Northeast Health System


Northeast Health System is one of the most comprehensive academic health care systems in the country, providing treatment and services to more than three million patients each year. The 11-hospital system resulted from a merger between two health systems.


Northeast Health System embraced a traditional outsourced Physician Advisor model using two different vendors. With the consolidation of the two health systems, one of the priorities was implementing consistent processes across the new organization. The Centers for Medicare and Medicaid Services (CMS) implemented the 2-Midnight Rule to address three vulnerabilities:

    1. Reduce inappropriate short inpatient stays
    2. Reduce inappropriate long observation stays
    3. Reduce variability in decision making regarding admission status.

Consistent with CMS objectives, Northeastern Health System’s goal was to increase efficiencies, reduce inappropriate observation rates in line with CMS/OIG guidelines, and eliminate the high degree of variability amongst its eleven hospitals in the application of the CMS 2-Midnight Rule for Traditional Medicare-Fee-For-Service (MFFS) patients. The existing vendors’ solutions were not addressing the inappropriately rising observation rates nor the variability of these rates across the facilities.

Not satisfied with either of its two vendors and to ensure best in class compliance and revenue integrity, Northeast Health System leadership engaged Versalus Health.


Northeast Health System partnered with Versalus Health to perform a Clinical Revenue Cycle Opportunity Assessment to assess variability in the application of the CMS 2-Midnight Rule and identify if there was overuse of inappropriate long observation.

After performing the Assessment, Versalus Health showed that by implementing a 2-Midnight Rule compliant approach would enable a revenue integrity opportunity of $17 million as well as reduce the statusing variability, and over usage of inpatient on short stay cases. The approach would align the system’s performance with CMS and the Office of Inspector General (OIG) guidelines under the 2-Midnight Rule.

Based on this Assessment, Northeast Health System decided to implement the Versalus Health 2- Midnight Rule Program as a pilot at four facilities in early 2019. After only three months of the pilot, Northeast Health System leadership decided to roll-out the program to the other seven hospitals, given the immediate operational, compliance, and financial improvements.


During the Assessment, Versalus Health identified revenue opportunities and compliance risks for all Northeast Health System sites. Versalus Health then utilized this information to implement targeted process recommendations and workflow modifications for Utilization Management and physician staff.

Graph 1 below shows the Versalus Health program’s impact on inappropriate long-stay Observation Rates for every Northeast Health System facility across an eight-month timeframe in 2019.


Throughout the assessment, implementation, and post go-live phases of the partnership, Versalus Health assigned a Strategic Advisor, who identified opportunities, brought in regulatory experts, successfully implemented a compliant process, and continues to measure monthly adherence to the 2-Midnight Rule by leveraging data, trends, and audits to identify variant cases and processes. Versalus Health and Northeast Health System work together to provide necessary targeted education and implement process modifications to address any outliers.

Case in point: In August 2019 (Q2 in Graph 1 above), the Strategic Advisor noticed an increase in the inappropriate long-stay observation rate at Hospital 4. The Strategic Advisor and senior leadership met and discovered an operational gap in case reviews—a case manager was not following CMS 2-Midnight Rule process, and some cases were not being reviewed.

The good news: the issue was identified and resolved within two months.

The outcome: Hospital 4’s observation rate has remained within the CMS/OIG expected range since Versalus Health provided additional education. The observation rate for the other 10 hospitals has been operationally positive since January 2020, and the program has remained sustainable through May 2022, despite the impact of all four waves of the COVID-19 pandemic, starting in March 2020.

By implementing a consistent and compliant process for the 2-Midnight Rule across all 11 facilities, Northeast Health System has recognized a positive net financial impact of over $83M  appropriate incremental revenue and a program-to-date long-stay observation rate as low as 3.1%, down from a blended 10.5% before the start of the Versalus Health partnership. Graph 2 below demonstrates the program’s impact from its go-live date in October 2019 through May 2022.

 Note: Program Go-Live completed in Oct 2019

Versalus Health successfully translated Northeast Health System’s data into actionable insights—despite a worldwide health crisis—and continues to help the system realize additional revenue opportunities, mitigate risks, and monitor results to ensure Medicare Fee-for-Service revenue.

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