CMS seeks comments on inpatient pay cut under two-midnight rule

CMS has issued a notice with comment period that discusses the basis for cutting hospitals' inpatient payments by 0.2 percent under its two-midnight rule.

The notice was issued in response to a court ruling that required HHS to provide further justification for the payment cut and to take steps to fix notice and comment flaws.

"We do not believe this cut was or can be justified," said Lawrence Hughes, American Hospital Association assistant general counsel. "However, we are evaluating the notice and will submit a robust critique to CMS as part of the comment process."

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.

The comment period on the rule will remain open until Feb. 2, 2016.

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