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AHA plans to fight CMS' 'two-midnight rule' this year


By Jessica Zigmond
Posted: January 23, 2014 - 4:15 pm ET
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The American Hospital Association will tackle the CMS' “two-midnight rule” on legislative, regulatory and legal fronts this year.

The controversial policy, included in the CMS' proposed rule for inpatient services in 2014, directs Medicare's contractors to assume hospital admissions are reasonable and necessary for patients who stay in a hospital through two midnights. Stays that are shorter than that are presumed legitimate if coded as outpatient observation. The agency developed the policy in response to a rise in observation stays, which expose patients to higher out-of-pocket costs.

Hospitals had been asking for clarity on the issue to insulate their admissions decisions from Medicare's auditors. The CMS, however, estimated that the policy would increase inpatient expenditures by about $220 million, so it proposed to offset that by permanently reducing the standard payment rate to hospitals by 0.2%, which quickly drew the ire of hospital providers.

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This week, a few AHA members laid the groundwork for legal action against the two-midnight policy. Banner Health in Arizona, Einstein Healthcare Network in Pennsylvania, Wake Forest University Baptist Medical Center in North Carolina and the Mount Sinai Hospital in New York filed appeals asking the CMS' Provider Reimbursement Review Board to grant an expedited judicial review for the hospitals' claims that the 0.2% payment cut is unlawful. The AHA and some other hospital associations are supporting the move.

The AHA is also lending its support to a House bill that would delay enforcement of the policy until Oct. 1. Since the final rule was issued last summer, the CMS has twice offered a reprieve to hospitals, with post-payment reviews not expected to start until April. The House bill from Reps. Jim Gerlach (R-Pa.) and Joseph Crowley (D-N.Y.) would also urge the CMS to implement a new payment policy for short inpatient stays in 2015.

AHA leaders and members discussed the efforts during a call Thursday outlining the association's. lobbying agenda for 2014 (PDF) That list focus heavily on protecting hospital payments from additional cuts and providing relief from what the AHA views as harmful policies to American hospitals.

The most pressing issue for healthcare providers that Congress will have to take up is the March 31 expiration of a short-term fix for Medicare physician payments and extension of certain healthcare programs.

As Congress addresses the sustainable growth-rate formula for physician reimbursement, the AHA will have to continue to make the case to lawmakers that hospitals should not be a “piggy bank” as they look for ways to offset the cost, said Tom Nickels, AHA's senior vice president for federal relations.

The association, Nickels said, will continue to push other Medicare changes as ways to achieve savings. For example, the AHA supports combining Medicare parts A and B and increased use of means-testing in Medicare cost-sharing. “In order for this to come to fruition, Congress needs to look at those reforms in the program.”

Follow Jessica Zigmond on Twitter: @MHjzigmond


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