Following the Shands Jacksonville Medical Center v. Burwell decision, the Centers for Medicare & Medicaid Services (CMS) signaled its intent via the FY2017 Inpatient Prospective Payment System (IPPS) Proposed Rule to eliminate the 0.2% payment reduction, associated with the Hospital Readmission Reduction Program outlined in the Affordable Care Act, implemented in 2013. CMS also proposes to provide a temporary, one-time prospective increase to the FY2017 payment for reductions taken from FY2014 through FY2016. It is anticipated that the 2017 IPPS Proposed Rule will be finalized in August 2016.
CMS first introduced the Two-Midnight Rule to establish the Medicare payment policy for Part A short-stay inpatient admissions, effective October 1, 2013. The Two-Midnight Rule stated that inpatient admissions generally would be payable if (1) the admitting practitioner ordered an inpatient status, (2) he or she expected the patient to require a hospital stay that crossed two midnights, and (3) the medical record supported that reasonable expectation.
The policy was intended to address the high-frequency use of observation status with the expectation that inpatient encounters would increase. As such, an annual reduction of 0.2% was incorporated into the Medicare inpatient payment rates to offset the cost to CMS resulting from the additional admissions.
While the payment reduction may no longer be a factor if the proposed rule is finalized in August, the Quality Improvement Organizations (QIO) and Recovery Auditors that began performing status reviews for short-stay inpatient claims in January 2016 are still in place. Providers that have exhibited (1) persistent noncompliance with Medicare payment policies, (2) high denial rates, and (3) failure to adhere to the Two-Midnight Rule after educational intervention from the QIO will be referred to the Recovery Audit Contractors for review. Currently, two QIOs are responsible for status-focused reviews, and both state they do not use specific criteria alone to determine appropriateness of inpatient status. Consideration should be given to the following:
- Are patients appropriately classified as inpatient or observation?
- Do you have adequate medical record documentation?
- Does a patient meet the “rare and unusual” exception policy?
PYA’s compliance team can assist you in evaluating how well your organization is complying with the Two-Midnight Rule standard and identifying key risk areas. For more information, contact one of our author executives below at (800) 270-9629.
