The document discusses the '2-midnight rule' implemented by CMS on October 1, 2013, which clarifies the criteria for determining hospital inpatient admissions, emphasizing the necessity for documentation by physicians that anticipates a stay exceeding two midnights. It also highlights New Jersey's regulations that are stricter than CMS guidelines, the importance of collaborative efforts among healthcare teams, and ongoing education for physicians regarding inpatient admission processes. Lastly, it outlines exceptions to the 2-midnight rule and the evolving regulatory landscape affecting hospital billing and compliance.

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Laureen A. Rimmer
Focus 23
Appropriate Level of Care
and the 2-Midnight Rule
Where it Stands as of NOW...
By Edward J. Niewiadomski, MD and Laureen A. Rimmer, RHIA, CPHQ, CHC
Edward J. Niewiadomski
continued on page 24
Effective October 1, 2013, The Centers for Medicare
and Medicaid Services (CMS) implemented a new rule, the
“2-Midnight Rule” that is intended to clarify which patients are
sick enough to be admitted to a hospital by adding “midnight”
as a point in time for determining inpatient length of stay and
requiring physicians to certify that they have the expectation
of care surpassing two midnights. Medicare would then pay
inpatient hospital rates. Prior to this rule, CMS outlined
observation care as short term, and generally would not exceed
24 hours but could be up to 48 hours in rare and exceptional
cases. It is important to note that a New Jersey State regulation
stipulates a length of stay criteria of less than 24 hours for
observation services. The New Jersey Department of Health
and Senior Services, N.J.A.C., Title 8, Chapter 43G-32.21
outlines the state standards for observation services and
scope which is more stringent than the CMS guidance on
observation services.
The key elements of the 2-Midnight rule require docu-mentation
in the medical record for medical necessity
and a presumption of the length of stay. The focus of the
documentation requirements for Medicare inpatient admission
is as follows:
• Inpatient admission order at the time of admission
by a physician or qualified practitioner licensed by state
to admit inpatients and who has admitting privileges;
• Physician certification of medical necessity includes
(before discharge):
 Inpatient admission order signed/authenticated by
the physician or countersigned, if needed;
 Dated order;
 Reason for inpatient services, including diagnosis,
patient history, patient comorbidities, severity of
signs & symptoms, risk of adverse events, current
medical needs requiring inpatient care, plan of care,
and plans for post hospital care; and
 Estimated length of stay (expected to stay at least 2
midnights).
There are other circum-stances
supporting short inpa-tient
stays, exceptions to the
2-Midnight benchmark, based
upon CMS guidance which
are as follows:
• Procedures defined as
“Inpatient–Only”
• Unforeseen beneficiary
death
• Unforeseen transfer
• Unforeseen departure
against medical advice
• Unforeseen clinical im-provement
• Election of hospice care in lieu of continued treatment
in the hospital
• Mechanical ventilation initiated during present visit
Documentation in the medical record, as always, is critical to
explain what happened during the episode of care. Physicians
need to tell the story of the patient by outlining the above, which
will provide auditors with the reasons for the inpatient status.
The 2-Midnight presumption and the 2-Midnight
Benchmark
The 2-Midnight presumption and benchmark are outlined
in CMS-1599-F. The 2-Midnight presumption specifies that
hospital stays spanning two or more midnights, after the
beneficiary is formally admitted as an inpatient based upon
the physician order, will be presumed to be reasonable and
necessary for inpatient status, as long as the stay in the hospital is
medically necessary. CMS will direct Medicare Administrative
Contractors (MACs) not to focus medical reviews on stays
spanning at least two midnights after admission. MACs may
review these claims as part of routine monitoring activity or as
part of other target reviews and/or in the event of evidence of

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continued from page 23
systematic gaming, abuse or delays in the provision of care to
qualify for the 2-Midnight presumption.
