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Impact of the Medicare Two-Midnight Rule on hospital admissions
In August 2013, the Centers for Medicare and Medicaid Services (CMS) published the ‘Two Midnight Rule’ to clarify Medicare Part A payments and improve accountability for inpatient admissions. The rule states that Part A payments will be made when the admitting practitioner expects the patient to require a hospital stay that crosses two midnights. Several legal challenges and legislative changes delayed the rule’s enforcement. However, CMS asked hospitals and physicians to apply this standard to allow Medicare Recovery Audit Contractors to perform probe and educate reviews between November 2013 and September 2015. We examine possible changes in hospital admissions after the implementation of the ‘probe and review period’.
Methods
We employed differences-in-differences (DD) technique to compare Medicare- with privately-insured admissions. We merged data from the Healthcare Cost and Utilization Project (HCUP) Florida State Inpatient Database (SID) with the American Hospital Association (AHA) Annual Survey database for years 2012 to 2014. We excluded patients admitted to non-acute care hospitals or critical access hospitals not subject to the rule, and patients whose length of stay (LOS) was greater than 6 days who were generally sicker and would unlikely to be confined by the rule.
Results
Our analysis sample contained 3,404,766 Medicare insured admissions and 1,365,107 privately insured admissions. We found that log number of admissions for Medicare and privately insured patients are largely parallel prior to the fourth quarter of 2013, when the ‘probe and review’ period started, despite seasonality in Medicare admissions, satisfying the parallel trends assumption of DD. Starting the fourth quarter of 2013, both types of admissions increased. The adjusted differential change in log number of admissions comparing Medicare- with privately-insured patients was 0.035 log admissions per quarter (95% CI, 0.01 – 0.067; P = 0.04). This suggests an increase in Medicare admissions per hospital-quarter by 3.5% relative to the increase in private insurance admissions post-treatment.
Conclusion and Policy Implications
Our findings suggest that in Florida state, compared to privately-insured patients, the number of admissions of Medicare-insured patients increased more after the initial ‘probe and review’ period for the Two Midnight Medicare rule. One possible effect of the rule was to clarify the definition of inpatient status for providers. This may have given providers more confidence in their decision to admit patients to hospital, and specifically Medicare patients. Furthermore, the post-treatment increase in privately insured admissions suggests spillover effect. This finding has policy implications: CMS had originally proposed inpatient payment cuts with the expectation of increased volume of inpatient admissions. These cuts were ultimately reversed. Our finding suggests that payment cuts may be justified in light of increases in volume of Medicare inpatient admissions.
