Clinical Documentation Improvement Staff

The Value of Clinical Documentation Improvement (CDI) and the Two Midnight Rule


MedPartners CDI Specialist Consultant

In the good old days, the process of caring for patients and payment for services was quite simple – physicians treated their patients extensively and the length of stay was not an issue. Well, healthcare continues to evolve and things change.

Of course, there is this constant driving force in all medical protocol – provide the best overall health care for the patient. Regardless of program or initiative, it always returns to the well-being of the patient.  The balance between care and payment has become increasingly difficult and generating a revenue source that matches the ever-increasing expense of patient care has become more challenging.

Over time the need to be compliant with CMS rules regarding inpatient services became a necessity as more services were scrutinized for bill appropriateness.  The need to understand the rules also became apparent. If there was to be a “standard”, then specific rules would have to be implemented to provide the guidelines necessary for a provider to receive proper payment.

Prior to October 13, 2013 most admissions were based on a physician’s knowledge and expertise which would then dictate the length of stay. Since this practice was not subject to specific guidelines, there was no oversight of cost controls resulting on imbalance in the payment process. Many hospitals & health care facilities were denied payments for incomplete documentation, lack of medical necessity, or unnecessary procedures. Conflict between CMS & providers were escalating and needed a solution.

Thus, CMS adopted the Two Midnight Rule for Medicare Part A inpatient payment for admissions on or after October 1, 2013. It provided guidelines with some exceptions to the rule. A system of review was implemented with the ability to appeal certain situations. Basically, it included a “presumption” that the two or more midnight stay was reasonable and necessary for Medicare Part A payment after the admitting provider or practitioner formally admitted the patient as an inpatient. The guideline recognized the physician’s responsibility to safeguard the patient.  It also created a “benchmark” that inpatient admissions would have to be supported by medical record documentation. CMS also specified that outpatient time before inpatient admission does not qualify as inpatient time.  A vigorous medical record review to guard against gaming, extensive delaying, etc., remained in effect.

CMS updated the Two Midnight Rule in 2016 allowing exceptions for patients who met inpatient criteria with hospital stay less than the two midnights on a case by case basis, such as, those who recover quickly, transfer to another facility, unexpected death, or leave Against Medical Advice (AMA).

The 2016 update also replaced the Medicare Administrative Contractors (MACs) with the Beneficiary and Family Centered Care Quality Improvement Organizations (BFCC QIOs) to conduct the initial short inpatient hospital claims with the focus of educating providers and hospitals about the Medicare Part A inpatient payment policy. This educational opportunity is probably one of the most important and potentially beneficial piece of the entire Two Midnight Rule. The education would assist in accurately determining an appropriate hospital inpatient admission.

Obviously, emphasis on education is at the core of all endeavors. Regardless of the business or specific entity, education and the ability to communicate well are essential to success.  We learn this principle early in life, particularly if we have participated in sports. Rules are taught and if team members communicate clearly and appropriately, the probability of success increases greatly. The same can be said in healthcare. Skilled professionals are trying to provide the best care for their patients and education on CMS regulations and guidelines must be provided and communicated.

Healthcare communication takes place during the patient encounter and opportunities exist to improve communication so that providers can appropriately tap into available legitimate revenue stream. This communication is called clinical documentation. The more detailed, explicit and valid the documentation, the more robust and accurate the submittal for financial compensation.

Clinical Documentation Specialists (CDSs) practice great communication skills by using their extensive experience, expertise, and share their knowledge, which by the way, includes the Two Midnight Rule, to review the medical record for appropriate documentation to accurately reflect the patient’s condition and care provided. The more specific providers document diagnoses, the easier to justify medical necessity for inpatient admission, testing and needed treatments.  This helps providers not only get reimbursed appropriately but it also focuses on better patient care and outcomes.


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