CMS Proposed Rule Would Modify "Two-Midnight" Policy


July 2, 2015—The Centers for Medicare & Medicaid Services (CMS) has issued a proposed rule that would revise a number of provisions for calendar year 2016, including changes to the hospital inpatient prospective payment system's “two-midnight” rule under the short inpatient hospital stay policy and the related -0.2% payment adjustment.

According to the CMS document, under the two-midnight rule, which was adopted effective October 1, 2013, an inpatient admission is generally appropriate for Medicare Part A payment if the physician (or other qualified practitioner) admits a patient as an inpatient based upon the expectation that he or she will need hospital care that crosses at least two midnights. In assessing the expected duration of necessary care, the physician (or other practitioner) may take into account outpatient hospital care received prior to inpatient admission. If the patient is expected to need less than two midnights of care in the hospital, the services furnished should generally be billed as outpatient services.

In this proposed rule, CMS would modify the existing “rare and unusual” exceptions policy under which the only exceptions to the two-midnight benchmark were cases involving services designated by CMS as inpatient only, as well as some rare and unusual circumstances published on the CMS website or other subregulatory guidance, to also allow exceptions to the two-midnight benchmark to be determined on a case-by-case basis by the physician responsible for the care of the beneficiary, subject to medical review.

However, CMS will continue to expect that stays of < 24 hours would rarely qualify for an exception to the two-midnight benchmark. In addition, CMS is revising that medical review strategy and announcing that, no later than October 1, 2015, it is changing the medical review strategy to have Quality Improvement Organization contractors conduct reviews of short inpatient stays rather than the Medicare administrative contractors.

For further general information on the two-midnight policy, interested parties may contact CMS’s Twi Jackson at (410) 786-1159, and for medical review information, they can contact CMS’s Steven Rubio at (410) 786-1782.

CMS is soliciting comments from interested parties until August 31, 2015. To be assured consideration, comments on all sections of this proposed rule must be received at one of the addresses provided in the document no later than 5 PM Eastern time on August 31, 2015. In commenting, please refer to file code CMS-1633-P.

As summarized by CMS, the extensive proposed rule—approximately 700 pages, which is available online and will be published in the Federal Register—would revise the Medicare hospital outpatient prospective payment system and the Medicare ambulatory surgical center (ASC) payment system for calendar year 2016 to implement applicable statutory requirements and changes arising from our continuing experience with these systems. CMS describes the proposed changes to the amounts and factors used to determine the payment rates for Medicare services paid under the outpatient prospective payment system and those paid under the ASC payment system. In addition, this proposed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting Program and the ASC Quality Reporting Program. Additionally, the document includes a proposed transition for Medicare-dependent, small rural hospitals located in all-urban states.


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