Inappropriate admissions mean more paperwork

Use Condition Code 44 to change level of care

If patients are admitted to the hospital when outpatient services were appropriate, the level of care can be changed, but there's a lot of paperwork involved to correct the error.

Hospitals can file Condition Code 44 to change a patient's inpatient status to outpatient and bill all medically necessary outpatient status but only if the change in patient status is made before discharge, the hospital has not submitted a Medicare claim for the admission, and the admitting physician and a member of the utilization review committee concur in the decision.

"Case managers need to review admissions at the point of entry or as soon as possible to make sure that the patient is an appropriate inpatient admission. If it's determined that the admission was inappropriate and the patient has already been discharged, the hospital can' t bill for therapeutic outpatient services provided during the encounter. It's best to get the level of care right at the onset," says Deborah Hale, CCS, CCDS, president and chief executive officer of Administrative Consultant Service, a healthcare consulting firm based in Shawnee, OK.

The hospital may not change a patient's status from inpatient to outpatient without utilization review committee involvement and the physician responsible for the care of the patient has to concur and change the level of care order to outpatient.

Hospitals are required to submit a claim for any Medicare inpatient admission, even if it is determined that the admission is not covered. If the hospital's utilization review committee determines after discharge that an entire admission did not meet inpatient criteria, the hospital must submit a provider-liable claim, admitting, in effect, that it made a mistake.

When patients are placed in observation status after being admitted as inpatients, the hospital must give them a written notice of their change in status and that they might be responsible for their Medicare Part B deductible and co-pay for outpatient services. If patients insist on continuing as an inpatient, the hospital must give them a hospital-issued notice of non-coverage (HINN), notifying them that Medicare does not cover their care.

"The most confusing part of the Condition Code 44 process is the timing of the order and the decision on whether to bill for observation time," Hale says.

CMS intends for hospitals to bill only for the services that have been ordered, which means that the clock for observation services doesn't start until the attending physician gives a subsequent order for observation services. Medicare does not permit retroactive physician orders or interference of physician orders. Hospitals may not receive reimbursement for observation services for the time the patient was in the hospital before the order was changed to observation services. Instructions for proper billing are found in the Medicare Claims Processing Manual, Chapter 1, Section 50.3.2.

The patient must have received at least eight hours of medically necessary observation services following the physician's order for observation services and nursing documentation of the services for the hospital to be paid.

"If the change from the inpatient level of care is made quickly enough after admission, the physician can order observation services and the hospital is likely to have enough time to bill for observation," Hale says.

The webinar by Deborah Hale, "Strategies for Appropriate Level-of-Care Determination: Avoiding Overutilization of Observation Services," is available at:


  • Deborah Hale, CCS, CCDS, President and Chief executive officer president of Administrative Consultant Services, LLC, Shawnee, OK. email:
  • Elizabeth Lamkin, MHA, Chief Executive Officer and Partner, PACE Healthcare Consulting, Hilton Head, SC. Email:
  • Kathleen Miodonski, RN, BSN, CMAC, Manager for The Camden Group, Los Angeles. email:
  • Linda Sallee, MS, RN, CMAC, ACM, IQCI, Director, Huron Healthcare with headquarters, Chicago. email: