There have been new developments in the hospital lawsuit against the “Two-Midnight” rule introduced by CMS in fiscal year 2014. The Federal agency correspondingly reduced inpatient payment rates by 0.2 percent, after a ruling in Shands Jacksonville Medical Center v. Burwell. At the time, the court decided that CMS had disregarded the requirement for mandatory notice and comment, on the information that was used by the agency to justify the 0.2 percent payment reduction. It subsequently ordered publishing the missing data to the public as well as reopening the subject for added comment, after which the court would see if the actions made were legal.
The cuts were originally introduced to offset a $220 rise in Medicare spending, as a result of rising patient admissions. Along with the other increases laid out in the proposed rule, this would bring up the net increase to around $539 million going towards hospital inpatient prospective payment systems, in the year 2017.
After the information was published according to court order and many comments came in April, CMS proposed to remove the payment reduction it had instated, as a means to compensate for the 2014-2016 fiscal year reductions, along with a single-time increase as well to inpatient rates in hospitals, of 0.6 percent in 2017.
The court had required CMS and hospital plaintiffs to file a status report by May 23, 2016. But instead, it allowed the parties to put off filing these reports for up to two weeks after the agency publishes the final rule for hospital inpatient payments for fiscal year 2017. According to the parties, the final rule when it comes out in August this year, “could affect the nature of, or need for, any further proceedings.”
Right now, CMS has the throwback from its 2014 action to manage, with the cut being admittedly dysfunctional at this point. For hospitals, the best way forward is to ensure they retain appeal rights when it comes to contesting underpayment resulted from the Two-Midnight rule, and the subsequent payment reduction of 0.2 percent. With the dissension CMS is taking from the industry, it will be giving a single bump from the cuts, so that hospitals don’t have to sustain too many losses.