The 2 Midnight Rule

The 2 Midnight Rule
Surviving to Thriving
May 15, 2014
Presented by Dr. Sandra M. Terra, DHS, MS, BSN, RNBC, CCM, CPHQ
Brian Pisarsky MHA, BS, RN, ACM
BRG Introduction
Berkeley Research Group (BRG) is an expert services consulting
firm with over 400 professionals and 19 offices.
BRG’s Healthcare consultants have worked on engagements at
hospitals and health systems throughout the United States.
Healthcare Provider
Practice Areas
•Clinical Economics
•Corporate Compliance
•Financial Advisory
•Disputes and Investigations
•Healthcare Policy and
•Hospital Performance
•Healthcare Construction
Transformational Performance Improvement
BRG helps hospitals improve operating
and plan for tomorrow’s healthcare environment
The 2MN Rule – What is it?
Effective October 1st, 2013 The Centers for Medicare and
Medicaid (CMS) new rule REQUIRES hospitals to apply guidelines
for inpatient and observation status differently than before. This
Rule can be confusing and is contrary to what we have done
before. New sub regulatory rules were written to govern this Rule.
The intent of the Rule is to minimize the Outpatient (Part B) copay impact on the Medicare Beneficiary, reduce multiple day
Observation stays and to help clarify when Inpatient (Part A)
services are appropriate.
The Rule also imposes a 2% payment cut to inpatient admissions
for Medicare Fee For Service patients admitted after October 1,
2013 to compensate for what CMS believes will be an increase in
CMS Final Rule
The Centers for Medicare & Medicaid Services (CMS) final rule
(CMS-1599-F) updates Medicare payment policies. The final rule:
o modifies and clarifies CMS’s longstanding policy on how
Medicare contractors (including RAC auditors) review
inpatient hospital admissions for payment purposes.
Under this final rule, surgical procedures, diagnostic tests and
other treatments (in addition to services designated as inpatientonly), are generally appropriate for inpatient hospital admission
and payment under Medicare Part A when
(1) the physician expects the beneficiary to require a stay that
at least two midnights and
(2) Admits the beneficiary to the hospital based upon that
2 MN Benchmark vs. Presumption
2 MN Benchmark (clinical)
2 MN Presumption (auditor)
Physicians should generally
admit as inpatients
beneficiaries they expect will
require 2 or more midnights of
hospital services, and should
treat most other beneficiaries
on an outpatient basis.
The clock starts when care
begins – after registration and
triage vital signs in an
outpatient setting. This can
include time spent in another
hospital but not ambulance
transport time from that
The 2-midnight presumption
directs medical reviewers
(auditors) to select Part A
claims for review under a
presumption that the
occurrence of 2 midnights
after formal inpatient hospital
admission pursuant to a
physician order indicates an
appropriate inpatient status for
a reasonable and necessary
Part A claim.
CMS-1599-F Timeline
• August 2, 2013 – Final rule published
• August 19, 2013 – CMS holds open door forum. Many questions
• Sept 5, 2013 – CMS issued further guidance on the Physician
order and Certification
• Sept 18, 2013 – AHA sent a letter to CMS asking to delay the
effective date based on the perceived ubiquity of the Rule
and the 2% reimbursement cut
• Sept 26, 2013 – CMS held 2nd open door forum. Still many
unanswered questions. CMS stated that they will continue to
issue further guidance.
• October 1,2013-Gov’t . Shut down and furlough stopped any
further clarification from CMS
CMS-1599-F Timeline, con’t
• November 27, 2013 – CMS publishes guidance on the medical
review of inpatient hospital claims
• February 24, 2014 – CMS produces an inpatient hospital probe
and educate update and extends the 120 day timeframe for
appeal/redetermination of those claims which were denied
under the educate and probe process. The educate and
probe process is extended to September 30 2014
• March 12, 2014 – Guidance for Auditors is issued by CMS
changing claim selection guidelines (again)
• March 27, 2014 – Another extension until March 31, 2015
The key
all see
from a
CMS View
• Beneficiary protection.
o Despite a flawed rule, they don’t
want patients lingering without
decisions beyond 2- midnights.
• They wish to provide time
boundaries to providers.
• They worry about 24-48
hour, inappropriately
billed stays, i.e., waste.
• Hospitals will bill more, not
less, short inpatient
stays. Pay reductions
and penalties will level
the field.
