Corporate Compliance

Note from the instructor: AHA files two lawsuits related to the 2-midnight rule; Still a rule in turmoil

Medicare Insider, May 6, 2014

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This week’s note from the instructor is written by Kimberly Hoy Baker, JD, regulatory specialist for HCPro.
Recently, the American Hospital Association (AHA), along with four hospitals/health systems and four hospital associations from New York City, New York State, New Jersey, and Pennsylvania, filed two lawsuits against the relatively controversial 2-midnight rule and some of its accompanying provisions. All this while Congress has recently extended the probe and educate period for the provision, and is considering other changes to the rule.
The first AHA lawsuit takes aim at the 2-midnight rule itself as well as the order and certification requirement and the Part B inpatient billing provisions. The complaint asks for the 2-midnight rule to be declared arbitrary and capricious and set aside, presumably returning to the prior guidance on inpatient admissions.
The complaint also asks that the physician order requirement be set aside as invalid, arbitrary, and capricious, and contrary to the Medicare Act. While the complaint seems to discuss the new certification requirements, which are more onerous for hospitals than the order requirement, the suit only appears to ask for the order requirement to be set aside.
Finally, they ask that the one-year timely filing requirement in the new Part B inpatient billing regulations be set aside as well. As the lawsuit notes, the one-year timely filing limit is difficult, if not impossible, to meet for audits by external auditors. Regardless of how the lawsuit proceeds, however, hospitals can take advantage of the new Part B inpatient billing rules by doing their own internal audits any time up to a year after the patient’s discharge and still get full Part B payment. This represents a big transition from requiring concurrent audits in order to get limited Part B inpatient payment and a big revenue opportunity for hospitals that they can take advantage of now.
The second lawsuit separately challenges the 0.2% cut in inpatient payments made by CMS in order to maintain the budget neutrality of the new inpatient status provisions in light of the additional inpatient admissions they anticipated. The complaint argues that the payment cut did not comply with the notice and comment period as required and violates technical requirements of the Medicare Act.
Meanwhile, the Protecting Access to Medicare Act of 2014 was recently passed, which extended the probe and educate period for MACs to review hospitals’ application of the 2-midnight rule until March 31, 2015. It also prohibited Recovery Auditors from auditing claims until that date. I recently wrote a white paper on this new law and the audits.
In addition to this legislation, there are also proposed laws in both the Senate and House that would restructure the 2-midnight rule or prevent its application, which can be accessed by searching “2 Midnight” at
Hospitals must continue their compliance efforts with all the new rules adopted for FY2014 because for now there is no change in their application and probe and educate audits continue at the MAC level. CMS may continue to issue guidance on their application informally on their website. Please note the CMS' Inpatient Review site has moved, so if you are monitoring that site for new guidance, please link to the new site here.
But hospitals must also be cognizant of all the potential changes to the rules that could be coming up and be prepared to be flexible to accommodate any new rules. We will make every effort to monitor these developments closely and keep you updated in the Medicare Insider. 

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