King & Spalding Submits Comments to CMS Regarding Two-Midnight Rule, Rejecting Agency’s Latest Rationale for Payment Reduction

King & Spalding

On February 2, 2016, on behalf of more than 200 client hospitals, King & Spalding responded to CMS’s latest justification for its two-midnight rule and associated 0.2 percent payment reduction, published at 80 Fed. Reg. 75107 (Dec. 1, 2015).  King & Spalding’s comments argued in part that CMS’s post hoc rationalization for excluding medical cases from the two-midnight rule’s estimated impact on overall inpatient admissions was unsupportable by both logic and data and that therefore the rate cut cannot stand. 

CMS’s Notice was a requirement of the United States District Court for the District of Columbia in Shands Jacksonville Medical Center v. Burwell, No. 14-00263 (D.D.C. Sept. 21, 2015).  Relying in large part on comments submitted by King & Spalding during CMS’s rulemaking implementing the two-midnight rule in 2014, Judge Randolph Moss’s September 2015 decision held “that the Secretary’s failure to disclose the critical assumptions relied upon by the HHS actuaries deprived Plaintiffs and other members of the public of a meaningful opportunity to comment on the proposed 0.2 percent reduction.”  Judge Moss ultimately concluded that CMS violated the Administrative Procedure Act, and remanded the case back to CMS to explain its rationale for excluding medical cases in its data analysis.

King & Spalding’s comments included the following:

  • CMS’s behavioral assumptions about how physicians and hospitals will respond to the two-midnight rule are inconsistent and mutually exclusive, making its calculation of a net increase of 40,000 inpatient cases – the basis for its rate cut – unsupportable;
  • CMS’s claims regarding the increased “variability” of medical cases, as compared to surgical cases, are not consistent with 2011 Medicare claims data – the same data originally used to substantiate the rate cut; and
  • CMS’s reliance on proprietary screening guidelines, including InterQual and the Milliman Care Guidelines, first mentioned in the December 2015 Notice, cannot now be used to justify a FY 2014 rulemaking, and in any event, CMS’s categorization of such tools is inaccurate.

Reporter, Elizabeth N. Swayne, Washington, D.C., + 1 202 383 8932,

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