Hospital View
Increased staff to oversee OBS,
audit, and documentation
Prospective and retrospective
changes in financial billing
status (observation vs inpatient)
with no clear guideline
Angering patients and HCAHPS
scores with all (essentially) stays
under 48 hours as outpatient
and subject to the co-pays
Readmissions—how to utilize
rule to best assist patients and
hospitals (under readmit
Revenue loss—some justified,
some not.
o CMS feels rule will increase
hospital revenue. Hospitals
see things differently.
Physicians View
• Documentation burden:
o expected stay–need vs.
o status on admission orders
o CLEAR documentation!
• Advocate for hospital or
o pressure at MN or “48-hr” mark?
• Coding and fraud—
mindful of inpatient and
observation billing
• New work flow driven by
Beneficiary View
Existing confusion about
inpatient vs. outpatient
Perceptions of care
o Care by the clock
o Does service suffer (lower
value care)?
Advanced beneficiary notice
o patients need to know
their status.
If OBS, the sooner patient out,
less cost to them (Part B
o Longer OBS stays are
more costly than short
inpatient stay (Part A FFS).
3 night SNF rule. No bridge to
post-acute care if inpatient
status not declared.
What the 2MN Rule Changes
• Inpatient Medical Necessity
• Arbitrary application of
clinical criteria by Auditors
• Unclear regulations
governing inpatient vs.
• Long outpatient observation
• Minimal physician
• High Beneficiary co-pay
• Review all cases against
clinical criteria
• All medically necessary
• No more 1 day stays
“Inpatient only” list
Acute to acute transfers
Unanticipated early recovery
• Auditor focus on
o ‘gaming’ the system
o Unnecessary delays in service
o Physician documentation
Other Changes
• Increase in revenue
• New Occurrence Code (72) 12/1/2013
o Contiguous outpatient hospital services that preceded the
inpatient admission” to be reported on inpatient claims
• Shift in coding staff mix
• Case Management & CDI personnel focus
• Decrease in Physician Advisor activity
• Increased burden on the physician for documentation of
clinical judgment
• New focus on delay in service
Major Billing Changes
• Redefining of Occurrence Code 72.
o Now alerts CMS that outpatient services were provided
prior to admission to an inpatient status (transmittal 1334,
published date 2014)
• Self denial without penalty during the Probe and Educate
o Now extended to March 31, 2015
o Process to ensure review of all MC FFS inpatient claims
• Appeal for all services provided if billing under Part B
o Bill for all services including IV fluids, associated nursing
care as you would be billing for OBS
o MUST follow NCD/LCD documentation requirements (start
& stop times)
• If a patient stays under 24 hours but at least 12 hours bill as
extended visit and management for flat fee
Impact on Coder Mix and CDI
Coder Mix
Clinical Documentation
• More inpatient means less
o Inpatient coding
approximately 4 per hour
o Outpatient coding
approximately 6-8 per
• More cases to review
o Inpatient initial record
approximately 40
minutes to 1 hour
• Increased focus on
components of physician
certification documentation
requirements including
medical necessity and
discharge plan
The Role of Case Management
• Decreased emphasis on 1st Level Reviewer Activities
against selected clinical criteria
o Guidance now comes from the physician, clinical documentation and
estimated day of discharge
• Increased emphasis on physician certification
documentation, discharge plan and recertification
if necessary
o Reinforce physician education about the Rule
• Capture of Avoidable days to identify delay in
o Patient and Physician convenience will be under closer scrutiny
• No services on the weekends (facility issue)
• Holding patients for specialist consultant exam
• Auditor behavior
o Probe and educate
o Pre-payment/MAC
• Physician documentation
Admission order SIGNED before discharge by the ordering physician
Certification Statement
Medical Necessity
Discharge Plan
Recertification as needed
• Financial penalties for services that recovery
auditors deem should have been documented as
outpatient services
• Overall 2% reduction in inpatient reimbursement
Probe and Educate
Probe and Educate
• CMS has instituted a Probe and Educate program.
That program has been extended several times.
Primarily because the auditors inappropriately
denied many claims. The exact concern most have
about the Rule.
o Some initial pre-payment reviews were incorrectly denied. Many of those
claims are still unresolved
o The MACs are still required to perform prepayment review of 10 (or 25 for
large hospitals) claims from all applicable providers within their jurisdiction
to ensure compliance with CMS-1599-F.
o Hospitals that have 0 – 1 errors identified in the initial group of claims
selected will be considered to be applying the new rule correctly.
