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AHA and others continue challenge of the two-midnight rule

By Kyle Murphy, PhD

Several healthcare organizations have redoubled their efforts to challenge the Department of Health & Human Services (HHS) over its implementation and enforcement of the two-midnight rule, according to a summary judgment filed in United States District Court. The plaintiffs comprise the same healthcare organizations that brought a lawsuit against HHS last month.

“The Centers for Medicare & Medicaid Services (“CMS”) has slashed Medicare payments to hospitals across the board by 0.2 percent, and it has done so without any basis in law,” state court documents. “A 0.2 percent cut may sound small, but it is not — it will deprive the nation’s hospitals of more than $200 million, by CMS’s own estimation. The payment cut should be vacated as arbitrary, capricious, and otherwise unlawful.”

Last month’s complaint called into question the decision to withhold reimbursement for admissions of less than three days based upon a new definition of inpatient as well as two other policies related to reimbursement conditions for inpatient services.

Now, the same group of plaintiffs is seeking to expedite the process by urging the federal court to grant an immediate ruling in their favor:

• American Hospital Association (AHA),
• Banner Health,
• Mount Sinai Hospital,
• Einstein Healthcare Network,
• Wake Forest Baptist Medical Center,
• Greater New York Hospital Association,
• Healthcare Association of New York State,
• New Jersey Hospital Association
• The Hospital & Healthsystem Association of Pennsylvania

The request for summary judgment argues that CMS is placing burdens on hospitals in an attempt to drive down the more expensive costs associated with inpatient care by redefining a key term:

That new definition makes it more difficult to categorize patients as “inpatients.” And since Medicare generally pays more for hospitals to treat inpatients as opposed to outpatients, the logical result should be that the new policy drives Medicare payments to hospitals down. Yet, in the same rulemaking in which it adopted the new definition of inpatient, CMS somehow concluded that the new definition will drive Medicare payments to hospitals up.

In contesting the 0.2-percent reduction in reimbursement rates, the plaintiffs have put forward three arguments challenging the validity of the payment cut.

The first argument centers of a lack of transparency on the part of CMS in failing to reveal either its assumptions or methodology behind its conclusion that the new definition would lead to more Medicare spending in its proposed rule.

The second contents that CMS failed to justify its calculations “even after numerous commenters complained about the proposed rule’s failure to explain the rationale.” The plaintiffs draw attention to a belated acknowledgment by the federal agency of what its assumptions were after the fact, which the healthcare organizations believe to be a sign that CMS knew its assumption would be heavily criticized.

The third and last point makes the argument that CMS violated procedural requirements for rulemaking by describing the reduction in the preamble to the final rule rather than codifying the policy in the Code of Federal Regulations. “This simply does not suffice because it is well-established that a preamble is not a regulation,” the plaintiffs argue.

Stay tuned for further developments.

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