Little-known Benefits of the Two-Night Rule

One of the notable things about the Centers for Medicare & Medicaid Services (CMS), and the Two-Midnight Rule in particular, is its ability to develop and maintain an entire commensal industry to explain it.

Recently I was asked, “Is an inpatient order required for billing Medicare and Medicare Advantage (MA)?” I thought I was sure of the answer, for fee-for-service Medicare. And since January 2024, I was fairly sure of the answer for MA. I thought about it and gave the low-value response of “maybe.”

Then, I really had to think about this. In the past, I had seen auditors and government contractors cite the regulations at 412.3(a) to deny payment for otherwise medically necessary inpatient care. While I find this maddening, I understand. Without an order, how would an auditor determine the intent to provide inpatient care? Outside of inpatient-only cases and some intensive care services, the absence of an inpatient order could be readily interpreted as an intent to provide outpatient services to a hospitalized patient.

So, exactly what does an inpatient order mean, and how important is it?

We need to look to the CFRs. Section 412.3(a) essentially imposes two requirements:

• An individual is considered an inpatient if formally admitted pursuant to an order for inpatient admission; and
• The order must be from a practitioner who has admitting privileges and is knowledgeable about the patient.

The Two-Midnight rule expanded that and specified the circumstances under which others may enter an inpatient order on behalf of a physician – and added that a delegated order must be co-signed within specified periods, but always prior to discharge.

This was the state of affairs until CMS 1694-F. The 2019 Inpatient Prospective Payment System (IPPS) noted that some medically necessary inpatient admissions were being denied payment due to technical deficiencies of inpatient orders. But CMS qualified this an “infrequent” occurrence. In such circumstances, CMS notes that an inpatient order is not required as long as “the medical record as a whole supports that all the coverage criteria (including medical necessity) are met … and the hospital is operating in accordance with the hospital conditions of participation.” Five years later, CMS has not removed the order requirement from the regulations.

This sound like directions to contractors, auditors and now, MA plans. It does not sound like carte blanche to abandon an effective order process and degenerate into the uncontrolled perdition of random billing of inpatient claims.

So, what does this mean for providers?

First, a valid order remains an unambiguous declaration of a physician’s intent with regard to a patient’s status.

Second, an absent or defective inpatient order is no longer automatically fatal. But I would recommend reviewing each of these claims for two reasons:

First, each such claim is a clear documentation of process failure, and possibly a violation of the conditions of participation.

Second, intent for inpatient care would depend exclusively on “the medical record as a whole.” In cases involving inpatient-only procedures, many intensive care unit admissions, and many cases exceeding two midnights, this might be a straightforward review.

Cases with fewer than two midnight stays, and some two-midnight stays, probably should not survive scrutiny. Finally, cases with unambiguous orders for some status other than inpatient should not be billed as inpatient.

It’s still ambiguous. I’m grateful to CMS for helping us stay employed.