CMS proposed inpatient payment rule rolls back two-midnight rule cuts

The federal government will no longer enforce inpatient payment cuts under the controversial two-midnight rule, according to the proposed rule released Monday. 

Instead of continuing plans for a 2 percent cut in Medicare reimbursement, in the 2017 Medicare Inpatient Prospective Payment System proposed rule, the Centers for Medicare & Medicaid Services (CMS) plans a temporary increase of  0.6 percent payment in fiscal 2017 to offset the estimated cost of the two-midnight rule policy. 

Earlier this year, more than 50 healthcare providers sued CMS over these cuts, aimed at offsetting increased hospital revenue due to more inpatient stays. The lawsuit argued the agency violated the Administrative Procedure Act by giving hospitals insufficient time to comment on the proposals, FierceHealthFinance previously reported. While CMS released its methodology that led to the proposed cuts last December, the American Hospital Association (AHA) argued this February that an alternate calculation method shows no need for such cuts.

CMS asserts the proposed cuts "were reasonable at the time they were made" and that the agency "does not generally believe it is appropriate in a prospective payment system to retrospectively adjust rates," the agency said in a statement. However, it said due to unique circumstances, it is willing to permanently remove the adjustment and also its effects for FYs 2014, 2015, and 2016 by adjusting the FY 2017 payment rates.

The  proposed rule, which will be available for comment in the Federal Register through June 16, would increase payments for about 3,330 general acute care hospitals by 0.9 percent, according to CMS.

It also includes continued penalties for excess preventable hospital readmissions, as well as ongoing 1 percent financial penalties for hospitals in the bottom 25 percent for hospital-acquired conditions.

AHA President and CEO Rick Pollack praised the reversal of the two-midnight rule payment cuts in a statement Monday, but expressed the association's disappointment that the proposed rule contains other payment cuts "significantly larger than Congress indicated and the hospital field anticipated."

To learn more:
- download the proposed rule (.pdf)
- here's the CMS fact sheet
- read the AHA statement