Making Sense of CMS’s Two-Midnight Rule

The Centers for Medicare and Medicaid Services (CMS) announced a new “Two-Midnight Rule” in the second half of 2013, which is causing some confusion among physicians and hospital administrators alike. Some groups, including the Association of American Medical Colleges, are calling for “legislative efforts to require CMS to more fully delay the 2-Midnight Rule until reasonable clinical guidelines for inpatient stays of less than two midnights are established.”

In a nutshell, the Two-Midnight Rule requires that any patient who is admitted for fewer than two midnights must be categorized (and billed to Medicare Part A) as an Observation patient; the rule states that any inpatient claims lasting fewer than two midnights will be denied outright. This means hospitals must note and track every step of the continuum of care – including the exact moment when a patient begins to receive care (not necessarily when the order is written) – to ensure appropriate time management and reduce instances of denied claims.

Under the new rule, a reasonable inpatient hospital stay that spans more than two midnights will have to show “sufficient documentation…rooted in good medical practice,” including patient history, the severity of signs and symptoms, co-morbidities, current medical needs, and the risk of an adverse event. Medicare administrative contractors and recovery auditors, better known as MACs and RACs, will expect these items to be documented in a physician’s assessment and plan of care, and are in the process of conducting an initial audit of these records nationwide through March 2014.

CMS hopes this new rule will reduce the number of inpatient stays lasting fewer than two midnights, thereby significantly reducing Medicare reimbursement costs, as inpatients receive roughly three times more subsidization dollars than observation patients. So, for a Medicare patient to qualify for reimbursement as an Inpatient, they must remain in the hospital for at least two midnights, or the hospital’s claim will be denied (despite a few specific and notable exceptions).

Resources & Information about CMS’s Two-Midnight Rule:

Frequently Asked Questions:  2 Midnight Inpatient Admission Guidance & Patient Status Reviews for Admissions on or after October 1, 2013, CMS

10 Things to Know About the Two-Midnight Rule, Becker’s Hospital Review 

The TwoMidnight Rule: What Hospitals and Health Systems Need to Know About Compliance, Becker’s Hospital Review 

Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013, CMS 

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