On April 14, 2014, the American Hospital Association (“AHA”), in conjunction with the Greater New York Hospital Association, the Healthcare Association of New York State, New Jersey Hospital Association and the Hospital & Healthcare Association of Pennsylvania, filed a complaint in the United States District Court for the District of Columbia alleging that the Centers for Medicare & Medicaid Services’ (“CMS”) implementation of its two-midnight policy “burden[s] hospitals with arbitrary standards and documentation requirements and deprive[s] hospitals of Medicare reimbursement to which they are entitled.” CMS’s two-midnight 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. AHA has asserted that CMS’s adoption of the rule is an “arbitrary and capricious” violation of the Administrative Procedure Act (“APA”), that it “undoes decades of Medicare policy,” and that it “unwisely permits the government to supplant treating physicians’ judgment.”
In addition to asserting that CMS has implemented the two-midnight rule “without observing the procedures” set forth under the APA, AHA asserts that the rule’s requirement that a hospital have a written physician order for admission as a condition of Medicare payment “is directly contrary to the Medicare statute.” Rather, AHA’s complaint notes that “the statute requires certification only for extended hospital stays.” AHA cites legislative reports behind the amendment of 42 U.S.C. § 1395f(a)(2)(A) stating that such change was adopted to “eliminate the hospital insurance program requirement that there be a physician’s certification of medical necessity with respect to each admission to a general hospital, and to require such a certification only in cases of hospital stays of extended duration.”
AHA also filed a separate complaint alleging that a 0.2% reduction in inpatient reimbursement rates implemented in conjunction with the two-midnight rule was implemented in violation of the APA. AHA alleged that “CMS’s calculations and analysis were wholly unexplained” and thus invalid for failure to undergo adequate notice and comment procedures.