In the 2016 Outpatient Prospective Payment System (OPPS) proposed rule (CMS-1633-P), the Centers for Medicare and Medicaid Services (CMS) left the two-midnight rule intact but added some new wrinkles.

If implemented as proposed, instead of the Medicare Administrative Contractors (MACs) doing status reviews for short inpatient stays, no later than Oct.1, 2015, this task will be assigned to the Quality Improvement Organizations (QIOs), which will review “a sample of post-payment claims.” (How big a sample? Who knows?)

Recovery Auditors (RAs) will continue to audit claims from those hospitals referred by the QIO because they had high rates of improper billing. (How high is high? Who knows?) And how do we know the QIOs will do a better job than the RAs when their volume of reviews explodes? 

In addition, CMS broadened the concept of “rare and unusual circumstances” for admission when the physician doesn’t expect the hospital stay to last two midnights or more “based upon the admitting physician’s clinical judgment that inpatient hospital admission is appropriate.” The criteria—severity of illness, need for outpatient services, and “the medical predictability of something adverse happening to the patient”—are the same confusing and ill-defined criteria that led to a massive number of RA denials, a 70 percent-plus denial overturn rate, and the overburdening and collapse of the Medicare appeals system. CMS is asking for comments on the use of screening criteria. (Hello, ALJ. We’re baaack.)

By going back to using “medical judgment” to determine necessity for short-stay admissions, CMS appears to have de facto resurrected the concept of “inpatient level of care” (because if not a level of care, how would a physician determine that inpatient care is required?), yet it has retained the two-midnight rule with its explicit policy that there is no such thing as an inpatient level of care at all. In this schizophrenic approach, on the one hand, a patient can receive intensive care as an outpatient under the two-midnight rule, but on the other, a patient needing intensive care could be admitted as an inpatient based on a physician’s medical judgment. Which is it, CMS?

I believe CMS got it right when it used the need for hospital care as one of the indicators for inpatient admission. That’s the decision that physicians actually do make. Determining billing status should not be in their hands. It was appropriate that a physician would determine admission versus outpatient care “back in the day” when outpatient treatment meant treatment at home or brief same-day care at the hospital and inpatient meant treatment in a hospital bed overnight. But with CMS obscuring the distinction between inpatient and outpatient care by calling a two-day hospital stay outpatient care just because it terminated prior to the second midnight, physicians have been asked to make a confusing determination that makes no sense to a clinician. 

CMS is asking for comments: Well, I have been calling for a “one-midnight rule” that would allow hospitals to classify as an inpatient any patient who requires overnight care in a bed other than in the ED or routine recovery. The need for hospital care is easier to determine and less subject to denial than judging risk of an adverse outcome and pretending to know the difference between inpatient and outpatient care. Hospitals would receive Part B payment for “extended ED services” in lieu of observation and patients would pay a reduced Part A deductible for stays less than three nights. All medications would be covered by the DRG and all nights the patient is hospitalized would count toward the skilled nursing facility (SNF) benefit.

The comment period extends to August 31, 2015, and is when we get to express our opinions on the proposed rule—not that CMS appears to listen very carefully.

Go to and let CMS know your thoughts anyway.

About the Author

Dr. Steven Meyerson is a geriatrician and consultant in Medicare compliance and case management. He has served as physician advisor and Medicare compliance educator. Dr. Meyerson received the 2014 Distinguished Achievement Award from the American College of Physician Advisors and is a member of the Board of Directors that group. 

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CMS Two-Midnight Rule Fact Sheet

2015 OPPS Proposed Rule

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