The Centers for Medicare and Medicaid Services finalized a proposal to add more flexibility in reimbursing hospital stays under Medicare Part A if they do not cross the two-midnight threshold, a move that was met with cautious optimism.
“Hospitals appreciate the certainty that stays of at least two midnights are inpatient, with stays of less than two midnights also considered inpatient based on physician judgment,” American Hospital Association Executive Vice President Tom Nickels said in a statement.
For hospital stays for which physicians expect the patient will need fewer than two midnights of hospital care, an inpatient admission may still be payable under Medicare Part A on a case-by-case basis based on the admitting physician’s judgment, according to the final rule.
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In addition, the agency does not plan to send recovery audit contractors (RACs) after doctors suspected of violating the two-midnight rule. Instead, CMS plans to use Beneficiary and Family Centered Care Quality Improvement Organizations to conduct initial medical reviews of claims for short-stay inpatient admissions. The claim reviews will focus on educating physicians and hospitals about the policy for inpatient admissions.
Only physicians with questionable practice patterns, such as high rates of claims denial after medical review, will be referred to auditors, according to CMS.
“We look forward to working with the [Quality Improvement Organizations] – which are not paid on a contingency fee basis like those bounty-hunter RACs – and to more fair auditing process,” Mr. Nickels added.
How the QIOs review claims is the part that will be closely monitored by stakeholders.
“CMS finalized the changes that were proposed, which are consistent with what the AAMC has been asking the agency to do,” the Association of American Medical Colleges said in a statement. “AAMC believes it is important that CMS monitor the QIO audits to ensure that they are working as anticipated, and that the QIOs audits do not produce the myriad of problems that the RAC audits produced.”
Even with the cautious optimism, there remains a sense that the new rule does not go far enough.
“Despite ongoing concerns with observation policy overall, we appreciate CMS’ efforts to modify the two-midnight rule to address widespread concerns and issues identified by the provider community, and SHM stands ready to help make it work,” the Society of Hospital Medicine said in a statement.
The organization called for further changes in response to CMS’ initial proposal for the increased flexibility. Those suggested changes included a revised definition of inpatient care to include all time spent in the hospital, better guidance on how audits will be conducted, more concrete guidance on short inpatient stays to minimize claims denials, and better alignment between hours spent in the hospital and the midnights crossed as part of a stay.
“SHM does not believe the two-midnight rule is the optimal policy for addressing the structural issues associated with observation status payment policy,” the organization noted. “However, we recognize this policy and the changes contained in the final rule were enacted with the goal of simplifying the inpatient admission decision, reducing the number of long hospital stays under observation status, and to strengthen deference to physician judgment.”