CMS Continues to Tinker with 'Two-Midnight' Rule

The Centers for Medicare and Medicaid Services continue to refine application of the “two-midnight rule,” the new standard for whether a Medicare beneficiary should be considered “inpatient” under Medicare Part A or “observation status” under Medicare Part B.

CMS last month updated its “two-midnight rule FAQ” to to cover circumstances where a patient is admitted to a hospital for a surgical procedure, but that procedure is cancelled. According to CMS, the claim can be submitted under Medicare Part A, provided proper documentation is in order (a copy of the text appears below).

The clarification only pertains to Medicare Administrative Contractor (MAC) reviews of claims. With regard to Recovery Audit Contractor (RAC) reviews, claims submitted under the two-midnight rule are exempt from scrutiny, except in cases where fraud or malfeasance is suspected. That moratorium on review was extended by Congress and signed into law by President Barack Obama last week. The legislation that not only created a temporary fix for the Sustainable Growth Rate (SGR) formula, it also expanded the moratorium to March 31, 2015.

 MACs will review denials

As CMS is refining enforcement of the two-midnight rule, it is also giving healthcare providers another bite at the apple. In February, CMS announced that it had asked MACs to review all past denials of claims under the two-midnight rule to make sure that  ”the claim decisions and subsequent education are consistent with the most recent clarifications on the order and certification guidance.” After that review, “the MAC may reverse their decision and issue payment outside of the appeals process if it determines that a claim is payable upon re-review.”

CMS is asking providers to check with MACs to make certain the re-review has been conducted before filing an appeal of the denial. CMS has waived the 120-day time limit on filing appeals and given providers until Sept. 30 to appeal two-midnight claim denials made between Oct. 1, 2013 and Jan. 30, 2014.

CMS, via its MLN Connects website, has made available a transcript from a February teleconference that provides even more “shading” behind the detail of the enforcement of the “two-midnight rule” that readers can find here.

Below is the clarification of the two-midnight rule enforcement as it pertains to cancelled surgical procedures:

Q: How will Medicare Review Contractors review cases in which a surgical procedure is cancelled after inpatient admission?
A: MACs will issue determinations for such claims based on the general Two-Midnight benchmark instruction. In other words, if the physician reasonably expects the beneficiary to require a hospital stay for two or more midnights at the time of the inpatient order and formal admission, and this expectation is documented in the medical record, the inpatient admission is generally appropriate for Medicare Part A payment.