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Clarifying the “Two-Midnight Rule” and Part A Payments Re: Inpatient Care

In August, the Centers for Medicare and Medicaid Services (“CMS”) announced a final rule regarding the prospective payment for acute care and long-term care hospital inpatient services for fiscal year 2014. This rule becomes effective on October 1, 2013.

This final rule provides clarification to hospitals and physicians for determining when a patient should be designated as an inpatient. Physicians often hesitate to order an inpatient admission stay for fear of denial of the costly inpatient reimbursement claim. When a Medicare review contractor denies a Medicare Part A inpatient admission, the hospital loses a significant amount of reimbursement due to Medicare Part B only covering a small proportion of ancillary services provided during inpatient admission.

If, on the other hand, a patient is designated as an outpatient from the beginning of his/her episode of care, Part B covers all of the services. However, a hospital cannot retroactively change a patient’s status as inpatient to outpatient. Thus, hospitals may benefit financially from treating admitted patients as outpatients under extended observation.

Under the final rule, CMS specified the circumstances under which an inpatient admission is appropriate and reimbursable under Medicare Part A. An inpatient admission is reimbursable under the following conditions:

  • The patient is formally admitted to the hospital pursuant to an order for inpatient admission by a physician or other qualified practitioner.

  • The admission order is in the medical record and is supported by the physician’s admission and progress notes; and,

  • The physician certifies that the services are required on an inpatient basis and includes the following in the medical record:

    • An order for inpatient admission;

    • A documented reason for the inpatient hospitalization for either inpatient medical treatment or a diagnostic study, or special or unusual services for cost outlier cases; and,

    • A statement that inpatient hospital services were provided in accordance with the admission order.

Further, the final rule clarifies that if a physician admits a Medicare beneficiary as an inpatient with an expectation that the beneficiary will require care that “crosses two midnights,” Medicare Part A payment is “generally appropriate.” However, if a physician expects the patient to require hospital care for less than two midnights, Medicare Part A payment is generally inappropriate. For a continued discussion about this final rule - click here.

© 2020 by McBrayer, McGinnis, Leslie & Kirkland, PLLC. All rights reserved.National Law Review, Volume III, Number 253


About this Author

Emily M. Hord, Health Care Attorney, McBrayer Law Firm

Emily M. Hord is an Associate of McBrayer, McGinnis, Leslie & Kirkland, PLLC. Ms. Hord concentrates her practice in healthcare law and is located in the firm’s Lexington office. Ms. Hord has experience in a variety of health law issues. She has represented hospitals and healthcare networks, physicians and other medical professionals, nursing homes, and private physician practices. She provides services in the following areas: regulatory and statutory compliance, Certificate of Need and licensing, professional license defense, employment contracts for medical professionals, HIPAA...