As reported in the June 6, 2016 issue of Part B News, the Centers for Medicare & Medicaid Services (CMS) has abandoned plans to cut inpatient hospital payments by 0.2% to pay for its “two-midnight rule.” This action comes as a result of a partial victory by the American Hospital Association in a lawsuit against CMS.
Since its introduction in 2013, the two-midnight rule has courted controversy. Its intent was to reduce observation status use by hospitals for patients on longer stays. Under the rule, a patient stay of longer than two midnights was considered an inpatient stay and thus paid at the inpatient rates. CMS estimated this would result in an increase in admissions, so they cut payments to hospitals by 0.2% to pay for the rule.
The change in payment aspect of the two-midnight rule may have little impact for physicians who see patients in the hospital. Physicians have always had the option to admit patients to inpatient status for less than two midnights, but hospital administrators are likely to continue to monitor admissions and seek to change them to observation status. As hospitals try to push observation stays beyond two days, Medicare Administrative Contractors (MACs) are likely to continue to scrutinize hospital admissions to determine if they were medically necessary.
Patients and patient advocacy groups strongly dislike long observation stays, as they are paid at outpatient rates, preventing patients from using inpatient benefits, and increasing patient out-of-pocket costs.