Practice Management

Medicare’s two-midnight rule


CMS’s inpatient-only list

Each year, CMS publishes a list of procedures that CMS will pay only under Part A (that is, as inpatient). This list is updated quarterly (Addendum E) and can be found on the CMS website.3 Hospitalizations associated with the procedures on this list should always be inpatient, regardless of the expected length of stay.

It is important to note that the inpatient-only list is dynamic; it is revised annually, and procedures can come on or off the list. Notably, in January 2018, elective total knee replacements and laparoscopic radical prostatectomies came off the inpatient-only list. Most surgeons and proceduralists know whether the procedure they are performing is on this list, and they should advise hospitalists accordingly if the hospitalist is to be the attending of record and will be writing the admission order.

Inpatient services are nevertheless appropriate

The third situation, in which an inpatient admission is appropriate even when the admitting provider does not expect a two-midnight stay, was added to the two-midnight rule in January 2016. CMS states that the factors used in making this determination can be based on physician judgment and documented in the medical record.

At first reading, one might think that CMS is, in effect, returning to the definition of an inpatient prior to the two-midnight rule’s implementation in 2013. However, CMS has not offered clear guidance for its use, and they did not remove any of the previous two-midnight rule guidance. In the absence of clear guidance, hospitalists may be best served by not using this latest change to the two-midnight rule in determining which Medicare beneficiary hospitalizations are appropriate for inpatient designation.

A final, and critical, point about the two-midnight rule is that it only applies to traditional Medicare, and it does not apply to other payers, including commercial insurance and Medicaid. Medicare Advantage plans may or may not follow the two-midnight rule, depending on their contract with the hospital. Which patients are appropriate for inpatient designations are usually determined by the individual contract that the hospital has signed with that payer.

A better understanding of the two-midnight rule including to whom it applies, when it applies, and how to apply it will help you accurately determine which hospitalizations are appropriate for inpatient payment. With this understanding you will quickly become the hero of your hospital’s case managers and billing department.

Dr. Locke is senior physician advisor at the Johns Hopkins Hospital in Baltimore and president-elect of the American College of Physician Advisors. Dr. Hu is executive director of physician advisor services at the University of North Carolina Health Care System, Chapel Hill, and president of the American College of Physician Advisors.


1. Medicare Benefit Policy Manual. Chapter 1 - Inpatient Hospital Services Covered Under Part A.

2. Code of Federal Regulations.

3. Current Procedural Terminology, Fourth Edition.

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