Why Medicare Advantage Denials for Patients with Two Midnights Still Exist

It has nearly been six months since 42 CFR 422.101(b)(2) within the Code of Federal Regulations was officially set into motion on Jan. 1, obligating Medicare Advantage (MA) plans to follow the Medicare Two-Midnight Rule and Medicare Inpatient-Only (IPO) lists when it comes to patient status.

Have all the postulated outcomes come to fruition? Hardly. Let’s consider two of them:

1. Denials from MA plans for inpatient-designated hospitalizations will drop precipitously.

• This most certainly has not happened, even anecdotally, because the Two-Midnight Rule does not simply involve passage of a second midnight in the hospital. It involves medical necessity of that second midnight. As much as it seems we have been talking about medical necessity since October 2013, when the Two-Midnight Rule was introduced by the Centers for Medicare & Medicaid Services (CMS), many continue to apply It inappropriately. More on this in a bit.

• While CMS made it clear in 2023 that MA plans must utilize the Two-Midnight Rule, they did not include any consequences or penalties if they do not. While some have recommended filing complaints to CMS about violations of the federal regulation by sending an email to your CMS regional office with the number of cases and the payors involved, this is only a suggestion, and not a formal notification or grievance process established by CMS. As such, there is technically nothing – at this point – to stop MA plans from electing not to comply with the Two-Midnight Rule.

2. Scores of MA plan medical directors will lose their jobs on Jan. 1 due to the simplicity of status determination related to application of the Medicare Two-Midnight Rule and subsequent decline of MA plan denials.

• Once again, application of the Two-Midnight Rule for hospitalizations covered by MA plans has not resulted in fewer denials. As such, there likely has been no decline in employment opportunities for MA plan medical directors. In fact, a cursory review of LinkedIn, and other job search engine sites results in plenty of postings for this type of position.

Let’s get back to the point about the passage of two midnights with medical necessity.

The problem is the term itself – “medical necessity.” In actuality, the concept is “medically necessary care which can only take place in the hospital setting.” Physical and occupational therapy services (including initial assessments), administration of oral medications, and assistance with activities of daily living (ADLs) and ambulation can all take place outside of the hospital. As such, none of these patient needs qualify as “medically necessary,” in the context of the Two-Midnight Rule.

This does not mean they are not necessary.

They most certainly are, and the lack of any of these services could very well lead to a disastrous or even deadly outcome for the patient. This conflict of concepts escalates the struggle clinicians and case/utilization management staff experience when making patient status decisions. 

Passage of a second midnight related to a delay in care also does not fit the bill for “medical necessity.” However, this can be trickier to assess. If discharge is delayed today because the hospitalist is waiting for cardiology to read the echocardiogram, which was performed yesterday – that’s a no-brainer.

Same goes for the patient who is hospitalized Friday and remains hospitalized Monday, because the hospital doesn’t perform stress tests on the weekends. But what if a patient with appendicitis presents to the emergency department at noon, an uncomplicated laparoscopic appendectomy takes place the following day at 4 p.m., and the patient discharges at 7 a.m. on the third day following an unremarkable recovery? Was the passage of two midnights medically necessary? It depends. Was there a medical condition that needed to be addressed or corrected before the surgery could take place, pushing it back to later in the day on the second day? Or was the patient ready for the procedure the afternoon of the first day, but there was no room in the surgical schedule until the following afternoon?

If the documentation is not clear about which was the case, you can be sure the payer will assume there was simply a scheduling delay and deny inpatient status.

Finally, let’s talk about urinary tract infections (UTIs). Maybe not just urinary tract infections – let’s utilize UTIs as a general stand-in condition when considering medical necessity.

You know the drill: “IV Ceftriaxone until urine culture and sensitivities return” is the common history and physical plan refrain, followed by a statement indicating that two midnights are expected.

Why? Because it generally takes at least two midnights, sometimes three, for a urine culture to demonstrate the infective pathogen and its sensitivities to various antibiotics. But why can’t the patient be placed on an oral antibiotic and discharged with follow-up on the urine culture results by their primary care provider? Is there a history of complicated UTIs for anatomical or instrumentation reasons, or has the patient suffered from highly resistant organisms in the past?

If these points are not applicable or are not documented in the record, medical necessity of two midnights cannot be assured as proven. 

It is imperative for clinicians, physician advisors, utilization managers, and yes, MA plan medical directors and case managers to understand the Medicare Two-Midnight Rule.

While a much simpler approach, I believe applying the Rule to any patient who remains hospitalized for at least two midnights is a non-compliant practice.

Don’t create confusion and frustration for your medical staff and utilization/case management colleagues. Utilize the Rule correctly, request additional clinician documentation when warranted to support medical necessity, and find other ways to address discharge delays in your hospital – other than attempting to pass them as appropriate inpatients.