CMS Pub. 100-04, ch. 1, § 50.3.1

Payment is made under the hospital Outpatient Prospective Payment System (OPPS) for

Medicare Part B services furnished by hospitals subject to the OPPS, and under the

applicable other payment methodologies for hospitals not subject to the OPPS.

“Outpatient” means a person who has not been admitted as an inpatient but who is

registered on the hospital or critical access hospital (CAH) records as an outpatient and

receives services (rather than supplies alone) directly from the hospital or CAH.

Under the hospital Condition of Participation (CoP) at 42 C.F.R. §482.12(c), patients are

admitted to the hospital or CAH as inpatients only on the recommendation of a physician

or licensed practitioner permitted by the State to admit patients to a hospital. In addition,

every Medicare patient must be under the care of a physician or other type of practitioner

listed in the regulation (“the practitioner responsible for care of the patient”). In some

instances, a practitioner may order a beneficiary to be admitted as an inpatient, but upon

reviewing the case, the hospital’s utilization review (UR) committee determines that an

inpatient level of care is not medically necessary.

Taking this into consideration, CMS obtained a condition code from the National

Uniform Billing Committee (NUBC), effective April 1, 2004, that specifies:

Condition Code 44--Inpatient admission changed to outpatient – For use on outpatient

claims only, when the physician ordered inpatient services, but upon internal utilization

review performed before the claim was originally submitted, the hospital determined that

the services did not meet its inpatient criteria.

The utilization review requirements for hospitals and CAH are found in their respective

CoPs at §482.30 or §485.641. The hospital must ensure that all the UR activities,

including the review of medical necessity of hospital admissions and continued stays

required by §482.30(d), are fulfilled as described in the regulation. Section 482.30(d)

delineates requirements that hospitals must follow when making the determination as to

whether an admission or discharge of a patient is or was medically necessary. Review of

admissions may be performed before, at, or after hospital admission. More information

about the hospital CoP may be found in Pub.100-07, State Operations Manual, Appendix

A - Survey Protocol, Regulations and Interpretive Guidelines for Hospitals. Section

485.641 requires CAHs to have a similar program for the evaluation of all services they

furnish, including the quality and appropriateness of diagnoses and treatments furnished

by their staff physician and non-physician practitioners. If in addition to making a

medical necessity determination (or evaluating the appropriateness of diagnosis and

treatment in a CAH) a hospital or CAH wishes to change a patient’s status from inpatient

to outpatient, the following requirements apply.

CMS set the policy for the use of Condition Code 44 to address those relatively

infrequent occasions, such as a late-night weekend admission when no case manager is

on duty to offer guidance, when internal review subsequently determines that an inpatient

admission does not meet hospital criteria and that the patient would have been registered

as an outpatient under ordinary circumstances. The State Operations Manual states that in

no case may a non-physician make a final determination that a patient’s stay is not

medically necessary or appropriate (see Appendix A - Survey Protocol, Regulations and

Interpretive Guidelines for Hospitals). However, CMS encourages and expects hospitals

to employ case management staff to facilitate the application of hospital admission

protocols and criteria, to facilitate communication between practitioners and the UR

committee or Quality Improvement Organization (QIO), and to assist the UR committee

in the decision-making process. Use of Condition Code 44 is not intended to serve as a

substitute for adequate staffing of utilization management personnel or for continued

education of physicians and hospital staff about each hospital’s existing policies and

admission protocols. As education and staffing efforts continue to progress, the need for

hospitals to correct inappropriate admissions and to report Condition Code 44 should

become increasingly rare.