Health Information Management

Q/A: Counting observation hours with condition code 44

APCs Insider, July 16, 2010

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Q: A patient is admitted as an inpatient, but the utilization review committee determines that the patient did not meet the inpatient criteria. The patient is converted to an outpatient using condition code 44 (inpatient admission changed to outpatient). Is it true that observation hours may not be counted retroactively back to time of arrival when condition code 44 is used? May we start billing observation only at the time the physician wrote the order or may we count the inpatient time as part of observation?

A: CMS has clarified that an order for observation services must be present before you bill for the service, just as any other outpatient service requires an order. CMS does not acknowledge retroactive orders. When a situation meets Condition Code 44 criteria, don't start counting hours until the time that the physician wrote the order for observation. Any services provided during the time before the observation order may be billable as an outpatient service if they meet other coverage requirements such as supervision. Hourly charges to account for nursing costs before the observation order may be billed under revenue code 0762 (observation room), but without a HCPCS. See CMS FAQ 9973.



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