(Additions in black bold font, proposed deletions with strike-thru)
Two-Midnight Rule
CMS adopted the Two-Midnight rule for admissions beginning on or after October 1, 2013. The rule states: Inpatient admissions will generally be payable under Part A if the admitting practitioner documents the patient to require a hospital stay that is expected to cross two midnights, and the medical record supports that reasonable expectation. Medicare Part A payment is generally not appropriate for hospital stays (acute, LTAC, and psychiatric) not expected to span at least two midnights.

Purpose
Because of the structure of Medicare, payment for hospital services is distributed differently for inpatient status versus outpatient status. When a patient is admitted to a hospital as an Inpatient, the reimbursement falls under the Inpatient Prospective Payment System (IPPS). In contrast, when a patient is admitted to the hospital as Observation, Medicare pays the hospital under the Outpatient Prospective Payment System (OPPS). The care provided is the same regardless of the Inpatient or Observation status assigned. The doctor must decide whether it is suitable to admit the patient as an Inpatient or Outpatient based on the 2 MN Rule criteria provided by CMS. The beneficiary is responsible for a one-time deductible if admitted (and billed) as Inpatient, but conversely will be responsible for a copayment on each individual hospital service if admitted (and billed) as Observation. CMS states the rule was introduced to provide greater clarity to the physicians and limit the use of observation status to reduce Medicare patient expenses.
Implementation
During the delay, CMS decided to conduct a "probe and educate" effort during which the Medicare claims processing contractors would review hospital's inpatient claims to determine the appropriateness of the inpatient admission under