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BY MARY M . BEARDEN AND ALLISON SHELTON , Brown & Fortunato , P . C .
The Centers for Medicare and Medicaid Services ( CMS ) announced a proposal to remove and offset the 0.2 percent rate cut that was adopted as part of the “ two midnight ” rule in FY 2014 . On April 27 , 2016 , CMS published a proposed rule ( Proposed Rule ) to update payment policies and rates for the Inpatient Prospective Payment System ( IPPS ) and the Long-Term Care Hospital ( LTCH ) Prospective Payment System ( PPS ) in FY 2017 .
Under the IPPS , CMS prospectively establishes payment rates based on diagnosis and severity of illness . Based on these payment classifications , CMS will generally pay a hospital a single payment for a particular case . CMS adjusts the payment
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rates annually . |
The Proposed Rule discusses the proposed annual update to the payment rates . Under the IPPS , CMS proposes a 0.9 percent rate increase for hospitals that participate in the Hospital Inpatient Quality R e p o r t i n g Program and that are meaningful users of electronic health records . To calculate the proposed rate increase , CMS took into account the following factors : the annual market basket update ; a 1.5 percent |
reduction for documentation and coding as required by the American Taxpayer Relief Act of 2012 ; and a 0.8 percent increase that is designed to remove and offset the 0.2 percent reduction that was implemented as part of the two-midnight rule .
CMS adopted the two midnight rule in the
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IPPS Final Rule for FY 2014 . Under the two midnight rule , Medicare Part A will generally cover an inpatient admission if the patient is reasonably expected to need hospital care for at least two midnights . When a patient is expected to need less than two midnights of hospital care , |
then services furnished to the patient should be billed as outpatient services . In 2015 , CMS modified an exception to the two midnight rule . Under the current exception , if documentation in the medical records supports
an admitting practitioner ’ s conclusion that a patient requires inpatient services , then Medicare Part A will cover the inpatient services on a case-by-case basis , even though the patient ’ s length of stay is expected to be less than two midnights .
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When the two midnight rule was initially adopted , CMS expected a significant increase in the number of inpatient stays . Due to the expected increase in utilization , CMS anticipated expenditures to increase by $ 220 million in FY 2014 . To offset the expected increase in expenditures , CMS adopted a permanent reduction of 0.2 percent to the payment rates under the IPPS .
After the two midnight rule was enacted , several hospitals filed suit to challenge the rate cut . In Shands Jacksonville Medical Center Inc . v . Burwell , the U . S . District Court for the District of Columbia determined that CMS had the authority to implement the rate cut . However , the court found procedural errors with CMS ’ s adoption of the 0.2 percent rate cut and ordered CMS to correct the deficiencies and reconsider the adjustment . The court ’ s order was issued on September 21 , 2015 .
In accordance with the court ’ s order , CMS published a notice with comment period on December 1 , 2015 . The notice discussed the basis of the 0.2 percent reduction . Based on public comments and other considerations , CMS proposes to prospectively remove the 0.2 percent rate reduction and to provide
Please see LEGAL AFFAIRS page 16
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