Gov't could pay hospitals extra $5B due to two-midnight rule delay


The 18-month enforcement delay of the two-midnight rule could cost the government $5 billion, a representative from Health Data Insights, an independent Medicare auditing company, told the House Committee on Ways and Means Subcommittee on Health during a hearing on Tuesday.

Under the controversial rule, Medicare will not reimburse hospitals at inpatient rates for treatment that does not span two midnights. Health Data Insights Medical Director Ellen Evans, M.D., said postponing the enforcement meant hospital claims for short patient stays through March 2015 will "never be subject to review."

Moody's Investors Service projects the rule may cost hospitals up to $4,000 in revenue per case, FierceHealthFinance previously reported. However, the American Hospital Association claims the $5 billion figure  is inflated, according to Kaiser Health News.

Centers for Medicare & Medicaid Services Deputy Administrator Sean Cavanaugh defended the rule, stating the agency will seek public input on how to define short hospital stays and how to design a more appropriate Medicare payment for admitted patients. Cavanagh cited anecdotal reports of hospitals keeping patients in observation to minimize their risk of losing Medicare payments if audited, according to his testimony.

"There are misaligned incentives in CMS' inpatient and outpatient payment system," Rep. Kevin Brady (R-Tex.), chairman of the Subcommittee on Health, said in his opening statement at the hearing. "But, hospitals are not doing anything wrong. Hospitals are simply responding to the incentives. No matter if a service is inpatient or outpatient, a hospital still uses the same equipment and the same medical staff to deliver care."

Although the rule aimed to reduce the number of patients in observation, it actually created more of these visits, Amy Deutschendorf, senior director of clinical resource management at the Johns Hopkins Medical System in Baltimore, told the committee. "Since Oct. 1, 2013, we have seen a three-fold increase in the number of patients our physicians cautiously predicted would only stay only one midnight, and thus began as outpatients, but later had to admit for longer stays, demonstrating the complexity of anticipating length of stay based on a patient's initial presenting symptoms," she said.

To learn more:
- check out Brady's opening remarks
- here's a link to additional testimony from the hearing 
- here's the KHN article