The American Hospital Association and several delivery systems have filed two federal lawsuits challenging the “two-midnight rule” for hospitals, as well as a 0.2 percent payment cut in Medicare to offset alleged higher costs because of the rule.

Under the two-midnight rule, Medicare will not reimburse hospitals under Part A for inpatient-level services provided to Medicare beneficiaries for treatment that does not span two midnights. The Centers for Medicare and Medicaid Services considers such treatment to be outpatient and payable under Part B.

Hospitals in lobbying efforts and administrative appeals have argued that the policy undermines medical judgment and safe care practices, did not give adequate time to prepare for the new rule and financially hurts them. CMS twice postponed enforcement of the rule and the Medicare Doc-Fix legislation recently enacted postponed the rule again, through March 31, 2015.

After exhausting administrative appeals, AHA, four delivery systems (Banner Health, Mount Sinai in New York, Einstein Healthcare Network & Wake Forest Baptist Medical Center) along with four state hospital associations (Greater New York, New York State, New Jersey & Pennsylvania) have filed two federal lawsuits against HHS Secretary Kathleen Sebelius in the United States District Court for the District of Columbia.

The first suit contends that the two-midnight rule, an expectation that physicians certify at admission that a Medicare patient is expected to need treatment for a period spanning two midnights, and Medicare’s policy of requiring rebilling of denied claims within one year of service when many claims are at least a year old when audited, are all unlawful policies, says Lawrence Hughes, assistant general counsel for the AHA.

In the suit, the associations and hospitals assert that the two-midnight rule is arbitrary and capricious. “It undoes decades of Medicare policy. It unwisely permits the government to supplant treating physicians’ judgment. And most important, it defies common sense. The word ‘inpatient’ simply doesn’t mean “a person who stays in the hospital until Day 3,’ and CMS is not at liberty to change the meaning of words to save money. The rule cannot withstand scrutiny under the Administrative Procedure Act.”

A second suit contends that the 0.2 percent Medicare payment based on CMS’ expectation of more patients being admitted for a two-midnight stay is unlawful. “Medicare has cut the reimbursement rate it pays to the nation’s hospitals without any reasoned basis for doing so,” according to the suit. “That unlawful payment reduction already is harming the Plaintiff hospitals. And all told, it will cost the nation’s hospitals more than $200 million this year alone.”

An email sent to CMS media officers after business hours on the evening of April 14 asking for comment on the lawsuits was not immediately responded to. The lawsuits are available here.

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