Don’t rely on Condition Code 44 to fix mistakes

Catch inappropriate admissions in advance

If your hospital is routinely filing claims under Condition Code 44, which changes a patient’s status from inpatient to outpatient, your system for determining appropriate admissions may be failing.

"Hospitals today are really struggling with medical necessity issues, especially since CMS is focusing on one-day stays. Many hospitals, in their attempt to be compliant, as they understand it are using Condition Code 44 to prevent admission denials. They believe billing a lot of Condition Code 44 claims demonstrates compliance, but when a hospital frequently uses Condition Code 44, it indicates a failure to determine an appropriate level of care," explains Deborah Hale, CCS, president of Administrative Consultant Services Inc., a health care consulting firm based in Shawnee, OK.

Condition Code 44 was instituted by the Centers for Medicare & Medicaid Services (CMS) in 2004 and allows hospitals to convert inpatient admissions to outpatient admissions and file claims for Medicare Part B outpatient services under certain circumstances.

When the hospital determines that a claim is eligible to be submitted using Condition Code 44, the entire episode of care should be billed as an outpatient episode of care, as though the inpatient admission never occurred.

According to CMS, Condition Code 44 is appropriately used when a hospital’s utilization review committee determines that an inpatient admission does not meet the hospital’s inpatient criteria only when all of the following conditions as set out by CMS have been met:

  • The change in patient status from inpatient to outpatient is made prior to discharge, while the individual still is in the hospital.
  • The hospital has not submitted a claim to Medicare for inpatient admission.
  • A physician concurs with the utilization review committee’s decision.
  • The physician’s concurrence with the utilization review committee’s decision is documented in the patient’s medical record.

The condition code allows hospitals to recoup reimbursement for some services when otherwise the bill for the entire episode of care could be denied. The only services the hospital can bill for under Condition Code 44 are some ancillary services that are listed in the CMS Medicare Benefit Policy Manual. Requirements for using Condition Code 44 are set out in Transmittal 299 from CMS.1

"Condition Code 44 is appropriate if the hospital can meet the conditions set out by CMS in Transmittal 299, but I am seeing a lot of mistakes," Hale says.

Some hospitals are just changing the billing code to Condition Code 44 and not going through the utilization review committee process required by CMS, she adds.

Others are using it to convert from inpatient to observation status.

"Condition Code 44 does not allow you to convert from inpatient to observation status, only from inpatient to outpatient," Hale notes.

Here’s an example of when Condition Code 44 is appropriate:

A patient comes to the emergency department after an episode of vomiting and is admitted to the hospital as an inpatient, even though there has been no attempt to manage the problem on an outpatient basis. The next morning, the case manager looks at the patient record and realizes that the patient did not meet criteria for admission as an inpatient.

The case manager should refer the case to the utilization review committee before the patient is discharged.

Rather than using Condition Code 44 to remedy inappropriate hospital admissions, hospitals should proactively catch inappropriate admissions at the point of entry before the services are delivered to the patient — and that’s where the case managers come in, Hale says.

"Instead of trying to fix incorrect admission status using Condition Code 44, hospitals should use case managers to screen and evaluate patients based on the hospital’s admission criteria. The initial decision about the site of service should be guided by case managers" she says.

Problems with the use of Condition Code 44 point out the necessity for having a case manager in the emergency department to help screen for appropriateness of admission and catch problems at the front end, rather than fixing them at the back end, she adds.

Most of the problems with improper admissions occur when the patients are admitted through the emergency department, Hale says.

That’s why it is essential for hospitals to have case managers in the emergency department to make sure that any patients admitted to the hospital meet whatever admissions criteria the hospital uses, she adds.

Case managers also should monitor the surgery arena to make sure it is clear from the beginning which patients will have outpatient surgery and which will be admitted as inpatients. They should monitor direct admissions for medical necessity. In cases where it appears that the patient doesn’t meet criteria, case managers should determine what factors might not be documented in the record and get additional documentation. If there is no additional information to support the necessity of admission, yet the patient cannot be managed in the home setting, the case manager should consider steering the patient to observation status, Hale says.

"The case manager’s role includes educating physicians about appropriate levels of care," Hale points out.

CMS is monitoring the frequency with which that code is used and is working on an updated version of Condition Code 44, Hale says.


  1. Transmittal 299 "Use of Condition Code 44: Inpatient Admission Changed to Outpatient" is available at