Revenue Cycle

Are hospitals bound by InterQual criteria when determining patient status?

Patient Financial Services Weekly Advisor, June 21, 2007

Q: I have a question about what to do when a physician writes orders to admit a patient to the hospital as an inpatient, but the patient did not meet InterQual criteria for inpatient status. Instead, the patient should have been admitted to observation. This typically occurs when the physician is not well informed on InterQual criteria.

I know we can change the patient's status while he or she is still in-house and if the physician writes an order to change to observation status. But what if the patient is discharged, the case manager reviews the chart before the bill goes out, and he or she finds that it does not meet inpatient criteria and should have been in observation instead? Can the hospital correct the billing to reflect the appropriate status (observation, not inpatient) so that Medicare is appropriately billed according to InterQual criteria?

A: The Medicare Benefit Policy Manual (100-2, chapter 1, section 10) states that inpatients are generally expected to remain at least overnight; that physicians are responsible for deciding whether the patient should be admitted; and that physicians should use generally use a 24-hour period as a benchmark for admission (i.e., they should order admission for patients who are expected to need hospital care for 24 hours or more, and treat other patients on an outpatient basis.) You can find the complete reference here:

The Medicare Benefit Policy Manual (100-2, chapter 6, section 20.5) also defines the observation level of care for Medicare patients. It states the following: 

Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation status is commonly assigned to patients who present to the emergency department and who then require a significant period of treatment or monitoring before a decision is made concerning their admission or discharge.

It also states that, "In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours." You can find the complete reference here:

CMS does not mention InterQual or any other level of care criteria in either definition. Hospitals frequently use level of care criteria as an objective tool to help make decisions regarding whether an individual's condition is severe enough, or the services provided are intense enough, to be admitted to a specific level of care. CMS still maintains that a physician's judgment should be the determining factor.

Consider querying the physician to help determine whether he or she truly felt the patient should be admitted as an inpatient.  If the physician documentation is consistent with this intent, then the inpatient level of care may be appropriate, despite the fact that it does not meet InterQual criteria. This is why most level-of-care criteria provides for some form of secondary/physician review to account for situations in which a patient's condition or care does not meet criteria, but the attending physician believes the ordered level of care is what is needed.

Medicare contracts with Quality Improvement Organizations (QIOs) to evaluate medical records for level-of-care appropriateness. The QIO reviews documentation to determine whether there is consistency between the physician's order, the physician's intent, the services provided, the medical necessity of the services, and the patient type billed by the facility. Some QIOs do use InterQual criteria as an objective tool, but must also take into account the physician's decision-making process.

If you must change the patient's status before he or she is discharged, report condition code 44 ("Inpatient admission changed to outpatient"). Medlearn Matters article SE0622, released on March 22, 2006, provides a full explanation of condition code 44, as well as its limitations. You can find it at the CMS Web site:

Condition code 44 requires the patient to still be in the hospital when his or her status is changed. CMS believes Medicare beneficiaries have the right to participate in treatment decisions and to know their treatment choices. They are also entitled to receive info about co-insurance and deductibles. If the change from inpatient to outpatient billing is made after the patient leaves the hospital, the patient is neither able to participate in the choice nor receive advance information about co-insurance and deductibles. 

If the patient has truly been admitted inappropriately to the inpatient level of care and you discover it after the patient's discharge, use the hospital utilization management process required by the Medicare Conditions of Participation (CoPs). You can find CoPs for hospitals, part 482.30, at the following Web site:

Editor's note: This question was answered by the APCs Weekly Monitor panel of experts.

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