HFMA provides a comprehensive, curated list of CMS guidance on the 2-midnight rule/benchmark for use by payers and providers  

Health systems nationwide continue to report unjust increases in beneficiary cost-sharing and delays in post-acute care by Medicare Advantage (MA) plans. These delays often result from automatic downgrades that contradict CMS requirements, specifically those relating to the agency’s two-midnight rule/benchmark, which mandates adherence by MA plans to establish agency-directed care standards.  

Despite the mandate that MA plans follow the two-midnight benchmark, providers continue to struggle with: 

• Excessive level downgrades 
• Denials  
• Appeals 

These payer tactics, mentioned above, not only increase care costs for beneficiaries and elevate risks of medical debt, but they also disrupt continuity of care for our nation’s elderly, impacting the well-being of seniors in our communities. 

To help payers and providers stay compliant with essential regulations aimed at protecting elderly and vulnerable patients, HFMA has curated the following comprehensive CMS guidance. This resource serves as a valuable tool to ensure adherence to best practices and regulatory requirements, relieve undue administrative burden and delays in care, and support healthcare organizations in delivering safe, effective care for those who need it most. 

CMS’s historical directives on the two-midnight rule and benchmark 

• Alignment of Medicare beneficiary coverage directives: CMS has consistently directed that Medicare beneficiaries receive at minimum an equivalent level of benefits under Medicare Advantage (MA) as provided through traditional Medicare coverage. Below is an overview of CMS regulations that outlines these core benefits available to all Medicare beneficiaries. 

• Section 1852 (a) (1) (A) of the Social Security Act, 42 U.S.C. § 1395w-22(a)(1)(A) in 1997 defines that “Each Medicare and Choice plan shall provide to members enrolled under this part [i.e. Part C] through provider and other persons that meet the applicable requirements of this subchapter and part A of subchapter XI of this chapter those items and services…for which benefits are available under parts A and B of this subchapter to individuals residing in the area served by the plan.”   

• CMS Regulation 42 C.F.R. §422.101, ‘Requirement related to basic benefits’ in 1998, 2000, and 2005 states that each MA organization must (a) provide coverage of, through the provisions of or payment for, all services that are covered by Part A and Part B of Medicare and (b) Comply with {CMS’s national coverage determinations. 

• Section 1852(a)(1)(A) of the Social Security Act, 42 U.S.C. § 1395w-22(a)(1)(B)(i) in 2005 confirms the Social Security Act defines “benefits” as “items and services (other than hospice care) for which benefits are available under parts A and B to individuals entitled to benefits under Part A and enrolled under Part B . . . .” 

