Vulnerabilities Remain Under Medicare's 2-Midnight Hospital Policy

CMS implemented the "2-midnight" policy in fiscal year (FY) 2014. The policy establishes that inpatient payment is generally appropriate if physicians expect beneficiaries' care to last at least 2-midnights; otherwise, outpatient payment would generally be appropriate. CMS implemented the 2-midnight policy to address three vulnerabilities in hospitals' use of inpatient and outpatient stays: improper payments for short inpatient stays; adverse consequences for beneficiaries of long outpatient stays, including that they may not have the 3 inpatient nights needed to qualify for skilled nursing facility (SNF) services; and inconsistent use of inpatient and outpatient stays among hospitals. This report follows up on previous OIG work and compares data from the year before and the year after the implementation of the 2-midnight policy.