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The federal agency in charge of Medicare announced that for the next three months it will relax enforcement of its controversial "two-midnight rule," but will not eliminate it per the desires of healthcare providers and now members of Congress.
Earlier this year the Centers for Medicare and Medicaid Services (CMS) announced a new standard for determining whether a patient is admitted to a hospital or there for observation, the two-midnight rule. Medicare patients must spend at least two continuous midnights in a hospital to be classified as inpatient, a status which comes with the highest reimbursement rates. Patients who spend less than two midnights will be automatically considered outpatient or under observation status.
As with any rule there will be exceptions: Patients can spend more than two midnights and still be considered outpatient, and likewise, patients can be considered inpatient even though they spent less than two midnights.
Patients, however, may not know whether their status is inpatient or observation, because they receive the same services in the same hospital beds. However, the cost to the patient is widely different, with Medicare picking up almost all the cost of a hospital inpatient stay, but only picking up parts of the cost of an observation stay, requiring the patient to pay co-pays for tests and pharmaceuticals.
For patients, the advice we offered a few weeks ago still stands: If you are admitted to a hospital, ask and ask often about your status. For more information about how to manage hospital visits, download this pamphlet from the United Hospital Fund, "Hospital Admission: How to Plan and What to Expect During the Stay." The section pertaining to inpatient versus observation status begins on page 9.
Healthcare providers have criticized the two-midnight rule from the beginning, and Congress has been getting involved by filing bills and sending a letter to CMS signed by 100 legislators. The response by CMS has been to soften its stance on enforcement for three months until Jan. 1. "During the implementation period of October 1, 2013 until December 31, 2013, CMS will instruct the MACs [Medicare Administrative Contractors] and Recovery Auditors not to review claims spanning more than two midnights after admission for appropriateness of patient status," the agency wrote in a clarifying FAQ published last month (the entire text of the FAQ can be read here).
But even though it won't be reviewing those claims, healthcare providers are expected to follow the rules to the letter, CMS says. And any attempt at "systematic gaming" of the rules will void the three-month transition and make a provider's claims fair game for auditing.
For those inpatient claims filed for patients who spent less than two midnights, CMS has instructed its MACs to review a sample of anywhere from 10 to 25 claims per hospital. If the MAC finds that the treatment did not qualify the patient for inpatient status, the claim will be denied (the hospital can re-bill the claim under Medicare Part B). If the MAC finds consistent issues with the claims, CMS will use the findings as a basis to educate the provider. If no issues are found, the MACs will not examine additional claims of this type until Jan. 1 "unless there are significant changes in billing patterns for admissions," writes CMS. More importantly to healthcare providers, all claims related to the two-midnight rule from Oct. 1 to Dec. 31 will not be subject to RAC audits.
Evan J. Albright is a contributing editor to insidePatientFinance.com. He lives in Massachusetts.
