8 Things NPs Need to Know About the ‘Two-Midnight’ Rule

A few months ago I accepted a new PRN position in the emergency department. While the job is in the same setting as I work with my primary employer, the culture in the department is much different at each hospital. In my new position I am required to admit my own patients rather than having my collaborating physician do so which has created somewhat of a learning curve for me. Not only do I need to get up to speed clinically, I am now responsible for having a better understanding of hospital billing policies.

As I enter admission orders for patients requiring continued care beyond the emergency department, I always stumble over the question that pops up on my computer screen, “Will this patient require a stay longer than two midnights?”. This question centers around recent controversial changes in the Centers for Medicare and Medicaid Services reimbursement policies. If you haven’t heard of the ‘two-midnight’ rule, you will.

Here’s what nurse practitioners need to understand about the CMS ‘two-midnight’ rule.

1. What is the ‘two-midnight’ rule?

Essentially, CMS’ ‘two midnight’ rule has to do with Medicare reimbursement for hospital services. There are two ways a patient stay in the hospital may be classified. A patient may be designated as an inpatient. Alternatively, the patient may be placed under ‘observation status’ making them an outpatient. Medicare pays for these types of services very differently. The difference between cost of inpatient and outpatient services can mean a significant difference in pay to the hospital as well as the party responsible for footing the bill.

Are You Ready to Thrive?

Learn more about our online residency program; we pair clinical and professional development to take advanced practice providers to the next level. Get More Info>>

For patients observation status, hospitals are reimbursed by Medicare Part B. Medicare reimburses observation stays at lower rates resulting in higher out-of-pocket costs for patients. Medicare patients admitted as inpatients are covered by Medicare Part A. These stays are reimbursed at higher rates and also allow for coverage should a Medicare beneficiary be discharged from the hospital to a skilled nursing facility.

2. Why was the ‘two-midnight’ rule created?

Hospitals and physicians have traditionally been given discretion over which patients require inpatient vs outpatient services. Although hospitals are reimbursed at higher rates for inpatient admissions, Medicare audits determining inpatient admission status medically unnecessary often resulted in denied claims. As a result, hospitals began keeping more patients in the hospital under ‘observation’, or outpatient status. For patients, this meant higher out of pocket health costs because if the way these visits are billed. Ultimately, CMS created the ‘two-midnight’ rule to give guidance as to which patients are eligible for inpatient admission and which should be kept at outpatients. The ‘two-midnight’ rule was announced in 2013 but was not enforced until March 31, 2015. 

3. Does the ‘two-midnight’ rule apply to all patients?

The ‘two-midnight’ rule does not apply to patients covered by other insurance carriers. The rule applies only to patients whose primary payer is Medicare.

3. What if I see a patient at 11:59pm?

Timing is everything with the ‘two-midnight’ rule. Since the rule uses midnight as a metric rather than the actual number of hours a patient requires care, placing a patient in admission status at 11:59 vs. 12:01 makes a difference when it comes to billing. If a patient will require 26 hours of care and is admitted at 11:59pm, then they technically may be placed in inpatient status. If the same patient is admitted at 12:01, just 2 minutes later, they must be placed in observation status according to the ‘two-midnight’ rule.

5. What if I’m not sure how long the patient will be hospitalized?

For many patients, it will be difficult to determine how long the patient will stay in the hospital based on the initial patient encounter. If you are uncertain as to how long the patient will require care, placing the patient in observation or outpatient status is best. As you get more information about the patient’s condition, you can always upgrade them to inpatient status. This prevents an unfavorable CMS audit.

6. How is the ‘two-midnight’ rule enforced?

Medicare Administrative Contractors (MAC) and Medicare’s Recovery Audit Contractors (RAC) are responsible for enforcing the new CMS rule. These regulatory bodies will not review claims involving stays lasting two or more midnights to see if the patient admission was appropriate. MACs will audit 10 to 25 claims per hospital, depending on hospital size. Critical access hospitals are exempt from these reviews.

7. How do I need to change my practice as a result of the ‘two-midnight’ rule?

Documentation is key with the ‘two-midnight’ rule. The billing department at your hospital may need to defend the admission status of your patients to CMS and the medical chart you create will be key in doing so. Accurate documentation of times is also essential in placing your patient in the correct status. Claims that do not support the patient’s admission status may be denied resulting in lost hospital revenue. Although you may not be responsible for billing, auditing, or even determining patient admission status, the parties involved in these determinations will thank you for complete and clear documentation.

8. Is the ‘two-midnight rule’ here to stay?

Naturally, hospitals and healthcare providers cried ‘foul’ when CMS released the controversial ‘two-midnight’ rule. Medical providers believe clinical judgment should determine a patient’s admission status. Hospitals are frustrated by the red-tape associated with the rule and the overhead associated with its implementation. CMS has been accepting feedback on the rule this year and plans to release a final ruling by August 1, 2015.

Have you noticed any changes to your practice as a result of the ‘two-midnight’ rule?


You Might Also Like: Healthcare Hackers-Patient Information on the Black Market


1 thought on “8 Things NPs Need to Know About the ‘Two-Midnight’ Rule”

  1. Pat Donahue MS, CNM, FNP

    I object to the label “midlevel” . There is nothing that I do that is “midlevel” between a physician and a RN which I am presuming is where it came from. I practiced as a CNM, certified nurse midwife for 20 years providing full scope practice including deliveries and when necessary first assisted on my patients that needed c-sections. I supervised Family Practice residents on the L&D floor. We circumcised the baby when the parents choose that option for their sons. I did many procedures that family practice docs didn’t do.

    As an FNP primary care provider I once again provided more extensive care especially to my women clients since I was also a CNM. Now as an aesthetic NP I do all procedures that are non invasive. I do laser tattoo removal, Botox, Juvederm, and micro-needling.

    As professionals we need to take ownership of our profession and choose our own salutation. I prefer NP. I correct clients who call me doctor thinking they are being nice. I am a NP and I am proud to be wellness focused, provide education on staying healthy.

Leave a Comment

Your email address will not be published. Required fields are marked *

Share Post:

Share on facebook
Share on twitter
Share on linkedin

Are you ready to Thrive?

Support + education for early career nurse practitioners.

Are you struggling as an early career NP or PA?

Learn more about ThriveAP, the program designed to boost primary care clinical knowledge.

Support and education for early career NPs & PAs

Download the ThriveAP info
packet for more information!