Finding in favor of hospitals, U.S. District Court Judge Randolph Moss Sept. 21 rejected the Department of Health and Human Services’ (HHS) arguments for imposing a 0.2% Medicare payment cut on hospitals as part of its “two-midnight” policy. The judge did not order HHS to return the withheld funds to hospitals, but gave the department the opportunity to further explain its rationale within a specified timetable. If HHS cannot do so, the payment cut may be set aside. The judge directed all parties involved in the consolidated challenge – which includes a case brought by the AHA, four hospital associations and four hospital organizations – to propose by Oct. 1, a timetable for reissuing the rule. “Although the deficiencies in the rule are serious, the court is not convinced that they are so grave that [HHS] should be precluded from taking corrective steps with respect to the 2014 inpatient prospective payment system,” Moss wrote. The case is Shands Jacksonville Medical Center, et. al., v. Sylvia Burwell.