CMS Pub. 100-04, ch. 1, § 50.3.2

In cases where a hospital or a CAH’s UR committee determines that an inpatient

admission does not meet the hospital’s inpatient criteria, the hospital or CAH may change

the beneficiary’s status from inpatient to outpatient and submit an outpatient claim (bill

type 13x or 85x) for medically necessary Medicare Part B services that were furnished to

the beneficiary, provided all of the following conditions are met:

1. The change in patient status from inpatient to outpatient is made prior to discharge or

release, while the beneficiary is still a patient of the hospital;

2. The hospital has not submitted a claim to Medicare for the inpatient admission;

3. The practitioner responsible for the care of the patient and the UR committee concur

with the decision; and

4. The concurrence of the practitioner responsible for the care of the patient and the UR

committee is documented in the patient’s medical record.

While typically the full UR committee makes the decision for the committee that a

change in patient status under Condition Code 44 is warranted, in accordance with

§482.30(d)(1) one physician member of the UR committee may make the decision for the

committee, provided he or she is a different person from the concurring practitioner who

is responsible for the care of the patient.

When the hospital has determined that it may submit an outpatient claim according to the

conditions described above, the entire episode of care should be billed as an outpatient

episode of care on a 13x or 85x bill type and outpatient services that were ordered and

furnished should be billed as appropriate.

Refer to Pub. 100-04, Medicare Claims Processing Manual; Chapter 30, Financial

Liability Protections; Section 20, Limitation On Liability (LOL) Under §1879 Where

Medicare Claims Are Disallowed, for information regarding financial liability

protections.

When the hospital submits a 13x or 85x bill for services furnished to a beneficiary whose

status was changed from inpatient to outpatient, the hospital is required to report

Condition Code 44 on the outpatient claim in one of Form Locators 24-30, or in the ASC

X12 837 institutional claim format in Loop 2300, HI segment, with qualifier BG, on the

outpatient claim. Additional information may be found in Chapter 25 of this manual,

(Completing and Processing the Form CMS-1450 Data Set). Condition Code 44 is used

by CMS and QIOs to track and monitor these occurrences. The reporting of Condition

Code 44 on a claim does not affect the amount of hospital outpatient payment that would

otherwise be made for a hospital outpatient claim that did not require the reporting

Condition Code 44.

One of the requirements for the use of Condition Code 44 is concurrence by the

practitioner who is responsible for the care of the patient with the determination that an

inpatient admission does not meet the hospital’s admission criteria and that the patient

should have been registered as an outpatient. This prerequisite for use of Condition Code

44 is consistent with the requirements in the CoP in §482.30 (d) of the regulations. This

paragraph provides that the practitioner or practitioners responsible for the care of the

patient must be consulted and allowed to present their views before the UR committee or

QIO makes its determination that an admission is not medically necessary. It may also be

appropriate to include the practitioner who admitted the patient if this is a different

person than the practitioner responsible for the care of the patient.

If the conditions for use of Condition Code 44 are not met, the hospital may submit a 12x

bill type for covered “Part B Only” services that were furnished to the inpatient.

Medicare may still make payment for certain Part B services furnished to an inpatient of

a hospital when payment cannot be made under Part A because an inpatient admission is

determined not to be medically necessary. Information about “Part B Only” services is

located in Pub. 100-02, Medicare Benefit Policy Manual, chapter 6, section 10. Examples

of such services include, but are not limited to, diagnostic x-ray tests, diagnostic

laboratory tests, surgical dressings and splints, prosthetic devices, and certain other

services. The Medicare Benefit Policy Manual includes a complete list of the payable

“Part B Only” services. See Pub. 100-04, Medicare Claims Processing Manual, chapter

4, section 10.12 for a discussion of the billing and payment rules regarding services

furnished within the payment window for outpatient services treated as inpatient services.

Entries in the medical record cannot be expunged or deleted and must be retained in their

original form. Therefore, all orders and all entries related to the inpatient admission must

be retained in the record in their original form. If a patient’s status changes in accordance

with the requirements for use of Condition Code 44, the change must be fully

documented in the medical record, complete with orders and notes that indicate why the

change was made, the care that was furnished to the beneficiary, and the participants in

making the decision to change the patient’s status.

When Condition Code 44 is appropriately used, the hospital reports on the outpatient bill

the services that were ordered and provided to the patient for the entire patient encounter.

However, in accordance with the general Medicare requirements for services furnished to

beneficiaries and billed to Medicare, even in Condition Code 44 situations, hospitals may

not report observation services using HCPCS code G0378 (Hospital observation service,

per hour) for observation services furnished during a hospital encounter prior to a

physician's order for observation services. Medicare does not permit retroactive orders or

the inference of physician orders. Like all hospital outpatient services, observation

services must be ordered by a physician. The clock time begins at the time that

observation services are initiated in accordance with a physician’s order.

While hospitals may not report observation services under HCPCS code G0378 for the

time period during the hospital encounter prior to a physician’s order for observation

services, in Condition Code 44 situations, as for all other hospital outpatient encounters,

hospitals may include charges on the outpatient claim for the costs of all hospital

resources utilized in the care of the patient during the entire encounter. For example, a

beneficiary is admitted as an inpatient and receives 12 hours of monitoring and nursing

care, at which point the hospital changes the status of the beneficiary from inpatient to

outpatient and the physician orders observation services, with all criteria for billing under

Condition Code 44 being met. On the outpatient claim on an uncoded line with revenue

code 0762, the hospital could bill for the 12 hours of monitoring and nursing care that

were provided prior to the change in status and the physician order for observation

services, in addition to billing HCPCS code G0378 for the observation services that

followed the change in status and physician order for observation services. For other rules

related to billing and payment of observation services, see chapter 4, section 290 of this

manual, and Pub.100-02, Medicare Benefit Policy Manual, chapter 6, Section 20.6.