CMS Extends Two-Midnight Partial Enforcement Delay Until September

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By Nathaniel Weixel

Jan. 31 --The Centers for Medicare & Medicaid Services has given hospitals more time to comply with its controversial “two-midnight” inpatient review policy.

According to a Jan. 31 posting on the agency's website, the CMS will extend the “probe and educate” pre-payment review process for Medicare Administrative Contractors (MACs) an additional six months, through Sept. 30. Previously, the probe and educate period was set to end April 1, the CMS said.

Under the updated policy, the agency said MACs will continue to have a limit of only 10 claims for average-size hospitals and 25 claims for large hospitals, as before. However, the dates of admission that MACs will consider will now be between March 31 and Sept. 30, 2014, the CMS said. MACs will also continue to hold educational sessions with hospitals through Sept. 30, the CMS said.

Also under the new extension, recovery auditors and other Medicare review contractors will not conduct post-payment patient status reviews of inpatient hospital claims with dates of admission on or after Oct. 1, 2013 through Sept. 30, 2014.

The two-midnight policy was finalized as part of the fiscal year 2014 hospital inpatient prospective payment system (IPPS) final rule, which was released Aug. 2, 2013, and published in the Aug. 19, 2013, Federal Register (78 Fed. Reg. 50,495) (24 MCR 977, 8/9/13). The final rule took effect Oct. 1.

The CMS first issued guidance for hospitals in September 2013 that attempted to clarify the two-midnight policy and gave hospitals a three-month transition period during which Medicare contractors wouldn't be allowed to review hospital admissions that span one midnight or less (24 MCR 1108, 9/13/13).

In November 2013, the agency extended the audit-free transition period another six months, through March 31 2014. In that November announcement, the CMS said 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.

However, the agency said it would 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 through that same period (24 MCR 1309, 11/8/13).

Hospital Opposition

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 and physicians have objected to the policy since it was first proposed last year.

The American Hospital Association, along with several hospital associations and four hospital systems, filed an appeal Jan. 22 with the Provider Reimbursement Review Board (PRRB) to get relief from the policy (25 MCR 141, 1/31/14) (see related article in the Legal News section).

In a Feb. 3 statement, AHA executive vice president Rick Pollack said the group was pleased with the newest six-month extension.

“This action clearly recognizes that there are still many unanswered questions about the policy,” Pollack said. “At the same time, we continue to urge CMS to fix the critical flaws of the underlying policy by immediately engaging stakeholders to find a workable solution that addresses the reasonable and necessary inpatient-level services currently provided by hospitals to Medicare beneficiaries that are not expected to span two midnights.”

The policy specifies that hospital stays spanning two or more midnights (more than one Medicare utilization day) 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.

The CMS developed the two-midnight policy because it was concerned with the overuse of observation status by hospitals. Medicare beneficiaries may find themselves being placed in observation status--an outpatient category--even if they received inpatient-type care.

Physician Certification

Also on Jan. 31, the CMS posted new guidance clarifying its policy on physician certification of the medical necessity of inpatient services as a condition of Medicare payment under the two-midnight policy.

The guidance was first issued in September 2013 (24 MCR 1108, 9/13/13).

As a condition of payment for hospital inpatient services under Medicare Part A, section 1814(a) of the Social Security Act requires physician certification of the medical necessity that such services be provided on an inpatient basis, the CMS said. The order to admit as an inpatient “is a critical element of the physician certification, and is therefore also required for hospital inpatient coverage and payment under Part A,” the agency said in the guidance.

During a Special Open Door Forum call with stakeholders Feb. 4, the CMS explained that the primary update to the guidance addressed stakeholder questions about who was allowed to issue the practitioner order. Teaching hospitals in particular had been concerned the CMS would deny coverage of inpatient admission by residents who are under the supervision of an attending physician, because residents often don't have admitting privileges.

CMS officials said during the call the guidance was updated to indicate that if a practitioner writes an admission order, it can be written on behalf of a physician who has admitting privileges, so long as the order is reviewed and signed off on prior to discharge.

“In countersigning the order, the ordering practitioner approves and accepts responsibility for the admission decision,” the CMS said in the guidance.

The CMS said: “This process may also be used for physicians (such as emergency department physicians) who do not have admitting privileges but are authorized by the hospital to issue temporary or 'bridge' inpatient admission orders.”

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

To contact the editor responsible for this story: Ward Pimley at

More information is at

The updated CMS guidance is at

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