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Condition Code 44

Compliance Monitor Q&A , October 19, 2007

Q: Do CMS regulations mandate that a hospital report Condition Code 44 on the outpatient claims form if hospital utilization review determines that an inpatient admission is not medically necessary and the case meets the criteria under Condition Code 44 to change the patient's status from inpatient to outpatient observation?

A: Section 50.3 in Chapter 1 of the Medicare Claims Processing Manual gives the guidelines for use of Condition Code 44. The following conditions must be met:

  1. The change in patient status from inpatient to outpatient is made prior to discharge or release, while the beneficiary is still a patient of the hospital;
  2. The hospital has not submitted a claim to Medicare for the inpatient admission;
  3. A physician concurs with the utilization review committee's decision; and
  4. The physician's concurrence with the utilization review committee's decision is documented in the patient's medical record.

When all of the criteria listed above are met, CMS requires the hospital to submit the claim as a Type of Bill (TOB) 13X or 85X with Condition Code 44 in one of the Form Locators 18-28 on the UB-04 or in the ANSI X12N 837 I in Loop 2300, HI segment, with qualifier BG, on the outpatient claim. The entire episode of care should be treated as an outpatient encounter.

Fiscal intermediaries use Condition Code 44 for tracking purposes only so the reimbursement that the hospital receives will be the same as it would receive for other outpatient services. Specifically, hospitals under OPPS will receive reimbursement based on APCs while critical access hospitals will receive reimbursement based on cost.

Medicare has stated that they expect the occurrence of Condition Code 44 to be rare and that they would expect to see a decrease in its use as hospitals educate physicians on admission criteria.

For additional information, refer to the Medicare Claims Processing Manual, Chapter 1, Section 50.3; Transmittal 299 CR 3444 released September 10, 2004; and MLN Matters SE0622.

Editor's Note: This question was answered by Lisa Dobbins, MHA, RHIA of MedAssets Net Revenue Systems in LA.