CMS' expansion of the two-midnight rule, which could affect more than 20% of Medicare Advantage patients this year, has led to increased inpatient volumes and revenue growth for hospitals in the first quarter, according to a report published May 13 by Strata Decision Technology.
MA provides coverage to more than 51% of the nation's seniors, almost 31 million people, according to Strata.
An analysis of StrataSphere data MA encounters from 2023 — before the rule was expanded to those patients — found that 22.3% were held in observation status for two days or more. By comparison, 8.7% of Medicare patients and 11.3% of patients covered by commercial plans had observation lengths of stay of two days or more in 2023.
In March, inpatient admissions increased 3.9% year over year while outpatient admissions declined 5.1%. Year-over-year growth in inpatient revenue exceeded outpatient revenue in March for the first time in more than two years, according to the report.
Inpatient revenue rose 3.7% versus March 2023, while outpatient revenue was up 2.4% year over year. The last time inpatient revenue growth outpaced outpatient revenue was November 2021, when inpatient revenue rose 10.2% compared to 8.6% for outpatient revenue, according to data from Strata. Outpatient revenue comprises about 47% of overall gross revenue.
The two-midnight rule requires patients to be admitted as an inpatient if the treating clinician determines they require hospital care that extends beyond two midnights — rather than being held under observation status as an outpatient.
The rule was implemented in 2014 but since January 2024 Medicare Advantage plans must also follow the rule, its case-by-case exception and the inpatient-only list. However, several MA plans continue to disregard this directive.
Strata's analysis of the two-midnight rule is based on data from 456 hospitals. Click here for more details on the report.