Q&A: Is the 2-Midnight Rule Going Away?

Q: I heard the 2-midnight rule is now gone based on changes to Medicare payment rates under the 2017 inpatient prospective payment system (IPPS) final rule. Is this true and if not what changed?

A: No, this is not the case. The 2-midnight rule is still alive and kicking. What the FY 2017 IPPS final rule did is finalize two adjustments in addition to updating the annual rate for inpatient hospital payments.

“First, CMS is finalizing the last year of recoupment adjustments required by the American Taxpayer Relief Act of 2012 (ATRA). Section 631 of ATRA requires CMS to recover $11 billion by FY 2017 to fully recoup documentation and coding overpayments related to the transition to the MS-DRGs that began in FY 2008,” states the CMS Fact Sheet. “For FYs 2014, 2015, and 2016, CMS implemented a series of cumulative -0.8 percent adjustments.  For FY 2017, CMS calculates that $5.05 billion of the $11 billion requirement remains to be addressed.  Therefore, CMS is finalizing a -1.5 percent adjustment to complete the statutorily-specified recoupment.”

And the second part of the change, which seems to be causing the confusion, CMS took action on a -0.2 percent adjustment it implemented in the FY 2014 IPPS final rule. This adjustment was initially made to account for an estimated increase in Medicare spending due to the 2-midnight policy. “Specifically, in the FY 2014 IPPS final rule, CMS estimated that this policy would increase expenditures and accordingly made an adjustment of -0.2% to the payment rates,” states the fact sheet.

Ronald Hirsch, MD, FACP, CHCQM, vice president of the Regulations and Education Group at Accretive Health in Chicago, answered this question.

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