Inpatient vs. Observation-Condition code 44

A conversation was recently had with a CMS representative regarding their policy and billing instructions associated with observation hours and services in situations when a patient is admitted as an inpatient but is subsequently found to be only eligible for observation; thus billed as an outpatient on the UB-04 reporting the Condition code 44.

Per CMS, observation hours are counted from the time the observation services begin in accordance with a physician order for observation services.  They further instructed that once the hospital has determined the patient should not have been admitted, the attending physician concurring with the decision to change the inpatient status should write an order for outpatient observation.  Only then can a hospital begin counting the hours of observation for billing purposes.  

It appears that this is a new interpretation of an old policy that had originally intended condition code 44 to be reported as a means for hospitals to correct the patient status designation for Medicare coverage and billing. The instruction for reporting condition code 44 provides for a process that allows the hospital to review inpatient admissions, while the patient is still receiving care, and permitting a change in patient status by allowing a corrected order by the physician. The inability to bill for services provided prior to the written changes in order to outpatient observation s to defeats the intent of the instruction in easing or allowing the correction of mistakes in patient classification.

CMS stated that a clarifying Q & A will soon be posted on the CMS website. One can only hope that this new interpretation does not become the new rule.

Written By Margart E. Fortin, CPC, CPC-H