• The MAC will cease further reviews for these hospitals
o Hospitals that have errors identified will receive education
Probe and Educate Results
• 29,158 records requested, 18,110 received, 6,012 reviews
completed. These reviewed records will be re-reviewed under
new guidance from CMS
• Missing or Flawed Order for Inpatient Admission
• Short-stay procedures not in the inpatient only list
• Short stay for medical conditions
• Physician Attestation statement without supporting
o Certification language states “2 Midnights”
o Documentation stated “D/C in the AM”
The Auditors
The primary concern centers on
the various regulatory auditors
and how they will adjudicate
payment under the 2 MN Rule.
Historically, hospitals have not
fared well under the
retrospective nature of the
auditors and are dubious that
the guidelines and instructions
will be correctly applied.
Failure on the part of the
auditors to adjudicate under the
Probe and Educate period has
only strengthen this concern.
75 year old female with history of chronic heart failure, COPD and arrhythmia,
presents via the ED for complaints of dizziness. She reports working in her garden for
most of the day. Onset of symptoms around 5 pm caused her to stop gardening
and sit down. Symptoms not resolving, she proceeds to the ED driven by her
7:30 PM triaged and vital signs taken. BP=105/62, HR=66, RR=20
7:45 PM patient is seen by the ED physician. She continues to complain of some
dizziness but reports she has improved since arriving in the ED. 500 cc IV bolus NS
infused. Patient reports improvement
8:45 PM patient given regular dinner tray. Reports some slight dizziness with nausea
9:45 PM Hospitalist re-examines the patient and writes an order certifying a 2
midnight stay for syncope.
0730 AM Progress note: patient stable throughout night. Reports much improved.
Physician order to discharge after regular lunch if tolerates.
100 PM patient discharged to home accompanied by neighbor
This claim is billed as Part A based upon physician order. Upon selection for Probe
and Educate this claim may be denied and deemed appropriate for outpatient
observation. The claim is recoded as outpatient observation and resubmitted for
payment under Part B.
The MAC, RAC, MIC’s etc.
Auditor Instructions
• CMS has instructed the Auditors to assess three things:
o The admission order requirements,
o The certification requirements, and
o The 2 midnight benchmark
• CMS also instructed the Medicare Administrative Contractors
(MACs) and Recovery Auditors that they are not to review
claims spanning more than two midnights after admission for a
determination of whether the inpatient hospital admission and
patient status was appropriate
• The Medicare review contractor will count only medically
necessary services responsive to the beneficiary's clinical
presentation as performed by medical personnel when
determining if the ‘benchmark’ of 2 midnights has been met
Audit Reviews
• Initially, CMS instructed the MACs and Recovery Auditors not
to review claims spanning more than two midnights after
admission for appropriateness of patient status during the
implementation period of October 1, 2013 until December 31,
• Currently, CMS will not conduct post-payment patient status
reviews for claims with dates of admission October 1, 2013
through March 31, 2015.
• CMS will conduct prepayment patient status probe reviews for
dates of admission on or after October 1, 2013 but before
March 31, 2014
• Recovery Auditors may conduct automated reviews or
complex reviews, for previously approved issues unrelated to
CMS-1599-F for dates of services prior to October 1, 2013,
which may continue through June 1, 2014.
Recovery Audit Contractors
• For a period of 12 months, CMS will not permit Recovery
Auditors to conduct patient status reviews on inpatient claims
with dates of admission between October 1, 2013 and March
31, 2015
o These reviews will be disallowed permanently; that is, the
Recovery Auditors will never be allowed to conduct
patient status reviews for inpatient medical necessity on
claims with dates of admission during that time period.
• In addition, CMS will not permit Recovery Auditors to review
inpatient admissions of less than 2 midnights after formal
inpatient admission that occur between October 1, 2013 and
March 31, 2015
Auditor Red Flags
• 1 day stays not on the
“inpatient only” list
o Missing occurrence code 72 can
contribute to selection
• An increase in 2 days
• An increase in 3 day stays
with a discharge to SNF
• Routinely converting
patients to inpatient on
the day of discharge
o Occurrence code 72 with no
room and board charges
• Delays in Care
o No service on the weekend
o Patients held for physician
specialty consult
Auditor Claim Selection
(the presumption)
• Describes whether claims will be selected for review
under the 2-midnight rule
• If a claim shows 2 or more midnights after formal inpatient
admission begins, the contractor will presume for claim
selection purposes that inpatient admission is appropriate.
This claim will not be the focus of medical review.
