Groups cry foul over two-midnight rule

The CMS' recent release of more details about its two-midnight rule and its plan to delay enforcement for six more months have done little to calm frustration among healthcare providers and patient advocacy groups with the policy.

The rule, which went into effect last October, was intended to pacify concerns among hospitals and physicians that Medicare's inpatient admission rules were vague and harsh. Tough auditing under the old rules had led to a sharp rise in outpatient observation care, which exposes patients to higher out-of-pocket costs but protects hospitals from auditing. The auditing also helped to create a backlog of 357,000 pending appeals that has swamped the Medicare administrative-appeals process.

But critics said the new rules governing Medicare inpatient admissions are as bad or worse than the previous system.

Under the two-midnight rule, for an inpatient stay to be deemed reasonable and necessary, the admitting physician must have good reason to believe the Medicare patient will need two nights in a hospital. With a few exceptions, any stay less than that length will be presumed to be outpatient care and reimbursed under the lower Medicare Part B rates.

“It doesn't make any sense,” said Ivy Baer, senior director and regulatory counsel for the Association of American Medical Colleges, which represents teaching hospitals and medical schools. “The decision should really be based on patient need, not how many midnights they were in the hospital.”

For example, some patients need to stay in an intensive-care unit following a cardiac stent operation, but that may only last for a day if the patient has a speedy recovery, hospital officials say. Stroke patients may need intensive monitoring and evaluation that lasts less than two nights. In both cases, those patients now receive outpatient care in the hospital.

Because many uncertainties about the policy linger, the CMS announced on Jan. 30 that it would not allow its recovery-audit contractors to go after healthcare providers using the rule until after Sept. 30—a six-month extension of an existing six-month moratorium intended to allow hospitals, doctors and Medicare's administrative contractors to figure out the finer points of the new rules. But some limited auditing by Medicare administrative contractors still will be allowed under a process the CMS dubbed “probe and educate.”

Now the CMS is facing sniping from the opposite direction. Citizens Against Government Waste, an advocacy group in Washington, decried the six-month delay on the recovery auditing process as evidence of hospital lobbyists' undue influence. The organization said Medicare would lose $4 billion through erroneous payments that can't be audited during the one-year “oversight holiday.” Tom Schatz, the group's president, said the CMS is moving to “destroy an auditing process that its own analysis proves is working exceptionally well.”

Providers have proposed legislation to modify the rules, and some hospitals are laying the groundwork for litigation. The American Hospital Association supports a proposal to establish a middle range of payments, between inpatient and outpatient rates, for short-stay inpatient care.

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