The Centers for Medicare and Medicaid Services (CMS) announced, on August 12, 2015, that it has extended the enforcement delay of the controversial two-midnight rule governing short hospital stays until the end of the year. As set forth in the FY 2014 IPPS Rule, the two-midnight rule imposes financial penalties for services that recovery auditors deem should have been documented as outpatient services. The enforcement delay had been set to expire on September 30, 2015.

Pursuant to the extension, CMS says that it will not allow Recovery Audit Contractors to conduct patient status reviews of short-term hospital admissions through the end of 2015.

Under the current rule, an inpatient admission under Medicare Part A is considered appropriate when the physician expects a case will require a two-midnight stay. Cases that fall short of this rule and do not meet medical necessity requirements for admission may be converted to and paid as an outpatient visit.

The postponement coincides with the proposed changes to the short-stay rule that the agency issued in July in which CMS proposed that the rule be modified to allow physicians to exercise judgment to admit patients for short stays on a case-by-case basis.

In addition to the enforcement delay, CMS also clarified other previously-announced policy changes:

  • As of October, Quality Improvement Organizations (QIOs) will be responsible for initial patient status reviews to assess the need for Part A payments for short-stay inpatient claims.
  • From October through the end of 2015, QIOs’ patient status reviews will be based on the current two-midnight policy.
  • The third round of Probe and Educate reviews will likely conclude by September 30, 2015.