Hospitals Sue CMS Over ‘Two-Midnight’ Rule, Pay Cut Accompanying Regulation

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April 14 -- In two related lawsuits filed April 14, the hospital industry challenged the Department of Health and Human Services' “two-midnight” rule for inpatient admissions, which industry says imposes regulatory burdens that could compromise care for seniors.  

In one complaint filed in the U.S. District Court for the District of Columbia, the American Hospital Association and other industry groups and individual hospitals challenged an August 2013 HHS policy for determining when a patient is an “inpatient” for purposes of Medicare reimbursement.

The AHA's filing said that this “new rule provides that a Medicare beneficiary is not an 'inpatient' unless the admitting physician expects that beneficiary to need care in the hospital for a period spanning two midnights.” The August 2013 rule was for fiscal year 2014 payments .

In a statement from the AHA, the plaintiffs said hospitals “take issue with the wholly arbitrary requirement that a physician must certify at the time of admission that a Medicare patient is expected to need care in the hospital for a period spanning two midnights to be considered an inpatient.” In the statement, Rich Umbdenstock, president and chief executive officer of the AHA, said that the two-midnight rule “undermines medical judgment and disregards the level of care needed to safely treat patients.” He added, “Hospitals stand by a physician's decision on what care is appropriate for each patient. The two-midnight rule is misguided and we feel confident the court will agree.”

Separate Lawsuit Challenges Pay Cut

A separate complaint filed April 14 takes aim at a payment cut that plaintiffs said “will cost the nation's hospitals more than $200 million this year alone” (Am. Hosp. Ass'n v. Sebelius, D.D.C., No. 1:14-cv-00607 , filed 4/14/14).

“Using the new two-midnights rule as a fig leaf,” the Centers for Medicare & Medicaid Services “decided to cut the payments hospitals receive for treating Medicare patients,” the complaint said.

The complaint said that CMS claimed, “without setting forth its actuaries' reasoning or calculations--that the two-midnights rule and other related policy changes would result in a net increase in the number of inpatient hospital stays that Medicare covers under Part A.” Specifically, the CMS reduced payments by 0.2 percent across the board for beneficiary discharges occurring on or after Oct. 1, 2013, the complaint said.

The AHA said it is joined in the litigation by the Greater New York Hospital Association, the Healthcare Association of New York State, New Jersey Hospital Association and the Hospital & Healthcare Association of Pennsylvania. Individual hospital plaintiffs are Wake Forest University Baptist Medical Center, North Carolina; the Mount Sinai Hospital, New York City; hospitals that are part of Phoenix-based Banner Health; and Einstein Healthcare Network, Philadelphia.

Attorneys representing the AHA include Sheree R. Kanner and Dominic F. Perella, of Hogan Lovells US LLP in Washington, and Melinda Reid Hatton of the AHA in Washington.

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