Newsmakers May 16-29: Banner Health, others sue MediCare

A new rule designed to reduce costs and limit charges to outpatients so irked the hospital community that many institutions – including Banner Health, which has a heavy presence in Northern Colorado – jointly filed suit in April against the U.S. Department of Health and Human Services.

Under the “two midnights rule” imposed by the Centers for Medicare and Medicaid Services, Medicare will not reimburse the hospital at inpatient rates unless a patient has stayed for two consecutive midnights. The patients must be classified and charged on an outpatient basis if they stay only one night.

The American Hospital Association led the filing of the lawsuit in U.S. District Court in Washington D.C. to stop the rule because of the short window hospitals were given for implementation and a lack of guidance on the rule. The rule could also prove quite costly for hospitals.

The rule stemmed in part from pressure on CMS to reduce the amount paid to hospitals nationwide as the nation’s debt increases and baby boomers age into Medicare. The CMS says it also addresses a growing problem in health care with hospitals, due to uncertainty about payments, implementing long periods of observation care in which patients are kept at hospitals for extended periods of time without ever being truly admitted.

But Banner Health chief financial officer Dennis Dahlen said the rule could mean millions of dollars in lost revenue for hospitals. For example, if a patient is classified as being in observation care as opposed to inpatient, the hospital makes about 80 percent less for the same treatments.

UPDATE

With full enforcement of the rule partially delayed to March 31, 2015, the lawsuit in Washington continues to make its way through the court system.

“It’s still in process and we’re going to see this process through,” Banner Health spokesman Paul Matthews said.

In November, meanwhile, Texas Republican Rep. Kevin Brady, chairman of the Ways and Means Subcommittee on Health, unveiled a discussion draft of the Hospitals Improvements for Payment Act of 2014. The bill is part of the committee’s efforts aimed at Medicare reform, and would repeal the two-midnights rule while laying out new solutions for short inpatient stays.

Reporter Joshua Lindenstein contributed to this report.

A new rule designed to reduce costs and limit charges to outpatients so irked the hospital community that many institutions – including Banner Health, which has a heavy presence in Northern Colorado – jointly filed suit in April against the U.S. Department of Health and Human Services.

Under the “two midnights rule” imposed by the Centers for Medicare and Medicaid Services, Medicare will not reimburse the hospital at inpatient rates unless a patient has stayed for two consecutive midnights. The patients must be classified and charged on an outpatient basis if they stay only one night.

The American Hospital Association led the filing of the lawsuit in U.S. District Court in Washington D.C. to stop the rule because of the short window hospitals were given for implementation and a lack of guidance on the rule. The rule could also prove quite costly for hospitals.

The rule stemmed in part from pressure on CMS to reduce the amount paid to hospitals nationwide as the nation’s debt increases and baby boomers age into Medicare. The CMS says it also addresses a growing problem in health care with hospitals, due to uncertainty about payments, implementing long periods of observation care in which patients are kept at hospitals for extended periods of time without ever being truly admitted.

But Banner Health chief financial officer Dennis Dahlen said…