Navigating Medicare Advantage Compliance One Year After the Two-Midnight Rule

The 2024 Medicare Advantage Final Rule changed inpatient coverage, requiring healthcare providers to reevaluate their patient strategies. Unlike traditional Medicare Part A, Medicare Advantage (MA) plans have greater flexibility in their interpretation and enforcement. Hospitals must adapt to maintain financial stability, and the government is keeping a sharp eye on compliance.

Understanding the Two-Midnight Rule and its impact

The goal of the Two-Midnight Rule, originally introduced under traditional Medicare Part A, was to reduce hospital admissions and to ensure the appropriate use of inpatient versus outpatient observation status. The rule states that Medicare Part A will generally cover hospital stays if the admitting physician expects the patient to require care that crosses two midnights, and the medical record supports that expectation.  Even if a physician does not expect a stay to cross two midnights, inpatient care may still be necessary based on complex medical factors documented in the medical record, or if the procedure is on the CMS Inpatient Only List. 

The Two-Midnight Rule does not directly apply to physician billing; however, as outlined in physician contracts, they must clearly document the patient’s condition and their expected length of stay. This documentation is necessary for hospitals to comply with the rule. Physicians bill their services under Medicare Part B, regardless of whether the patient is inpatient or outpatient, so the rule does not change how they code or bill for their services. However, hospitals risk claim denials, delayed reimbursements, and penalties if documentation does not align with an MA plan’s criteria. 

Strengthening partnerships with payers

Regular Joint Operating Committee (JOC) meetings are helpful for healthcare providers and payers to discuss important topics. These meetings focus on compliance trends and challenges with claim processing while providing ways to improve processes. Areas of mutual interest covered include audit results, patterns in denials, and ways to streamline workflows. This keeps providers and payers on the same page. However, for these collaborations to be successful, they need to share two common goals: providing high-quality patient care and making the reimbursement process as efficient as possible. Open communication and shared performance metrics build that understanding.  It’s also important to tackle compliance challenges before they get out of hand. 

Taking proactive steps like analyzing trends, spotting inconsistencies in claim submissions immediately, and engaging directly with payers to clarify policies addresses potential issues before they become major problems. Payer access to concurrent clinicals for authorization and level of care approval remains a top discussion item on most JOC agendas. Complete denial letters including a detailed rationale for denial is often another important JOC topic. 

Optimizing case management and utilization review

Aligning case management processes with MA requirements can mitigate compliance risks. Efficient workflows ensure timely documentation and appropriate level-of-care determinations, reducing the likelihood of denials. Consistent and thorough utilization reviews are essential for maintaining compliance. Adhering to payer-specific guidelines and leveraging technology-driven review tools can enhance accuracy and efficiency in decision-making. Ongoing education ensures that case management staff remain current on evolving compliance requirements. Collaborative training between clinical and administrative teams fosters a culture of compliance and reduces knowledge gaps that could lead to errors. 

Leveraging physician advisor programs

Physician advisors act as a bridge between clinical teams and administrative requirements. They align clinical documentation with payer expectations and ensure adherence to compliance guidelines. Engaging physician advisors enhances documentation quality, which reduces denial rates and improves payer-provider communication. Their expertise supports hospitals in making informed decisions that align with MA coverage criteria. Important to ensure admitting physicians understand documentation tips, understand the rules and criteria for inpatient admissions, and the importance of documenting the expectation of a stay spanning at least two midnights. Keep the messaging simple, “think with ink” and ensure the electronic medical record Problem List is updated throughout the admission. As more tests come back, additional specificity on acute and chronic conditions will yield a clear picture of acuity while potentially reduce retrospective physician queries. 

Maximize payer Peer to Peer (P2P) opportunities on current disputes believed to meet two midnight standards. Physician Advisors are an excellent resource to surface key aspects of the admission including factors that led to the Inpatient Admission such as failed outpatient therapy, complex history, risk factors, etc. The physician must consider the patient’s individual risk factors, including age, comorbidities, and potential complications, when making decisions about admission level of care. 

Using data-driven strategies for denial prevention

Analyzing denial data allows hospitals to pinpoint exactly any recurring issues and payer-specific trends. Leveraging these analytics to make changes allows for proactively resolving compliance gaps before they impact revenue. Technology-driven solutions improve real-time tracking of claims, denials, and appeals. Best practices in revenue cycle management focus on automating denial prevention and streamlining the resolution processes. Establish a governance structure within the organization designed to pull together key resources for different departments such as patient access, case management, utilization review, coding, clinical appeals, and managed care. Alignment within these cross functional areas will be key to identify opportunities and drive better outcomes. 

Writing effective appeal letters

A well-structured appeal letter should directly address the reason for the denial and incorporate strong supporting evidence with references to payer-specific guidelines. Precision and clarity increase the likelihood of a successful appeal. Real-world case studies demonstrate the impact of data-backed documentation in overturning denied claims. Case managers and hospitals should use these examples to construct effective appeals. 

Appeal letters should include consistent structure and sound criteria supporting inpatient level of care. Quality Assurance reviews are helpful to identify opportunities to letter quality. Clinical references, appeal details, appropriate template selection, and clear and concise grammar would all be important QA criteria. Lastly, appeal letters should be persuasive in nature with the best argument to win as the opening position. 

Lessons learned one year after implementation

The first year following the 2024 Medicare Advantage Final Rule revealed both challenges and best practices. Trends indicate that practices with strong payer relationships, robust case management processes, and data-driven compliance strategies will see the most success. Adapting to regulatory changes will remain an ongoing effort.

Compliance with Medicare Advantage rules is required for financial stability and operational efficiency. These proactive strategies put hospitals securely in the best position for long-term success.

Photo: FG Trade, Getty Images

Kyle McElroy serves as Conifer’s Vice President of Clinical Operations overseeing middle revenue cycle operations along with clinical appeals and denial prevention. His role is uniquely positioned within revenue cycle to include health information management, hospital coding, clinical documentation integrity, revenue integrity, clinical appeals, and denial prevention.

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