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.
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CMS’ 2017 IPPS proposed rule: 10 points to know
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Major health systems, payers make progress toward value-based payment goal
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