The Centers for Medicare and Medicaid Services (CMS) recently issued controversial new criteria for hospitals to use to determine whether a patient's stay in a hospital should be treated as an outpatient observation stay or an inpatient admission. CMS has implemented two related policies to determine whether a patient should be admitted as an inpatient.

Two-midnight Presumption

If an inpatient stay spans two midnights, CMS generally will presume the stay to be reasonable and necessary and absent evidence of gaming or abuse by a facility (including intentional delay in the provision of services), the agency typically will not review the admission decision. Conversely, admissions that do not cover two midnights, presumptively will not be deemed reasonable and necessary. However, the facility can be paid on an inpatient basis for a short stay patient, if the two-midnight benchmark was satisfied at the time of admission.

Two-midnight Benchmark

An inpatient admission generally is deemed to be appropriate when the admitting practitioner has a reasonable and supportable expectation that the patient will need care at the hospital for a period spanning not less than two midnights, based upon the information available to the practitioner at the time of the admission decision. To prevent gaming, CMS requires an inpatient admission order by a practitioner who is familiar with the patient's condition and plan of care that is furnished at or before the time of admission, and the order must be contained in the medical record before the patient's discharge. In addition, the physician must certify, prior to the patient's discharge, that the inpatient hospital services were required on an inpatient basis for the patient's medical treatment. The certification must be signed and documented in the medical record prior to the hospital discharge. The physician order also is a required component of the physician certification. Under the 2014 IPPS rule, this certification now has become a condition for payment rather than simply a condition of participation.

Procedures that are designated as inpatient-only procedures are excluded from the two-midnight benchmark policy.

Hospitals have objected vigorously to this rule, voicing concerns over the potential for payment reductions (particularly if the provider is very efficient) and reduced patient satisfaction. Their complaints have been heard in Congress. Last week, for example, 105 members of the House of Representatives signed a letter requesting CMS to delay this rule. To address these concerns, CMS announced that the agency will transition to the new rules with a three-month grace period, referred to as a "probe and educate" period by CMS, during which hospitals will not face financial penalties as they work to comply with the new inpatient admission rule.