Less than three months after having partially delayed its “two-midnight” inpatient review policy, the Centers for Medicare and Medicaid Services (CMS) has further delayed the controversial policy from taking full effect.

According to revised guidance on its website, CMS will extend an interim “probe and educate” period for an additional six months from March 31, 2014 to Sept. 30, 2014. During this time, Medicare contractors will engage in a limited pre-payment compliance review of Medicare claims (10 claims for most hospitals and 25 claims for larger hospitals) with dates of admission between March 31, 2014 and September 30, 2014. If the inpatient admission status of a selected claim does not meet the criteria of the two-midnight rule, contractors will deny the claim and conduct educational outreach to the billing entity. Meanwhile, CMS will hold open forums in the coming weeks and months to address questions about the two-midnight rule. Recovery auditors and other Medicare contractors generally will not undertake post-payment patient status reviews of claims with dates of admission between Oct. 1, 2013 and Oct. 1, 2014.

The two-midnight rule, which CMS issued in its fiscal year 2014 update on Medicare payment policies and rates under the Inpatient Prospective Payment System (IPPS), was supposed to take effect on Oct. 1, 2013. Under the rule, CMS deems services generally appropriate for inpatient hospital admission and payment when an admitting physician expects a Medicare beneficiary to be hospitalized for a period that “crosses at least two midnights” and admits the patient to the hospital on that basis. The rule further elaborates on the timeframe for assessing an expectation that care will exceed two midnights and the documentation necessary to support such an expectation. CMS has explained that the two-midnight rule “responds to both hospital calls for more guidance about when a beneficiary is appropriately treated—and paid by Medicare—as an inpatient, and beneficiaries’ concerns about increasingly long stays as outpatients due to hospital uncertainties about payment.”

Hospital and physician groups, however, have argued that CMS’s partial delays are insufficient and have generally opposed the two-midnight rule as rigid and burdensome in its documentation requirements. The rule has also drawn criticism for its direct financial impact. Because CMS estimated that the two-midnight rule would convert more “observation” care—for which Medicare beneficiaries tend to bear a greater portion of the costs—into costlier inpatient care, the agency reduced standard payment rates to hospitals by 0.2 percent in the IPPS rule to cover the estimated additional costs.