Question

How has the two-midnight rule impacted the design and operations of healthcare? How effective has this policy been in curbing costs? Has in influenced what types of delivery structures healthcare systems are developing?

Answer 1

The two-midnight rule refers to the rule that inpatient admission and payment are appropriate in case the physician expects that the patient needs to be kept in the hospital for two nights and let the patient stay based on this observation. Further, in case the patient stays less than two midnights hospital will be paid based on observation status instead of inpatient status.

This rule by CMS (Centre for Medicare and Medicaid Services) has been criticized by various hospital groups including the Federation of American Hospitals saying that this rule has been made based on flawed and arbitrary assumptions. It has been reported that medicare beneficiaries had 1.5 million stays under observation status, and further, 1.4 million long outpatient stays in the year it was implemented.

As it applies to only traditional Medicare, it has been criticized. It was estimated that this rule could reduce average reimbursement per case in the range of 3000 to 4000 dollars. However, one the one hand it serves the people while on the other hand, it raises questions of negative margin for the hospitals.