CMS Extends RAC Prohibition of Reviews of Stays Longer than 2 Midnights

The prohibition of recovery audit contractors (RACs) conducting a post-payment patient status review of inpatient hospital claims for inpatient stays spanning more than two midnights has been extended for an additional six months, to September 30, 2014. The Final rule updating the Inpatient Prospective Payment System (IPPS) for fiscal year (FY) 2014 CMS stated that inpatient admissions would be presumed to be reasonable and necessary when the admitting physician anticipated that the beneficiary’s inpatient stay would span at least two midnights and the admitting physician documented the reason for that determination in the admittance order. Under this extension RACs and Medicare Administrative Contractors (MACs) are prohibited from conducting these reviews for inpatient claims with dates of admission between October 1, 2013, and October 1, 2014, and when the beneficiary was a hospital inpatient for a time period that included two midnights, unless there was evidence of fraud and abuse or delay in the provision of care in an attempt to qualify for the two midnight presumption.

Probe and Educate Reviews

MACs, however, will be able to continue to conduct “probe and educate” reviews for inpatient stays shorter than two midnights. Under the “probe and educate” process outlined in an earlier CMS release, MACs can select 10 claims for prepayment review for most hospitals and 25 claims for larger hospitals to determine if the inpatient stay of less than two midnights was reasonable and necessary. Claims found to be out of compliance for this time period will be denied, and the MAC is to follow-up with the hospital via letter or phone call to explain why the claim was denied. MACs were instructed that if the total time the beneficiary spent in the hospital receiving medically necessary care, including pre-admission outpatient time, was longer than two midnights, the presumption would be met that the inpatient stay was reasonable and necessary under the “probe and educate” policy. This “probe and educate policy” is to continue through September 30, 2014, as well.

RAC Reviews

Although RACs are prohibited from conducting post-payment or pre-payment reviews of inpatient status, they will be able to continue to review IPPS claims from hospitals for correct use of a billing code, the medical necessity of a surgical procedure, and inpatient status reviews with dates of admission prior to October 1, 2013, as well as inpatient status reviews of inpatient stays less than two midnights. RACs can review claims to determine if an overpayment or underpayment has been made. RACs are paid a contingent fee based on the amount of overpayments collected. In FY 2009 and FY 2010, CMS reports, contingent fees ranged from 9.0 percent to 12.5 percent of amount of overpayment collected.


CMS will be conducting a special open door forum on February 4, 2013, for hospitals, practitioners, and other interested parties to ask questions about physician orders, physician certification, inpatient admission orders and medical review criteria under these policies. A Medicare Learning Network (MLN) national provider call will be held on February 27, 2014, to address these issues as well.

CMS adopted the presumption that an inpatient stay expected to be longer than two midnights would be reasonable and necessary to address concerns that hospitals were holding beneficiaries in outpatient departments instead of admitting them as inpatient in fear that a RAC would find that the inpatient admittance was not reasonable or necessary and deny the claim. Beneficiaries were also complaining that these long stays in outpatient departments were resulting in large copayment as outpatient services are provided under Part B. The American Hospital Association and other organizations sought a ban on reviews of claims for stays longer than two midnights by RACs as they felt that the policy needed to be further clarified.