The 2-Midnight benchmark represents when an inpatient
admission is generally appropriate for Medicare coverage and
Part A inpatient payment. For purposes of determining whether
the 2-Midnight benchmark was met, CMS will direct MACs to
consider time the beneficiary spent receiving outpatient services
within the hospital prior to inpatient admission, in addition to
the post-admission duration of care. The pre-admission time
may include services such as observation services, treatment
in the emergency department (ED), and procedures provided
in the operating room or other treatment area. MLN Matters
Number: MM8586 was released January 24, 2014 to provide
clarification to hospitals regarding the billing of inpatient hos-pital
stays to track the total, contiguous outpatient care prior
to inpatient admission to the hospital. CMS has redefined oc-currence
span code 72 which allows providers to voluntarily
identify those claims in which the 2-Midnight benchmark was
met because the beneficiary was treated as an outpatient in the
hospital prior to the formal inpatient order and admission.
From the issuance of the Inpatient Prospective Payment
System (IPPS) Final Rule CMS 1599-F for Fiscal Year (FY)
2014 on August 19, 2013 to the soon to be published IPPS
Final Rule FY 2015, CMS-1607-F on August 22, 2014 to the
Outpatient Prospective Payment System (OPPS) Proposed
Rule for Calendar Year (CY) 2015, the public comments and
CMS guidance evolves. The table on page 25 outlines the
milestones in this regulatory journey. In spite of the OPPS
Proposed Rule for CY 2015 which proposes 20 days as the
appropriate minimum threshold for physician certification,
these regulations have been and continue to be effective as
of October 1, 2013. In spite of the OPPS CY 15 proposal,
clinical documentation in the medical record drives medical
necessity for inpatient hospital stay. Physician documentation
needs to be specific and explicit.
Best practice Today
Currently, no specific procedures or forms are required.
The physician certification may be entered on various forms,
notes or records (with appropriate signatures) included in
the medical record, or on a special form, so long as there is a
separate signed statement for each certification. In the absence
of specific certification forms, the medical record elements
identified above may be sufficient to meet the initial inpatient
certification requirements for each component.
Collaboration of the revenue cycle team, inclusive of Case
Management, Patient Access Services, Health Information
Management, Clinical Documentation Improvement and
Patient Financial Services with the physicians is the key strategy
to success. Understanding the clinical processes, electronic
24 Focus
health record interfaces to the billing system and validating
the patient status concurrently are essential. How would your
organization answer these questions?:
• What is the Case Management model to support con-current
physician decision making on the patient status;
inpatient vs. observation vs. outpatient?
• Are there case managers in the ED to collaborate with
the ED physicians, hospitalists and/or community phy-sicians
to assess the clinical picture of the patient, ensure
the medical record tells the story and then places the
patient in the appropriate status?
• Is there strong physician leadership to monitor obser-vation
patients timely and make the next appropriate
clinical decisions?
• What is the role of the Utilization Review Committee
and Physician Advisors?
• Are physicians educated and do they have the tools
needed to support the clinical decision making?
• Are the clinical and financial metrics implemented and
assessed for improvement opportunities?
• Are there policies for observation billing, use of occur-rence
span code 72, inpatient only procedures?
• Is there auditing of hospital systems, policies and proce-dures
for compliance?
• Is there a process to aggressively appeal cases that appear
to meet inpatient criteria?
As CMS continues to state, the decision to admit a patient
as an inpatient is a complex medical decision based upon many
factors including the risk of an adverse event during the period
considered for hospitalization. The MACs will continue their
probe and educate while the Recovery Auditors will be in a
holding pattern by not conducting inpatient status review of
claims through March 31, 2015. Hospitals need to monitor
the regulatory advisories and remain diligent and compliant in
meeting the CMS requirements for the 2-Midnight Rule.
About the authors
Laureen A. Rimmer, RHIA, CPHQ, CHC, Director,
Coding and Compliance at BESLER Consulting has over
twenty-five (25) years of experience in health information
management administration, performance improvement,
utilization management, medical staff operations and
physician practice management. Laureen’s health information
management experiences, as well as operational experiences, have
provided key expertise in Recovery Audit Contractor (RAC)
engagements for the firm. Laureen has extensive experience with
Joint Commission accreditation, post survey intervention, as well
as CMS/State licensure compliance and has been instrumental in
implementing change in departmental operational engagements
for the firm. Laureen is a Registered Health Information
Administrator, Certified Professional in Healthcare Quality
and Certified in Healthcare Compliance.

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Focus 25
date Guidance Comments
8/19/13 IPPS Final Rule CMS-1599-F for FY 2014 2 Midnight Rule effective with admissions on or after
10/1/13.
