CMS Rolls Back Two-Midnight Rule Payment Cuts

October 19th, 2016

CMS will no longer enforce the inpatient payment cuts to the Two-Midnight Rule, according to the proposed rule published in the Federal Register on April 27.

The change in policy comes after 55 hospitals filed a lawsuit against the Department of Health and Human Services (HHS) in response to the 0.2% reimbursement cut for Medicare payments under the controversial Two-Midnight Rule. The American Hospital Association and other organizations also sued, claiming a violation of the Administrative Procedure Act. CMS now plans a 0.6% increase in 2017 to offset the cost of the Two-Midnight Rule. The proposed rule would increase payment to about 3,330 general acute care hospitals by 0.9%.

CMS will continue to penalize hospitals for high 30-day readmission rates, and will continue to penalize hospitals in the bottom 25% for hospital-acquired conditions (HACs).

The proposed rule also includes the Medicare Outpatient Observation Notice (MOON), which requires hospitals to give a copy of the CMS notice to any observation patient who is receiving observation services for more than 24 hours. The notice must be provided within 36 hours and before the patient is discharged. The rule also includes changes to the Hospital Value-Based Purchasing Program.