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7 Things to Know About the Two-Midnight Rule

The Two-Midnight Rule is a Medicare policy determining when inpatient admissions are appropriate for payment under Medicare Part A. This rule is crucial for hospitals, physicians, and healthcare administrators to understand, as it significantly impacts hospital payment and beneficiary cost-sharing. 

Understanding and complying with the Two-Midnight Rule is essential for healthcare providers to ensure appropriate Medicare billing and to avoid potential financial penalties.  

Two-midnight rule

Specific actions are needed, especially due to recent updates. For example, as Day Egusquiza, President and Founder of AR Systems Inc. & Patient Financial Navigator Foundation, Inc., told SAI360 in a webinar, Medicare Advantage organizations must comply with amended 422.566 (d) as in Section III.G of the Final Rule. This mandates denial based on a medical necessity determination (subjective) which has to be physician-reviewed or reviewed by an appropriate health care professional who has appropriate expertise.

Particularly regarding Medicare Advantage plans, companies must stay informed and adapt their practices accordingly. “Relook at every line of service when addressing the Medicare Advantage patient,” Day emphasized. 

On that note, below, we offer information via CMS.gov to help organizations plan and prepare. 

What Is the Two-Midnight Rule and Its Purpose? 

The Two-Midnight Rule establishes when an inpatient admission is necessary and payable under Medicare Part A. It generally applies to cases where a hospital stay crossing two midnights is expected, based on the admitting practitioner’s judgment and medical record support. 

How Does the Rule Affect Inpatient vs. Outpatient Hospital Services? 

This rule impacts the billing of Medicare for hospital services, differentiating between inpatient stays (billed under IPPS in Medicare Part A) and outpatient services (billed under OPPS in Medicare Part B). 

What Are the Changes in Admissions Flexibility and Enforcement? 

The rule allows more flexibility in determining when admissions not meeting the benchmark are payable under Part A. Enforcement has shifted from MACs to QIOs, affecting the review process of short inpatient hospital stays. 

What Should Companies Know About Documentation and Medical Necessity? 

Hospitals must document properly to support the medical necessity of inpatient admissions under this rule, justifying the expected length of stay and the reasons for inpatient care. 

How Should Healthcare Providers Approach Training and Compliance? 

Healthcare providers need training on the Two-Midnight Rule’s nuances, including recent updates, to understand its implications on billing and Medicare audits. 

What Does the Shift in Monitoring and Audits Entail? 

Hospitals should prepare for potential audits by Medicare Advantage plans and other entities, necessitating vigilance in documenting the medical necessity of admissions. 

What Is the Impact on Patient Care and Billing? 

The Two-Midnight Rule affects payment structures and patient care decisions, requiring companies to balance clinical decisions with billing considerations. 

More Resources from SAI360 

Click here to watch our webinar with health care reimbursement and operations expert, Day Egusquiza: Two-Midnight Rule Nightmares 

Let’s Start a Conversation 

Click here to schedule a virtual coffee with one of our team members and learn more about how our GRC solution can help your organization thrive. 

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