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Hospitals Sue Medicare Over “Two Midnights” Rule Due to Reimbursement Issues

The Einstein Healthcare Network has joined in with Banner Health in Phoenix, Wake Forest Baptist Medical Center in Winston-Salem and Mount Sinai Hospital in New York in lawsuits against administrators of the federal Medicare program. The lawsuits allege that a rule on how to qualify inpatient hospital admissions should be dropped due to its arbitrary nature, and that the 0.2 percent reduction in Medicare payments to these medical centers should be discarded.

The rule at issue in the lawsuit says that patients must be in the hospital at midnight for two consecutive days for the hospital to benefit from the inpatient payment rate. Otherwise, hospitals only receive compensation for the outpatient payment, which amounts to approximately one third of the payment for inpatient treatment.

The health care organizations acting as the plaintiffs in this case argue that the so-called “two midnights” rule deprives hospitals of the appropriate Medicare reimbursement, and that the rule is too arbitrary to properly apply to these cases. The rule can hurt patients as well, as outpatient care usually comes with significantly higher co-payment rates than inpatient care.

Medicare regulators applied the 0.2 percent cut to hospital reimbursement rates (a figure that works out to about $220 million overall) in belief that the two midnights rule would create more inpatient stays, despite it actually making it tougher for stays to qualify as inpatient. In that lawsuit, the hospitals argue that this cut was unlawful, as Medicare regulators did not give information that would have given the hospital industry a chance to analyze the reasons used to make the cut.

This case is certain to be of interest to health care providers everywhere as it progresses — it could have ramifications for the way hospitals across the country qualify patient stays as “inpatient” or “outpatient.” Speak with a dedicated health care lawyer at Buttaci Leardi & Werner, LLC for further guidance.

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  • Posted on: Oct 9 2014