Understand What Constitutes a Hospital Admission

Coding Compass: Facility

A revision to the 2014 IPPS final rule helps to clarify the “two-midnight” rule.

By Julie E. Chicoine, Esq., RN, CPC, CPCO

All too often, chronically ill, medically fragile patients present to a hospital’s emergency department (ED) or outpatient clinic with exacerbation of chronic problems the patient and family members cannot manage alone. In some cases, the patient may be “admitted” for observation status, only to find out later that his or her care did not constitute a true “inpatient” hospital admission, which results in unexpected financial costs. Equally frustrating is when hospitals are concerned about Medicare Part A payment rejection from Medicare administrative contractors (MACs) and/or recovery audit contractors (RACs) for these “outpatient services” when it’s not clear the patient’s condition merits an inpatient admission.

CMS Provides Clarification

In light of these challenges, the Centers for Medicare & Medicaid Services (CMS) issued a revision to the 2014 Inpatient Prospective Payment System final rule (CMS-1599-F, published Aug. 19, 2013), as well as subsequent guidance and answers to frequently asked questions (FAQ) to clarify CMS payment policy for inpatient hospital and critical access hospital (CAH) admissions.

Per these collective documents, and in addition to services CMS has designate as covered inpatient services, additional care such as surgical procedures, diagnostic tests, and “other treatments” is appropriate for inpatient hospital admission and payment under Medicare Part A when the physician:

Expects the patient to require a stay that spans at least two midnights; and

Admits the patient to the hospital based upon that expectation.

Note: CMS clarifies that procedures defined as “inpatient-only” are not included in the two-midnight rule and may be furnished on an inpatient basis regardless of the beneficiary’s length of stay.

The following summarizes key requirements for compliance with the two-midnight rule.

Physician Order/Certification: CMS clarifies that a Medicare beneficiary is considered a hospital inpatient when formally admitted pursuant to an order for inpatient admission by a physician (or other qualified practitioner). The medical record must include the physician’s order and certification, documenting:

Authentication – the physician must certify the inpatient admission orders comply with Medicare regulations and services are reasonable and necessary;

Reason for the inpatient services;

Estimated time the beneficiary requires to be in the hospital; and

Plans for post hospital care.

Certification begins with the order for inpatient admission and must be furnished (verbal orders permitted) “at or before the time of the patient’s admission.” CMS makes it clear that retroactive orders are unacceptable.

Factors to Consider when Admitting a Patient

To ensure compliance with the two-midnight rule, CMS clarifies in the revision that it will defer to the physician’s clinical judgment as to whether a beneficiary’s complex situation and “risk of morbidity or mortality” merits inpatient hospital admission. For payment, CMS will look for documentation that supports such a decision, including “the beneficiary’s age, disease processes, comorbidities, and the potential impact of sending the beneficiary [safely] home.”


Per CMS, the timeframe used in determining the two-midnight stay begins when “care” in the hospital begins. Care includes all of the time the beneficiary has spent in the hospital receiving services in outpatient observation, the ED, an operating room, or other treatment areas in the hospital. CMS, however, emphasizes that the time a beneficiary spends waiting for care (i.e., in the ED triage or waiting area) before the formal inpatient admission order is not considered inpatient time.

Note: The ambulance time prior to arrival at the hospital does not start the clock for calculating the two-midnight benchmark.


In clarifying that “no specific procedures or forms” are required for certification, CMS provides guidance to contractors reviewing claims under this new benchmark (see “Reviewing Hospital Claims for Patient Status: Admissions On or After October 1, 2013,” http://cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medical-Re view/Downloads/ReviewingHospi​talClaimsforAdmissionFINAL.pdf).

CMS guidance states that medical record documentation “must support a reasonable expectation of the need for the beneficiary to require a medically necessary stay lasting at least two midnights.”

In terms of what would constitute sufficient documentation, CMS’s FAQ publication advises, “sufficient documentation will be rooted in good medical practice,” meaning that documentation must support the medical necessity for the level of services rendered. CMS further states that the “[e]xpected length of stay and the determination of the underlying need for medical or surgical care at the hospital must be supported by complex medical factors such as history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event, which review contractors will expect to be documented in the physician assessment and plan of care.”

