Health Information Management

Court gives providers a chance to comment on 2-midnight rule payment reduction

HIM-HIPAA Insider, September 28, 2015

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By Steven Andrews

CMS proposed relatively small tweaks to its controversial 2-midnight rule in the 2016 OPPS proposed rule, but even bigger changes could be coming due to a court ruling involving the agency.

The American Hospital Association (AHA), along with four hospital associations and four hospital organizations, brought a lawsuit against CMS arguing that the agency did not have the authority to impose an associated 0.2% payment reduction to inpatient payments. The lawsuit also accused CMS of not following proper procedures for instituting the payment cut, providing detail to justify the cut, or allowing providers sufficient time to comment.

The suit, brought soon after the proposed rule was published, is finally heading toward some sort of resolution. A federal judge ruled September 22 that CMS violated the Administrative Procedures Act and must provide a proper rationale for the cut and allow providers to submit comments on the issue.

The court ordered CMS and all other parties involved in the suit to propose a timetable for reissuing the rule and allowing time for comments. All parties must comply by October 1 and if CMS does not release a timetable, the payment cut could be overturned.

CMS’ rationale for the 0.2% payment reduction was that the 2-midnight rule would result in an influx of outpatient cases to the inpatient setting, leading to increased costs to the Medicare program. The agency believes it must offset these costs by applying a payment reduction.

The ruling requires CMS to provide additional information to justify the 0.2% reduction so that the public has a meaningful opportunity to submit comments. CMS has been listening to provider comments on the rule since issuing it, as evidenced by its numerous tweaks and frequent extensions of the probe and educate timeline. This delay gives providers another chance to submit meaningful comments to the agency about the rule and its effectiveness.

The court also rejected an argument put forth by the government that medical MS-DRG cases would be unaffected by the 2-midnight rule and could be excluded from the agency’s analysis in support of the need for the offset.

However, the court did reject arguments from the AHA and other providers that CMS does not have the authority to impose an across-the-board cut to inpatient services.

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