This article from the December 2014 issue of the Lone Star Express, a publication of the Lone Star chapter of HFMA, reviews the current state of the 2-Midnight rule. It reviews key elements of the rule, the focus of Medicare documentation requirements, and best practices for compliance.

1. 1
Lone Star
Express
HFMA
Healthcare Financial
Management Association
The Lone Star Chapter
News Magazine
December 2014,
Volume 16, Issue 3

2. 9
Appropriate Level of Care and the 2– Midnight Rule
Where It Stands as of NOW
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 sur-
passing two midnights. Medicare would
then pay inpatient hospital rates. Prior to
this rule, CMS outlined observation care
as short term and generally would not ex-
ceed 24 hours but could be up to 48 hours
in rare and exceptional cases. It is im-
portant to note that a New Jersey State
regulation stipulates a length of stay crite-
ria 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 documentation in the medical rec-
ord for medical necessity and a presump-
tion 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 quali-
fied practitioner licensed by state to
admit inpatients and who has admit-
ting 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 histo-
ry, patient comorbidities, severity
of signs & symptoms, risk of ad-
verse 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 mid-
nights).
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 oper-
ating room or other treatment area. MLN
Matters Number: MM8586 was released
January 24, 2014 to provide clarification
to hospitals regarding the billing of inpa-
tient hospital stays to track the total, con-
tiguous outpatient care prior to inpatient
admission to the hospital. CMS has rede-
fined occurrence span code 72 which al-
lows providers to voluntarily identify
those claims in which the 2-Midnight
benchmark was met because the benefi-
ciary was treated as an outpatient in the
hospital prior to the formal inpatient order
and admission.
From the issuance of the Inpatient Pro-
spective 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 Outpa-
tient Prospective Payment System (OPPS)
Proposed Rule for Calendar Year (CY)
2015, the public comments and CMS guid-
ance evolves. The table below outlines the
milestones in this regulatory journey. In
spite of the OPPS Proposed Rule for CY
2015 which proposes 20 days as the appro-
priate 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 pro-
posal, clinical documentation in the medi-
cal record drives medical necessity for
inpatient hospital stay. Physician docu-
mentation needs to be specific and explic-
it.
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) in-
cluded in the medical record, or on a spe-
cial 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.
There are other circumstances supporting
short inpatient stays, exceptions to the 2-
Midnight benchmark, based upon CMS
guidance which is as follows:
Procedures defined as “Inpatient–
Only”
Unforeseen beneficiary death
Unforeseen transfer
Unforeseen departure against medical
advice
Unforeseen clinical improvement
Election of hospice care in lieu of
continued treatment in the hospital
Mechanical ventilation initiated dur-
ing present visit
Documentation in the medical record, as
always, is critical to explain what hap-
pened during the episode of care. Physi-
cians 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 bench-
mark are outlined in CMS-1599-F. The 2-
Midnight presumption specifies that hospi-
tal 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 nec-
essary. CMS will direct Medicare Admin-
istrative 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 tar-
get reviews and/or in the event of evidence
of 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

3. 10
Appropriate Level of Care and the 2– Midnight Rule
Where It Stands as of NOW
Collaboration of the revenue cycle team,
inclusive of Case Management, Patient
Access Services, Health Information Man-
agement, Clinical Documentation Im-
provement and Patient Financial Services
with the physicians is the key strategy to
success. Understanding the clinical pro-
cesses, electronic 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 concurrent physician deci-
sion making on the patient status; in-
patient vs. observation vs. outpatient?
Are there case managers in the ED to
collaborate with the ED physicians,
hospitalists and/or community physi-
cians to assess the clinical picture of
the patient, ensure the medical record
tells the story and then places the ap-
propriate status?
Is there strong physician leadership to
monitor observation 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 im-
provement opportunities?
Are there policies for observation
billing, use of occurrence span code
72, inpatient only procedures?
Is there auditing of hospital systems,
policies and procedures for compli-
ance?
Is there a process to aggressively ap-
peal cases that appear to meet inpa-
tient 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 dur-
ing the period considered for hospitaliza-
tion. The MACs will continue their probe
and educate while the Recovery Auditors
will be in a holding pattern by not con-
ducting 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.
By: Edward J. Niewiadomski, MD and Laureen A. Rimmer, RHIA, CPHQ, CHC
Edward J. Niewiadomski, M.D., Senior Medical Advisor for BESLER Consulting is an accom-
plished physician with over three decades of experience in direct patient care and healthcare admin-
istration. Dr. Niewiadomski is the former Senior Vice President of Medical Affairs and Chief Medi-
cal 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 com-
pleted a residency in Internal Medicine at Robert Wood Johnson University Hospital in New Bruns-
wick, 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.
Laureen A. Rimmer, is the Director of Coding, Accreditation & Clinical Services for BESLER
Consulting. Laureen has over twenty-five (25) years of experience in health information manage-
ment 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 compliance and revenue cycle engage-
ments for the firm. Laureen has extensive experience with CMS/State licensure compliance and has
been instrumental with implementing change in departmental operational engagements for the firm.
Laureen is a graduate of Northeastern University, Boston, MA, is a Registered Health Information
Administrator (RHIA), Certified Professional in Healthcare Quality (CPHQ) and Certified in
Healthcare Compliance (CHC).

4. 11
Appropriate Level of Care and the 2– Midnight Rule
Where It Stands as of NOW
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 provid-
er questions and probe & educate by the MACs for dates of admis-
sion 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 Outpa-
tient 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 determin-
ing if an inpatient order should be written, based upon the expecta-
tion that the beneficiary will stay in the hospital for 2 or more mid-
nights receiving medically necessary care.
1/30/14 CMS guidance to clarify physi-
cian 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 educa-
tion 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 com-
pleted most of first round probe
reviews (10 or 25 claims, vol-
ume 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 re-
views 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 fur-
ther feedback in rare and unusual circumstances that were not iden-
tified 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. Propos-
ing, 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.