The two-midnight rule has brought some clarity to the definition of inpatient status. The new rule certainly reduced the number of stays eligible for admission, so it functionally implemented a reimbursement reduction. But there is no disputing that the new rule is clearer than the preexisting guidance.  

Still, the poorly written guidance that was replaced by the two-midnight rule offers some vital lessons. Whether or not you still have pending short-stay cases, these lessons may save you significant money. 

Somehow, Recovery Auditors (RACs), consultants, and lawyers managed to con hospitals into ignoring the actual Medicare guidance about inpatient status.

I suspect that the majority of people involved in determining patient status, if asked to describe the standard for admission before the two-midnight rule, would cite InterQual, Milliman, or some other similar reference tool. Let me be clear: InterQual has never been the Medicare standard for differentiating inpatient status from outpatient/observation. Others may say that the standard was “a 24-hour stay.” That’s wrong too. 

The actual length of a hospital stay was not material, even under the old guidance. Some might assert that admission was appropriate when the physician expected a stay to last 24 hours. This is getting closer to being accurate, but it misses a vital point. The first standard articulated in the manuals was a physician expectation that the patient would spend the night in the hospital. Let’s look at the text, found in Section 10 of the Medicare Benefit Policy Manual. The bold portions have been highlighted for emphasis:

Generally, a patient is considered an inpatient if formally admitted as inpatient with the expectation that he or she will remain at least overnight and occupy a bed even (if) it later develops that the patient can be discharged or transferred to another hospital and not actually use a hospital bed overnight. The physician or other practitioner responsible for a patient’s care at the hospital is also responsible for deciding whether the patient should be admitted as an inpatient. Physicians should use a 24-hour period as a benchmark, i.e., they should order admission for patients who are expected to need hospital care for 24 hours or more, and treat other patients on an outpatient basis. However, the decision to admit a patient is a complex medical judgment which can be made only after the physician has considered a number of factors, including the patient’s medical history and current medical needs, the types of facilities available to inpatients and to outpatients, the hospital’s by-laws and admissions policies, and the relative appropriateness of treatment in each setting.

That paragraph arguably articulates three different standards: An expectation of an overnight stay, an expectation of a 24-hour stay, and a third standard that is “complex” and depends on the physician’s judgment of the patient’s needs, the hospital bylaws, and other unnamed factors. “Overnight” can be construed to mean something different everywhere in the U.S. with the exception of during winter north of the Arctic Circle in Alaska.    

InterQual isn’t mentioned at all. Based on this language, if the physician expected an overnight stay, I would feel totally comfortable defending a decision to admit. Consider the number of times you have heard a description of a different standard. How many times have you heard someone assert that it is necessary to examine what happened during a stay to determine whether an admission was necessary, for example? The use of InterQual, Milliman, and other tools that consider the course of a hospitalization are all inconsistent with that Manual instruction. All three of the standards articulated in the Manual are based on the physician’s expectation of what will happen during the stay, not what actually occurred. Somehow, however, the entire hospital industry was convinced that it was necessary to review what happened during the stay.Hospitals were conned into adopting a non-existent standard for hospital admissions. 

“Show me the rule.” In this case, the mantra is really “show me the policy,” because Centers for Medicare & Medicaid Services (CMS) manuals are not regulations; they are merely policies. Before the two-midnight rule there was no “rule” governing patient status.

But that distinction aside, if more people had insisted on actually reading the guidance from CMS, perhaps millions of dollars that were paid to RACs (or voluntarily refunded by hospitals) would still be in the hands of the hospitals that had provided services entirely consistent with Medicare’s instructions.

When someone insists that you must refund money, please make them “show you the rule.” If you either read it carefully or use good counsel and make sure that your lawyer is carefully reading the rule with an open mind, you can prevent this sort of injustice from happening again.    

About the Author 

David M. Glaser, Esq., is a shareholder in Fredrikson & Byron’s Health Law Group. David assists clinics, hospitals, and other healthcare entities negotiate the maze of healthcare regulations, providing advice about risk management, reimbursement, and business planning issues. He has considerable experience in healthcare regulation and litigation, including compliance, criminal and civil fraud investigations, and reimbursement disputes. David’s goal is to explain the government’s enforcement position and to analyze whether the law supports this position. David is a popular panelist on Monitor Monday and is a member of the RACmonitor editorial board. 

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