The CMS has extended its enforcement delay for the controversial two-midnight rule governing short hospital stays to fall in line with recently proposed changes to the policy.
The agency proposed in July that the rule be modified to allow physicians to exercise judgment to admit patients for short stays on a case-by-case basis. An enforcement delay, passed by Congress in legislation replacing Medicare's payment formula for doctors, was set to expire on Sept. 30.
The CMS said on its website Wednesday that it would extend the delay through the end of the year.
The two-midnight rule calls for Medicare's payment and audit contractors to assume a hospital admission was legitimate if it spans two midnights. Shorter stays are assumed to be more appropriately billed as outpatient observation care.
The rule was intended to provide clarity in response to a spike in observation claims widely assumed to be a defensive tactic by hospitals weary of auditors challenging their admissions. Hospitals and physicians, however, have intensely opposed the policy, arguing that it undermines their clinical judgment.
The changes proposed in July put quality improvement organizations, or QIOs, in charge of initial reviews of the appropriateness of short inpatient hospital stays. The QIOs replace Medicare Administrative Contractors in that role.
Recovery audit contractors, or RACs, will only be allowed to conduct patient-status reviews for hospitals that persistently violate Medicare payment policies. RACs will continue to conduct reviews of short stay inpatient claims for reasons unrelated to patient status, including coding reviews and reviews of medical necessity.
The American Hospital Association says it urged CMS to extend the delay because the proposed changes to the rule, if finalized, won't take effect until January. The extension “will continue to prevent recovery audit contractors from issuing inappropriate denials for medically necessary patient care,” the AHA said in an e-mail to members.
Administrative contractors are now educating hospitals and probing their current claims for errors related to the policy, a process that will continue through the end of September and possibly part of October. Beginning in October, QIOs will begin conducting reviews based on current payment policies, and they will enforce the two-midnight rule beginning Jan. 1.
The Medicare Payment Advisory Commission, which advises Congress on Medicare spending, has previously suggested that lawmakers push for repealing the two-midnight rule in its entirety and suggested several policy changes to address problems raised by short hospital stays. The CMS, however, said its public comment period did not produce any viable alternatives.