9/26/13 CMS Special Open Door Forum
Conference call and transcript of call outlining responses to
provider questions and probe & educate by the MACs for
dates of admission 10/1/13 to 12/31/13. MAC to focus on
one inpatient midnight claims. Recovery Auditors not to
review claims for this issue for same dates of admission.
(exception for pre-payment reviews of therapy in
pre-payment demonstration states).
1/24/14
CR # 8586 Occurrence Span Code 72 Identification of
Outpatient Time Associate with an Inpatient Hospital
Admission and Inpatient Claim for Payment
Guidance to account for total hospital time, including
outpatient time that directly precedes the inpatient
admission when determining if an inpatient order should be
written, based upon the expectation that the beneficiary will
stay in the hospital for 2 or more midnights receiving
medically necessary care.
1/30/14 CMS guidance to clarify physician order & certification
for Hospital inpatient admission
Content of physician certification outlined, timing,
authorization to sign the certification, inpatient order and
specificity of orders.
10/1/13 to 1/31/14 MAC Probe & Educate
Probe & educate time period 10/1/13 to 9/30/14. MAC
requested to re-review claims to ensure claim decision and
subsequent education consistent with most recent
clarifications. Appeal timelines clarified.
4/1/14 President signed the Protecting Access to Medicare Act
of 2014
Extends MAC probe & educate to 3/31/15. Recovery
Auditors prohibited to conduct inpatient status review of
claims 10/1/13 to 3/31/15.
5/12/14
CMS UPDATE: MACs completed most of first round
probe reviews (10 or 25 claims, volume dependent) and
beginning provider education
CMS conduct pre-payment patient status probe reviews for
dates of admission 10/1/13 to 3/31/15. MACs conduct
patient status reviews using probe & educate strategy for
claims 10/1/13 to 3/31/15. MAC education and repeat
process, when necessary.
5/15/14 CMS, HHS Proposed IPPS Rule for FY 2015. Final
Rule to be published 8/22/14.
Suggested Exceptions for the 2 Midnight Benchmark;
inviting further feedback in rare and unusual circumstances
that were not identified to justify inpatient admission for
Part A payment, absent an expectation of care spanning at
least 2 midnights.
7/14/14 CMS, HHS Proposed OPPS rule for CY 2015
Inpatient admission order is necessary for all inpatient
admissions and proposing to require such orders as a
condition of payment, rather than as an element of the
physician certification. Medical necessity documentation for
inpatient stay still required. Proposing, for non-outlier cases,
20 days as the appropriate minimum threshold for physician
certification and define long stay cases as cases with stays 20
days or longer.
Edward J. Niewiadomski, M.D., Senior Medical
Advisor, at BESLER Consulting is an accomplished
physician with over three (3) decades of experience in
direct patient care and healthcare administration. Dr.
Niewiadomski is President of Healthcare Initiatives, LLC, a
healthcare consulting company that brings new, cutting-edge
technologies and programs to Healthcare organizations that
result in high quality, increased efficiency, cost-savings and
compliance. Dr. Niewiadomski is the former Senior Vice
President of Medical Affairs and Chief Medical Officer for a
community, acute care facility in New Jersey. He has served in
multiple senior leadership positions for other New Jersey hospitals.
Dr. Niewiadomski earned his medical degree from the University
of Medicine and Dentistry of New Jersey – Rutgers Medical School
and completed a residency in
Internal Medicine at Robert Wood Johnson University Hospital in
New Brunswick, New Jersey. He also is a member of the American
Medical Association, the Medical Society of New Jersey and currently
serves on multiple association committees and board of trustees.
Footnotes
CMS: Selecting Hospital Claims for Patient Status Reviews: Admissions on
or after 10/1/13 (last update: 2/24/14)
CMS: Inpatient Hospital Reviews, Update 3/12/14
CMS FAQs, Update 3/12/14
CMS: MLN Matters Number MM8586, 1/24/14; revised 4/8/14
CMS Fact Sheets: FY 2015 Policy & Payment Changes for Inpatient Stays
in Acute Care Hospitals and Long Term Care Hospitals, 8/4/14
New Jersey Department of Health and Senior Services, N.J.A.C., Title 8,
Chapter 43G-32.21