Medicare Advantage and the Two-Midnight Rule

There has been a lot of recent chatter about the applicability of the Two-Midnight Rule to Medicare Advantage (MA) plans. If ever there was rampant confusion about something, it is this. The Final Rule that formally obligated the MA plans, CMS-4201-F, was finalized in April, with the rule stating that the regulations became effective June 5.

But as many have found out, none of the MA plans changed one thing on June 5 – and they were right not to, because the next line in the rule states that “the provisions in this rule are applicable to coverage beginning January 1, 2024.” Now, once again, I would defer to my lawyer colleagues to explain how a rule can have an effective date and a drastically different applicability date, but that’s the way it is. (I suspect that ambiguity is a feature of legal documents and not a flaw, as non-lawyers often view it.)

And I hate to side with the MA plans, but at least for the two-midnight provision, it actually makes sense. Each year MA plans submit bids to the Centers for Medicare & Medicaid Services (CMS) to get contracts to serve as a Part C entity. I suspect there is a giant room full of actuaries that do all sorts of predictions on cost. And for the current calendar year, the MA plans are paid based on their bids submitted back in 2022. And as we all know, back in 2022, the MA plans’ expectation was that for 2023, they would be able to continue to blatantly ignore the Two-Midnight Rule (as they have done, with CMS permission, since 2013). So that means requiring the plans to start following the Two-Midnight Rule in the middle of 2023 would just not be fair to the MA plans, as there would be significantly more inpatient claims to pay, and that would endanger their multi-billion-dollar profits.

As a result, the passage of the rule in April with applicability in 2024 allows them to appropriately adjust their 2024 bids that were due in June to compensate for the costs for all the new inpatient claims. Now, before you attack me, yes, I know that the MA plans are going to do everything they can to avoid approving inpatient admissions, just as they do now. The gamebook may change, but the objective will remain the same.

Interestingly, the confusion over the applicability is not limited to providers. When MA medical directors are asked if they are or will be following the Two-Midnight Rule, the responses vary from “what’s that?” to “oh, that does not apply to us” to “our legal team says our contract with you overrides that.” Ignorance certainly is blissful.

Now, regardless of what the MA plans may say, they will have to follow the Two-Midnight Rule as of January. They must honor the Inpatient-Only List, and there is no ambiguity there. Likewise, they can no longer use their proprietary retrospect-o-scope and deny inpatient admissions when patients die, leave against medical advice, or transfer out. Likewise, they must allow you to consider time spent at a transferring hospital in your counting of midnights.

On the other hand, you can bet they will put all their efforts into claiming that a patient doesn’t actually have a two-midnight expectation, or that the second midnight is not medically necessary, or that the risk is not high enough for the case-by-case exception to apply.

And I will have to admit, in some cases they will be correct. There is tremendous variation in medical care around the country, and often within the same city. How do we address this? Think objectively. Use the medical literature and professional society guidelines. Use your commercial guideline tools like MCG Care Guidelines – not to determine admission status, but the need for hospital care.

And of course, the best and likely most effective strategy will be to get your doctors to justify their inpatient admission decisions and risk assessments in writing. What are they worried about? What are they planning to do? How long will it take? What risk factors place the patient at higher risk than other patients with the same condition?

That will be easy, right?