Breaking News: Medicare Advantage Must Follow Two-Midnight Rule

CMS releases final rule April 5.

With an extremely compressed timeframe, the Centers for Medicare & Medicaid Services (CMS) released CMS-4201-F, the rule setting new regulations for Medicare Advantage (MA) plans. As I reported in a previous RACmonitor News article, in December 2020, CMS proposed to codify the requirement that MA plans follow the Two-Midnight Rule, including the Inpatient-Only List. Then, only a few weeks after the comment period closed, during which 887 comments were submitted, CMS sent the final rule to the Office of Management and Budget (OMB) for approval on March 8; approval was issued on March 31, and the final rule was released April 5.

And as expected, the final rule codifies the requirement that MA plans do indeed have to follow the Two-Midnight Rule and the Inpatient-Only List. CMS specifically notes that MA plans must not only follow the two-midnight benchmark – when a physician admits a patient as an inpatient with the clinically appropriate expectation that the patient will need two midnights of necessary hospital care – but also the “case-by-case exception,” wherein two midnights are not expected, but based on complex medical factors documented in the medical record, inpatient care is nonetheless necessary.

It should be noted that CMS specifically rejected the two-midnight presumption’s applicability to MA plans, noting that the plans have the discretion to audit any inpatient admissions of their choosing to ensure that two midnights of hospital care were indeed medically necessary. CMS noted that the presumption will continue to apply to their contractors and the claims that are chosen for audit. But it should be remembered that two-midnight admissions can still be audited if there is a suggestion of gaming or delays in care. 

CMS also did not prohibit MA plans from using commercial criteria such as MCG or InterQual, noting that these tools are evidence-based and can help determine medical necessity. But CMS specified that in the case of admission to a skilled nursing facility (SNF) or inpatient rehabilitation facility (IRF), the criteria cannot be used in place of the Medicare guidelines. CMS went on to specify that “the MA plan must provide, in a publicly accessible way, the internal coverage criteria in use; a summary of evidence that was considered during the development of the internal coverage criteria used to make medical necessity determinations; a list of the sources of such evidence; and an explanation of the rationale that supports the adoption of the coverage criteria used to make a medical necessity determination.” How that will play out remains to be seen.  

CMS also noted that “while CMS does not have requirements that govern who within an MA plan must conduct peer-to-peer reviews, we reiterate that if the MA plan issues an adverse organization determination, the physician or other appropriate healthcare professional who conducts the organization determination review must have expertise in the field of medicine that is appropriate for the item or service being requested.” This may have an effect on the peer-to-peer process followed by many MA plans.

It appears that the provisions of this rule related to utilization review are effective immediately, as CMS was simply codifying the existing regulations governing MA plans, but I will admit that as often is the case, it is not clearly stated by CMS.

There is much more to this rule including the requirement that MA plans have a UM Committee that includes practicing physicians. Stay tuned to Monitor Monday and RACmonitor news for more updates.