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Strengthening Program Safeguards for Short Inpatient Stays

Published on 

Wednesday, June 19, 2024

 | OIG 

On June 13, the OIG published the report CMS Could Strengthen Program Safeguards To Prevent and Detect Improper Medicare Payments for Short Inpatient Stays. This audit was initiated to assess program safeguards for ensuring that Medicare claims for short inpatient stays complied with Medicare Requirements.


Two-Midnight Rule

It is hard to believe that so much time has passed since the Two-Midnight Rule went into effect on October 1, 2013. In general, when a hospital stay does not span two midnights, inpatient status is not appropriate. There are caveats, for example, procedures designated as “inpatient only” are appropriate for inpatient billing regardless of the length of stay.


Post two-midnight rule implementation, the OIG concluded in a report that “hospitals were still billing for many short inpatient stays that were potentially inappropriate under the two-midnight rule, and Medicare paid almost $2.9 billion for these stays.” At that time, CMS agreed with the OIG recommendation that they improve oversight of hospital billing under the two-midnight rule.


About the June 13, 2024 13 OIG Report

The OIG focused on program safeguards for short inpatient stays for calendar years 2016 through 2020. Program safeguards used by CMS and it contractors include measuring improper payment rates through the Comprehensive Error Rate Testing (CERT) Program, implementing claims processing edits, and conducting post payment review claims. The audit covered:

  • $19.7 billion in Medicare Part A claims, and
  • 2.5 million short inpatient stays at 3,340 acute-care hospitals.

    After the two-midnight rule went into effect, the CERT added a table to their supplemental improper payment data highlighting projected improper payments by length of stay. The first year this was reported the 0- or 1-day stays projected improper payment rate was 27.8% with a projected improper payment of $2.1B. In the December 2023 data, the 0- or 1-day stays improper payment rate remained high at 21.7% with a projected improper payment of $1.7B.


    Report Conclusion

    Three weaknesses in the established program safeguards for preventing and detecting improper payments for short inpatient stays and recovering payments. Specifically, the OIG concluded that CMS did not have:

  • Adequate information to identify short inpatient stays at risk for noncompliance with the two-midnight rule,
  • Prepayment edits for claims at risk for noncompliance with the two-midnight rule, and
  • Adequate policies and procedures to review claims at risk for noncompliance with the two-midnight rule and to recover payments.


Weaknesses occurred from CMS mostly relying on post payment reviews by BFCC-QIOs to ensure compliance with the two-midnight rule. Although thousands of claims were reviewed and denied $49.2 million in improper payments during the audit period, this represents only 0.6 percent of the $7.8 billion in improper payments estimated by CMS CERT reviews.


Recommendations to CMS

The OIG made the following four recommendations to CMS:

  • Add information to inpatient claims indicating any stay that did not span two or more midnights because of an unforeseen circumstance,
  • Develop a list of inpatient-only procedure codes associated with the outpatient procedure codes on the inpatient-only procedure list,
  • Implement prepayment edits for claims for short inpatient stays at risk for noncompliance with the two-midnight rule, and
  • Update policies and procedures for post payment reviews to focus on claims for short inpatient stays identified as at risk for noncompliance with the two-midnight rule and to focus on overpayment recoveries.

CMS Response to Recommendations

CMS neither agreed nor disagreed with the OIG recommendations, merely stating that they will take them into consideration as it determines appropriate next steps.


I would not get too excited about the recommendation to develop a list of inpatient-only procedure codes associated with outpatient procedure codes on the inpatient-only procedure list. MMP clients have often asked if there was such a list available as hospitals work to identify inpatient-only procedures. Currently, there is no such list. Also, I agree with CMS in that this task would be a challenge as “the ICD-10 and HCPCS code sets are intended to reflect and represent services in different healthcare settings that there would limitations in developing a one-to-one mapping.”


In the meantime, I encourage you to take the time to read this report in its entirety for additional information regarding the OIGs findings, the BFCC QIO 2 Midnight Claim Review Guideline that Livanta, the National Medicare Claim Review Contractor, utilizes in performing short stay audits nationwide, and CMS comments in response to the OIG’s recommendations. 

Article Author: Beth Cobb, RN, BSN, ACM, CCDS
Beth Cobb, RN, BSN, ACM, CCDS, is the Manager of Clinical Analytics at Medical Management Plus, Inc. Beth has over twenty-five years of experience in healthcare including eleven years in Case Management at a large multi-facility health system. In her current position, Beth is a principle writer for MMP’s Wednesday@One weekly e-newsletter, an active member of our HIPAA Compliance Committee, MMP’s Education Department Program Director and co-developer of MMP’s proprietary Compliance Protection Assessment Tool.

This material was compiled to share information.  MMP, Inc. is not offering legal advice. Every reasonable effort has been taken to ensure the information is accurate and useful.