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July 23, 2018 - Revised: 03.19.24

The Two-Midnight Rule: Preventing Denials

Hospital Inpatient vs. Outpatient

What type of care does my Medicare beneficiary need?

The physician or qualified practitioner must decide if it is reasonable and necessary to admit the beneficiary as an inpatient or if it is more appropriate to provide outpatient treatment. In each case, actual treatment takes place in the hospital facility. To support an inpatient hospital admission, the beneficiary's clinical presentation, prognosis and expected treatment must support the expectation of the need for his/her hospital care to span two or more midnights.

  • This decision significantly impacts the provider's reimbursement and the beneficiary's cost sharing
  • Not all care (medical or surgical) provided in a hospital setting is appropriate for inpatient Part A coverage

Documenting the Decision to Admit

What documentation should the physician provide to support the expectation of a hospital stay that spans 2 or more midnights was reasonable?

The decision to admit a beneficiary as an inpatient is a complex medical judgment that can only occur after the physician considers various factors including (but not limited to):

  • Beneficiary's age
  • Disease processes
  • Comorbidities
  • Potential impact of sending the beneficiary home

Many elective procedures that transpire without complications will require a stay of less than two midnights, and do not merit an inpatient hospital admission. If the physician is unable to determine if the beneficiary will require 2 or more midnights of hospital care at the time the beneficiary presents, the physician may order observation services and consider an order for inpatient admission at a later point in time. The physician must complete and document the “change of status” order prior to the patient's discharge. If the physician determines the patient's care will likely require a stay that spans two or more midnights, the medical record should reflect those factors to support that conclusion.

Documentation Expectations

  • Expected length of stay to span 2 or more midnights; and,
  • Determination of the underlying need for medical or surgical care at the hospital is supported by complex medical factors in the physician assessment, plan of care, treatment orders, and physician notes
    • History and comorbidities
    • Severity of signs and symptoms
    • Current medical needs
    • Risk of an adverse event
    • Any additional documentation to provide medical necessity

Background

The Comprehensive Error Rate Testing (CERT) Program continues to report high error rates for inpatient hospital claims because the medical record documentation submitted for review does not meet the criteria established in the Two-Midnight Rule to support a reasonable and necessary determination for a covered Part A inpatient admission.

The Two-Midnight Rule states

  • Hospital care is covered as a Part A inpatient admission when the admitting practitioner expects a patient's hospital stay to cross two midnights and the medical record supports this reasonable expectation.
  • Coverage under Part A is not appropriate for hospital stays where the practitioner does not expect care to span two or more midnights.
  • Treatment decisions are based on a physician’s and/or qualified practitoner’s medical judgment.
  • This rule does not prevent the physician from providing any service at any hospital, regardless of the expected duration of the service.

Special Notation for Coverage

When the physician expects the patient to stay at least 2 midnights (and the medical record supports this expectation), but the length of the actual stay was less than two midnights (due to unforeseen circumstances, such as: unexpected patient death, transfer, clinical improvement, departure against medical advice, or admission for an inpatient only procedure) the care is still appropriate for Part A inpatient coverage.

Short Inpatient Hospital Stays (expected to last less than two midnights):

  • If a procedure is not included on the inpatient-only list, or is otherwise listed as a national exception, an inpatient admission is covered under Medicare Part A on a case-by-case basis (based on the judgment of the admitting physician).
  • A scenario in which an inpatient hospital admission is required for care when the physician does not expect the beneficiary to remain in the hospital for at least two midnights is rare and unusual.
    • Documentation in the medical record must support that an inpatient admission is necessary and is subject to medical review.

      CGS Two Midnight Errors Sept 2023-Jan 2024

Resources

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