• Exception: Will monitor claim patterns for evidence of
systematic gaming or abuse, such as unnecessary delays in
the provision of care to surpass 2 inpatient midnights
Case Study #2: Admit from Physician Office
A 80 year-old woman presents to her primary care physician’s office not
feeling well. Past medical history is significant for chronic obstructive
pulmonary disease and the patient is on multiple medications. She has
experienced increasing shortness of breath for several days.
6:00 pm - Patient is evaluated by primary and sent to the hospital for
further evaluation via ambulance.
9:00 pm – Upon arrival at the hospital the admitting practitioner confirms
the suspected diagnosis and admits the beneficiary based on the
expectation that the patient’s care will span at least 2 midnights.
10/2/2013 -10/4/2013
•Patient continues to receive medically necessary hospital level of
•9:00 am - Patient is discharged home.
Hospital may bill this claim for inpatient Part A payment. Claim will
demonstrate 2 midnights of inpatient services. Review contractors may
not select this claim for review as it is subject to the “presumption.”
Case Study #3: ED presentation
68 year-old man presents to the ED with several day history of urinary symptoms, vague
intermittent abdominal discomfort, “gassy” and “feverish” feeling over the past several
days, and intermittent chills and nausea without vomiting. Patient on oral medications for
constipation, hypertension, cholesterol, and diabetes. Patient complains that he is not
feeling like himself – no appetite, tired, “maybe a touch of the flu”. No other complaints.
10:00 pm - Patient is triaged.
10:10 pm - Urine sample and glucometer reading obtained and patient sent to the
waiting room.
11:00 pm - MD assesses patient, orders therapeutic/additional diagnostic modalities.
12:00 am - Patient with new complaint of chest pain – additional therapeutic/diagnostic
modalities ordered.
•12:15 am – MD re-evaluates and determines a need for medically necessary hospital
level of care/services for this patient to beyond midnight #2.
•12:35 am – Formal order/admission provided.
•7:35 am: Patient is discharged home.
Hospital may bill this claim for inpatient Part A payment. Claim will demonstrate 1
midnight of outpatient services and 1 midnight of inpatient services. This claim may be
selected for medical review, but should be deemed appropriate for inpatient Part A
payment so long as the documentation and other requirements are met.
Physician Documentation
The Rule does not have the previous
caveat of “Acute or Inpatient
Medically Necessary” simply
“Medically Necessary” services. All
services that are not considered
custodial fall under this definition
with appropriate and complete
physician documentation.
The key is appropriate and
complete physician documentation.
Documentation in the medical
record must support a reasonable
expectation of the need for the
beneficiary to require a medically
necessary stay lasting at least two
Documentation Changes
• Documentation MUST include Factors that support a
reasonable expectation of the duration of stay to exceed 2
o Factors may include:
• The physician expectation that the patient will require
care spanning at least two midnights.
o Medical History
o Comorbidities
o Severity of signs/symptoms
o Current medical needs (i.e., IV diuretics)
o Risk of an adverse event during the time period of
Documentation Changes
• There has always been a requirement for appropriate clinical
documentation to justify an inpatient level of care. The
documentation requirements under the 2 MN Rule will be
much stricter than before.
o The Rule REQUIRES a physician signature on any verbal or
telephone orders BEFORE discharge
• No more 30 days or even 72 hours
• Medical Staff by-laws might need to be changed
• The Probe and Educate data shows denial of claims (as
inpatient) for this specific reason
Case Study # 4: Flawed Physician Order
80 year-old patient presents from home to the ED on a Saturday with clinical presentation
consistent with an acute exacerbation of chronic congestive heart failure. She is short of
breath and hypoxic with ambulation. The physician determines that she will require
hospital care for diuresis and monitoring, however it is unclear at presentation whether
she will require 1 or 2 midnights of hospital care.
9:00 pm – Patient begins receiving medically necessary services in the ED. She shows
evidence of fluid overload, requiring intravenous diuresis and supplemental oxygen and
continuous monitoring.
11:00 pm – Intravenous diuretics are provided and an order for observation services is
written with a plan to re-evaluate her within 24 hours for the need for continued hospital
care or discharge to home.
9:00 am - She remains short of breath and hypoxic with ambulation, requiring additional
intravenous diuresis and supplemental oxygen.
5:00 pm – She continues to respond to diuretics but remains short of breath and hypoxic
with ambulation, requiring additional intravenous diuresis for another 12 to 24 hours.
VERBAL Inpatient admission order is written based on the expectation that the patient will
require at least 1 more midnight in the hospital for medically necessary hospital care.