Outreach and Education Cases Provide Guidance

In regard to the new standard, CMS continues outreach and education efforts and hosted an MLN Connects™ National Provider Call on Jan. 14, 2014. This call provided an overview of the inpatient hospital admission and medical review (payment) criteria. As part of the call, CMS provided six case scenarios to illustrate how to apply the two-midnight rule to sample medical records. Let’s take a look at two of them:

Case Scenario 3: Treatment in the ICU (paraphrased)

Dec. 1 at 9:00 a.m., a 73-year-old male with accidental environmental toxic exposure presents to the emergency department via ambulance. He is awake and alert.At 9:03 a.m., Poison Control is consulted. They advise that the patient requires telemetry monitoring, and to plan to intubate as needed. Because the hospital facility is small, telemetry monitoring is only available in their ICU. At 9:07 a.m., therapeutic and diagnostic modalities are ordered and initiated, and the patient’s airway remains intact. At 10:00 a.m., the physician requests transfer to the ICU for telemetry monitoring. At that time, the physician is unsure whether the patient will need medically necessary hospital-level care or services for two or more midnights. This determination depends on the clinical presentation and the diagnostic tests results.

Dec. 2 at 10:30 a.m., the medical concerns are resolving, and the airway continues to remain intact. At 12:00 p.m., the physician determines the patient is safe for discharge home.

This should be billed as an outpatient claim for services. When billing this to Medicare, the location does not matter because, according to Melanie Combs-Dyer, acting director of the CMS Provider Compliance Group, “despite the placement in the intensive care unit, the decision still should be centered around whether or not the physician expects the beneficiary to remain in the hospital for medically necessary services for 2 or more midnights.” (See FAQ 4.4).


Case Scenario 6: Medical Necessity (paraphrased):

Nov. 9 (Saturday), a 78-year-old male with a past and current medical history of chronic illnesses well controlled with medication  presents alone to the emergency department at 7:30 p.m., following a fall from home. He slipped while shoveling, fell, and sustained a closed wrist fracture. At 11:30 p.m., the patient’s arm fracture is confirmed by the practitioner and pain medication is provided.

Nov. 10 (Sunday) at 3:30 a.m., the patient’s pain is well controlled, and he is stable for discharge, but he requires custodial care. No family or friends are available, and the hospital social services are unavailable until Monday morning. He is held in the hospital pending a home care plan, has no IV access, and his pain is well controlled with oral medication.

Nov. 11 at 10:00 a.m. (Monday) morning, the patient is released to home with a family member. No other complications are noted.

In this scenario, it would be appropriate to bill Medicare for the outpatient services only. CMS will not pay for social and custodial care, convenience factors, or wait times when calculating the two-midnight benchmark in this scenario.

“The patient must be receiving medically necessary hospital care, and if a beneficiary is kept in the hospital beyond 2 midnights, but it appears that the beneficiary is kept solely for purposes of systematic gaming or abuse in order to surpass the 2-midnight presumption, this claim may be reviewed by Medicare review contractors,” Combs-Dyer said.

Find Out More

CMS is still making decisions in regard to two-midnight rule rare and unusual circumstances, and is accepting submissions for evaluation at IPPSAdmissions@cms.hhs.gov.

To read the “2-Midnight Benchmark for Inpatient Hospital Admissions MLN Connects™ National Provider Call” transcript, go to www.cms.gov/Outreach-and-Education/Outreach/NPC/Downloads/01-14-14-2Midnight-transcript.pdf. You can also download presentation materials from www.cms.gov/Outreach-and-Education/Outreach/NPC/Downloads/2014-01-14-Midnight-Presentation.pdf.

Julie E. Chicoine, Esq., RN, CPC, CPCO, is senior attorney for Ohio State University Wexner Medical Center. She earned her Juris Doctor degree from the University of Houston Law Center. Chicoine also holds a Bachelor of Science and a nursing degree from the University of Texas Health Sciences Center at Houston. She has written and spoken widely on healthcare issues, and is an active member of the AAPC community and the Columbus, Ohio, local chapter.


Renee Dustman

Renee Dustman

Renee Dustman is executive editor at AAPC. She has a Bachelor of Science degree in Journalism and a long history of writing just about anything for just about every kind of publication there is or ever has been. She’s also worked in production management for print media, and continues to dabble in graphic design.
Renee Dustman

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Renee Dustman is executive editor at AAPC. She has a Bachelor of Science degree in Journalism and a long history of writing just about anything for just about every kind of publication there is or ever has been. She’s also worked in production management for print media, and continues to dabble in graphic design.

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