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Last Modified: 7/31/2018 Location: FL, PR, USVI Business: Part A

Use of condition code 44 FAQ

Q: Should a facility use condition code 44 on a claim if the admitting physician decides the patient should be in observation rather than an inpatient setting, without prompting by the utilization review (UR) committee or case management and prior to the discharge of the patient/submission of the claim?
A: No. When a physician orders a patient to be placed under observation, the patient's status is that of an outpatient. The purpose of observation is to determine the need for further treatment or for inpatient admission.
Condition code 44 is used when an inpatient admission is being changed to outpatient. According to the Centers for Medicare & Medicaid Services (CMS) internet-only manual (IOM), Publication 100-04, Medicare Claims Processing Manual, Chapter 1 -- General Billing Requirements external pdf file, condition code 44 is:
For use on outpatient claims only, when the physician ordered inpatient services, but upon internal utilization review performed before the claim was originally submitted, the hospital determined that the services did not meet its inpatient criteria.
Note: For Medicare, the change in patient status from inpatient to outpatient is made prior to discharge or release while the patient is still a patient of the hospital.
Additionally, concurrence of the UR committee and the physician must be documented in the medical record.
Source: CMS IOM, Pub. 100-04, Chapter 1, section 50.3 external pdf file and Chapter 4 external pdf file; Medicare Learning Network® Matters Special Edition article SE0622 external pdf file
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