When a doctor admits a Medicare beneficiary for hospital care, his or her choice may have been influenced by a Centers for Medicare and Medicaid Services (CMS) standard that sounds like a term from a spy novel: the two-midnight rule.
The two midnight rule is used when a doctor believes a Medicare beneficiary needs inpatient care that is likely to eclipse two midnights, requiring inpatient care instead of cheaper outpatient care, Regan Tankersley, an attorney with the Hall Render law firm that provides consulting to health systems, he told Healthcare Brew.
“It’s a more expensive setting, care is more expensive and therefore it costs more for the payer,” he said.
CMS first implemented the two-midnight rule in 2013 to provide hospitals with a benchmark on what types of care qualify for Part A coverage, meaning the insurer fully covers the costs of treatment for services, such as inpatient hospital care or time in a skilled nursing facility. With Part B coverage, which includes outpatient services, the insurer pays a lower percentage of those costs, usually 80%, according to Medicare.
According to Tankersley, by misdescribing coverage in Part A, a provider could overcharge the insurer for treatments. Before the rulemaking clarified what coverage could fall under Part A, CMS auditors found inconsistencies in the medical claims the agency received from hospitals.
“[T]Through the Recovery Audit program, CMS has identified high error rates for hospital services rendered in a medically non-necessary setting (i.e., inpatient rather than outpatient),” a 2015 CMS fact sheet states.
According to a 2016 Office of the Inspector General for the Department of Health and Human Services (HHS-OIG) report, Medicare may have paid nearly $3 billion in short-term hospital stays misclassified under Part A in 2014.
On the other hand, mischaracterizing coverage as Part B could prevent patients from accessing coverage for certain services, such as admission to a skilled nursing facility, according to the report.
“Hospitals have taken some of the guesswork out of when they should admit patients,” Tankersley said.
The rule eliminated provider “fear” that “we admit them because we think they’re sick enough, and then Medicare or an auditor comes back and says, ‘No, we think they should have been outpatients,’ and then they make up the payment,’” he added.
According to KFF, enrollment in Medicare Advantage (MA), a program through which private insurers contract with Medicare to provide coverage, has grown to more than 30 million members, up from 14.4 million members when the two midnight rule came into force. Last June, CMS and HHS added a new rule to the Federal Register: MA plan providers must also follow the two-hour payment structure.
“Many Medicare Advantage plans or commercial plans have pre-authorization [for inpatient admission]” Tankersley said. Faced with the rule, MA plans could “turn back and say, ‘No, we’re not going to allow this to be admitted.’ And then you go back to this bucket and outpatient services.
This article was originally published by Healthcare Brew, a subsidiary of Morning Brew.