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Ways and Means Holds Hearing on Two-Midnight Rule, RAC Audits

The House Ways and Means Subcommittee on Health held a hearing on hospital Medicare payment issues Tuesday, May 20. The subcommittee focused on three overarching issues pertaining to hospital inpatient reimbursement:

  • the two-midnight rule that redefined which hospital stays qualify for inpatient reimbursement
  • recovery audit contractor (RAC) reviews of hospital payment determinations
  • provider appeals of Medicare payment determinations

The witnesses at the hearing included Sean Cavanaugh, deputy administrator and director of the Center for Medicare in the Centers for Medicare & Medicaid Services (CMS) and Jodi Nudelman, regional inspector general for the Office of Evaluation and Inspections in the Office of the Inspector General.

The subcommittee discussed the administrative burden caused by the two-midnight rule, which has prompted hospitals to hire additional staff to ensure compliance with the rule. Members of the subcommittee emphasized the two-midnight rule imposes an arbitrary, time-based presumption of whether an inpatient stay is appropriate and removes decision-making discretion from physicians.

Due to concerns with the two-midnight rule, Congress recently passed legislation requiring CMS to continue to delay enforcement of the rule until March 31, 2015. Cavanaugh noted that CMS is seeking comment on an alternative payment methodology for short inpatient stays in the fiscal year 2015 Inpatient Prospective Payment System proposed rule. The panel also discussed the high rate at which RAC decisions are overturned, which may indicate excessive and inaccurate auditing by these contractors. Finally, the panel focused on the backlog of cases for review at the administrative law judge level due to a recent increase in the number of appeals.


About the Author

Shahid Zaman is a senior policy analyst at America's Essential Hospitals.

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