The American Hospital Association, along with a small group of health systems and hospital associations, is suing the federal government to overturn the so-called "two-midnight" rule governing whether to classify Medicare beneficiaries as inpatients or outpatients.
In two related lawsuits filed in the U.S. District Court for the District of Columbia on April 14, the plaintiffs contend that the controversial two-midnight policy is bad for hospitals, physicians, and patients because it "permits the government to supplant treating physicians’ judgment."
In August 2013, officials at the Centers for Medicare & Medicaid Services (CMS) finalized the two-midnight policy as part of the 2014 Hospital Inpatient Prospective Payment System final rule. The policy aims to clarify when patients should be admitted to the hospital as inpatients and when they can be treated in the hospital as outpatients, often under observation status.
Under the rule, patients should be considered inpatients if physicians expect it will be medically necessary for them to stay in the hospital over the course of two midnights. If physicians anticipate that patients will leave the hospital earlier, then their stay is generally classified as outpatient.
The rule officially took effect on Oct. 1, 2013, but Congress has delayed postpayment audits from the Recovery Audit Contractors until March 31, 2015.
The rule has significant financial implications for hospitals since Medicare’s Part A payments for inpatient services are typically higher than the Part B payments for outpatient services.
Although CMS estimates that the policy will lead to more inpatient admissions, the AHA and the other plaintiffs said it is likely to do the opposite.
The lawsuits also challenge the new requirement that each inpatient admission have a written physician order as a condition of payment by Medicare. The additional paperwork will not protect patient health, they wrote.
"The new requirement serves only to give CMS a reason to deny otherwise valid Part A claims – a ‘gotcha’ for those hospitals that fail to use the specific language mandated in the rule," the plaintiffs wrote.
The AHA-led lawsuits also seek to overturn the 1-year time limit for seeking Medicare Part B payment after an audit has determined that a hospital stay was inappropriately billed as an inpatient or Part A claim. AHA said that effectively bars hospitals from receiving any payments for those claims because Medicare’s Recovery Audit Contractors almost never begin their review process until a least a year after the date of service.
"In other words, the time limit has already expired on the first day a hospital could seek payment," the plaintiffs wrote.
Lawrence Hughes, AHA’s assistant general counsel, said that the litigation process is expected to move slowly and may not be resolved by the time the enforcement delay expires on March 31, 2015.
mschneider@frontlinemedcom.com
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