EDITOR’S NOTE: The following is an open letter to the Office of Inspector General written by Ronald Hirsch, MD, in response to today’s OIG report on the Two-Midnight Rule.

On December 19th, you presented hospital utilization review directors, compliance officers and physician advisors your holiday gift to them, an analysis of the Two-Midnight Rule. While we all appreciate any gift, this gift is somewhat analogous to presenting your teenager a brand new iPhone 5 when the latest model is the iPhone 7. As you know, your report is based on an analysis of data from FY 2013 and 2014. Two years have passed and, as you pointed out, the Centers for Medicare and Medicaid Services made two significant changes to the Rule for 2016, essentially rendering your data completely obsolete.

That aside, a few issues deserve comment. The first is the problem of “long outpatient stays.” In the report you note “these factors may include an inability to safely discharge beneficiaries, delays in care, or confusion about the 2-midnight policy.” I cannot overemphasize the problem with unsafe discharges and the frustration that causes hospital staff and patients alike. There are generally two patient types that fit in this category. The first are those who require a short period of hospital care that is not expected to exceed two midnights but are unable to safely return to their previous living situation. This would include a patient with a non-surgical fracture or injury who now requires skilled therapy along with assistance with activities of daily living but does not have anyone to provide such care for them at home. In this case, because there is no ongoing need for hospital care that would warrant inpatient admission nor access to the part A benefit for transfer to a skilled nursing facility, the hospital is required by regulation to maintain the patient as an outpatient until an adequate discharge plan can be found, the patient recovers adequately to safely return home or the patient develops a nosocomial complication that warrants inpatient admission.

The other category is patients who do not require any hospital care whatsoever but are not safe to return home. These patients often have lost the ability to perform their activities of daily living because of the natural progression of their aging process and are brought to the hospital by family, friends or the police for safety, using the hospital as a community safety net. Once again, there is no need for hospital care of any type but the lack of available resources and current regulation mandate the hospital keep the patient as outpatient until a safe plan can be developed. In cases where guardianship is required, the patient remains hospitalized as outpatient for weeks (or months), with absolutely no revenue to the hospital for the ongoing nursing care, room and board.

While hospital staff and CMS officials recognize that Medicare only provides coverage for skilled care and do their best to follow these rules, patients and patient advocacy groups rest this problem squarely on the shoulder of hospitals, blaming us for not gaming the system by admitting them as inpatient and keeping them at least three days (also known as committing Medicare fraud) to help the patient gain access to a nursing home. While it is unclear what percent of your estimated 750,000 long outpatient stays represent these patients, I can assure you that they are the most frustrating for hospitals and beg for a solution.

You also briefly note in the report that in fiscal year 2014 and 2015 the Recovery Auditors were prohibited from reviewing short inpatient stays and that initially the Medicare Administrative Contractors (MACs) reviewed a small sample of records from each hospital and that this duty then transitioned to the Quality Improvement Organizations (QIOs). What was not mentioned is that CMS would not have changed the audits from the MACs to the QIOs if there was not an issue with the quality of the results produced by the MACs and that the QIO audits were temporarily halted by CMS due to inconsistent results on the first round of audits. If two sets of contractors with extensive training directly from CMS were unable to properly understand the 2-Midnight Rule, why would you think that hospitals would understand it any better? To illustrate that frustration, when CMS introduced the new exception for physician determination that inpatient admission is warranted despite an expectation of less than 2 midnights, several providers asked CMS for case examples that would fit this exception; CMS referred the providers to the QIOs. When the QIOs were asked for case examples, they referred to providers to CMS. Anecdotal evidence also indicates that the QIOs are approving short inpatient stays where even the hospital admits that billing inpatient admission was inappropriate and the admissions were billed in error. Since day one, CMS has refused to clearly define “necessary hospital care” and until that is done, there will continue to be extreme subjectivity, continuing denials and likely another several hundred thousand cases being appealed after denial.

At the same time, I am shocked to see you report that 29% of hospitals increased their use of short inpatient admission for patients with chest pain. That number seems to be lacking a decimal point between the two and the nine. But while we normally think of chest pain as an outpatient stay, it should be noted that the 2-Midnight Rule has introduced new situations when inpatient admission is now indicated, such as the morbidly obese patients who requires a two-day nuclear stress test or the patient whose pain requires ongoing intravenous analgesia past the second midnight. These circumstances are uncommon though and if correct, that 29% does seem to warrant actual medical record review, as do the 18% of hospitals who increased their use of short inpatient admissions. Those of us who spend countless hours trying to get things right are dismayed when it comes to light that there are some who disregard regulations with potentially seemingly nefarious motivations.

Finally, while your report stresses the increased payment to hospitals for similar patients treated as inpatient rather than outpatient, you make absolutely no attempt to quantify the actual cost to hospitals to provide such care to determine if the outpatient payment is too low, the inpatient payment is too high, or if both or neither is true. You cite the average payment for an outpatient hospitalization for fainting at $1,309. That payment must include room and board and nursing care for a stay that averages about 30 hours, the visit to the Emergency Department (ED) that initiated that stay, and all lab, imaging and diagnostic testing performed. For fainting, that usually includes about 10 blood tests, an electrocardiogram, a CT scan, an MRI, and an echocardiogram. Does $1,309 adequately reimburse the hospital for those direct expenses? Likewise, an outpatient stay for coronary stent placement is paid at $8364, but that includes patients who not only receive one stent but any number of stents. The stents each cost several thousand dollars and then you have to add on the cost of all the supplies used, the ED visit, the cost of the operating suite where the procedure was performed and the recovery expenses, again including room, board and nursing.

While I understand that Medicare’s payment structure is purposely designed to be based on the average cost to care for a patient with a condition, if the outpatient payment does not come close to covering the costs for even the simplest patient, hospitals are going to continue to be disillusioned with the payment structure and some may be tempted to stretch the (seemingly purposefully) ambiguous guidance from CMS to make more patients inpatient. Furthermore, teaching hospitals receive added payment through their inpatient admissions and the shift of many of these cases from inpatient to outpatient lessens their payments despite the fact that these patients do not lessen the costs of education. And, as mentioned earlier, there is scarcely little reimbursement whatsoever for the patients whose long outpatient stays are due to the outdated and markedly non-patient-centered rules for skilled nursing facility access.

Thank you for taking the time to review this; I look forward to your 2017 reports and would be thrilled to work with you on any initiatives to make our health care system better for all.


Ronald Hirsch, MD, FACP, CHCQM

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