A Deeper Dive on MACRA - What it means for the Two-Midnight Rule

CMSIn 2013, in an effort to clarify Medicare medical necessity policy around hospital inpatient admissions, CMS issued a policy specifying that an admission will qualify for Part A reimbursement when a physician certifies that a patient’s treatment is expected to require an inpatient stay spanning two midnights. In addition, CMS provided instructions to its payment contractors that inpatient hospital claims with lengths of stay greater than two midnights after the formal admission will be presumed generally appropriate for Part A payment and will not be the focus of medical review efforts unless there is evidence of systematic gaming, abuse or delays in the provision of care. This policy came to be informally known as the “Two Midnight Rule.”

The policy change was immediately controversial and ultimately resulted in litigation that is still pending. In September 2013, shortly before the rule became effective, CMS announced a three-month enforcement delay during which Medicare Administrative Contractors (MACs) were instructed to conduct a “Probe and Educate” campaign where they would review a small sample of inpatient claims lasting less than two midnights—10 for most hospitals, and 25 for large hospitals—to see how well hospitals were complying with the new admissions criteria. MACs could deny claims not in compliance with the rule during this period, but the denials would be limited to the 10/25 claims review limits.

CMS MACs also would use the results of these probes to educate hospitals on how well they were doing. CMS further ruled that Recovery Audit Contractors (RACs) could not conduct any reviews of short-stay inpatient claims during the transition, and RACs could not look back at those claims at a later date. In November 2013, CMS extended the moratorium another three months, from December 31, 2013, to March 31, 2014. On January 31, 2014, CMS announced a third delay, this time extending the prior instructions to MACs and RACs to September 30, 2014.

Under this most recent delay, MACs would continue to select 10 or 25 claims per hospital with admission dates of March 31, 2014, through September 30, 2014, for review and compliance with the Two Midnight Rule. As such, pre-payment review continued for admission dates between October 1, 2013, and September 30, 2014 with MACs conducting outreach and education efforts based on their findings. RACs were still not conducting post-payment reviews for compliance with the Two Midnight Rule for inpatient hospital claims with admission dates between those dates. In April 2014, Congress enacted legislation authorizing another six-month extension of the “Probe and Educate” program and also extending the stay on post-payment reviews for services furnished through March 31, 2015.

MACRA once again authorizes CMS to extend the “Probe and Educate” program, this time through September 30, 2015, and once again bars the agency and its RACS from conducting post-payment reviews, for discharges occurring through September 30, 2015 other than in cases of suspected fraud.

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