HHS needs to better justify two-midnight cuts, court rules

The U.S. Department of Health and Human Services must rethink a section of the controversial two-midnight rule that would cut 0.2% from inpatient payments to hospitals, a federal judge ruled this week.

U.S. District Court Judge Randolph Moss said HHS Secretary Sylvia M. Burwell needs to better justify the rate cut, which has caused concerns among hospital associations. The court also ruled HHS must reopen the portion of the rule that includes the rate cut for more public comment.

Burwell originally said the cut would help offset the estimated $220 million it would cost to shift patients from outpatient to inpatient status under the two-midnight rule. Hospitals cried foul, saying the cut was unnecessary, and that they weren't given an opportunity to comment on the proposed cut.

The two-midnight rule, which requires patients to be hospitalized for two midnights before they qualify as an inpatient, is currently on an enforcement delay. Inpatient status allows Medicare beneficiaries to quality for skilled nursing coverage after hospital discharge.

Experts say while the judge's ruling doesn't alter the rule or payment reductions for now, it could lead to changes further down the road.