Selected Topics from the 2015 OIG WORK PLAN: New Two-midnight Inpatient Admission Criteria

Selected Topics from the 2015 OIG WORK PLAN: New Two-midnight Inpatient Admission Criteria


by Christopher Richards, RHIA, CCS

This series of posts will highlight potential provider vulnerabilities with respect to the OIG 2015 work plan. Our sister company, Barry Libman Inc., is available to assist you with any areas where you feel you might have potential exposure. Certainly, everyone is in full agreement that a good compliance plan strives to identify concerns before the OIG does.


Hospital—Related Policies and Practices –  New two-midnight inpatient admission criteria

“We will determine the impact of new inpatient admission criteria on hospital billing, Medicare payments, and beneficiary copayments. This review will also determine how billing varied among hospitals in FY 2014. Previous OIG work identified millions of dollars in overpayments to hospitals for short inpatient stays that should have been billed as outpatient stays. Beginning in FY 2014, new criteria state that physicians should admit for inpatient care those beneficiaries who are expected to need at least 2 nights of hospital care (known as the ‘two-midnight policy’). Beneficiaries whose care is expected to last fewer than 2 nights should be treated as outpatients. The criteria represent a substantial change in the way hospitals bill for inpatient and outpatient stays.”


Simply put – this is a moving target and requires your vigilance as it evolves into a long-term policy. CMS has been trying to define medical necessity as it applies to full inpatient admission since the beginning of the DRG system in 1985.

The so-called two-midnight rule is the most recent effort to simplify the decision to “admit” as a full inpatient or “place” in observation.  The two-midnight rule evens allows for a combination of the two.

Two Congressional bills are currently in the works that address the controversy created by the initial rule –

H.R. 3698
“To delay the enforcement of the Medicare two-midnight rule for short inpatient hospital stays until the implementation of a new Medicare payment methodology for short inpatient hospital stays, and for other purposes.”

S. 2082
“To provide for the development of criteria under the Medicare program for medically necessary short inpatient hospital stays, and for other purposes.”

At present the two-midnight rule is the policy in place although audit enforcement of the rule by MACs and RACs has been delayed.  This has not prevented the OIG from embarking on its own study to advise congress of its conclusions.

About the Author

Chris Richards, RHIA, CCS
Chris joined Barry Libman Inc. as a Senior Associate in 2014 after 27 years with Masspro, the Massachusetts Quality Improvement Organization (QIO). Chris’s areas of expertise include health information administration, case management, quality improvement, hospital payment oversight, and documentation education initiatives. He has a comprehensive understanding of the Federal Medicare program rules and regulations, as well as extensive experience ensuring that clinical coding and DRG assignment result in accurate provider reimbursement. A graduate of Hobart College, he received a postgraduate Bachelor of Science in Health Information Administration from Northeastern University.

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