IPPS doesn’t change two-midnight rule
Hospitals still must follow the regulation
The Centers for Medicare & Medicaid Services (CMS) did not clarify the controversial two-midnight rule in the Inpatient Prospective Payment System final rule for 2015 but may issue clarifications in sub-regulatory guidance later in the year or early next year, says Thomas McCarter, MD, FACP, chief clinical officer at Executive Health Resources, a Newtown Square, PA, healthcare consulting firm.
Executive Summary
Although the Centers for Medicare & Medicaid Services (CMS) asked for suggestions on alternative methods of identifying and paying for short hospital stays, the agency did not clarify the two-midnight rule in the Inpatient Prospective Payment System final rule for 2015.
- CMS may issue sub-regulatory guidance to clarify the two-midnight rule later this year or early next year. Hospitals need to stay on top of CMS messages to avoid being blindsided by new rules.
- Meanwhile, the Medicare Administrative Contractors (MACs) are continuing Probe and Educate audits, and some have denial rates of 75%.
- Most of the claims were denied because of lack of medical necessity, lack of a physician signature, or because physicians did not document an expected length of stay.
The two-midnight rule was a major change in the 2014 IPPS, McCarter points out. "In the 2015 proposed rule, CMS suggested that it was looking for alternative methods of identifying short stays and paying for short stays but didn’t put forth a proposal in the final rule. There has been no change in the two-midnight rule. We’ll see the clarifications either in next year’s rulemaking or in sub-regulatory guidance," McCarter says.
In the IPPS proposed rule, issued in April, CMS asked for suggestions on how to change the two-midnight rule to cover short stays. Here is a quote from the IPPS final rule:
"We thank commenters for the many comments submitted on this issue, and we will take these into account in any potential future rulemaking. Although there was no consensus among the commenters, we look forward to continuing to actively work with stakeholders to address the complex question of how to further improve payment policy for short inpatient hospital stays."
CMS frequently issues sub-regulatory guidance to clarify existing regulations, and sometimes it has a major impact, McCarter says.
For instance, on August 8, CMS issued Transmittal 534, which allows the Medicare Administrative Contractors to deny other claims, such as attending physician or surgeon’s fees related to a hospital stay if the hospital stay is denied. "This is a huge change that allows auditors to deny payment to physicians without requiring any documentation or even notifying the physician that the claim is under review," McCarter says.
Hospitals must have a process to stay on top of the messages that CMS issues to clarify or change its regulations to avoid being blindsided when the new regulations go into effect, says Steven Greenspan, JD, LLM, vice president of regulatory affairs for Executive Health Resources.
Meanwhile, the two-midnight rule continues to be in effect.
"Many people in the healthcare field believe that the provisions of the two-midnight rule have been delayed, but that’s not the case. There has been a tremendous amount of pushback from hospitals about the two-midnight rule and a lot of argument that it is not a fair approach, but hospitals still have to follow the policies outlined in the 2014 final rule," says Deborah K. Hale, CCS, CCDS, president of Administrative Consultant Services, a Shawnee, OK, healthcare consulting firm.
The Recovery Auditors won’t be able to review compliance with the two-midnight rule until Oct. 1, 2015, but the Medicare Administrative Contractors are conducting prepayment audits under the Probe and Educate initiative, she adds.
In addition to the MACs, the Zoned Program Integrity Auditors (ZPICS), charged with looking for fraud and abuse, are also auditing two-midnight cases. "There are a lot of auditors out there, and they are doing a lot of business," McCarter says.
The initial Probe and Educate audits are winding down, McCarter says. However, MACs can escalate the audits for hospitals that have claims errors. If the problem persists, the MAC will repeat the audit and will request 10 times the original number of charts, or 100 charts for small hospitals and 250 charts for larger hospitals. "Based on the published MAC denial rates to date, most hospitals will be escalated to higher audit numbers," McCarter adds.
"We are seeing MACs with denial rates as high as 75% when they audit under Probe and Educate. This means that providers and MACs are disagreeing 75% of the time on what the two-midnight rule means. That’s a significant number of denials," Greenspan says.
Most denials are based on medical necessity, McCarter says. "The MACs are saying that the documentation did not support the need for an inpatient level of care and that the services should have been provided on an outpatient basis," he adds.
"In this new world of healthcare, hospitals need to answer two questions to comply with the two-midnight rule: Does the physician have a reasonable expectation of a two-midnight stay, and are the services being provided medically necessary," Greenspan says.
There has been a tremendous number of denials because the physician order to admit as inpatient was not signed prior to discharge or the physician did not explain that the patient improved more quickly than expected, resulting in a one-midnight stay rather than the expected two midnights, Hale says.
"The MACs have been very rigid. In some instances, the MACs were wrong in denying the claims and CMS has asked the MACs to look back at the denials of cases reviewed early on. Hospitals should continue to appeal the denials if they believe the MAC is wrong," Hale says.
