Two-Midnight Audit Findings Under Scrutiny

Well, here we go again. As I mentioned last week, the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) took a very long break from auditing hospitals, but it appears they are back at full steam.

Last week they released an audit of Jefferson Regional Medical Center in Arkansas.

And as you would expect, I zeroed in on the audits of the inpatient admissions. While last week I found fault with the OIG’s auditor in their determinations, but also felt the provider documentation could have been improved, this time the example case that the OIG presented really suggests that their auditor has some serious quality issues.

The OIG describes the case by noting that “One enrollee, who had been taking medication for hypertension, presented to the Hospital with acute high blood pressure. The enrollee’s blood pressure responded to oral medications administered in the Hospital. Cardiac enzymes were negative, and the electrocardiogram was unremarkable. The enrollee was admitted for medication adjustment, and the admitting physician expected the enrollee could be discharged within 24 to 48 hours.”

But the hospital added a few details. The patient not only had elevated blood pressure, but also a headache and congested cough. They were found to have an acute exacerbation of heart failure, in addition to elevated blood pressure, and were treated in the intensive care unit with careful monitoring “to lower blood pressure in a controlled fashion without compromising cerebral, coronary, or renal perfusion.” Although we do not have other case details, that certainly does not sound like a patient admitted simply for medication adjustment.

In addition, we all know the rule is the Two-Midnight Rule, not the 48-Hour Rule. The OIG’s auditor clearly does not realize that a patient who at the time of inpatient admission has an “expectation of 48 hours” of hospital care would actually pass two midnights and warrant inpatient admission.

In addition, in their audit, the OIG noted that for three cases, the hospital did not apply the correct discharge status code. As you know, the discharge status code indicates whether the patient was discharged home, to a skilled nursing facility (SNF), to another facility, died, or left against medical advice. For discharges to SNF or transfers to another hospital, depending on the length of stay, there may be an adjustment to the hospital’s payment.

Well, the OIG reported that due to those three errors, the hospital was overpaid $78. That’s $26 per admission. But that makes absolutely no sense. There is absolutely no DRG whereby the per-diem rate for a transfer DRG adjustment would be $26. That math just does not add up. Yet that is what is reported, and that amount gets added to the total overpayment, which leads to their extrapolated overpayment.

Finally, there are two quick Program for Evaluating Payment Patterns Electronic Report (PEPPER) updates. First, both critical access hospitals (CAHs) and hospices now have access to their fiscal-year 2025 PEPPERs. SNFs and hospices only get their data once a year. In addition, the PEPPERs for the first quarter of 2026 for acute-care hospitals, which includes claims for services in October to December 2025, were just released.

So, if you are like me and are all prepared to present the fourth-quarter data to the utilization review committee, time to get the new PEPPER and update your presentation.