Hospitals praise CMS' plan to drop two-midnight inpatient payment cuts

CMS' fiscal year 2017 Medicare Inpatient Prospective Payment System proposed rule does away with the two-midnight rule's inpatient payment cuts — a move that pleased hospitals and others in the healthcare industry.

Under the two-midnight rule, which was introduced in the 2014 IPPS rule, CMS expected 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. The payment reduction was strongly opposed by hospitals and sparked lawsuits challenging the payment cut.

In its FY 2017 rule, CMS proposed permanently removing this adjustment for FY 2017 and also its effects in FYs 2014 through 2016.

American Hospital Association President and CEO Rick Pollack was pleased CMS reversed the "inappropriate and unfair" payment reduction. "The AHA successfully challenged CMS' interpretation through the courts to convince them to restore the resources that hospitals are lawfully due," he said.

Although it proposed dropping the payment reduction, CMS still believes the assumptions underlying the rate cut were reasonable when they were made in 2013.

More articles on healthcare finance:

CMS' 2017 IPPS proposed rule: 10 points to know
OIG: Missouri hospital received $81k in Medicare overpayments
Major health systems, payers make progress toward value-based payment goal

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