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Are hospitals improperly converting inpatient cases to observation?

Medicare Weekly Update, October 28, 2008

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It was recently brought to my attention that some (perhaps many) hospitals may be using the condition code 44 process to retroactively convert inpatient cases to observation. The condition code 44 process is designed to allow a hospital to retroactively convert a case from inpatient to outpatient status under certain conditions. However, the fact that CMS permits a case to be converted to outpatient status does not necessarily mean that the hospital may treat the patient as having been in observation from the time of initial admission. Observation care requires an express order for observation. At this point, it is not clear to me that CMS would permit a retroactive observation order for a patient converted from inpatient to outpatient status using the condition code 44 process. In fact, in the MLN Matters article (SE0622) on the condition code 44 process, CMS stated:

The instructions provided in CR3444 and the information in this article should be followed within the framework of an individual hospital’s existing policies and procedures and do not override or supersede other CMS policies or procedures on observation services . . .  (emphasis added)

I am, however, still exploring this issue. If I run across any other authority addressing this issue, I’ll report back in a future issue of Medicare Weekly Update.

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