United States: OIG Issues Report On Medicare's ‘2-Midnight Hospital Rule'


On December 19, 2016, the US Department of Health and Human Services Office of Inspector General (OIG) posted a report examining the Centers for Medicare & Medicaid Services' (CMS's) "2-Midnight Rule." The OIG concluded that although the number of inpatient stays decreased and the number of outpatient stays increased under the 2-Midnight Rule, Medicare paid nearly $2.9 billion in fiscal year 2014 for potentially inappropriate short inpatient stays. The OIG recommended that CMS improve oversight of hospital billing.

On December 19, 2016, the US Department of Health and Human Services Office of Inspector General (OIG) posted a report examining the Centers for Medicare & Medicaid Services' (CMS's) "2-Midnight Rule." The OIG concluded that although the number of inpatient stays decreased and the number of outpatient stays increased—both goals of the 2-Midnight Rule— Medicare paid nearly $2.9 billion in fiscal year (FY) 2014 for potentially inappropriate short inpatient stays. The OIG recommended that CMS should improve oversight of hospital billing.  Specifically, the OIG recommended that CMS (1) conduct routine analysis of hospital billing, focusing reviews on hospitals with high or increasing numbers of short inpatient stays that are potentially inappropriate; (2) identify and target for review short inpatient stays; (3) analyze the potential effects of adding time spent as an outpatient to the three-night requirement for skilled nursing facility (SNF) services; (4) assess ways of protecting beneficiaries who have had an outpatient stay from paying more than they would have as an inpatient.


CMS developed the 2-Midnight Rule in 2013 as a basis for determining when payment under Medicare Part A was appropriate for inpatient stays. The 2-Midnight Rule generally treats inpatient payment as appropriate if the stay is expected to last at least two midnights. The 2-Midnight Rule provides for an exception that permits Part A reimbursement on a case-by-case basis for inpatient admissions expected to span less than two midnights if the documentation in the medical record supports the admitting physician's determination that the patient requires inpatient hospital care. Further discussion of the 2-Midnight Rule is available in the following articles:

The OIG Report

The OIG analyzed paid Medicare hospital claims from FY 2013 and FY 2014, identifying inpatient stays using Part A hospital claims and outpatient stays using Part B hospital claims.  The OIG defined a "short stay" as a stay that lasted less than two midnights while a "long stay" was a stay that lasted two midnights or longer. The OIG also assessed whether claims information for short inpatient stays met CMS criteria for payment under the 2-Midnight Rule.  The OIG considered claims that met CMS criteria to be "appropriate" and claims that did not meet the criteria for payment under the 2-Midnight Rule as "potentially inappropriate."

The OIG found that, consistent with CMS's goals in enacting the 2-Midnight Rule, from FY 2013 to 2014, the number of short outpatient stays increased (11.6 percent) while the number of short inpatient stays decreased (9.9 percent). 

In addition, the OIG found the following

  • Hospitals are billing for a large number of short inpatient stays that are potentially inappropriate (i.e., the claim does not appear to meet any of CMS's criteria for an appropriate inpatient stay) under the 2-Midnight Rule.
  • Hospitals are continuing to bill for a substantial number of long outpatient stays.
  • Hospitals do not take a consistent approach to the use of inpatient and outpatient states with use varying by institution.
  • Despite certain inpatient stays and outpatient stays for similar services, Medicare pays more (on average, three times as much) for such short inpatient stays than it does for equivalent short outpatient stays. For instance, reimbursement for a coronary stent insertion short outpatient stay is $8,364 versus $13,269 for a coronary stent insertion short inpatient stay. Similarly, reimbursement for irregular heartbeat (medium severity) is $1,905 for a short outpatient stay versus $4,801 for a short inpatient stay.
  • Increasingly, beneficiaries in outpatient stays are paying more than they would have as inpatients. For instance, for coronary stent insertions, the average inpatient beneficiary payment from was $1,022 while the average beneficiary payment for outpatient stays was $1,667.
  • With outpatient stays increasing, beneficiaries may have limited access to SNF services because Medicare covers SNF services only if a beneficiary had a hospital stay that included at least three nights as an inpatient.

The OIG also looked at common reasons for potentially inappropriate short inpatient stays, which include irregular heartbeat, chest pain, digestive disorders and loss of blood flow to the brain, among others.

OIG Recommendations and CMS Response

Increased Analysis of Hospital Billing with Focus on Hospitals with High/Increasing Numbers of Short Inpatient Stays

The OIG recommended that CMS conduct routine analysis of hospital billing to identify hospitals with high or increasing numbers of short inpatient stays that are potentially inappropriate under the 2-Midnight Rule. The OIG instructed that CMS should then use this analysis to better target its auditing and enforcement efforts. The OIG is also providing to CMS the list of hospitals that the OIG identified in this study that have high or increasing numbers of short inpatient stays. 

In a letter from October 27, 2016, CMS concurred with this recommendation, stating that it will instruct its Quality Improvement Organizations (QIOs) to conduct routine analysis of hospital billing for inpatient stays and target for review hospitals with high or increasing numbers of short inpatient stays.

Identify and Target for Review Short Inpatient Stays

The OIG also recommended that CMS routinely use claims information to identify potentially inappropriate short inpatient stays and then use medical review to determine appropriateness.  CMS concurred with the recommendations, stating that its QIOs are currently conducting initial status reviews of short stays in hospitals to determine the appropriateness of Part A payment for short stay hospital claims.

Study Effects of Adding Outpatient Time to Inpatient to Help Beneficiaries Qualify for SNF Services

The OIG recommended that CMS analyze the effects of counting time spent as an outpatient toward the three-night requirement that a beneficiary needs to qualify for SNF services because currently beneficiaries with similar post-hospital care needs have different access to and cost sharing for SNF services depending on whether they were hospital outpatients or inpatients.  CMS concurred with this recommendation but stated that it lacks the statutory authority to make such a policy change.

Assess Ways of Protecting Beneficiaries in Outpatient Stays from Paying Disproportionate Amounts

The OIG found that because beneficiaries generally pay for each Part B service they receive, beneficiaries in outpatient stays may pay more than they would as inpatients, even if they receive similar services. The OIG recommended that CMS explore statutory and policy changes to ensure more equitable cost sharing for beneficiaries with similar care needs. CMS concurred with the recommendation and stated that it believes that the current statutory requirements are fairly prescriptive surrounding beneficiary cost-sharing liability under the inpatient prospective payment system (IPPS) and outpatient prospective payment system (OPPS). 


Hospitals should review the appropriateness of short inpatient stays and their use of inpatient and outpatient stays to ensure that they are adhering to the 2-Midnight Rule and that CMS's QIOs will not flag the hospitals' claims.

OIG Issues Report On Medicare's '2-Midnight Hospital Rule'

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.