Hospitals sue Medicare over 'two-nights' rule

The Einstein Healthcare Network joined in two civil lawsuits against Medicare administrators alleging that a new rule on what qualifies as an inpatient hospital admission is arbitrary and should be dropped and that a related 0.2 percent cut in Medicare payments to hospitals should be revoked.

The rule, adopted in August by the Centers for Medicare and Medicaid Services, says that a patient has to be in the hospital at midnight on two consecutive days for the hospital to receive an inpatient payment rate.

If the patient does not stay in the hospital past the second midnight, into a third day, hospitals are stuck with the outpatient payment - about a third of what they would receive for an inpatient.

The "two-midnights" rule "has deprived and will deprive hospitals of Medicare reimbursement for reasonable, medically necessary care they provide to patients. And the rule is arbitrary and capricious," the lawsuit said.

The Centers for Medicare and Medicaid Services declined to comment on the litigation.

The rule also hurts patients financially because they typically face significantly higher co-pays for outpatient care.

The lawsuit was filed in U.S. District Court for the District of Columbia late Monday. The lead plaintiff was the American Hospital Association. It was joined by four regional associations, including the New Jersey Hospital Association and the Hospital and Healthsystem Association of Pennsylvania.

Banner Health in Phoenix, Mount Sinai Hospital in New York, and Wake Forest Baptist Medical Center in Winston-Salem, N.C., are the health-care organizations that joined Einstein, which referred a request for comment to the American Hospital Association.

The hospital industry is also up in arms that Medicare regulators decided to cut hospital reimbursement rates by 0.2 percent, or $220 million, to account for the fact that the two-midnights rule - which makes it tougher to qualify as an inpatient - would somehow result in more inpatient stays.

The hospital industry argued in the second lawsuit that the payment cut was "unlawful" because federal regulators failed to provide information that would have allowed the hospital industry to critique the estimates used to arrive at the $220 million in payment cuts.

Einstein, which has hospitals in Philadelphia and East Norriton, has already felt the sting of the cuts in the current fiscal year, which started Oct. 1 for the federal government, losing $88,000 in Medicare payments through April 4, the lawsuit says.