AHA: Explanation for two-midnight rule reductions doesn't cut it

Alternate methodology shows no need for reimbursement cuts

The Centers for Medicare & Medicaid Services' justification for proposed inpatient payment cuts doesn't make the grade, according to the American Hospital Association (AHA).

The AHA sued over the 0.2 percent cuts, part of the controversial "two-midnight rule," in 2015, with 55 hospitals filing a separate suit against them in January. Last September a federal judge ruled that the Department of Health and Human Services had given hospitals insufficient explanation for the cuts in violation of the Administrative Procedure Act. In December, CMS issued a notice clarifying the rationale behind the cuts. The agency estimates inpatient discharges will rise a net 40,000, which will cost Medicare $220 million and require the cuts to offset the additional costs. 

But it still hasn't published important data, and some details of its methodology are severely flawed or reliant on questionable assumptions, AHA Executive Vice President Thomas P. Nickels argues in a letter to the agency.

Moreover, "a number of the methodological and data choices made were arbitrary and capricious because they were not explained and/or because they were unreasonable on their face," Nickels wrote, "As a result, the actuaries' estimates were severely flawed and, in some instances, baseless."

The AHA, in a report accompanying the letter, analyzed Medicare data using a methodology it claims makes more realistic assumptions about shifts to outpatient care. Under this methodology, the letter states, the shifts from inpatient to outpatient settings balance each other out, eliminating the need for cuts, according to Nickels.

To learn more:
- read the letter with report (.pdf)
- here's CMS' notice justifying the cuts

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