10 Things to Know About the Two-Midnight Rule

In the 2014 Medicare inpatient prospective payment system final rule, CMS included a new regulation for hospitals and health systems: the two-midnight rule.

CMS has issued guidance on the rule in a couple separate instances. For hospitals and health systems trying to grasp the foundational elements of the two-midnight rule, here are 10 points to know.

1. Inpatient admissions are considered reasonable and necessary for Medicare beneficiaries who require more than a one-day stay in a hospital or who need treatment specified as inpatient only.

2. Stays lasting less than two midnights must be treated and billed as outpatient. In other words, physicians should admit Medicare beneficiaries as inpatients if they expect beneficiaries will "require two or more midnights of hospital services, and [physicians] should treat most other beneficiaries on an outpatient basis," according to CMS.

3. Medicare administrative contractors and recovery auditors — better known as MACs and RACs — will not review claims involving stays that span two or more midnights after the initial inpatient admission to see if the admission was appropriate.

4. Medicare auditors will conduct prepayment patient status reviews for claims that span less than two midnights and have dates of admission on or after Oct. 1, 2013, but before March 31, 2014, but they will not conduct post-payment patient status reviews for claims during that same period.

5. MACs will review 10 to 25 claims per hospital, depending on the size of the hospital.

6. Critical access hospitals are exempt from MAC and RAC reviews.

7. Medicare auditors will base their review of a physician's expectation of medically necessary care surpassing two midnights on the information available to the admitting physician at the time of admission.

8. Hospitals can rebill for medically reasonable and necessary Part B inpatient services if their Part A inpatient hospital claims are denied, provided the denial is based on the fact the inpatient admission was not reasonable and necessary.

9. Physician documentation will be crucial for hospitals. According to CMS, a reasonable inpatient hospital stay that spans more than two midnights will have to show "sufficient documentation…rooted in good medical practice." For example, patient history, comorbidities, the severity of signs and symptoms, current medical needs and the risk of an adverse event are items MACs and RACs will expect to be documented in a physician's assessment and plan of care.

10. Based on the results of initial reviews, CMS will conduct educational outreach efforts later in 2014. Claims that do not comply with the new rule will be denied, and hospitals will receive reasons for denial via letter. Individual phone calls will be made to providers with moderate, significant or major compliance concerns.

For more information on two-midnight inpatient admission reviews, read this FAQ document from CMS.

More Articles on Hospitals and Medicare Payments:
The Cost-Based Question Surrounding Critical Access Hospitals
CMS Proposes Payment System for Federally Qualified Health Centers
CMS Releases Final Rule on 2014 Inpatient Payments

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