Medicare officials are proposing to ease the requirements of the so-called two-midnight rule governing how the agency pays for short hospital stays, deferring more to the medical judgment of the admitting physician.

For stays in which the physician expects the patient to need less than two midnights of hospital care for procedures not on the inpatient only list or listed as a national exception, “an inpatient submission would be payable under Medicare Part A on a case-by-case basis based on the judgment of the admitting physician. The documentation in the medical record must support that an inpatient admission is necessary, and is subject to medical review,” officials at the Centers for Medicare & Medicaid Services wrote in a fact sheet .

The change is included in the proposed annual update to the Hospital Outpatient Prospective Payment System. The proposed rule is scheduled to be published July 8 in the Federal Register, but was made available online July 1.

It would be “rare and unusual for a beneficiary to require inpatient hospital admission for a minor surgical procedure or other treatment in the hospital that is expected to keep him or her in the hospital for a period of time that is only a few hours and does not span at least overnight,” CMS added.

Medicare’s payment policy would not change when hospital stays span two midnights or longer, the agency said.

The proposal comes after extensive input from physicians and hospitals, as well as the results of “probe and educate” audits. Currently, CMS policy states that stays of at least two midnights are generally paid under Medicare Part A, while stays that are expected to be shorter are classified as outpatient stays and are paid under Medicare Part B.

Enforcement for this two-midnight policy would also shift under the proposal. Quality improvement organizations (QIOs) rather than Medicare administrative contractors (MACs) or recovery auditors would conduct first-line medical reviews of providers submitting claims for inpatient admissions. Recovery auditors will conduct reviews for those hospitals that have consistently high denial rates based on QIO patient status review outcomes.

“QIOs have a significant history of collaborating with hospitals and other stakeholders to ensure high quality care for beneficiaries,” CMS stated.

Overall, the proposed Hospital Outpatient Prospective Payment System update is expected to result in a –0.2% adjustment for hospital payments in 2016, which includes a 2.7% projected hospital market basket increase minus adjustments for multifactor productivity and other required cuts.