Hot Off the Press: Regulatory Updates on the “Two Midnight Rule”

Posted on Tue, Jul 15, 2014

By Jeff Slepin, MD, MBA, FACEP, Regional Medical Director

As defined by the Centers for Medicare and Medicaid Services (”CMS”) Inpatient Prospective492533811.jpg Payment System (IPPS) Final Rules effective October 1, 2013, for fiscal year 2014, the “Two Midnight Rule” was enacted to apply to attending physicians in the decision regarding the medical necessity of inpatient admissions.  Inpatient admissions were clarified as being generally appropriate if the patient’s stay in the hospital is reasonably anticipated to span a time period crossing two calendar midnights; otherwise the patient would be more appropriately considered for placement on outpatient observation services.  Since its introduction, there has been considerable confusion regarding its implementation, application, and enforcement.

Here are some of the key points of the rule:

Definition of the “Ordering Physician.” — At the time of hospitalization, an order must be furnished by a physician or other practitioner (“ordering physician”) who is: (a) licensed by the State to admit inpatients to hospitals, (b) granted privileges by the hospital to admit inpatients to that specific facility, and (c) knowledgeable about the patient’s hospital course, medical plan of care, and current condition at the time of admission.

Physician certification of medical necessity of inpatient care: as a condition of payment to the hospital for inpatient services under Medicare Part A, physician certification of the medical necessity that such services must be provided and considered along with other documentation in the medical record as evidence that hospital inpatient services are reasonable and medically necessary. A “Certifying Physician” must certify the medical necessity of the inpatient admission while the patient is in the hospital (prior to discharge) and have knowledge of the case, including the order for inpatient admission, expectation of a patient stay encompassing a period spanning at least two midnights, rationale for inpatient admission (medical necessity), estimated time the patient will need to remain in the hospital, and plans for post-discharge care.

Status Change – Outpatient Observation to Inpatient Admission (or vice-versa)

The transition (conversion) of a patient from Outpatient Observation status to Inpatient Admission may occur due to the progression of the patient’s signs, symptoms, and evolution of disease process when it is recognized that the patient may require care in the hospital longer than a period spanning two midnights AND meets medical necessity criteria for inpatient admission (severity of illness and intensity of services).  This is accomplished by an order in the medical record by the “ordering physician” and must occur during the hospital stay; it cannot be done retrospectively after discharge.

78606064.jpg A patient initially admitted as inpatient may be “converted” to outpatient observation status (generally, in collaboration with the Case/Utilization Management staff) if the patient is determined not to meet medical necessity criteria for inpatient admission andnot expected to stay in the hospital for a period spanning two midnights. Conversion from inpatient admission to outpatient observation status, unlike the converse transition, may occur after the patient is discharged.

There are other requirements and nuances of the Two Midnight Rule. Discussions with and analysis by hospitals and other organizations identified a number of concerns and questions subsequently brought to the attention of CMS for clarification and/or consideration of revision.  Accordingly, CMS initially delayed the enforcement of the Rule, from the standpoint of Recovery Audit Contractor auditing activities, until March 31, 2014. A second delay was announced by CMS until October 1, 2014.

A document containing guidance and clarification from CMS, entitled “Hospital Inpatient Admission Order and Certification,” provides more information on the application of the Two Midnight Rule, and is useful for hospitalist and emergency physicians to understand their respective roles in supporting the hospital’s compliance with the requirements.  It can be found at:

“Hot News!”- The most recent delay went into effect on April 1, 2014, when the Protecting Access to Medicare Act of 2014 was signed into law.  Section 111 of this law prohibits CMS from allowing the Recovery Auditors to conduct post-payment inpatient hospital patient status reviews on claims with dates of admission October 1, 2013 through March 31, 2015.

It is anticipated that the statutory and regulatory requirements, and the interpretation of those requirements, may change from time to time as the changes associated with healthcare reform continue to evolve.  We will attempt to keep all providers informed as developments occur.



slepin_jeffrey_5451.jpgAbout Dr. Slepin:  M. Jeffrey Slepin, MD, MBA, is a residency-trained, ABEM certified emergency physician who has been a Regional Medical Director for EmCare since 2003.  He attended Emory University and completed his medical education at the Medical College of Virginia. Following his residency at the University of Florida Health Sciences Campus in Jacksonville, he practiced in Virginia and Florida. He obtained his MBA at the College of William and Mary Graduate School of Business prior to joining EmCare.

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