Hospital Groups Call for More Two-Midnight Changes

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By Michael Williamson

Sept. 2 — A controversial payment policy governing short-term hospital stays should be further changed, several organizations told the CMS in comments on the 2016 Medicare outpatient payment proposal.

In addition, a medical device trade group, the Advanced Medical Technology Association (AdvaMed), told the agency in an Aug. 31 letter that it is concerned about the proposal's changes to a Medicare program that pays for new medical technologies.

The CMS July 1 issued the proposed rule (80 Fed. Reg. 39,199) that would cut payments to hospitals under the outpatient prospective payment system (OPPS) by approximately $43 million, or 0.1 percent, in calendar year 2016. Comments (CMS-1633-P) were due Aug. 31.

An agency fact sheet on the proposal said a final rule will be released “on or around” Nov. 1.

Hospitals' Concerns 

Many of the Association of American Medical Colleges' (AAMC) Aug. 31 comments focused on proposed changes to what is known as the two-midnight policy.

Under the current policy, Medicare Part A generally doesn't pay for hospital stays that aren't expected to span at least two midnights. However, the outpatient proposal would make certain short stays payable under Medicare Part A.

Generally, the two-midnight proposals in the rule “hold the promise of a more equitable system that relies on a physician's medical judgment” rather than a time-based approach that wasn't equitable to providers or beneficiaries, the AAMC said.

However, the outpatient proposal didn't offer any plans to do away with a 0.2 percent cut to inpatient payments tied to the two-midnight policy. When the CMS originally implemented the two-midnight rule in 2013, it established the 0.2 percent pay cut on the recommendation of its actuaries. A representative from the American Hospital Association told Bloomberg BNA in July that the agency's actuaries thought the policy would increase inpatient admissions.

The CMS revisited the inpatient payment reduction in the outpatient proposal and explained the rationale for it, the AAMC said. However, the agency's explanation for the cut was “incomplete and failed to provide sufficient evidence to support” its continuation, the trade group said.

The American Hospital Association also pushed for elimination of the 0.2 percent inpatient pay cut in its Aug. 27 comments on the outpatient rule.

Premier Inc., a group purchasing organization, told the CMS in its Aug. 27 letter on the rule that the “limited data points” provided in the outpatient proposal didn't provide adequate justification to support the 0.2 percent cut to inpatient payment rates.

Device Issues 

The rule also drew concerns from several device-related groups.

In the proposal, the CMS outlined changes to device pass-through payments. Device pass-through payments in the Medicare program are intended to enable access to certain new medical devices, according to the fact sheet.

Currently, the CMS accepts and reviews applications for device pass-through on a quarterly basis through a subregulatory process, the fact sheet said.

However, the rule would change the process so that the CMS would include discussions of its preliminary decisions on pass-through applications (both approvals and denials) in future OPPS proposed rules.

The new system would allow the CMS to accept public comments on its preliminary pass-through decisions.

Comments on a preliminary decision, in theory, could convince the agency to change its initial pass-through application approval or denial when the CMS issues OPPS final rules.

The CMS added that the pass-through payment policy change responds to requests for greater transparency and “it also better aligns with the process used for evaluating New Technology Add-On payment requests under the Inpatient Prospective Payment System (IPPS).”

In July, Robert Wanerman, an attorney with Epstein Becker & Green PC in Washington, told Bloomberg BNA the outpatient proposed rule would bring more transparency to the pass-through payment application process.

Under the proposal, manufacturers and other interested parties would get to know which applications get approved or denied, he said, adding that the agency would explain its reason for approving or denying applications.

AdvaMed said while it supports the outpatient proposal's efforts to make the pass-through process more transparent, it is concerned that denied applications for that program wouldn't be reconsidered in a timely manner, or at all.

The device trade group “cannot support a proposal that could adversely impact the ability to submit legitimate reconsideration requests backed by additional clinical and other data developed subsequent to the initial submission(s),” AdvaMed's letter said.

Faulty Device Credits 

The Pew Charitable Trusts, a public policy organization, in an Aug. 31 letter called on the CMS to include unique device identifiers (UDIs) in its claims forms to reduce costs associated with failed or recalled medical implants as part of proposed changes to hospital payment policies for outpatient procedures.

The UDI system requires the labels and packages of devices distributed in the U.S. to include a unique device identifier, unless the agency grants an exception or alternative.

In September 2013, the Food and Drug Administration published its final rule on device identifiers, which has a series of compliance dates running through September 2020, depending on the type of device.

In the rule, the CMS proposed to reduce payments to hospitals when the hospital obtains a manufacturer credit for a failed or recalled implanted device that needs to be replaced. A 2014 investigation by the Department of Health and Human Services Office of Inspector General revealed that hospitals regularly didn't report manufacturer credits to the CMS and often neglected to request those credits from manufacturers in the first place, Pew said. These hospital practices, according to Pew, resulted in overpayments by the CMS.

However, adding UDIs to the agency's claims forms would enable CMS to proactively notify hospitals about credits that they should report to CMS, thus saving taxpayer money, Pew said.

The CMS has opposed including UDIs in its claims forms. In a February letter to Sen. Elizabeth Warren (D-Mass.), the CMS said revising claim forms to include UDIs would require “substantial, expensive, and time-consuming changes.”

To contact the reporter on this story: Michael D. Williamson in Washington at

To contact the editor responsible for this story: Brent Bierman at

AdvaMed's letter is at

The AAMC's letter is at

The American Hospital Association's letter is at

Premier's letter is at

Pew's letter is at