Hospitals Sue CMS Over Two-Midnight Rule Payment Cuts

Lawsuit questions agency’s calculations

Fifty-five hospitals have filed a lawsuit against the U.S. Department of Health and Human Services in response to Medicare payment reductions under the “two-midnight” rule, according to a report from FierceHealthFinance.

According to the controversial rule, “an inpatient admission is generally appropriate for Medicare Part A payment if the physician (or other qualified practitioner) admits the patient as an inpatient based on the expectation that the patient will need hospital care that crosses at least two midnights… If the patient is expected to need less than two midnights of care in the hospital, the services furnished should generally be billed as outpatient services.”

Anticipating more inpatient stays, the Centers for Medicare and Medicaid Services (CMS) proposed a 0.2% reduction in reimbursements to offset the increased revenue. In December 2015, the agency published a clarification of how it calculated the payment cut in the Federal Register. The clarification called for comments by February 2, 2016, with a final notice to be published by March 18.

The new lawsuit claims that the CMS violated the Administrative Procedure Act, depriving hospitals of a sufficient opportunity to comment. It also claims that the two-midnight rule is based on unfounded assumptions, such as taking for granted that approximately 400,000 stays will shift from outpatient to inpatient status, whereas 360,000 inpatient stays will shift to outpatient status. Overall, the suit charges that the rule is “confusing, ambiguous, and internally inconsistent.”

FierceHealthFinance obtained a copy of the lawsuit from Foley & Larder LLP, a law firm based in the District of Columbia that is representing the 55 hospitals.

Sources: FierceHealthFinance; January 12, 2016; Case No. 16-0032; January 8, 2016; and Federal Register; December 1, 2015.