Q&A: Applying the 2-midnight rule to procedures removed from the IPO list

Q: Are procedures removed from the inpatient-only (IPO) list in 2021 subject to the 2-midnight rule?

A: CMS finalized removing 266 services related to musculoskeletal procedures from the IPO list in 2021, noting these are some of the services most frequently cited for removal by stakeholders. It will also remove an additional 32 procedures identified in comments.

The removal of procedures from and the ultimate elimination of the IPO list will lead to all services being subject to the 2-midnight rule, which is used to determine whether Part A coverage and inpatient reimbursement is appropriate. Therefore, it is vitally important that hospitals understand the correct application of the 2-midnight rule based on the need for hospital services and that it is not based on proprietary tools that define intensity of services or severity of illness.

CMS finalized a policy to exempt procedures that are removed from the IPO list beginning on January 1, 2021, from site-of-service claim denials, Beneficiary and Family-Centered Care Quality Improvement Organization (BFCC-QIO) referrals to Recovery Audit Contractors (RAC) for persistent noncompliance with the 2-midnight rule, and RAC reviews for “patient status” (that is, site-of-service) until such procedures are more commonly billed in the outpatient setting (i.e., 50% or more are performed outpatient).

BFCC-QIOs will continue to review short-stay inpatient claims for procedures removed from the IPO list for medical necessity and to educate providers, but claims would not be denied on patient status alone.

For more information, see "Note from the instructor: No relief for weary providers in OPPS and MPFS final rules" by Valerie A. Rinkle, MPA, CHRI.