Kusserow on Compliance: The OIG announces plan to begin auditing the Two-Midnight Rule

The HHS Office of Inspector General (OIG) announced that it will begin auditing short stay claims again, and when appropriate, recommend overpayment collections. The agency’s previous audits identified millions of dollars in overpayments for inpatient claims with short lengths of stay. The OIG found that many have billed stays as inpatient claims when they should have been billed as outpatient claims, which usually results in a lower payment.

To reduce inpatient admission errors, CMS implemented the Two-Midnight Rule in 2014. CMS generally considered it inappropriate to receive payment under the inpatient prospective payment system (IPPS) for stays not expected to span at least two midnights. The only procedures excluded from the rule were newly initiated mechanical ventilation and any procedures appearing on the Inpatient Only List. Revisions were made to the Two-Midnight Rule after its implementation.

The OIG plans to once again audit hospital inpatient claims after the implementation of and revisions to the Two-Midnight Rule. The objective is to determine whether inpatient claims with short lengths of stay were incorrectly billed as inpatient and should have been billed as outpatient or outpatient with observation. The OIG also plans to review policies and procedures for enforcing the Two-Midnight Rule at the administrative level and contractor level. With this new initiative, hospital Compliance Officers should consider focusing on this issue as part of their 2021 work plan.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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