• CMS’s two-midnight rule/benchmark directive: Since the two-midnight rule/benchmark was introduced in 2013, the agency has consistently provided clear guidance that MA plans are required to adhere to the rule. Below is a high-level summary of that historical guidance.
• CMS Regulation 42 C.F.R. § 412.3 Admissions in August 2013 states that… (a)  For purposes of payment under Medicare Part A, an individual is considered an inpatient of a hospital, including a critical access hospital, if formally admitted as an inpatient pursuant to an order for hospital admission by a physician or other qualified practitioner in accordance with this section and §§ 482.24(c), 482.12(c), and 485.638(a)(4)(iii) of this chapter for a critical access hospital. In addition, inpatient rehabilitation facilities also must adhere to the admission requirements specified in § 412.622. 
• 42 CFR § 412.3(d)(1) states Except as specified in paragraphs (d)(2) and (3) of this section, an inpatient admission is generally appropriate for payment under Medicare Part A when the admitting physician expects the patient to require hospital care that crosses two midnights. (i) The expectation of the physician should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. The factors that lead to a particular clinical expectation must be documented in the medical record in order to be granted consideration. (ii)  If an unforeseen circumstance, such as a beneficiary’s death or transfer, results in a shorter beneficiary stay than the physician’s expectation of at least 2 midnights, the patient may be considered to be appropriately treated on an inpatient basis, and payment for an inpatient hospital stay may be made under Medicare Part A. 
• 42 CFR § 412.3(d)(2) states an inpatient admission for a surgical procedure specified by Medicare as inpatient only under § 419.22(n) of this chapter is generally appropriate for payment under Medicare Part A regardless of the expected duration of care. Procedures no longer specified as inpatient only under § 419.22(n) of this chapter are appropriate for payment under Medicare Part A in accordance with paragraph (d)(1) or (3) of this section. Claims for services and procedures removed from the inpatient only list under § 419.22 of this chapter on or after January 1, 2020, are exempt from certain medical review activities. 
• 42 CFR § 412.3(d)(3) states Where the admitting physician expects a patient to require hospital care for only a limited period of time that does not cross 2 midnights, an inpatient admission may be appropriate for payment under Medicare Part A based on the clinical judgment of the admitting physician and medical record support for that determination. The physician’s decision should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. In these cases, the factors that lead to the decision to admit the patient as an inpatient must be supported by the medical record in order to be granted consideration. 
• CMS Preamble to the Final Rule 78 Fed. Reg. 50496, 50506 on Aug. 19, 2013, states [F]or those hospital stays in which the physician expects the beneficiary to require care that crosses 2 midnights and admits the beneficiary based upon that expectation, Medicare Part A payment is generally appropriate. 
• Medicare Benefit Policy Manual Chapter 1, § 10 (referencing 42 C.F.R. § 412.3) Generally, a patient is considered an inpatient if formally admitted as inpatient with the expectation that he or she will require hospital care that is expected to span at least two midnights and occupy a bed even though it later develops that the patient can be discharged or transferred to another hospital and not actually use a hospital overnight. 
• CMS addresses false narratives regarding the two-midnight rule/benchmark directive: Amid growing concerns over persistent misconceptions regarding MA plans and their obligation to follow the Two-Midnight Rule, CMS has consistently reiterated that the benchmark applies to MA plans just as it does to traditional Medicare. 
• The perception that the two-midnight rule is a new requirement for MA plans as of 2024.  
  This is an untrue perception; the two-midnight rule/benchmark has been mandatory for MA plans since its adoption in 2013. 
• The perception that MA plans do not have to follow the two-midnight rule/benchmark for out-of-network patients. 
  In an announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare Advantage and Part D payment policies and Final Call Letter (April 2, 2018) at p. 206, the agency reiterated “42 CFR 422.214 requires MA PPOs to pay for services consistent with original Medicare coverage and payment rules on an out-of-network basis (i.e., the two-midnight rule). 
• The perception that the two-midnight presumption is required of MA Plans 
  • The agency has clarified that the two-midnight presumption is indeed optional for MA Plans.  
    MA plans are permitted to conduct their own utilization reviews and are not required to assume that a stay exceeding two midnights automatically qualifies as an inpatient admission for audit purposes. Unlike Medicare contractors, MA plans have the flexibility to ‘prioritize medical claim reviews’ according to their internal guidelines (88 Fed. Reg. at 22192, 2023). Additionally, MA plans may continue using prior authorization and concurrent case management to assess the medical necessity of inpatient stays. 
• The perception that MA plans can utilize other medical necessity criteria instead of utilizing the two-midnight rule to determine inpatient care 
  This perception is incorrect. CMS states “MA plans may not use InterQual or MCG criteria, or similar products, to change coverage or payment criteria already established under Traditional Medicare Laws. Use of these tools, in isolation, without compliance with requirements in this final rule at § 422.101(b), (c), and §422.566(d), is prohibited.” 
• The perception that only inpatient care counts towards the two midnights 
  • 78 Fed. Reg. 50496, 50946 (Aug. 19, 2013) states “[T]he decision to admit the beneficiary should be based on the cumulative time spent at the hospital beginning with the outpatient service. In other words, if the physician makes the decision to admit after the beneficiary arrived at the hospital and began receiving services, he or she should consider the time already spent receiving those services in estimating the beneficiary’s total expected length of stay.” 
    • Recommended documentation practices to support inpatient levels of care under the two-midnight rule/benchmark guidelines:  Adopting specific operational processes and documentation practices can support inpatient-level care for patients anticipated to stay beyond two midnights. While these best practices cannot eliminate the possibility of audits or requests for additional information, they enhance preparedness to substantiate the appropriateness of inpatient care.  
    • When preparing for inpatient levels of care, physicians should ensure accurate documentation of the following key parameters: 
      • I expect the patient to require hospital care that crosses two midnights. My expectation is based on such complex medical factors as the patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. The factors that led to my clinical expectation are documented in the medical records.   
        OR 
      • While I do not expect the patient’s hospital care to cross two midnights, an inpatient admission is appropriate in my clinical judgment. My decision to admit is based on such complex medical factors as the patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. The factors that led to my decision to admit the patient as an inpatient are supported by the medical record. 
        OR 
      • The patient requires the care on CMS’s inpatient only list under 42 CFR 419.22(n). 
• Use of occurrence span code 72: Identifying outpatient time associated with an inpatient admission for payment claims.  
  • This occurrence span code should be applied on inpatient bills whenever contiguous outpatient hospital services preceding an inpatient admission contribute to a stay extending beyond two midnights.