In 2013, the Centers for Medicare and Medicaid Services (CMS) introduced the Two Midnight Rule (2MN Rule) in response to widespread findings by Recovery Audit Contractors regarding inappropriate inpatient admissions. The 2MN Rule stipulates that hospital care spanning less than two midnights, with few exceptions, is generally inappropriate for payment under Medicare Part A. While initially actual enforcement of the 2MN Rule struggled to get off the ground, it is now widely embraced by most healthcare facilities a decade later.
One of the difficulties along the way has been the Medicare Advantage (MA) plans’ consistently maintaining the 2MN Rule did not apply to them. This resulted in a significant number of inpatient denials for MA patients, whereas the same hospitalization for a traditional Medicare beneficiary would have been covered by Part A under the 2MN Rule. MA beneficiaries denied an inpatient admission potentially faced higher out of pocket costs and forfeited their eligibility for rehabilitation care at the skilled nursing facility level due to the lack of a three-day inpatient stay.
Many facilities attempted to rectify these issues through appealing denials and contract negotiations with the MA plans, resulting in great administrative cost. However, most found the MA plans would not budge from their position.
Chapter 4 of the Medicare Managed Care Manual, 100-16 outlines the benefits and beneficiary protections that MA plans must offer. The basic rule states:
“An MAO offering an MA plan must provide enrollees in that plan with all Part A and Part B original Medicare services, if the enrollee is entitled to benefits under both parts, and Part B services if the enrollee is a grandfathered “Part B only” enrollee. The MAO fulfills its obligation of providing original Medicare benefits by furnishing the benefits directly, through arrangements, or by paying for the benefits on behalf of enrollees.”
The significance of this statement is due to the inclusion of the 2MN Rule in the Medicare Benefit Manual, it is a benefit to all Medicare beneficiaries. MA plans have consistently cited a variety of reasons why this basic benefit rule did not apply to them, and CMS remained silent on the issue until April of 2023, when they published CMS 4201-F which becomes effective January 1, 2024. The rule finalizes that MA plans must comply with National Coverage Determinations (NCD’s), Local Coverage Determinations (LCD’s) and general coverage and benefit conditions included in traditional Medicare statutes and regulations. Through this provision, MA plans are prohibited from denying coverage of a Medicare covered item or service based on internal, proprietary, or external clinical criteria not found in traditional Medicare coverage policies. Simply put, CMS is confirming that MA plans must adhere to Medicare guidelines, which includes the 2MN Rule.
MA organizations have been relatively quiet about the impending changes, however, there is anecdotal evidence to suggest that some MA organizations continued to believe that the rule did not apply to them due to the specifics outlined in their contracts with medical organizations governing benefit administration. On October 24, 2023, CMS reaffirmed that the rule does indeed apply to all MA organizations by publishing a memo stating they would begin conducting strategic conversations surrounding utilization management (UM) requirements with MA plans in November 2023. Furthermore, the memo stated that CMS would conduct audits to assess MA compliance with the UM requirements outlined in CMS 4201.
Please note there have been no alterations to existing Medicare rules. CMS has merely indicated their intention to now enforce the pre-existing regulations that require MA plans to follow traditional Medicare UM processes. Therefore, facilities can, and should hold MA plans accountable for inpatient admissions that meet the 2MN Rule, beginning immediately, challenging any denial of coverage when the encounter met the 2MN Rule or any other previously published Medicare rule.
If have any questions concerning the Two-Midnight Rule Exceptions, please contact:
Joli Fitzgibbons, Senior Director at jolifitzgibbons@sunstoneconsulting.com
Laura Ehrlich, Senior Clinical Specialist at lauraehrlich@sunstoneconsulting.com