The Clinical and Financial Consequences of the Centers for Medicare and Medicaid Services’ Two-Midnight Rule in Total Joint Arthroplasty

To lessen the financial burden of total joint arthroplasty (TJA) and encourage shorter hospital stays, the Centers for Medicare and Medicaid Services (CMS) recently removed TKA from the inpatient-only list. This policy change now requires providers and institutions to apply the two-midnight rule (TMR) to short-stay (1-midnight) inpatient hospitalizations (SSIH).

The National Inpatient Sample from 2012 through 2016 was used to analyze trends in length of stay following elective TJA. Using publically-available policy documentation, published median Medicare payments, and National Inpatient Sample hospital costs, we analyzed the application of the TMR to SSIHs and compared the results to the previous policy environment. Specifically, we modeled 3 scenarios for all 2016 Medicare SSIHs: (1) all patients kept an extra midnight to satisfy the TMR, (2) all patients discharged as an outpatient, and (3) all patients discharged as an inpatient.

The overall percentage of Medicare SSIHs increased significantly from 2.7% in 2012 to 17.8% in 2016 (P < .0001). Scenario 1 resulted in no change in out-of-pocket (OOP) costs to patients, no change in CMS payments, and hospital losses of $117.0 million. Scenario 2 resulted in no change in patient OOP costs, reduction in payments from CMS of $181.8 million, and hospital losses of $357.3 million. Scenario 3 resulted in no change in patient OOP costs, no change in CMS payments, and an estimated $1.71 billion of SSIH charges at risk to hospitals for audit.

The results of this analysis reveal the conflict between length of stay trends following TJA and the imposition of the TMR.