The Two-Midnight Rule To Reshape Medicare Advantage Plans

Healthcare providers discussing compliance with the Two-Midnight Rule in a hospital.

Article Sponsored by:

Community Resource Consultants Inc. (CRCI)

Community Resource Consultants Inc. (CRCI) is a Michigan-based organization specializing in trauma rehabilitation medical case management. With over 34 years of experience, CRCI is dedicated to empowering survivors of catastrophic auto accidents to regain control of their lives and achieve both physical and emotional well-being. Their team of Licensed Master Social Workers (LMSWs) and Registered Nurses (RNs) are experts in navigating the complexities of today’s healthcare system, ensuring that survivors receive the necessary services for their recovery and rehabilitation. CRCI’s core values include advocacy, people, knowledge, and dependability, reflecting their commitment to being leading advocates and facilitators of long-term collaborative care.

News Summary

Medicare Advantage plans will adopt the Two-Midnight Rule starting January 2024, impacting classifications of patient hospital stays and financial dynamics for hospitals. This rule aims to ensure patients receive appropriate inpatient coverage and improve consistency with traditional Medicare. While the rule could increase hospital revenue due to more patients qualifying as inpatients, some providers anticipate challenges related to increased medical expenses and compliance. Healthcare providers must adapt by engaging with payers and enhancing documentation practices to align with the new regulations.

Medicare Advantage Welcomes Two-Midnight Rule: What This Means for Patients and Hospitals

The healthcare landscape is shifting, and this time it’s Medicare Advantage making headlines! Starting in January 2024, Medicare Advantage plans will officially follow the Two-Midnight Rule, bringing new opportunities and challenges for patients and hospitals alike. So, what’s all the fuss about? Let’s break it down!

What is the Two-Midnight Rule?

First introduced to traditional Medicare Part A, the Two-Midnight Rule aims to clarify when a patient should be classified as an inpatient versus being placed under outpatient observation. Under this guideline, if a doctor believes a patient will need to stay in the hospital for more than two midnights, they should be classified as an inpatient. Why is this significant? Because being considered an inpatient generally unlocks more comprehensive coverage options and is more financially advantageous for hospitals.

Expanded Coverage under Medicare Advantage

As of this upcoming January, all Medicare Advantage plans must comply with this rule for the very first time. This adjustment reflects an effort by the Centers for Medicare and Medicaid Services (CMS) to create more consistency between traditional Medicare and Medicare Advantage plans. In a nutshell, it’s about making sure that patients are receiving the right classification during their hospital stays, which in turn can help manage healthcare costs better.

The Financial Impact

This change has some substantial financial implications. An analysis found that over 20% of Medicare Advantage patients who were held in outpatient observation for two days could actually qualify as inpatients under the new rules. With that shift, hospitals saw a 3.7% jump in inpatient revenue in March 2024 compared to the previous year. Meanwhile, outpatient revenue only grew by 2.4%. It’s the first time in over two years that inpatient revenue growth pulled ahead of outpatient services, marking a noteworthy trend in hospital income!

Risks and Challenges Ahead

However, it’s not all smooth sailing. Despite the potential for increased revenue, some providers are anticipating that this new rule will also bring heightened financial pressure. For instance, Humana, the second-largest Medicare Advantage provider, has estimated a 0.5% impact on their earnings in 2024 due to increased medical expenses associated with the Two-Midnight Rule.

Providers like Universal Health Services and Tenet Healthcare Corp are beginning to notice an uptick in patient utilization, although they haven’t directly attributed these changes to the Two-Midnight Rule just yet. What’s encouraging for hospitals is that an overall increase in revenues has been reported, with a median operating margin of 4.7% for the first quarter of 2024. So, what’s next for hospitals as they navigate these new waters?

Proactive Strategies for Healthcare Providers

As the landscape evolves, it’s becoming increasingly important for hospitals to shore up their relationships with insurance payers. Experts suggest that hospitals should engage in Joint Operating Committee meetings with payers to discuss compliance trends and improve claim processing methods.

Challenges still lurk around the corner, particularly regarding compliance and potential claim denials stemming from poor documentation practices. To address this, many hospitals are turning to technology and data-driven strategies to monitor claims more efficiently and analyze trends in denial rates. Utilizing physician advisors can also help ensure that clinical documentation aligns with payer expectations, thereby reducing denial rates.

Ongoing Education and Monitoring

It’s vital for clinical and administrative staff to remain educated on the ever-changing compliance landscape. Clear and timely documentation can significantly reduce errors in patient status determinations. With CMS pledging to monitor adherence to the Two-Midnight Rule, hospitals are encouraged to be proactive about compliance to prevent unwarranted delays and denials of inpatient care.

As we head towards a new year with fresh policies affecting Medicare Advantage, it’s a thrilling time full of opportunities for patients and healthcare providers. Understanding these changes will be key to navigating the evolving healthcare environment!