OIG Releases Report on Vulnerabilities with Two-Midnight Policy

January 6, 2017
Policy Snapshot

The Office of Inspector General (OIG) released a report in December noting that the two-midnight policy led to limited access to skilled nursing care. According to the report, the policy increased the number of beneficiaries with hospital stays that did not qualify them for Medicare Skilled Nursing Facility (SNF) coverage.

The report found that the number of inpatient stays decreased and the number of outpatient stays increased since the implementation of the 2-midnight policy. Short inpatient stays decreased more than long outpatient stays and despite these changes, “vulnerabilities still exist.” The report stated that, “Hospitals are billing for many short inpatient stays that are potentially inappropriate under the 2-midnight policy, and some of these stays are for similar reasons as short outpatient stays. This raises concerns that Medicare is paying differently for similar care and may reflect hospitals’ financial incentives to use inpatient stays. Hospitals also continue to bill for a large number of long outpatient stays. Moreover, an increased number of beneficiaries in outpatient stays pay more and have limited access to SNF services than they would as inpatients. Finally, hospitals continue to vary in how they use inpatient and outpatient stays, even though the policy was intended to promote consistency among hospitals. The Centers for Medicare & Medicaid Services (CMS) needs to address these vulnerabilities by improving oversight of hospital billing under the 2-midnight policy and increasing protections for beneficiaries.”

The OIG investigators analyzed Medicare hospital claims from fiscal years 2013 and 2014 to assess the impact of the policy, which was implemented in fiscal 2014. In FY 2014, Medicare beneficiaries had 633,148 hospital stays that lasted at least three nights but did not include three inpatient nights, a necessity to becoming eligible for Medicare SNF coverage. That number represents a 6% increase of non-SNF eligible stays over fiscal 2013, the OIG report stated.

The OIG recommended the following to CMS in the report: “We recommend that CMS (1) conduct routine analysis of hospital billing and target for review the hospitals with high or increasing numbers of short inpatient stays that are potentially inappropriate under the 2-midnight policy; (2) identify and target for review the short inpatient stays that are potentially inappropriate under the 2-midnight policy; (3) analyze the potential impacts of counting time spent as an outpatient toward the 3-night requirement for SNF services so that beneficiaries receiving similar hospital care have similar access to these services; and (4) explore ways of protecting beneficiaries in outpatient stays from paying more than they would have paid as inpatients. CMS concurred with all four recommendations.”

The third recommendation, is consistent with the legislation the Society supports, H.R 1571 & S. 843 The Improving Access to Medicare Coverage Act, sponsored by Rep. Joe Courtney and Senator Sherrod Brown.