Under the two-midnight rule, which was introduced in the 2014 Inpatient Prospective Payment System rule, CMS generally considered hospital stays of less than two midnights to be outpatient cases, while stays spanning two or more midnights were appropriate for payment under the IPPS rule. Expecting the rule to lead to a decline in the number of long observation stays and an increase in the number of inpatient admissions, CMS decided to offset the cost through a 0.2 percent reduction in inpatient payments. The payment reduction was strongly opposed by hospitals across the nation, and lawsuits were filed challenging the payment cut.
After receiving strong backlash, CMS ultimately did away with the two-midnight rule’s inpatient payment cuts last year.
In the notice issued this week, CMS instructed Medicare administrative contractors to apply an interest adjustment factor for determining payment on discharges from June 1, 2017, to May 31, 2018, at 67 hospitals that challenged the two-midnight rule’s payment adjustment. CMS issued the notice after entering into a settlement agreement with several healthcare organizations that sued CMS over implementation of the two-midnight rule.
Provider numbers for hospitals eligible for an adjustment are listed in Attachment A of the notice.
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