On May 20, 2014, the House Ways & Means Health Subcommittee held a hearing on hospital issues in Medicare.  The hearing addressed a number of Medicare issues including the Recovery Audit Contractor (RAC) program, short stay inpatient admissions, appeals and CMS’s implementation of the Two Midnight Rule. Witnesses included Sean Cavanaugh, Deputy Administrator and Director, Center for Medicare, CMS, and Dr. Ellen Evans, Medical Director of HealthDataInsights, the Region D RAC.

At the beginning of the hearing, Chairman Kevin Brady (R-TX) explained that “[i]n order to understand why CMS chose to pursue [the Two-Midnight] policy, we must first explore the events leading up to this policy.  After we review those events in today’s hearing, the Congress will be able to make an informed judgment about the merits of the [Two-Midnight] policy and potentially pursue alternative solutions.”  Chairman Brady also noted that RACs have focused auditing efforts on short stay admissions and that “[p]rior to the [Two-Midnight] standard there were no definitive rules governing which payment system was correct for short stay [admissions].”

According to the transcript of the hearing available from CQ Roll Call, Mr. Cavanaugh, Deputy Administrator of CMS, was questioned during the hearing regarding, among other things, CMS’s Two-Midnight policy.  Mr. Cavanaugh explained that the provider community requested that CMS clarify its inpatient admission policies, and further stated that while CMS solicited feedback regarding how to clarify its inpatient admission policies, there was not a consensus on how to clarify such policies.  CMS finalized its Two-Midnight policy in August 2013.  Mr. Cavanaugh acknowledged that the provider community continues to seek guidance from CMS regarding short stay admissions.  Mr. Cavanaugh was also questioned about the backlog of the Medicare appeals system, and stated that CMS is part of the HHS-wide work group that is currently addressing the backlog in the appeals system.  

Dr. Evans, HDI’s Medical Director, also participated in the hearing.  Chairman Brady asked Dr. Evans whether CMS ever instructed RACs to stop auditing certain challenging short stay DRGs so that CMS could insert a targeted payment approach to quickly and easily solve the problem of short-stay DRGs.  Dr. Evans explained that CMS has not permitted RACs to review short stay admissions since the implementation of the Two-Midnight policy but had not previously instructed RACs to stop auditing short stay admissions. 

As we previously reported, any individual or organization may submit a written statement for consideration by the Subcommittee and for the official hearing record.  Submissions are due by June 3, 2014.

Chairman Brady’s opening statement is available here.  Statements from other witnesses participating in the hearing are available here.