Two-Midnights Rule Reduces Hospital Admissions

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A change in reimbursement rules designed to cut down on overuse of observations stays for Medicare patients has pushed hospital admission rates down to the lowest number seen in a decade on a monthly survey conducted by Citi Research.

The investment research group looks at 98 hospitals’ admission rates every month, and the October and November numbers show that admission rates are down between 4% and 5% from a year ago. The analysts attributed the change largely to the new reimbursement rule that requires a hospital stay of at least two-midnights before it can be billed at inpatient rates. Any stay that covers less than two midnighs must be billed as an outpatient service.

However, the report also noted the negative effect of the problem-ridden rollout of the Affordable Care Act’s individual insurance mandate.

"It is reasonable to conclude that the cumulative impact of changing physician employment and payment models is beginning to play a role, as well as the paralyzing effect of the impotent Obamacare rollout," Citi analyst Gary Taylor said in a report.

Because falling admission rates hurt profits, publically traded hospital chains saw their stock fall by more than 2% on Tuesday. Reuters reported that HCA Holdings Inc fell 2.9 percent to $45.81, Community Health Systems Inc declined 2.9 percent to $38.11, and Tenet Healthcare Corp was down 1.9 percent at $39.80.