AHA and hospitals challenge two-midnight rule in federal court

The American Hospital Association, four state hospital associations and four hospital/healthcare systems are taking the Centers for Medicare & Medicaid Services to court over its controversial two-midnight rule that restricts inpatient payment to only be appropriate in cases where the admitting physician expects that the patient will stay in the hospital long enough to cover at least two midnights.

Last year, the rule contributed to a drop in inpatient numbers that negatively impacted almost all hospital operators and caused administrative headaches that eventually led CMS to put enforcement of the rule on hold until problems could be worked out. There is also a bill in Congress sponsored by U.S. Senators Robert Menendez (D-N.J.) and Deb Fisher (R-Neb.) to fix the two-midnight rule. Read more here.

In two related suits, the AHA, the hospital associations and the hospitals are seeking a Federal court ruling on whether the two-midnight rule and a 0.2 percent payment cut related to it are a violation of both Medicare stature, which specifically prohibits the requirement that physicians issue written orders for inpatient stays that are not extended in nature, and the Administrative Procedure Act (APA), which is a law that prohibits Federal agencies (like CMS) from making rules that are “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.” Because CMS used faulty assumptions and did not explain its reasoning, the two midnights criteria for an appropriate inpatient stay is both arbitrary and capricious, the AHA, the other associations and the hospitals noted in their suit.

Specifically, they want the court to declare that the two-midnights rule, the one-year time limit on resubmitting denied Part A inpatient claims for Medicare Part B payment, the requirement that physicians write an order for all inpatient admissions, and the 0.2 percent payment cut are all illegal because they are either arbitrary and capricious rules that violate the APA, or violations of the Medicare Act. They also want CMS to reimburse the hospitals for all the care that was provided under denied Part A claims that could then not be resubmitted as Part B claims because the one-year deadline for submitting a claim had already passed by the time the Part A claim was denied.

Both cases were filed in the U.S. District Court for the District of Columbia. Joining the AHA in the suits are the hospital networks Banner Health in Phoenix, Ariz., Mount Sinai Hospital in New York, Einstein Healthcare Network in Philadelphia, and Wake Forest Baptist Medical Center in Winston-Salem, N.C., as well as teh Greater New York Hospital Association, the Healthcare Association of New York State, the New Jersey Hospital Association, and the Hospital and Health System Association of Pennsylvania.