The Two-Midnight Rule – Even the Auditors Get it Wrong

As you may recall, last week I defended two payers that faced unwarranted outrage on social media. But if you read my Thursday article, you will know that I followed that defense with a hearty criticism of my own health insurer, Blue Cross of Illinois, for changing my screening colonoscopy claim to a diagnostic colonoscopy and subjecting me to coinsurance that I should not have had to pay.

And when I discussed that on LinkedIn, it struck a nerve. That post was viewed over 50,000 times, with many posting comments of similar experiences.

Moving on, I’m going to go back to the Two-Midnight Rule for a bit.

No, there is nothing new from the Centers for Medicare & Medicaid Services (CMS), but I wanted to get a start on my 2025 continuing education credits, so I paid for and watched a webinar about the Rule that was presented by a Livanta medical director.

Let me start with the good. And well, actually, there was only one thing. He stated that CMS has told Livanta that non-invasive forms of ventilation, like continuous positive airway pressure (CPAP) and bilevel positive airway pressure (BiPAP), do not qualify as mechanical ventilation for the two-midnight exception. Only intubation with use of a ventilator does. That is something that is often discussed, and Dr. Bruce Ermann, a frequent Monitor Mondays listener, can now get his first good night of sleep in 11 years, with that definitive answer.

Now, here is the bad.

First, the presenter referred several times to the Two-Midnight Rule being “all about time.” We all know that is not true. You cannot admit someone as inpatient with a minor illness, then keep them two midnights, and expect to get paid the DRG without question. Now, granted, that admission will not be audited by Livanta, since it met the benchmark of two inpatient days, but that does not make it a compliant admission.

Audit risk or not, the rules need to be followed.

Then, when discussing the Inpatient-Only List, he stated that if an inpatient-only surgery is inadvertently performed as outpatient, CMS will deny payment, and the hospital cannot appeal. That is wrong. As I have discussed before, the three-day payment window now applies to inpatient-only surgeries. That means if the patient is outpatient at the time of surgery, as long as the admission order is written within the next three days, while the patient is hospitalized, it is payable.

He also presented some Visio diagrams about the admission decision, wherein he states that if the patient is admitted inpatient and then passes one midnight, the doctor should be asked if they expect a second midnight. If not, the status should be changed to observation. And yes, he did refer to observation as a status, and you know how much I hate that. But going right to a Condition Code 44 change is not right. Before doing that, you need to assess whether the admission decision was correct, and if the patient may have had an unexpected rapid recovery that would allow you to leave it as inpatient.

Finally, he noted that documented homelessness could support a two-midnight expectation, based on the increased complexity of the case or the resultant delay in arranging a safe discharge. But honestly, I do not know what to do with that, for most cases. Maybe for a patient with a complex infection that needs IV antibiotics, but I’d proceed carefully – and with excellent documentation.  

So, the information was disappointing, but I still got my two CME credits. Mission accomplished.

Programming note: Listen live as Dr. Ronald Hirsch makes his Monday rounds on Monitor Mondays with Chuck Buck and sponsored by R1-RCM.