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Medicare calls for review of 'two-midnight' denials


By Joe Carlson
Posted: February 26, 2014 - 3:30 pm ET
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Federal officials have ordered their auditors to double-check all Medicare inpatient claims that were denied payment under the new "two-midnight" rule since Oct. 1.

The Medicare agency rolled out the rule last fall to clarify precisely when its beneficiaries should receive expensive inpatient treatment paid in full by the government, and when they should be treated through outpatient observation, which pays hospitals less and exposes patients to cost-sharing. Generally the new rule says patients need to be in a hospital bed for two nights, the so-called “two midnights,” to qualify for inpatient care.

But the policy has proven difficult to implement in the nation's roughly 5,000 Medicare-receiving hospitals, and clarifications issued on Sept. 5 and Jan. 30 are raising new complications.

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On Tuesday, the agency revealed that Medicare contractors may have denied claims for reasons no longer supported under the latest updates. Therefore, it wants to review all denials under the new rule so far. Those reviews will be handled outside the normal appeals process for payment denials.

“I think it's a positive step,” said Jeffrey Micklos, executive vice president and general counsel for the Federation of American Hospitals. “CMS did the right thing. They said instead of fighting that through the appeals process, you can go through re-review.”

It's not clear how many Medicare inpatient claims will be affected by the “re-reviews.” The agency said its contractors had requested 29,000 medical records to audit as of Feb. 7, and 6,000 of those reviews were complete (PDF). CMS officials didn't say how many claims have been denied under the two-midnight policy.

The CMS encouraged hospitals to work with their local Medicare contractors to make sure denials under the two-midnight rule have undergone re-review before using the formal Medicare appeals process.

The CMS is waiving the normal 120-day window to appeal for denials under the two-midnight rule, but only for decisions that pre-date the Jan. 30 rules, according to the updated policy announced Tuesday.

Follow Joe Carlson on Twitter: @MHJCarlson


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