On March 18, 2014, Representative Jim McDermott (D-Wash.) sent a letter to US Department of Health and Human Services (“HHS”) Secretary Kathleen Sebelius “express[ing] concern about the backlog of appeals pending with the Office of Medicare Hearings and Appeals (“OMHA”)” and making recommendations for the improvement of the recovery audit contractor (“RAC”) audit appeals process.  Representative McDermott’s comments were based, in part, on the results of the OMHA Appellant Forum held on February 12, 2014.

Among Representative McDermott’s recommendations was a call to modify the Centers for Medicare and Medicaid Services (“CMS”) “two midnight” rule.

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.

Representative McDermott asserted that the “two midnight” policy itself is “flawed and unworkable” and recommended that CMS revise the RAC program rather than to implement the two midnight policy.

Representative McDermott expressed his belief that “the underlying issue that is driving the need for more concrete admission standards—the RA program—should be re-examined and modified.”

Representative McDermott also recommended enhanced accountability for RAC auditors, “suggest[ing] that there needs to be some financial penalty associated with RA collections that are overturned on appeal.”  He also suggested that future RAC contracts “include performance standards for accuracy of collections from providers.”

Read Representative McDermott’s letter.