CMS issued guidance on September 26, 2013, regarding the implementation of the “Two-Midnight” rule addressed in the August 2013 Inpatient Prospective Payment System (IPPS) final rule.  Under the Two-Midnight rule, patient admissions expected to span at least two midnights will presumptively qualify for payment under Medicare Part A.  For those patient admissions that last less than two midnights, CMS will presume care should have been provided on an outpatient basis payable under Medicare Part B.  Thus, hospital inpatient admissions spanning less than two midnights ordinarily will not be covered under Medicare Part A. 

Since the issuance of the final IPPS rule in August, hospitals have expressed concern regarding the Two-Midnight rule’s impact on patient care and logistical difficulties associated with its implementation.  In response, CMS announced that the implementation period of the Two-Midnight rule will span three months, from October 1, 2013 through December 31, 2013.  While the effective date has not been delayed, CMS has established procedures during implementation that will protect hospitals from denied claims, audits, and financial penalties.

For admissions occurring during the implementation period, Recovery Auditors (RACs) will not be able to review inpatient admissions of one midnight or less.  In order to monitor hospitals’ implementation of the Two-Midnight rule, Medicare Administrative Contractors (MACs) will review 10 to 25 claims per hospital that span less than two midnights to determine the medical necessity of the admission.  If there are no issues with the selected claims, MACs will discontinue further review during the implementation period.  If the review uncovers issues with a hospital’s inpatient claims, however, the MAC will conduct education for the hospital and any follow-up steps necessary to ensure compliance.  At the end of the implementation period, CMS will review progress made and evaluate the need for further guidance and a possible additional transition period.

Reporter, Paige Fillingame, Houston, +1 713 615 7632, pfillingame@kslaw.com.