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CMS Drops Two-Midnight Rule Payment Cuts in 2017 IPPS Proposed Rule

April 19, 2016

On April 18, 2016, CMS announced that the agency will not continue a 0.2 percent payment reduction to Inpatient Prospective Payment System (“IPPS”) payments that was instituted in 2014 as part of the two-midnight rule. Additionally, CMS proposed to give hospitals a onetime pay increase of 0.6 percent in 2017 to retroactively offset the effect of the two-midnight rule payment reduction in 2014, 2015, and 2016.

The two-midnight rule payment reduction was challenged in several lawsuits against CMS, the lead case being Shands Jacksonville Medical Center Inc.
et al. v. Burwell et al., case number 1:14-cv-00263, in the U.S. District Court for the District of Columbia. In September 2015, the court in Shands found that CMS’ “failure to disclose the critical assumptions relied upon by the HHS actuaries deprived [hospitals] of a meaningful opportunity to comment on the proposed 0.2 percent reduction.” The court ordered CMS to provide its methodology and justification for the payment reduction and reopen the public comment period on the issue.

Hospitals do not need to do anything to receive the retroactive payment adjustment; it will be included as a factor in the IPPS standardized amount, the hospital-specific payment rates, and the national capital Federal rate in FY 2017. The pre-publication version of the 2017 IPPS Proposed Rule can be viewed here.

If you have questions about how this change affects your organization, please contact a member of HDJN’s Reimbursement team.

The information contained in this advisory is for general educational purposes only. It is presented with the understanding that neither the author nor Hancock, Daniel, Johnson & Nagle, PC, is offering any legal or other professional services. Since the law in many areas is complex and can change rapidly, this information may not apply to a given factual situation and can become outdated. Individuals desiring legal advice should consult legal counsel for up-to-date and fact-specific advice. Under no circumstances will the author or Hancock, Daniel, Johnson & Nagle, PC be liable for any direct, indirect, or consequential damages resulting from the use of this material.