CHA News Article

Federal Court Sides with Hospitals Over 0.2 Percent “Two-Midnight” Cut

Late yesterday, a federal judge rejected the Centers for Medicare & Medicaid Services’ (CMS) argument that it met all legal requirements for rulemaking when it cut hospitals’ inpatient payments by 0.2 percent in accordance with its “two-midnight” policy. Finding in favor of hospitals, the court ordered CMS to provide further justification and additional opportunity for hospitals to comment. The ruling does not order the government to immediately return the withheld funds to hospitals, but rather grants CMS the opportunity to further explain its rationale within a specified time period. The court ordered that no later than Oct. 1, all parties involved in the consolidated challenge — including the American Hospital Association, four hospital associations and four hospital organizations —propose a timeline for reissuing the rule.

The permanent, prospective cut was first included in the agency’s fiscal year 2014 final inpatient prospective payment system and took effect Oct. 1, 2013. In July, CMS proposed changes to the two-midnight policy, which CHA supports, but did not propose rescinding the 0.2 percent cut.