Hos­pi­tals hope for re­lief from Medi­care’s two-mid­night pur­ga­tory

Modern Healthcare - - NEWS - By Bob Her­man

Lots of peo­ple have ideas about how to change Medi­care’s un­pop­u­lar two-mid­night rule for short pa­tient stays. But based on the public com­ments the CMS so­licited in May, there’s no con­sen­sus on what a new pol­icy should look like.

Ex­perts mostly agree the two-mid­night rule is un­likely to be scrapped, but it may take a new form with more flex­i­bil­ity. Ted Doolit­tle, who worked as deputy direc­tor of the CMS’ fraud and abuse unit from 2011 to early 2014, said the agency has to find a happy medium from its cur­rent all-ornoth­ing pay­ment ap­proach. “Let’s turn it to a ski slope in­stead of a cliff,” said Doolit­tle, who now works as an at­tor­ney for LeClairRyan.

The two-mid­night rule was part of Medi­care’s fis­cal 2014 in­pa­tient rule. It at­tempts to de­fine a med­i­cally nec­es­sary Medi­care in­pa­tient ad­mis­sion. It says when an ad­mit­ting physi­cian rea­son­ably ex­pects a pa­tient will need a hos­pi­tal stay that spans at least two mid­nights, the hos­pi­tal is el­i­gi­ble for Part A re­im­burse­ment. But if a pa­tient stays in a hos­pi­tal for fewer than two nights, hos­pi­tals should list the en­counter as ob­ser­va­tion and bill Medi­care for the lower Part B pay­ment, which also im­poses higher cost­shar­ing on pa­tients. An­other is­sue is that pa­tients un­der ob­ser­va­tion care are not el­i­gi­ble for Medi­care-cov­ered nurs­ing and re­ha­bil­i­ta­tion ser­vices, which re­quire three nights as a hos­pi­tal in­pa­tient.

In light of the rule’s un­pop­u­lar­ity, the CMS asked for public com­ment on how to im­prove pay­ments for short stays, but there was no con­sen­sus on a new pol­icy, CMS spokesman Alper Oz­i­nal said.

One pro­posed so­lu­tion in­volves re­mov­ing the cri­te­ria that pa­tients spend two con­sec­u­tive mid­nights in the hos­pi­tal. The Medi­care Pay­ment Ad­vi­sory Com­mis­sion said that re­quire­ment cre­ates a “tim­ing in­equity, whereby cases are paid dif­fer­ently de­pend­ing upon whether they were ad­mit­ted just be­fore or just af­ter mid­night.”

In­stead, ob­servers say the CMS could es­tab­lish a slid­ing pay­ment scale that pri­or­i­tizes spe­cific hours of care and ser­vices pro­vided. For ex­am­ple, if a pa­tient is ad­mit­ted and stays in the hos­pi­tal for 32 hours, the hos­pi­tal could break down what ser­vices were pro­vided in four eight-hour pe­ri­ods. If the most ex­pen­sive care was de­liv­ered in the first 16 hours, Medi­care could pay hos­pi­tals in­pa­tient rates for that time­frame and lower rates for the lat­ter half of the stay.

An hours-based claims sys­tem could re­duce the large gap in re­im­burse­ment and en­cour­age doc­tors to make pa­tient de­ci­sions based on their best clin­i­cal judg­ment rather than un­re­li­able time pre­dic­tions, ad­vo­cates say. Un­der the cur­rent rule, “the in­cen­tives are to rely less on your med­i­cal train­ing and more on your cre­ative writ­ing train­ing to see if you can jus­tify that sec­ond mid­night,” Doolit­tle said.

Other short-stay sug­ges­tions in­clude pay­ing a per-diem rate that is lower than the full in­pa­tient amount. This strat­egy is used to­day for hos­pi­tals that trans­fer in­pa­tients with a short length of stay to an­other hos­pi­tal.

One of the big­gest is­sues is mak­ing sure any new short-stay pay­ment method­ol­ogy is bud­get-neu­tral for the gov­ern­ment. If the CMS were to cre­ate new pay­ment bun­dles for short stays, money to cover them would have to come from ex­ist­ing Medi­care dol­lars.

Priya Bathija, a health pol­icy direc­tor at the Amer­i­can Hos­pi­tal As­so­ci­a­tion, said the main theme from the two-mid­night public com­ments is that if hos­pi­tals can’t get paid in­pa­tient rates for short stays, pay­ments should at least not drop to the much lower out­pa­tient rates. In ad­di­tion, re­spon­dents said ob­ser­va­tion pa­tients should be deemed in­pa­tients for the pur­pose of pro­tect­ing them from higher Part B coin­sur­ance and the costs of re­hab care.

Al­though Medi­care’s re­cov­ery au­dit con­trac­tors can’t re­view hos­pi­tal claims for com­pli­ance with the rule un­til April 2015, the pol­icy ap­pears to be chang­ing be­hav­iors. Com­mu­nity Health Sys­tems, Franklin, Tenn., said it recorded 5,000 fewer ad­mis­sions in its first quar­ter this year be­cause of the two-mid­night rule. Min­neapolis­based Al­lina Health and the Cleve­land Clinic also said in their sec­ond-quar­ter fi­nan­cial state­ments that the two-mid­night rule was par­tially re­spon­si­ble for lower ad­mis­sions and in­creased ob­ser­va­tions.

Cur­rently, Medi­care ad­min­is­tra­tive con­trac­tors are sup­posed to coach hos­pi­tals on how to im­prove short­stay claims, in what the CMS calls a “probe and ed­u­cate” process. The agency will eval­u­ate that coach­ing process this fall be­fore it is­sues new guid­ance on the rule. MedPAC is also ex­pected to of­fer al­ter­na­tives to the two-mid­night pol­icy this fall.

Al­though changes are ex­pected to fa­vor hos­pi­tals and Medi­care pa­tients, no timetable has been set for any de­fin­i­tive so­lu­tion. “I just don’t see that hap­pen­ing all that quickly,” said Regan Tanker­s­ley, a health­care at­tor­ney with Hall, Ren­der, Kil­lian, Heath & Lyman.

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