Health Information Management

CMS gives providers a chance to comment on 2-midnight rule payment methodology

APCs Insider, December 11, 2015

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By Steven Andrews
Small tweaks to the 2-midnight rule in the 2016 OPPS final rule should help providers, but a lengthy court battle related to the rule could end up making a bad situation worse.  
A suit brought by the American Hospital Association (AHA) and other hospital associations and organizations against CMS recently resulted in the court ruling that CMS had to provide information on how it calculated a negative 0.2% reduction in inpatient payment rates as a result of implementing the 2-midnight rule. The court also said that providers should have an opportunity to comment on the calculation.
In early December, CMS released a notice with comment period to meet the court’s requirement, but providers might not be pleased with forcing the agency’s hand. CMS notes that when originally estimating the number of outpatient cases that should shift to inpatient as a result of the rule, it looked at 2011 claims containing HCPCS codes G0378 (hospital observation service, per hour) and G0379 (direct admission of patient for hospital observation care).
Using this data, CMS identified approximately 350,000 observation stays that lasted two or more midnights. The agency combined that with approximately 50,000 claims that contained major procedures based on APCs that resulted in stays lasting more than two midnights. CMS also analyzed data from the inpatient side by looking at inpatient claims containing surgical MS-DRGs with stays that lasted less than two midnights and found approximately 360,000.
The agency used this data to determine a net increase of 40,000 inpatient discharges as a result of the rule to calculate $220 million in increased expenditures on the inpatient side, leading to the reduction.
However, CMS now says that in light of new regulations and by using different metrics to estimate the shift, as many as 570,000 cases could move to the inpatient side, resulting in an even larger payment shift.


Providers are encouraged to comment on the rule in order to let CMS know what the best method for estimating these cases would be. This could have a large impact on payments, so if you’re interested in commenting, head to and make a submission by February 2, 2016. 

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