Health Law News From Arnold & Porter

Health Law News From Arnold & Porter

March 10, 2014
2 min read

Implement and educate: CMS continues to clarify two-midnight rule

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From international law firm Arnold & Porter LLP comes timely views on current regulatory and legislative topics that weigh on the minds of today’s physicians and health care executives.

In the final payment rule for fiscal year 2014, CMS codified a “Two-Midnight Rule” that applies to surgical procedures, diagnostic tests, and other treatments provided in acute care inpatient hospital facilities, long-term care hospitals, critical access hospitals, and inpatient psychiatric facilities.

This rule establishes both a benchmark for physicians to determine when an inpatient admission will likely be viewed as appropriate for Part A payment, and a presumption for medical review contractors to use in conducting post-payment audits. For the benchmark, the rule specifies that Part A payment is generally appropriate if, at the time of an inpatient admission, the physician expects that the stay will cross two midnights. The rule also specifies that medical review contractors should presume that claims for inpatient stays lasting longer than two midnights are generally appropriate for Part A payment.


Ted Lotchin

Although the two-midnight rule is effective for inpatient claims submitted on or after Oct. 1, 2013, CMS has recently clarified how its medical review contractors should operationalize the presumption during “patient status reviews.” Specifically, CMS has directed its Medicare administrative contractors (MACs) and recovery audit contractors (RACs) to no longer review inpatient claims spanning more than two midnights. CMS also has delayed RAC review of inpatient stays lasting less than two midnights through Sept. 30, 2014.

Physician order and certification requirement

Perhaps of most interest for physicians and other practitioners, the two-midnight rule codifies a number of requirements for the documentation needed to support the medical necessity of an inpatient admission. CMS has stated in its previous guidance to hospitals that the order to admit as an inpatient must be properly documented in the medical record in order for a facility to receive Part A payment for the admission. CMS’ most recent guidance now clarifies that the order must specify the admitting practitioner’s recommendation to admit “to inpatient,” “as an inpatient,” “for inpatient services,” or use similar language. The agency also cautions against using language that “may have specific meaning for individuals that work in a hospital (eg, “admit to 7W”) but may not be commonly understood by others.”


In addition to the requirement for an admission order, Medicare only pays for inpatient hospital services if a physician certifies that the services were reasonable and necessary and provides certain key information about the admission (ie, reasons for treatment; estimated time in hospital). According to CMS, the certification must be signed by the physician responsible for the case or by another physician who has knowledge of the case, such as the attending physician, a physician on call for the attending physician, a surgeon responsible for a major surgical procedure, or a surgeon on call for such a surgeon.

The “probe-and-educate” program

For the moment, CMS is reviewing compliance with these documentation requirements through the “probe-and-educate” program. Under this program, MACs are conducting pre-payment reviews of a sample of inpatient claims lasting less than two midnights and using the results to educate providers. MACs also will deny claims that do not comply with the two-midnight rule, and the early results from this program have identified a number of common reasons for such denials: imprecise language in admission order (eg, “admit to observation”); beneficiaries presenting for a procedure in which treatment and discharge typically occur in less than two midnights; short stays for medical conditions; and disagreement between pre-printed text on a physician order form and admitting physician’s plan of care.

Ted Lotchin, JD, MPH, can be reached at Arnold & Porter LLP, 555 12th St. NW, Washington, DC 20004-1206; 202-942-5250; email: