CMS gets more time to justify two-midnight rule's inpatient pay cut

The U.S. District Court for the District of Columbia has granted CMS' request to delay issuing a final notice to provide further justification for a cut to inpatient payments in conjunction with the controversial two-midnight rule, according to the American Hospital Association.

Under the two-midnight rule, which was introduced in the 2014 Inpatient Prospective Payment System rule, CMS generally considers hospital stays of less than two midnights to be outpatient cases, while hospital admissions for stays spanning two midnights or longer are deemed appropriate.

Expecting a decline in the number of long observation stays and an increase in the number of inpatient admissions, CMS proposed offsetting the cost through a 0.2 percent reduction in inpatient payments. Hospitals strongly disagreed with the proposed cut and brought a lawsuit claiming HHS violated the Administrative Procedure Act by not providing adequate notice or a meaningful opportunity to comment on the payment reduction.

Last September, a federal judge sided with the AHA and numerous other associations and organizations across the country in a lawsuit challenging the inpatient payment cut. The judge ordered HHS to provide further justification for the payment cut and to take steps to fix the notice and comment issues. CMS issued revised justification Dec. 1, 2015, and accepted comment through Feb. 2.

CMS originally had until March 18 to issue a final notice related to the two-midnight rule inpatient payment cut. Now that the court has granted an extension, CMS has until April 27, according to the AHA.

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