CMS Not to Impose Inpatient Payment Cuts to Hospitals Under the 2-Midnight Rule

The CMS will discontinue imposing an inpatient payment cut to hospitals under the two-midnight rule following ongoing industry criticism and a legal challenge. It will provide a onetime bump to hospitals to offset the cuts. The agency imposed the cut because it estimated the two midnight policy would increase Medicare spending by approximately $220 million due to an expected increase in inpatient admissions.

Hospitals may also see a short lived improvement of 0.6% in FY2017. That may make up for the 0.2% discount to the charges of the final three years. While the initial furor that followed the passage of the “two-midnight” admission standard may have subsided, short stays continue to occupy a significant mindshare for policy makers. Despite much discussion, no concrete alternatives have been put forward.

Hospitals had challenged a 0.2% discount for inpatient companies meant to offset estimated prices to Medicare related to the 2-midnight rule. The rule directs CMS cost contractors to presume hospital stays are appropriately billed as inpatient admissions rather than outpatient remark visits in the event that they span two midnights.

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