Medicare Advantage Plan Agrees: Two-Midnight Rule Applies Right Now

Medicare Advantage Plan Agrees: Two-Midnight Rule Applies Right Now

The rants continue, especially when dealing with CMS.

For my first rant, I was recently discussing readmissions with a colleague. No, I am not going to rehash my criticism of the whole readmission reduction program, other than to say that until society addresses the social determinants of health (SDoH), we will never stop all readmissions. But I am going to rant about the variety of ways that readmissions are handled. This discussion came about because a hospital wanted to combine two admissions within 30 days onto one claim. They also asked about using the leave-of-absence rules. While we had few clinical details, we did know that the second admission, which was over two weeks after the first discharge, was for sepsis with acute kidney injury.

Well, first, leave of absence is for a planned readmission, such as need for a surgery. If these doctors planned for this patient to develop sepsis, they have much bigger problems than how to bill the stays. The second concern they had was that if they combined the admissions, that would mean that the admission began on the date of the first admission, and that sepsis would therefore be coded as not present on admission, creating a quality-of-care issue.

Then, when the rules for that payor were reviewed, it was realized that their guidance on readmissions was to use 72 hours. Why was this facility even looking at 30 days, when the payor limited it to 72 hours? And then to top it off, when you read the actual payor policy, it stated that if a beneficiary is readmitted within 72 hours of being discharged for the same or related conditions, the claim is subject to review for medical necessity and quality of care. That’s right: not one single word about combining the admissions. So, this readmission two weeks after the first earned the right to exist on its own claim. Be sure to always read the payor rules and follow them. I suspect that no one wants to forego compliant revenue.

The other rant I have is about payors that claim to follow Centers for Medicare & Medicaid Services (CMS) guidelines for billing, but then make up their own rules. In particular, they claim that there is no limit on the number of hours a patient can remain in observation. And that got me thinking. OK, let them have that right, but since they claim to follow CMS guidelines, that means that the provider should also follow the three-day payment window. If your long observation patient exceeds three calendar days and then gets admitted as an inpatient, you really should be submitting two claims: one for the inpatient admission and the services in the three preceding calendar days, and another claim for all services prior to that, including the ED visit and any observation hours (and other services provided up until midnight on that day three days prior to the inpatient date). If the patient received over eight hours of observation services on the days prior to the three-day window, you may even be able to get the full observation payment, depending on how the payor pays for observation stays. Let’s see how these payors like paying two claims – or will they once again state that they follow CMS rules, but only those that provide them financial benefit?

Finally, the CMS proposed rule on Medicare Advantage (MA) plans drew 887 comments. The comments from the MA plans range from total opposition by Humana to a nuanced response from UnitedHealth Group (UHG). UHG pretty clearly not only states that they agree with the two-midnight rule, but they acknowledge that it is applicable to MA plans today. In their preamble, UHG states, “we appreciate the opportunity to provide feedback on specific policy changes to help CMS build upon the successes of the MA program.

As CMS finalizes policies for 2024, UHG recommends the agency prioritize the following specific adjustments…uphold CMS’s longstanding policy regarding when a beneficiary should be considered an inpatient for purposes of correct Medicare billing (the 2-Midnight Rule).” I do not think it can get clearer than that.

I will add that UHG does seek clarification that it is not simply the physician proclaiming that two midnights are necessary, but that the expectation of two midnights is truly clinically appropriate. I hate to say it, but I think that is actually reasonable, and most of us have argued that the physician’s statement must be supported by the clinical picture and documentation in the medical record. They also argue that commercial criteria can help with that determination. And once again, I agree with them in that criteria can be one of the tools that help make that determination – with the caveat that criteria like MCG Care Guidelines are simply one screening tool that can be used, and not the final arbiter of necessity.

The lobbying organization for insurance companies, America’s Health Insurance Plans (AHIP), also submitted a comment opposing the adoption of the Two-Midnight Rule for MA plans. But their comment deserves ridicule, as they stated that “CMS guidance acknowledges that the two-midnights rule (sic) is a ‘Medicare claims processing procedure’ and CMS has said it would not interfere with how MA plans and contracted hospitals establish their criteria for determining inpatient admissions as compared to observation stays.” But if one goes to their cited reference, 78 FR 50495 at 50934, you will see that CMS says no such thing. The discussion there was about Part B rebilling for self-denied claims. Shame on AHIP for intentionally attempting to deceive CMS officials.

I also want to thank the many who submitted comments, often using the template furnished by the American College of Physician Advisors and supplemented with excellent personal stories about their work and the difficulties faced when dealing with MA plans. I am sure you all join me in looking forward to the final rule.

But late last week, the story took a very unusual turn, when CMS sent the final rule to the Office of Management and Budget (OMB) for review and approval, a mere three weeks after the comment period closed. This is unprecedented to have a proposed rule go to the OMB that quickly. My comments alone should have taken CMS more than three weeks to read, analyze, and develop a response.

What does this mean? No one except CMS knows, but my hope, which is unlikely to be correct, is that CMS has carved out the section of the rule about the applicability of the Two-Midnight Rule to MA plans and is submitting that as an Interim Final Rule with Comment Period to codify that section immediately, if for no other reason than to stop me from asking about it on every single CMS call. Lots of people will be watching, so we will keep you informed.


Ronald Hirsch, MD, FACP, CHCQM, CHRI

Ronald Hirsch, MD, is vice president of the Regulations and Education Group at R1 Physician Advisory Services. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute-care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic. He is a member of the Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians. Dr. Hirsch is a member of the RACmonitor editorial board and is regular panelist on Monitor Mondays. The opinions expressed are those of the author and do not necessarily reflect the views, policies, or opinions of R1 RCM, Inc. or R1 Physician Advisory Services (R1 PAS).

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