#two-midnight rule

Dive Brief: CMS on Tuesday finalized the 2017 Medicare payment rates under the Inpatient Prospective Payment System (IPPS) and the Long-Term Care Hospital (LTCH) Prospective Payment System. The agency, under the final legislation for 2017, is “permanently removing” the -0.2% adjustment of compensation for inpatient services related to the “two-midnight rule.” This will increase FY 2017 payments by approximately…

UnitedHealth will drop most of its Obamacare business, and Wal-Mart just waded into the prescription drug pricing debate. But first: A victory for providers in CMS’s latest inpatient payment proposal. CMS BACKS DOWN ON TWO-MIDNIGHT RULE — The much-derided, much-delayed provision was set to have major implications for hospital reimbursement; instead, CMS on Monday said…

This July, the Centers for Medicare and Medicaid Services (CMS) issued the 2016 Proposed Rule for the Medicare Program. Though the proposed rule includes expected annual modifications to Medicare payments, a major highlight is the changes proposed to the two-midnight rule, which will significantly impact hospital medical coding in 2016.

A highly regulated healthcare system is bound to create complex systems for patient status management. Healthcare institutions and medical workers are already required to provide round-the-clock observations and thorough documentation of patient status from the moment a patient enters the hospital or clinic through the time of discharge. This is a complex and labor-intensive process which requires the skill and knowledge of well-trained medical case managers. 

The policy also helps providers accurately determine inpatient status and increase hospital payments. Under the rule, if a patient stays for less than two midnights, the hospital is only eligible for the lower Part B reimbursement. Patient stays listed under Part B do not make a patient eligible for Medicare-covered nursing and rehabilitative services, which require patient stays of three nights or more. Billing under Plan A according to the Two-Midnight Rule requires hospitals to present complete documentation that justifies the patient's stay, including the following information on the patient's medical record:

the fact of admission

reason for admission

that the physician expects the patient to be admitted for at least two midnights

reason for the length of stay

The Consequences of Non-Compliance Non-compliance with this Medicare policy is accompanied by non-punitive measures and, most often, the denial of reimbursement claims. Hospitals risk RAC denials when documentation is incomplete or when the recovery auditing agency deems the justification for hospital stays insufficient to warrant a Class A payment. It is important for hospitals to comply with this rule to ensure reimbursement. This means not only that proper documentation must be implemented, but also that physician cooperation is present. Physicians are tasked with making the decision to admit the patient and must give the basis to determine whether or not an inpatient status is medically necessary. Hospitals must also re-evaluate and redouble care coordination efforts, improve care management programs, and improve data and analytic systems. Claims will be reviewed before being approved for payment. If there are issues regarding compliance, the administration contractors will work with the hospital to correct any errors. Medicare is allowing hospitals to acclimate to this new policy before healthcare reviews are conducted. While Medicare is taking appropriate steps to make the transition to this new policy as painless as possible, hospitals must remain vigilant and enact measures to ensure full compliance. It is also important to educate patients about observation status and its financial implications in order to establish expectations about care and ultimately improve patient satisfaction scores, which also plays a role in the grant of medical reimbursement. 

Make sure you are complying with the Two-Midnight Rule. Contact Provident Consulting for expert advice.