recent months. In the last quarter of 2014, auditors recovered just $48 million in misused funds, the lowest total in the program’s five-year history. They also point to a recent report by the Government Accountability Office, which found that $60 billion of Medicare funds were deemed improper payments in fiscal 2014—nearly half of the total federal funds that were improperly disbursed.

“It’s really concerning to see report after report showing the error rate increasing,” said Kristin Walter, spokeswoman for the Council for Medicare Integrity, which is affiliated with the audit contractors. “We’re talking about billions of dollars that are lost every year.”

The recovery audit contractor program has also been mired in uncertaintybecause of ongoing litigation. The CMS outsources the program to four private companies—CGI Federal, Connolly, HealthDataInsights and Performant Recovery—and pays RACs a fee for every overpayment identified.

Hospitals also support including a moratorium extension in any SGR package that comes up for a vote, whether a permanent repeal or a short-term fix. But the prospects for that happening remain uncertain.

“This is a very closely held process,” Kahn said. “We get little hints here and there, but I just don’t know on this issue quite frankly.”

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