Anesthesiologists as Their Hospitals’ Partners: Understanding the Two-Midnight Rule
In order to engage fully with their hospital partners, anesthesiologists need to understand some of their institutions’ concerns. While our readers may not hold the solutions, familiarity with pressures on the hospitals can only help in negotiating the relationships, day-to-day and at contract renewal time. The Two-Midnight rule is a current hospital hassle of which anesthesiologists should have some awareness.
Background
Whether a patient is admitted as an inpatient or treated as an outpatient has a considerable impact on hospital payment and on patient cost sharing. Medicare covers inpatient admissions under Part A and pays $3,100 more on average for an inpatient stay than for an outpatient observation stay, which is paid under Part B, according to claims data reviewed by the Medicare Payment Advisory Commission (MedPAC).
By 2012 the Medicare Recovery Audit Contractors (RACs) had become so aggressive in pursuing medically unnecessary hospital admissions that hospitals started keeping patients for extended outpatient observation stays. Keeping patients in observation, i.e., in outpatient status avoids the risk that an inpatient claim might be denied at a future date. The rate for extended outpatient stays spiked dramatically. Among the unintended consequences were a decrease in the number of patients eligible upon discharge for Medicare coverage of skilled nursing facility services, which requires a minimum three-day inpatient stay, and an increase in patients’ out of pocket expenses.
The Two-Midnight Rule
In a doomed attempt to reduce the confusion among hospitals and physicians as to when an inpatient admission would be considered reasonable and necessary for payment purposes, CMS adopted the Two-Midnight rule for admissions in 2013. This rule stated, as CMS noted in its Fact Sheet issued on July 1, 2015, that:
Inpatient admissions will generally be payable under Part A if the admitting practitioner expected the patient to require a hospital stay that crossed two midnights and the medical record supports that reasonable expectation.
Medicare Part A payment is generally not appropriate for hospital stays not expected to span at least two midnights.
The Two-Midnight rule also specified that all treatment decisions for beneficiaries were based on the medical judgment of physicians and other qualified practitioners. The Two-Midnight rule does not prevent the physician from providing any service at any hospital, regardless of the expected duration of the service.
Despite CMS’ use of the word “generally” and the presumption that inpatient treatment during a stay that crosses two midnights is medically necessary, hospitals and physicians have found the rule disruptive of clinical decision-making, inflexible and burdensome, and they have continued to lobby for repeal. The rule also appeared to penalize hospitals for innovations designed to reduce length of stay. Implementation of the rule was delayed several times.
The Proposed Modification
CMS announced that it would modify, not repeal, the Two-Midnight rule in its annual proposed rule on Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems (OPPS) which it released on July 1, 2015. The revision, if adopted, would give providers much greater latitude and perhaps less predictability. Repeating its expectation “that it would be rare and unusual for a beneficiary to require inpatient hospital admission for a minor surgical procedure or other treatment in the hospital that is expected to keep him or her in the hospital for a period of time that is only for a few hours and does not span at least overnight,” CMS proposed:
For stays for which the physician expects the patient to need less than two midnights of hospital care (and the procedure is not on the inpatient only list or otherwise listed as a national exception), an inpatient admission would be payable under Medicare Part A on a case-by-case basis based on the judgment of the admitting physician. The documentation in the medical record must support that an inpatient admission is necessary, and is subject to medical review.
Inpatient admissions of fewer than two midnights’ duration would thus be payable, but claims would be subject to first-line reviews for reasonableness by the Quality Improvement Contractors (QIOs). Factors that would indicate reasonableness would include the severity of the patient’s symptoms and the risk of an adverse clinical event occurring in the hospital. QIO involvement would be a welcome change from initial review and enforcement by the RACs. QIOs will continue to focus on education of providers, according to CMS, while the RACs will pursue those hospitals that have consistently high denial rates based on QIO patient status review outcomes.
CMS will be accepting public comments on the proposed rule through August 31, 2015 and is expected to issue a final version late this year.
Impact
An American Hospital Association spokesperson quoted in an article on Medpage Today dated July 7, 2015 called the OPPS proposal “’a good first step,’” saying that “’It opens the door to create a new exception that certain hospital inpatient services don't need to cross two midnights in order to be considered inpatient and appropriate for payment under part A’” but that “the real impact of the rule will depend on how it is finalized and implemented.”
The decision to admit a patient is almost always made by a physician other than an anesthesiologist or pain specialist. Consequently, as suggested in the first paragraph of this Alert, the proposed change to the Two-Midnight rule will not have a direct impact on most of our readers. It is an important issue for hospitals and other physicians, however, and therefore one that’s worth a few minutes of our time.