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  • Washington Highlights

    OIG Issues Report on Vulnerabilities of Two-Midnight Rule

    Len Marquez, Senior Director, Government Relations

    The Department of Health and Human Services (HHS) Office of the Inspector General (OIG) Dec. 16 issued a report on the issues following the Center for Medicare and Medicaid Service’s (CMS)’s implementation of the Two-Midnight rule policy.

    The Two-Midnight rule states that Medicare inpatient payment is generally appropriate if physicians expect beneficiaries’ care to last at least two midnights.

    The OIG found that hospitals are billing for “many” short inpatient stays that are potentially inappropriate under the policy. Additionally, the report found that Medicare pays more for “some short inpatient stays than for short outpatient stays while hospitals continue to bill for a large number of outpatient stays.” The report also found an increased number of beneficiaries receiving care on “an outpatient basis pay more and have limited access to skilled nursing facility (SNF) services than they would as inpatients.” The OIG noted that “hospitals continue to vary in how they utilize inpatient and outpatient stays.”

    The OIG recommended that CMS improve its oversight of hospital billing under the two-midnight rule and increasing protections for beneficiaries by:

    • “Conducting routine reviews of hospitals’ compliance with the Two-Midnight rule with an emphasis on those providers that have high or increasing numbers of short hospital inpatient stays, and short inpatient stays;

    • Identifying and targeting short inpatient stays are potentially inappropriate;

    • Analyzing the potential impact of counting time spent in a hospital as an outpatient toward the three-night requirement for Medicare coverage of SNF services; and

    • Studying how to better protect beneficiaries who receive hospital care on an outpatient basis from facing greater out-of-pocket costs than they would have as inpatients.”

    CMS agreed with all four of OIG’s recommendations.