On February 24, 2014, the Centers for Medicare and Medicaid Services (“CMS”) directed Medicare administrative contractors (“MACs”) to reopen all claims denied under the “two midnight” rule between October 1, 2013 and January 30, 2014.

The “two midnight” rule, issued as part of the FY 2014 Inpatient Prospective Payment System (“IPPS”) final rule, “modifies and clarifies CMS’s longstanding policy on how Medicare contractors review hospital and critical access hospital (“CAH”) inpatient admissions for payment purposes.”  The rule creates the presumption that hospital services occurring over the course of two or more midnights of a beneficiary’s inpatient admission are “reasonable and necessary for inpatient status,” as long as the stay at the hospital is itself medically necessary.

Since the FY 2014 IPPS final rule, CMS issued guidance on September 5, 2013 and January 30, 2014 “clarify[ing] the physician order and physician certification requirements for hospital inpatient admissions.” Concerned that MACs having evaluated the appropriateness of claims for inpatient stays may have denied payments in contravention of such clarifying guidance, CMS has directed each of the MACs to reopen and re-review claims denied during that period in light of the September 5, 2013 and January 30, 2014 guidance.

CMS directed the MACs to “reverse their decision and issue payment outside of the appeals process if the MAC determines that a claim is payable upon re-review by the MAC.”  Accordingly, CMS “urge[d] providers to work with their MACs to determine if a claim has undergone final adjustment (in other words, has been re-reviewed) prior to submitting an appeal request.”  Further, “to ensure that the re-review process does not affect the ability of a provider to file a timely appeal of a denied claim,” CMS “waive[d] the 120 day timeframe for filing redetermination requests received before September 30, 2014 for claim denials under the Probe & Educate process that occurred on or before January 30, 2014.”

Review CMS’s guidance regarding the reopening of two midnight rule payment denials.

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