•10:00 am - The patient’s acute CHF exacerbation is resolved and she is discharged
12/10/2013 200PM – The attending physician signs and dates the admission order
Case Study #5: Admission to the ICU
73 year-old male with an accidental environmental toxic exposure presents to
the ED. 12/1/2013
9:00 am - Patient arrives by ambulance to the ED. Patient is awake and alert.
9:03 am - Poison control/POISONINDEX consulted, which advises that patient
requires telemetry monitoring; plan to intubate if necessary. Small hospital
facility, telemetry monitoring is only available in the intensive care unit.
9:07 am - Therapeutic and diagnostic modalities have all been ordered and
initiated. Patient airway intact.
10:00 am - MD requests transfer to ICU for telemetry monitoring. Unclear to the
physician if this patient will need medically necessary hospital level
care/services for 2 or more midnights. Determination will be dependent on
clinical presentation and results of diagnostic and therapeutic modalities.
10:30am - Medical concerns/ sequelae resolving; airway remained intact
absent mechanical intervention.
12:00pm - Physician writes orders to discharge home.
Hospital should bill for outpatient services. Location of care in the hospital
does not dictate patient status. The patient’s expected length of stay was
unclear upon presentation and the physician appropriately kept the patient
as an outpatient because an expectation of care passing 2 midnights never
developed. No other circumstance was applicable.
Case Study #6: Unforeseen circumstances
Disabled 50 year-old man presents to ED from home with history of cancer,
now with probable metastases and various complaints, including nausea and
vomiting, dehydration and renal insufficiency.
10:00 pm - presents to the ED at which time the admitting provider evaluates
and orders diagnostic/therapeutic modalities.
4:00 am - Physician writes an order to admit. Patient is formally admitted with
the expectation of medically necessary hospital level of care/services for 2 or
more midnights.
9:00 am - Appropriate designee and the family discuss with the primary
physician the desire for hospice care to begin for this patient immediately.
3:00 pm – Patient is discharged with home hospice.
Hospital may bill this claim for inpatient Part A payment. Claim will
demonstrate 1 midnight of inpatient services. This represents an unforeseen
circumstance interrupting an otherwise reasonable admitting practitioner
expectation for hospital care. Upon review, this should be appropriate for
inpatient admission and payment so long as the physician expectation and
unforeseen circumstance were supported in the medical record.
Case Study # 7: Medical Necessity
78 year-old man with a past and current medical history of chronic illnesses that are
well controlled with medications. Patient slips while shoveling and falls and sustains
a closed wrist fracture.
11/9/2013 Saturday
o 11:00 pm - Beneficiary presents to the ED following fall at home. Beneficiary
presents alone.
o 11:30 pm - Beneficiary arm fracture confirmed by practitioner. Pain medication
11/10/13 Sunday
o 3:30 am - Beneficiary pain well controlled, stable for discharge but continues to
require custodial care. No family or friends available and hospital social
services are unavailable until Monday morning.
Beneficiary held in hospital pending home care plan, no IV access, pain well
controlled with oral medication.
11/11/13 Monday
•10:00 am – Beneficiary released to home with family member. No other
Outpatient services may be provided and billed to Medicare as appropriate.
What does this mean to my
hospital's finances"?
• Financial impact of more inpatient, less observation
and a 2% reduction in overall payment
o Probe and Educate period
o After March 31, 2015
o Projection based on history
• Patient co-pay
o Effect on collections/patient accounting/work flow
o Effect on bad debt
• Staffing mix and responsibilities
• Capture of all services for potential payment
o MC FFS claim may be retro-reviewed in new work flow and will require
billing as Part B if found deficient
Recommendations for thriving
• Review work flows for all staff including medical staff
• Ensure adequate clinical documentation to include
dates and times on physician orders
• Institute robust Multidisciplinary Rounds to ensure
close monitoring of delays in provision of services
• Ensure correct status from all Points of Entry
o Process to ensure all Medicare FFS records are reviewed prior to claim
o 2MN rule only applies to Medicare FFS at this point
• Educate, educate, educate
Medical staff
Claim processing
Recommendations for thriving con’t
• Configure automated
claims management to
accommodate new rules
• Assess system vulnerability to
delay in service denial
• Educate/train CM and CDI
staff on appropriate
• Institute internal audit of all
short stay claims
Outpatient Observation
Track, trend and report
• Fortify denial management
activities to respond to
MAC’s and RAC’s rapidly to
avoid take back