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The new CMS “Two-Midnight Rule,” which is intended to provide greater clarity regarding when inpatient hospital admissions are generally appropriate for Medicare Part A payment, goes into effect today. However, in order to address widespread concern among hospitals and doctors about the new rule, CMS officials announced last Thursday that government recovery auditors will delay scrutiny of short inpatient stays for 90 days while providers get acclimated to the new policy. This CMS policy, which was issued as a proposed rule in March and as a final rule on August 2, is in part a response to hospital complaints that auditors were denying large numbers of claims for inpatient care because the auditors believed the patient could have been considered an outpatient under observation status (Medicare pays less for outpatient services than inpatient care).

In an attempt to clarify billing for inpatient stays, CMS now says that a physician must sign an admitting order, which must be “supported by the physician admission and progress notes, in order for the hospital to be paid for hospital inpatient services under Medicare Part A.” When the physician “expects to keep the patient in the hospital for only a limited period of time that does not cross 2 midnights, the services are generally inappropriate for payment under Medicare Part A, regardless of the hour that the patient came to the hospital or whether the patient used a bed.”

Auditors reviewing claims are instructed to presume that stays lasting two midnights or longer are reasonable and necessary and will qualify for higher payment under Medicare Part A. However, stays lasting less than two midnights will not be presumed to qualify as inpatient stays and instead will be paid under Medicare Part B, which covers outpatient services.