CMS proposes rolling back 2-midnight rule
The controversial 2-midnight rule may be no more following CMS’ release of its latest proposed rule for the hospital inpatient prospective payment system (IPPS). When it was first put in place for fiscal year 2014, the 2-midnight rule established a benchmark for inpatient admissions where a Medicare Part A payment would be considered reasonable and necessary for patient stays that lasted at least two midnights. Stays that didn’t reach that benchmark would be billed as outpatient services, which are covered by Medicare Part B and tend to result in lower hospital reimbursements.
Under the new proposed rule, CMS would no longer impose a 0.2% payment cut for inpatient stays under the 2-midnight rule. Hospitals would also receive a one-time 0.6% payment in fiscal year 2017 to offset the reduction in inpatient payments over the previous three years.
In the proposed rule, CMS wrote, "We still believe the assumptions underlying the 0.2[%] reduction to the rates put in place beginning in FY 2014 were reasonable at the time we made them in 2013. Nevertheless … in the context of this case, we believe it would be appropriate to use our authority … to prospectively remove, beginning in FY 2017, the 0.2[%] reduction to the rates put in place beginning in FY 2014."
The proposed rule, which would affect about 3,330 acute care hospitals and 430 long-term care hospitals, would apply to patient discharges from October 1, 2016 and later.
Under the proposed rule, acute care hospitals that are meaningful use electronic health record (EHR) users and that successfully participate in the Hospital Inpatient Quality Reporting Program would receive a 0.9% payment increase.
Overall, CMS estimates that the elimination of the payment cut and proposed payment increases will result in an additional $ 539 million in payments in fiscal year 2017.
CMS held a comment period for the proposed rule, which ended in June. A final rule will be issued August 1.
The proposed rule comes as welcome news to some. Following the announcement of the proposed rule, the American Hospital Association (AHA) released a statement from President and CEO Rick Pollack that said, "[The] rule includes a very important outcome because it reverses the inappropriate and unfair 0.2[%] payment reduction for inpatient services that was implemented as part of the original ‘two-midnight’ policy. The AHA successfully challenged [CMS’] interpretation through the courts to convince them to restore the resources that hospitals are lawfully due."
Background
Two years ago, CMS enacted the payment cuts for inpatient stays to offset an anticipated increase in inpatient admissions as a result of the 2014 IPPS 2-midnight rule. The increase in admissions was predicted to cost $ 220 million.
Following the rule’s introduction, there was vocal opposition to the rule from hospitals that argued it arbitrarily complicated care for Medicare beneficiaries, and legal challenges were subsequently launched over the 0.2% cut.
In the case Shands Jacksonville Medical Center v. Burwell, several hospitals and hospital associations, including the AHA, questioned whether Sylvia Burwell, secretary of the Department of Health and Human Services (HHS), had the authority to make the proposed across-the-board reductions, and whether her prediction of the $ 220 million increase was valid.
In September, the U.S. District Court for the District of Columbia found that HHS did have the authority to reduce the reimbursement rates, but that the justification for the 0.2% cut was lacking.
In his ruling, District Judge Randolph Moss wrote, "The Court is unable to evaluate whether the [s]ecretary’s decision was reasonable because her omission prevented the public from offering meaningful comments. The [p]laintiffs never had the opportunity to explain where, in their view, she went wrong, and, thus, the [s]ecretary never had to provide a reasoned justification of her position."
Moss ordered Burwell to provide additional justification for the reimbursement cut and allow a public comment period. CMS issued a request for comments in December.
The following month, 55 additional hospitals filed a similar lawsuit over the 2-midnight rule’s 0.2% inpatient payment cut and the estimated increase in inpatient admissions the cut was based on.
CMS pauses reviews of short-stay claims
On a related note, in May, CMS put a temporary pause on reviews performed by Beneficiary and Family Centered Care Quality Improvement Organizations (BFCC-QIO) to determine if payments under Medicare Part A are appropriate for claims for inpatient stays that span less than two midnights.
In a message posted June 6, CMS explained it "became aware of inconsistencies in the BFCC-QIOs’ application of the two-midnight policy for short hospital stay reviews, and … we temporarily paused short stay patient status reviews to give us time to improve standardization in the BFCC-QIOs’ review process."
BFCC-QIOs will use the temporary pause to complete retraining on the two-midnight policy and to review all claims that were denied since last October. BFCC-QIOs began conducting the short-stay claim reviews in October, which were previously conducted by Medicare Administrative Contractors.
CMS believes audit activities will resume in 60?90 days, according to the update it posted in June. In the meantime, hospitals that previously had a claim denied should check with their BFCC-QIO to see if the claim has been denied before filing an appeal. Hospitals that have already filed appeals will have the findings of the re-review performed by the BFCC-QIO shared with the appeals adjudicators.