Two midnight rule: Latest developments Last Updated: August 13, 2014
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Premier and the broader hospital community have been actively engaged on the two midnight rule for determining the medical necessity of inpatient hospital stays. Over the past weeks, there have been a number of significant developments, which are summarized below.


Last Friday, the Centers for Medicare & Medicaid Services (CMS) announced a further delay in the enforcement of the “two midnight” rule for determining the medical necessity of inpatient hospital stays until October. While the provider community is pleased about this reprieve, this action by CMS does not delay or alter the underlying policy, nor does it guarantee that the issue will be addressed in the proposed inpatient prospective payment rule this April.

During this delay period, contractors will continue to carry out “Probe and Educate” prepayment reviews on a sample of inpatient claims with dates of admission from March 31 through September 30. Those that fail to comply with the new benchmark requirements will be denied. Contractors also will continue to carry out educational outreach to providers. The number or range of claims will not change as a result of the extension, CMS said. Also, RAC auditors generally will not conduct reviews of claims for inpatient status for the extended period – meaning RAC reviews will be limited for all of fiscal year (FY) 2014, except for purposes of Comprehensive Error Rate Testing (CERT) or in response to potential fraudulent or abusive behavior.

CMS also has released updated guidance on inpatient admission orders and certification.

Yesterday, CMS held a call to field questions related to implementation of the two midnight benchmark for inpatient hospital admissions as specified in the FY14 inpatient final rule. The open door forum was coordinated to respond to question on the above guidance.


Despite CMS’ enforcement delay of the two midnight policy until October, Premier is still seeking a legislative solution—potentially in the physician payment system reform bill currently under consideration. Reps. Jim Gerlach (R-PA), Joseph Crowley (D-NY), Tom Reed (R-NY), Rep. Peter Roskam (R-IL) and Ron Kind (D-WI) in late December introduced a bill (H.R. 3698, the Two Midnight Policy Delay Act), which would delay the enforcement of the rule until October 1, 2014 and require CMS to develop a new Medicare payment methodology for short inpatient hospital stays in FY15. As you know, CMS’ recent announcement to delay enforcement of two midnight handles one facet of the Gerlach bill, but fails to address the provider community’s concern with developing a new payment policy for short inpatient high acuity stays.

With this in mind, we encourage you to continue to reach out to your representatives asking them to co-sponsor Rep. Gerlach’s bill, the Two-Midnight Rule Delay Act of 2013 (H.R. 3698). The legislation currently has 85 cosponsors. When communicating with your lawmakers, underscore that this legislation is urgently needed to ensure that CMS has time to address the serious flaws in the policy. These include:

  • Medicare beneficiaries could assume a higher financial burden for their care. If patients whose care spans less than two midnights receive medically necessary inpatient care, but are denied inpatient payment under the new policy, they would unfairly face increased cost sharing under Medicare Part B as an outpatient.
  • Your hospital/health system could be undercompensated for providing medically necessary services that do not meet the new criteria spelled out by CMS.
  • Even though this policy will not become effective until September 30, 2014, implementing the policy will be difficult, if not impossible for your hospital when the enforcement of the policy goes into effect. The policy differs substantially from current procedures and requires extensive staff training and modifications to admission protocols, documentation and electronic health records.

If your Representatives are interested in supporting the legislation, have them contact Lori Prater with Congressman Gerlach’s office.


In January, the American Hospital Association, the Greater New York Hospital Association, and several other hospital associations filed a lawsuit to stop the two midnight rule. Premier member hospitals involved in the litigation include Banner Health, Einstein Healthcare Network, and Mt. Sinai Hospital. In the two midnight rule CMS imposed, without any quantification, a 0.2 percent cut to inpatient payments based on the agency’s estimate of the additional costs of the new admissions policies. The legal appeal argues that the rule is “arbitrary and capricious” and asks for the Provider Reimbursement Review Board to grant expedited judicial review for the organization’s claims that the payment cut is unlawful.