The Centers for Medicare and Medicaid Services has delayed through December enforcement of its new two-midnight rule, which went into effect Oct. 1. The rule change is an attempt to clarify admission and medical review criteria for inpatient services, while also addressing the growing trend of patients being held in observation for lengthy periods of time.
The new policy states that when a patient’s stay in the hospital surpasses two midnights, the patient is presumed to be an inpatient. Services for patients staying fewer than two midnights are presumed to be provided in the outpatient setting.
Dr. Evan Pollack
Reactions to the policy from providers have been mixed. Hospitals have fiercely opposed the change, which included across-the-board cuts to inpatient Medicare reimbursements.
"The two-midnight rule makes it pretty transparent," said Dr. Evan Pollack, an internist who practices near Philadelphia and is cochair of the American College of Physicians health and public policy committee in Pennsylvania. "I think this brings the decision making back to the treating physician. If you’re not planning to send the patient home the next day, it’s still your decision to admit him."
The policy also takes aim at shorter inpatient hospital stays and could save the Medicare program money, Dr. Pollack said.
At one hospital, data have shown more patients would lose inpatient status than gain it under the new policy, said Dr. Ann Sheehy, who heads the hospital medicine division at the University of Wisconsin in Madison. Dr. Sheehy and her colleagues recently studied observation – which is technically an outpatient service – as well as inpatient stays, at the University of Wisconsin Hospital from July 2010 through December 2011, and determined how many patients would have been affected by the two-midnight rule. They concluded that the hospital would have lost $14.6 million in reimbursements during that period because many more short hospital stays would have been converted to observation stays, for which payments are significantly less than for inpatient services.
The study counters a CMS projection finding the policy will cost the Medicare program $220 million. The agency has offset the amount by reducing hospital payments elsewhere by 0.2%.
Although the data showed the University of Wisconsin Hospital losing Medicare pay, Dr. Sheehy said that the policy change may cost Medicare ultimately. Physician and patient behavior patterns could change as more become aware of the two-midnight benchmark.
"There will be longer stays that are more expensive," Dr. Sheehy said. "Patients will know about the rule and want to stay for another midnight in order to avoid cost-sharing fees. Some will end up staying two midnights because [providers] fear being audited."
Many patients will fall into a "gray area" when spending 26-47 hours in the hospital, she added. Whether some patients cross the two-midnight threshold will depend on the time of day they arrive at the hospital. Patients arriving at 11 p.m., for example, will have shorter stays before reaching two midnights than will others presenting in the morning.
"When rules look like that, it opens the process up to manipulation," Dr. Sheehy said. "Everyone will look at it and ask, ‘How can we get to two midnights?’"
For now, the CMS has instructed Medicare Administrative Contractors and Recovery Audit Contractors to not target hospital inpatient status during reviews for claims with dates of service between Oct. 1 and Dec. 31, according to an agency frequently asked questions page. But the CMS will allow contractors to audit 10-25 cases per hospital during that time for educational purposes.
"We feel it’s giving them a running start," Dr. Sheehy said. Recovery Audit Contractors "will know which hospitals are having problems and go after them in January."
The rule also has faced opposition from Congress. In September, a bipartisan group of more than 100 House members sent a letter to CMS Administrator Marilyn Tavenner urging a 6-month delay to the rule. Patients may face higher out-of-pocket costs while hospitals also have not had enough time to educate providers about the rule.
"We are concerned that hospitals in our districts could be undercompensated for providing medically necessary services that do not meet the new criteria spelled out by the CMS and face administrative challenges in complying with new requirements," the letter stated.
This story was updated 10/15/2013.