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House Ways and Means Committee Holds Hearing on CMS’s Two-Midnight Rule

May 23, 2014—The House Ways and Means Health Subcommittee May 20 held a hearing covering current hospital issues in the Medicare program including the Center for Medicare and Medicaid Services (CMS)’s “two-midnights” policy, which establishes new rules regarding how short hospital stays will be paid under Medicare.

In a statement  submitted for the record, AAMC President and CEO Darrell G. Kirch, M.D., expressed appreciation for the extension of the “two-midnights” enforcement delay through March 2015 but highlighted several ongoing concerns. The statement describes, “While the AAMC values this modest relief from RAC audits directed at these stays, the underlying two-midnights policy is still very much in effect and is negatively affecting providers and patients every day, as hospitals are still expected to be in full compliance with the flawed rule.”

The statement also focuses on the unique and challenging patient populations cared for at major teaching hospitals saying, “In academic medical centers ... [s]eemingly simple presenting conditions, such as chest pain, are often not so simple in patients who suffer from multiple comorbidities. Though some chest pain cases may be appropriately handled in observation units, very sick patients— with underlying cardiac, lung, and other diseases— require more intensive monitoring and treatment, especially because the risk of fatality is high if a heart attack does occur. In these cases, inpatient care is medically necessary – even if the patient is deemed fit to return home without further diagnosis after less than ‘two midnights’ of careful monitoring.”

Subcommittee Chair Kevin Brady (R-Texas) opened the hearing acknowledging his concerns with the “two-midnights” policy saying, “Every dollar hospitals spend on inaccurate Medicare audits and appeals are dollars lost that should have been used to care for seniors. We are here to discuss the problems facing hospitals today, but also to find solutions that bring sense to our Medicare program and improve care for America’s seniors. ... This is a bipartisan concern shared by many different stakeholders, the Medicare program and lawmakers on this Committee.”

Ranking Member Jim McDermott, M.D., (D-Wash.) highlighted the increased financial burden hospitals are facing stating,In recent years hospitals have been asked to do more with less. We have slowed the rate of growth of the payments and asked them to work harder to improve quality, and decrease unnecessary readmissions. Many of these activities support the noble goal of improving care for patients that they serve, such as the Accountable Care Organizations and the patients at medical home, while reducing long- term costs, but they require upfront capital investments. Hospitals are employing people and providing good and stable benefits for their employees, something other sectors should emulate. Hospitals are doing all of this in the face of a number of regulations and justifiable scrutiny. The administration recognizes the sacrifice this sector has put forward.”

The first panel of witnesses included Sean Cavanaugh, Deputy Administrator and Director to the Center for Medicare, CMS, and Jodi Nudelman, Deputy Inspector General of Fraud and Services from the HHS Office of Inspector General. The witnesses highlighted the confusion surrounding the rule, feedback heard from providers, and possible alternatives to better define the rule.

In response to questions of CMS’s commitment to work with providers, Mr. Cavanaugh replied, “I think it was a big part of our attitude going into this year, as you recall we suspended the recovery auditors looking at these cases for these purposes because we wanted to work with providers and we wanted to do it. And instances where hospitals are having trouble understanding or implementing the new rule, the RACs are working with them to educate them.”

Rep. Joe Crowley (D-N.Y.) shared similar concerns as the AAMC regarding the impact of the two-midnights policy on academic medical centers stating, “These hospitals and others across the country are struggling with the implementation of the two-midnight rule. While I appreciate CMS’ efforts to try and clarify when a patient should be admitted as inpatient, I have serious concerns about the overall policy.”

Rep. Crowley further cited legislation that he has cosponsored with Rep. Jim Gerlach (R-Pa.), the Two-Midnight Rule Delay Act of 2013 (H.R. 3698), that would delay the enforcement of the policy so that CMS may develop a new payment methodology for short inpatient stays.

A second panel included witness testimony from health care providers, patient advocates, and Recovery Audit Contractors. Amy Deutschendorf, M.S., R.N., ACNS-BC, senior director, Clinical Resource Management, Johns Hopkins Hospital and Health System, an AAMC member, urged members to recognize harmful implications the rule would have on academic medical centers and the communities they serve.

She testified, “Hospitals like Johns Hopkins continue to provide the same essential community services – serving the uninsured, maintaining trauma centers and burn units, conducting research and training the next generation of physicians – even if CMS arbitrarily decides that some hospital care should no longer be reimbursed as inpatient care.”

Ms. Deutschendorf went on to explain the impact of the “two midnights” rule on major teaching hospitals’ core missions saying, “Yet when CMS’s two-midnight policy shifts payment for necessary hospital care into the outpatient system, these hospitals experience decreases in their Direct Graduate Medical Education (DGME) payments and lose their payments for indirect medical education (IME) and disproportionate share (DSH) payments. These payments were intended to support the delivery of care to vulnerable patients and those who may require the services unique to teaching hospitals. We cannot afford for these social missions to be jeopardized at a time when medical education for new practitioners is critical to meet the demand for the infusion of new health care consumers under the Affordable Care Act.”


Len Marquez
Director, Government Relations
Telephone: 202-862-6281

Courtney Summers
Senior Legislative Analyst
Telephone: 202-862-6042


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Washington Highlights, a weekly electronic newsletter, features brief updates on the latest legislative and regulatory activities affecting medical schools and teaching hospitals.

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Jason Kleinman
Sr. Legislative Analyst, Govt. Relations
Telephone: 202-903-0806