Healthcare News & Insights

Spike in hospital observation stays despite two-midnight rule

Medicare’s controversial two-midnight or “Cinderella” rule, aimed at saving money by reducing the number of hospital observation stays, is doing just the opposite. 179229580

A senior director at John Hopkins Medical System in Baltimore, MD, told a Congressional panel last week that since the Centers for Medicare & Medicaid (CMS) announced the standard last September, the hospital has seen a three-fold increase in the number of outpatients whose doctors later had to admit them for longer stays, Kaiser Health News reported.

Amy Deutschendorf, senior director of clinical resource management testified before the House Committee on Ways and Means Subcommittee on Health that doctors are reluctant to classify patients as inpatients as soon as they present. “The two-midnight policy now requires physicians to abandon their medical assessment of medical necessity when determining the appropriate setting of care and instead imposes a rigid time-based approach,” she said.

Rule would penalize seniors and hospitals

Under the proposed policy, Medicare patients must spend at least two continuous midnights in a hospital to be classified as an inpatient — a status which comes with the highest reimbursement rates. Patients who spend less than two midnights are considered outpatient or under observation, with Medicare only picking up part of the tab.

When asked by Rep. Bill Pascrell (D-NJ) on why the number of Medicare observation patients has increased 88% over the past six years, CMS Deputy Administrator Sean Cavanaugh testified that he was told hospitals are placing patients in observation to minimize their risk of not getting reimbursed.

The two-midnight rule has come under fire by hospitals and senior citizens. CMS has delayed enforcement of the policy through March 2015 after bowing to pressure from healthcare providers and senior citizens who lobbied lawmakers to have the rule overturned.

Medicare beneficiaries who are not admitted to the hospital for three days are not only ineligible for nursing home coverage, but are hit with high co-pays for pharmaceuticals and tests. Pascrell  questioned the CMS chief about the possibility of removing Medicare’s three-day hospitalization requirement for nursing home eligibility.

Cavanaugh testified that federal regulators have used a provision under the Affordable Care Act (ACA) that allows the standard to be waived, but the agency has used it only in experimental payment programs. Cavanaugh continued to defend the policy to lawmakers, saying regulators will seek public input on how to define a short hospital stay and create a more appropriate payment system.

Enforcement delay costing feds $5B

Healthcare Data Insights, an independent Medicare auditing company, told the Congressional panel that delaying enforcement of the two-midnight rule was costing the government over $5 billion because hospital claims for short patient stays will “never be subject to review.” The American Hospital Association said the auditing company’s estimates are highly inflated.

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