Written by Brooke Haycraft, CEMC, CFPC, CPC-H, CPC
The Centers for Medicare and Medicaid Services (CMS) recently announced that they would be slightly revising its, ‘Two-Midnight Rule’, a policy well-known by healthcare providers due to its strict guidelines.
Current ‘Two-Midnight Rule’ Brief Overview
The Two Midnight Rule was created for providers to help determine if their patients should be billed as inpatient or outpatient status. If the provider expected the patient to require healthcare that spanned over two midnights and ordered an inpatient admission based upon that expectation, CMS generally would determine that inpatient status is admissible and appropriate. Contrarily, CMS declared that inpatient status would not be appropriate if the physician foresaw the patient to require care that was less than two midnights.
Overall, this rule has been heavily criticized since its implementation in 2014; healthcare associations and hospitals alike have called it confusing and unclear. Other leaders have stated that this policy undermines medical judgement of providers and has proven to be very controversial.
Final Updates to the Two Midnight Rule
On November 2, 2015, CMS announced that they intend on keeping the Two Midnight Rule, but has proposed changes to the policy to make it less stringent and give providers greater medical decision making responsibilities.
Changes to the 2016 Hospital Outpatient Prospective Payment System (OPPS) will now allow hospitals to admit and bill under Part A Medicare as an inpatient stay when a patients’ visit in a hospital has not met the Two Midnight Rule admission requirements on a case-to-case basis based on the decision by the admitting provider.
The Quality Improvement Organization (QIO) will now be reviewing initial patient status reviews to verify if Medicare Part A reimbursement is fitting for short-inpatient stays. This introductory review was previously performed by the Recovery Audit Contractor (RAC) or Medicare administrative contractors (MACs).
Lastly, under the Final Rule for 2016, CMS has decreased its inpatient reimbursement to hospitals by approximately .2%. CMS stated that the payment reduction is intended to offset previously outpatient cases that will now become inpatient stays due to the Two-Midnight Rule updates.
Why were these updates proposed? Because CMS is moving away from its current, ‘fee-for-service payment system’ and moving towards a quality-based-prospective-payment system, these policy changes will align with the direction of payment systems of the very near future; allowing providers to use their medical judgement to determine inpatient vs. outpatient status is more quality driven to the patient’s care rather than inpatient status being based strictly upon a Two Midnight policy.