CMS Will Give Hospitals More Time To Comply With ‘Two-Midnight' Rule

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By Nathaniel Weixel  

Nov. 5 --The Centers for Medicare & Medicaid Services will give hospitals additional time to comply with its “two-midnight” inpatient review policy.

However, a hospital industry group said the relief from Medicare contractor reviews provided by the CMS isn't sufficient. The two-midnight policy is intended to improve Medicare payment integrity and provide clarity on when a doctor should order hospital admission for a patient, but hospitals have expressed concerns about its implementation.

In a series of notices posted on its website, the agency said Medicare Administrative Contractors (MACs) will generally not conduct post-payment patient status reviews for Medicare claims with dates of hospital admission of Oct. 1, 2013, through March 31, 2014, three months longer than previously announced.

In an updated Q&A dated Nov. 5, the CMS said it won't permit Recovery Audit Contractors to review inpatient admissions of zero or one midnight that begin between the six months of Oct. 1, 2013, through March 31, 2014.

The CMS two-midnight presumption specifies that hospital stays spanning two or more midnights after the beneficiary is formally admitted as an inpatient (pursuant to a physician order for such admission) will be presumed to be “reasonable and necessary for inpatient status,” as long as the stay at the hospital is medically necessary.

Because the admission is presumed to be reasonable and necessary, the CMS said “absent evidence of systematic gaming or abuse,” contractors aren't to review claims spanning two or more midnights after admission.

However, the CMS said a claim subject to the two- midnight presumption may still be reviewed for issues “unrelated to appropriateness of inpatient admission,” such as patient status.

Additionally, the CMS said it may review claims to ensure the services provided during the inpatient stay were reasonable and necessary in the treatment of the beneficiary; to ensure accurate coding and documentation; or to conduct other reviews as dictated by the CMS and/or other authoritative governmental agency.

The exact definition of a hospital inpatient was revised by the fiscal year 2014 hospital inpatient prospective payment system (IPPS) final rule, which was released Aug. 2 and published in the Aug. 19 Federal Register (78 Fed. Reg. 50,495). The final rule, which took effect Oct. 1, instructs Medicare contractors to presume an inpatient hospital admission is reasonable and medically necessary if a beneficiary requires more than one Medicare utilization day, which the agency defines as an encounter spanning two midnights .

The agency issued guidance for hospitals in September that attempted to clarify the new policy. In the September guidance, the CMS said hospitals would have a three-month transition period during which Medicare contractors wouldn't be allowed to review hospital admissions that span one midnight or less .

Contractor Guidance

Although the CMS said contractors won't be allowed to conduct post-payment reviews for six months, the agency said it will instruct MACs to conduct pre-payment “probe and educate” reviews of a small sample of Medicare Part A inpatient hospital claims spanning one midnight or less.

The agency said it will set a limit of only 10 claims for average-size hospitals and 25 claims for large hospitals for dates of admission on or after Oct. 1, 2013, but before March 31, 2014.

In two documents posted recently, the CMS gave providers more details on the instructions it will give to contractors conducting the “probe and educate” audits. One document is on selecting claims for patient status reviews; the other is on reviewing hospital claims for patient status.

Inpatient stays spanning zero to one midnight after the beneficiary is formally admitted as an inpatient aren't subject to the “medically necessary” presumption and may be selected for review, the CMS said. The CMS said it will instruct MACs to deny each noncompliant claim and to outline the reasons for denial in a letter to the hospital.

The CMS said it will also instruct the MACs to offer individualized phone calls to those providers with either moderate/significant or major concerns. During such calls, the MAC will discuss the reasons for denial, provide pertinent education and reference materials and answer questions, the CMS said.

Hospitals Not Satisfied

Hospitals have objected to the two-midnight policy since it was proposed, and the agency's three-month delay for compliance did nothing to assuage the industry's concerns.

In a Nov. 5 statement, the American Hospital Association said it “recognizes the need for CMS's new guidance regarding the two-midnight policy and the 'Probe and Educate' audits that will be conducted by MACs. However, it lacks clarity, is inconsistent with previous guidance set forth by the agency, and raises new questions with regard to enforcement of the two-midnight policy.”

Additionally, the industry group said that even with the extended partial delay, “hospitals do not have enough time to operationalize the two-midnight policy. AHA will continue to pursue delayed enforcement of the two-midnight policy until Oct. 1, 2014 and seek additional clarifications from CMS.”

A group of House lawmakers also has asked the CMS to delay the new policy. In a Sept. 24 letter, a bipartisan group of more than 100 House members asked the agency to delay the policy for six months, which is what the agency agreed to do. The lawmakers asked the CMS to revisit the policy during the delay .


To contact the reporter on this story: Nathaniel Weixel in Washington at

To contact the editor responsible for this story: Brian Broderick at

An updated CMS Q&A is at

A guidance for contractors on selecting claims for review is at

A guidance for contractors on reviewing hospital claims is at