The Two-Midnight Rule: What Is It, and What Does It Mean for Us?

Premier Pulse     May 2018

1114925682By Robert Morrison, MD, associate chief medical officer, Miami Valley Hospital, Premier Health physician advisor

In 2014, the Centers for Medicare & Medicaid Services introduced the two-midnight rule as part of its Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS) rules. The two-midnight rule was revised in 2016. Here’s how it works:

When any patient is hospitalized, the admitting doctor must make decisions within three main areas regarding the medical necessity for hospitalization:

  1. The severity of illness – how sick is the patient?
  2. The intensity of service – what kind of work-up and treatment does the patient need?
  3. The risk of death or an adverse event – what bad things will happen if the patient is not hospitalized?

From Medicare’s perspective, short hospital stays are for minor illnesses and less intense treatments that have a low risk of death or an adverse event. Longer hospital stays are for sicker people who need more intense treatments with a higher risk for mortality or morbidity, and who have a greater need for hospital resources and personnel. Medicare has defined a short hospital stay as less than two midnights, and a long hospital stay as two midnights or longer. Short hospital stays will be paid under Medicare Part B; long hospital stays will be paid under Medicare Part A.

When a Medicare patient is hospitalized, the physician must determine whether the length of stay will span two midnights. If the care the patient needs can only be provided in the hospital, and the physician believes that the care will span two or more midnights, then the patient should be admitted on inpatient status. If the physician thinks that the patient will not be in the hospital two midnights, then the patient should be placed in observation status.

Care that can only be provided in the hospital often is not necessarily what physicians would consider extraordinarily high tech. Cardiac monitoring, neuro checks every two hours, serial labs, IV medications, aggressive respiratory care, and the like are services that can only be provided in the hospital by trained personnel who know how to interpret and monitor what is going on with the patient. If someone who might be having a stroke arrived in your emergency department, you would never send that patient home to have the family keep an eye on him; you would want him or her in a neuro unit staffed with nurses and technicians who are trained to look for the subtle or not-so-subtle signs of a stroke.

It's important to remember that delays in care that lead to the second midnight do not mean that the patient is an inpatient. If you can’t get an MRI until the third day, that does not mean your patient is an inpatient – unless clinically he has had a stroke, you are treating him for the stroke, and you are ordering therapies and planning for rehab while you are waiting for his MRI.

Finally, your documentation must be cogent, succinct, and completely descriptive of your clinical impression, your intended work-up, and your treatment plan. What condition the patient has, and what you are going to do to treat it must be crystal clear to anyone reading your note. Say in your note, for example, “It is my clinical impression that this patient has had a stroke based on my exam and imaging as below. The stroke team is on board; I have ordered an MRI, medications and therapies as below; and I fully expect this patient will need at least two midnights of hospital care for her stroke.”

What if your patient doesn’t stay the second midnight? That happens; the DKA recovers quickly; the patient leaves AMA; the patient dies; the patient goes to hospice. In these cases, you would keep the patient on inpatient status and document what happened, saying, for example, “The patient was discharged sooner than I expected due to….” Medicare does not expect you to always anticipate exceptions to the two-midnight rule. If the patient was sick enough on admission that you thought he or she would be in the hospital for at least two midnights, then that is justification for inpatient care.

What about the dreaded RAC audits we have feared for years? Well, CMS has chosen to audit our inpatient admissions using Quality Improvement Organizations (QIOs). QIOs are charged by CMS to improve the quality of health care for Medicare beneficiaries. They will use education and collaboration first if they detect a misuse of the two-midnight rule. They will, though, refer hospitals that have consistently high denial rates to the Recovery Auditor Contractor for our region, who will then conduct a vigorous audit of inpatient admissions. How can we be sure that we won’t be audited? We can’t. But our best defense is solid documentation, and that’s the physician’s job.

So, use the two-midnight rule appropriately; document assiduously; and take great care of your patients as you always do. If you have any questions about this rule, please call your friendly physician advisor.

Take care,

Bob Morrison

Dr. Morrison is the associate chief medical officer at Miami Valley Hospital and a physician advisor for Premier Health. He can be reached at (937) 208-2315 or (937) 203-6215, or by email

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