A Second Look at the Two Midnight Rule

Anwar“You gotta change us to inpatient!”

Mrs. Mack’s daughter was referring to me changing her mother’s status from “inpatient” to “outpatient.” If Mrs. Mack was discharged as an outpatient, she wouldn’t be able to afford to go to the nursing home she needed to make a full recovery, and her daughter couldn’t care for her at home.

Physicians and hospital are all too familiar with this scenario.  When a patient stays inside a hospital building, they can be either an inpatient or an outpatient.  A patient can be either in an inpatient status or an outpatient status, yet stay in a hospital bed overnight and receive identical care.  The ‘2 Midnight Rule’ serves to put this determination of status in the hands of doctors, but somehow, physicians like those in the Society of Hospital Medicine and the American Hospital Association dislike this new responsibility.

When I work as an emergency physician or an internist, I used to have to explain to patient families that this status designation is not in my hands.

Mrs. Mack’s daughter was in a precarious situation, but not an uncommon one; I’ve heard similar requests from patients and their families, and with good reason.

A family in this situation would have to pay for the entire first month of nursing home care if the patient was in an outpatient status, but as an inpatient, Medicare sees the stay as an extension of the hospital visit and it is a covered benefit with much less out-of-pocket expense.

Medicare and many insurers pay hospitals differently and patients are responsible for different amounts based on this status.  For the hospital stay, Inpatient status patients have to pay a Medicare deductible and Outpatient status patients have to pay about 20% of their bill.  This is in addition to having to pay huge bills if they are an observation patient and have to go from the hospital to a nursing home, like the Macks.

Patients don’t get to choose which kind of status they get into.  Often, a specialized nurse or administrator reviews the medical record with commercial tools like the InterQual manual to determine whether the patient is in observation or inpatient status.

Although some agencies say that this adds administrative burden, the 2 Midnight Rule is pretty simple.  With it, if the admitting physician thinks that the patient will be in the hospital for more than 2 midnights, then they qualify for the inpatient status designation.  If not, then they are observation status.  Also, if a patient stays in the hospital for more than 2 midnights, then the patient is automatically considered an inpatient.  The Mack family would be able to qualify for nursing home care without the use of InterQual manual.

Doctors and hospitals don’t like change.  However, the providers are the probably in the best position to make this determination.  First, the payment for the physician is not directly tied to this status.  Second, the commercially available tools are oversimplified and inadequate in assessment of the patient as whole.  In fact, a recent study found the InterQual manual wholly inaccurate in determining who needs which status in heart failure patients.

Medicare has placed this rule, partially, to reassert the primacy of the doctor-patient relationship.  These manuals are no longer necessary and hence, the biggest losers in this change are the makers of these popular tools.  Also, without these bad criteria and the benefit of the doubt resting on the side of the physician, the regulators, who are private contractors working on commission, have less to rely on.  These contractors stand to lose on the change too.

We can’t have it both ways.  Senior citizen advocacy groups have filed suits alleging patients are hamstrung by these tools all the while, the American Hospital Association and MedPAC have even filed a suit alleging that the ‘2 midnight rule’ response from Medicare is arbitrary and harmful to hospitals.  The unintended consequences of the old system are apparent.  There will likely be some unintended consequences with the new ‘2 midnight rule’ but it’s far too early to determine what the effect on hospital revenue and administrative costs will be.

Interestingly, recent analyses of the prior system, including one by the office of the Inspector General at the Department of Health and Human Services show that very few patients have excessive bills related to use of ‘observation status.’

While the true victims of this previous system are probably less than we’ve been lead to believe, they are nonetheless real people, like the Macks, who were caught in a program designed to help them.  The ‘2 midnight rule’ goes a long way to remedy these types of situations.  The real losers here are the makers of the InterQual Manual who’s product will be rendered useless with this policy.  Physicians and patients should embrace this change and realize that no policy is perfect.  Granted, perhaps the entire way Medicare makes payments to hospitals needs an overhaul, but ‘the 2 midnight rule’ was designed to help patients and is more of what we want in healthcare.

Anwar Osborne, MD practices both as a hospitalist and emergency medicine physician at Emory University Hospital Midtown in Atlanta Georgia.  He is also the medical director of 2 observation units and has published extensively in the field of Observation Medicine.  

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10 replies »

  1. i’m really not sure how to respond to this. i mean, what part of the previous way the rule worked did not involve ‘nag nurses’. in fact, what are ‘nag nurses?’. in my experience, the utilization review nurses (perhaps this is what you mean by ‘nag nurses’?) are armed with the InterQual manuals and not the physicians.

  2. Can you give a reference for this: “In fact, a recent study found the InterQual manual wholly inaccurate in determining who needs which status in heart failure patients”?

  3. A physician order is needed to determine status, but MDs are bound by the rules just as much as case management. In my experience, physicians are rarely familiar enough with the rules to make adequate status determinations.

  4. Many errors in your understanding, or lack thereof. The nag nurses and others beat on doctors to kick patients out, as if it were a contest.

    All those touchy feely ads to attract the patient, and when the patient gets into a bed, patient becomes an enemy to the hospital.

    2 mn rule is a joke, and is determined by the nag nurses and their book

  5. Hi,

    thanks for reading. ‘automatic’ refers to the presumption portion of the rule for reviewers. appropriateness is assumed in this context. Obviously, there must be an order for inpatient admission. However, if the patient stays beyond the 2nd midnight (appropriately) then they meet the benchmark criteria for inpatient status.

    those manual are useless in determining who is an inpatient and who is an outpatient from the standpoint of medicare and that is what was hurting seniors. George Mills summed it up in the open door session here:

    “InterQual and Milliman are just tools, they are not Medicare policy; the RACs and MACs and CERT use them, but they are not definitive on Medicare rules and regulations and coverage decisions (Medicare rules) are what is definitive, not the InterQual or Milliman.”


    so reviewers will use these some I’m sure, but their role will most certainly be diminished and this rule asserts that the physician makes this determination of appropriateness.

  6. While I agree with your support of the 2 MN rule, you made some errors. First, you state, “Also, if a patient stays in the hospital for more than 2 midnights, then the patient is automatically considered an inpatient.” That is wrong. First it must be medically necessary for the patient to stay two midnights; if they are staying because they do not want to drive home in the dark, the patient does not qualify for inpatient admission. Second, it is not “automatic.” The doctor must order inpatient admission.

    You also state that InterQual and MCG have no role. That is also wrong; they do help case managers and insurers determine if the patient requires hospital care. They cannot say inpatient or observation but they still have a very important role because many hospitalized patients could be safely treated in a lesser setting than a hospital and Medicare and insurers should not have to pay for expensive care in a hospital when less expensive care elsewhere is equally safe.

  7. I sure, perhaps the entire way Medicare makes payments to hospitals needs an overhaul, but ‘the 2 midnight rule’ was designed to help patients and is more of what we want in healthcare.