122 Short-Term Acute Care Hospitals File Lawsuit Against HHS Over Two-Midnight Rule | Healthcare Informatics Magazine | Health IT | Information Technology Skip to content Skip to navigation

122 Short-Term Acute Care Hospitals File Lawsuit Against HHS Over Two-Midnight Rule

August 1, 2016
by Heather Landi
| Reprints

More than 100 short-term acute care hospitals are listed as plaintiffs in a lawsuit filed against the U.S. Department of Health and Human Services (HHS) Secretary Sylvia Mathews Burwell over payment cuts in the Centers for Medicare & Medicaid Services (CMS) two-midnight rule for Medicare inpatient admissions.

Short-term acute care hospitals that participate in the Medicare and Medicaid program are paid under the inpatient prospective payment system (IPPS). The two-midnight rule directs CMS payment contractors to presume hospital stays are appropriately billed as inpatient admissions rather than outpatient observation visits if they span two midnights. The rule also reduces inpatient prospective payment system rates for fiscal years 2014 through 2018 by 0.2 percent, or $220 million in the aggregate for each year.

In the lawsuit, the plaintiffs allege that the Final Rule is “confusing, ambiguous and internally inconsistent as to the extent of a one-day stay (a stay in which the patient was not expected to, and does not, cross two midnight) can be appropriately inpatient.”

The lawsuit also cites a September ruling in the Shands Jacksonville Medical Center v. Burwell civil case, in which hundreds of hospitals challenged the same rate reduction at issue in this lawsuit. The judge in that case ruled the HHS secretary must provide better justification for the part of the two-midnight rule that would cut inpatient payments to hospitals.

In April, CMS published a Notice of Proposed Rulemaking for the IPPS rule for fiscal year 2017 that proposed to remove the 0.2 percent downward adjustment going forward via a permanent, prospective, upward adjustment beginning in FY 2017. Hospitals will also see a temporary increase of 0.6 percent in fiscal 2017. That would make up for the 0.2 percent reduction to the rates the past three years.

The hospital plaintiffs allege that there “were not given a meaningful opportunity to comment on the proposal to reduce operating and capital IPPS payments by 0.2 percent.” And, the lawsuit states the HHS Secretary’s actions were in violation of the Administrative Procedure Act and were “without observance of procedure required by law.”

The lawsuit also states, “The Final Rule is arbitrary and capricious because its assumptions, that approximately 400,000 encounters will shift from outpatient to inpatient and approximately 360,000 encounters will shift from inpatient to outpatient, causing a net gain of 40,000 inpatient stays, are mere speculations based on CMS’s faulty assumptions concerning how hospitals and Medicare contractors will react to the 2 Midnights policy, which is confusing, ambiguous, and internally inconsistent.”

And, the plaintiffs also alleged in the lawsuit that the 0.2 percent cut in hospital reimbursement is “invalid because it exceeds CMS’s statutory authority. The statutory authority relied upon by CMS in the Final Rule, as delegated by the Secretary to CMS, does not permit CMS to make across-the-board decreases in the base amount of operating and/or capital inpatient prospective payments due to hospitals.”

The plaintiff hospitals have asked the court to declare the rule’s 0.2 percent IPPS payment cut invalid, require HHS to recalculate the payment rates for fiscal year 2014 in order to offset the cuts hospitals incurred under the two midnight rule and require HHS to award the hospitals the payment difference.

Get the latest information on Finance and Revenues and attend other valuable sessions at this two-day Summit providing healthcare leaders with educational content, insightful debate and dialogue on the future of healthcare and technology.

Learn More

Topics

News

Dignity Health, CHI Merging to Form New Catholic Health System

Catholic Health Initiatives (CHI), based in Englewood, Colorado, and San Francisco-based Dignity Health officially announced they are merging and have signed a definitive agreement to combine ministries and create a new, nonprofit Catholic health system.

HHS Announces Winning Solutions in Opioid Code-a-Thon

The U.S. Department of Health and Human Services (HHS) hosted this week a first-of-its-kind two-day Code-a-Thon to use data and technology to develop new solutions to address the opioid epidemic.

In GAO Report, More Concern over VA VistA Modernization Project

A recent Government Accountability Office (GAO) report is calling into question the more than $1 billion that has been spent to modernize the Department of Veterans Affairs' (VA) health IT system.

Lawmakers Introduce Legislation Aimed at Improving Medicare ACO Program

U.S. Representatives Peter Welch (D-VT) and Rep. Diane Black (R-TN) have introduced H.R. 4580, the ACO Improvement Act of 2017 that makes changes to the Medicare accountable care organization (ACO) program.

Humana Develops Medication Management Tool

A new tool developed by Humana enables the company’s members to keep a list of their medications in one place.

Four Hospitals Piloting OurNotes Initiative in 2018

Beginning in January, four academic hospitals—Beth Israel Deaconess Medical Center in Boston, University of Washington in Seattle, Dartmouth-Hitchcock Medical Center in Lebanon, New Hampshire and University of Colorado in Boulder—will begin piloting a new digital tool called OurNotes that enables patients to contribute to their clinical notes.