MedPAC suggests CMS scrap two-midnight rule

The Medicare Payment Advisory Commission (MedPAC) recommends that the Centers for Medicare & Medicaid Services withdraw its proposed two-midnight rule, AHA News Now has reported.

CMS introduced the two-midnight rule after the hospital sector complained about the lack of clarity over short-stay inpatient admissions. Such patients are often thought to be better treated in an outpatient setting, a change that dramatically reduces the costs for the Medicare program and cuts reimbursement for providers.

After several delays, CMS plans to enforce the two-midnight rule at the end of this month. But hospitals have urged that it not go into effect until other disputes are resolved.

As an alternative to the rule, MedPAC recommends that recovery audit contractors (RACs) instead focus on hospitals that have the most short-stay admissions, and base the contingency fees paid to RACs on the rate that their payment clawbacks are overturned on appeal.

However, a recent letter to MedPAC chairman Glenn Hackbarth by American Hospital Association Senior Vice President Linda Fishman aired concerns about changing the focus of RACs. 

 "We are deeply concerned about the concept of applying penalties based on an arbitrary threshold of what constitutes an 'excess' number of short stays," Fishman wrote. "It is unclear how an 'excess' number of short stays would be determined. Setting an arbitrary threshold clouds the role of physician judgment, flies in the face of the Medicare program's longstanding policy that medical necessity drives coverage decisions, and ignores legitimate variation in practice."

RACs and hospitals have been tangling over the former's business practices since they began examining Medicare payment claims a half-dozen years ago. Hospitals often claim that RACs unfairly claw back their payments and are motivated to do so by the contigency payments they receive. Hospitals now appeal about half of all RAC clawbacks, causing the appeals system to become so congested that CMS has offered to settle disputed short-stay claims for 68 cents on the dollar.

To learn more:
- read the AHA News Now article 
- check out Fishman's letter (.pdf)

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