Hospitalists: Two-midnight rule has negative impact on patient care, finances

Add hospitalists to the growing list of medical professionals who are concerned about the federal government requirements for short inpatient stays.

In a study released this week by the Society for Hospital Medicine, researchers say that a lack of understanding of the two-midnight rule has a negative impact on patient care and patient finances. The hospitalists argue that the rule disrupts their workflow, damages the physician-patient relationship and impacts their clinical decisions.

The study further emphasizes the problems that clinicians complained about this week during a Senate hearing on the effects of Medicare observation status on seniors. Marna Borgstrom, president and CEO of Yale-New Haven Health System in Connecticut, testified that the rule "disregards physicians' clinical judgment and exacerbates the existing challenges that hospitals face when having to explain to beneficiaries a policy that causes beneficiary confusion."

In order to qualify for Medicare reimbursement under inpatient rates, the two-midnight rule requires that physicians deem the patient's condition as serious enough to require at least two overnight stays. Patients who aren't formally admitted may remain under outpatient or observation status--an action that may leave patients with high out-of-pocket expenses. The federal government currently prohibits RACs from conducting hospital patient status reviews on claims with dates of admission Oct. 1, 2013 through March 31, 2015, However, MACs may review a small set of claims from that time period and can deny them if they don't meet the two-midnight threshold.

Hospitalists urge a short-term solution involving more emphasis on provider and patient education. Patients especially need to understand the difference between admission as an inpatient and observation status and how it impacts their financial responsibilities. They also want the Centers for Medicare & Medicaid Services (CMS) to change skilled nursing facility care coverage rules as well as reform the Medicare Recovery Audit Contractor program.

Over the long-term, hospitalists want CMS to eliminate observation status and replace it with a program that includes a low-acuity modifier that accounts for patients whose inpatient visits are brief and require fewer or less-intensive hospital resources. They'd also like to see a Medicare payment system with a budget neutral formula that accounts for any changes in patient care.

In response to complaints from clinicians about the rule, lawmakers have introduced two pieces of legislation: the Improving Access to Medicare Coverage Act of 2013, which would count every patient day spent in observation status toward Medicare's required inpatient stay, and the Notice of Observation Treatment and Implications for Care Eligibility Act of 2014, which would require hospitals to clearly notify patients who are under observations status longer than 24 hours.

To learn more:
- here's the report (.pdf)

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