CMS Updates the Medicare Benefit Policy Manual to Better Align with the Two-Midnight Rule

It has become customary for the Centers for Medicare & Medicaid Services (CMS) to issue a new rule, regulation, or update to manual guidance on the eve of a holiday weekend.

CMS remained true to form this past holiday season when, on Dec. 22, 2016, it issued Transmittal 232, Change Request 9930, updating Chapter 1, Section 10 of the Medicare Benefit Policy Manual (MBPM) to include language incorporating the two-midnight rule. 

The manual update was effective as of Jan. 1, 2017. Since the two-midnight rule was implemented on Oct. 1, 2013, it begs the question why CMS waited 1,188 days (or three years and three months) prior to updating the Inpatient Hospital Services section of the MBPM. We may never learn why CMS deemed this the year for the change, but prior to Jan. 1, 2017 CMS relied on a deft reinterpretation of the 24-hour benchmark in order to align Chapter 1, Section 10 of the MBPM with two-midnight rule guidance. As CMS stated in CMS-1599-F, “our proposed two-midnight benchmark, which we now finalize, simply modifies our previous guidance to specify that the relevant 24 hours are those encompassed by two midnights.”

Before we unpack some of the changes, let us first begin with a look at the now “old” language, specifically relating to the use of a benchmark in physician decision-making. The sentence reads as follows: “physicians should use a 24-hour period as a benchmark, i.e., they should order admissions for patients who are expected to need hospital care for 24 hours, or more, and treat other patients on an outpatient basis.” 

CMS tweaked that section to incorporate the two-midnight rule by stating that “physicians should use the expectation of the patient to require hospital care that spans at least two midnights period as a benchmark, i.e., they should order admission for patients who are expected to require a hospital stay that crosses two midnights.” CMS continues, and this is an important distinction in the current two-midnight rule setting, “and the medical record supports that reasonable expectation.”

CMS makes clear that a two-midnight expectation and a two-midnight hospital stay alone are insufficient to justify the appropriateness of an inpatient admission paid under Part A. CMS clearly posits that the documentation in the medical record must actually support the reasonableness of the physician’s length-of-stay expectation. The need for clear documentation to support the physician’s expectation and the medical necessity of the inpatient hospital stay is much more than CMS lip service.  Quality Improvement Organizations (QIOs) are specifically denying claims because of the lack of documentation to support the expectation and, when the Recovery Audit Contractors (RACs) are finally fired up again, it is easy to anticipate that they too will deny claims on a similar basis.

Let us also take a moment to focus on what has been removed from the manual language. The dependent clause cited above as part of the old manual language – “and treat other patients on an outpatient basis” – has been removed entirely. Whereas the old guidance sent a strong message that if the benchmark were not met, the patient should be treated as an outpatient, the new guidance does not contain a similar conditional statement. It is apparent that CMS correctly dispensed with this language to allow for inpatient admissions wherein the admitting physician expects a patient to require hospital care for a period of time that does not cross two midnights. Short, less-than-two-midnight hospital stays may be appropriate for payment under Medicare Part A even when the two-midnight benchmark is not met. 

Now that we have taken time to examine some of the manual additions and deletions, let us take some time to focus on what remained the same. It remains unchanged that, according to CMS and Chapter 1, Section 10 of the MBPM, the decision to admit a patient is a complex medical judgment that requires the consideration of a number of factors, including but not limited to the patient’s medical history and current medical needs, the hospital’s bylaws and admissions policies, the types of facilities available, the severity of the patient’s signs and symptoms, and the medical predictability of something adverse happening to the patient.

CMS also chose not to disturb the instruction reading that “admissions of particular patients are not covered or noncovered solely on the basis of the length of time the patient actually spends in the hospital.” Accordingly, the medical necessity component of the inpatient admission decision-making process has always been, and continues to be, the determinative factor. 

I encourage everyone to review the manual updates and grow familiar with the modified language. To recap, the main takeaways, as I see them, are the emphasis on documentation to support the reasonableness of the physician’s expectation, the allowance for short inpatient hospital stays made possible by removing language that defaults the patient to an outpatient status if the benchmark is not met, and that, despite the changes, medical necessity remains the cornerstone of the inpatient admission decision-making process.