Condition Code 44: Use Wisely

The billing Code 44 and the required UR process have become intertwined.

Utilization review teams and physician advisors have the same goal as the Centers for Medicare & Medicaid Services (CMS): correct status for all patients. But getting a Medicare inpatient into the correct status creates an administrative wrinkle: the dreaded billing Code 44. Consider this scenario: utilization review produces an order changing a patient from inpatient to observation status and a chart note while the patient is still in-house. However, this requires the agreement of both the utilization review (UR) team and the physician of record. Sounds simple, but it’s not.

Medicare believes that observation ends when medical necessity for an inpatient admission crystalizes. Insurers want to start everyone as observation. Regretfully, they find reasons preventing conversion.

To prevent this misuse propagated by Medicare Advantage (MA) plans, Medicare limits observation to fewer than two midnights, as it creates an increased financial burden for the patient. As observation charges are billed in eight-hour increments, the hospital can recover some costs for observation services after the order if more than eight hours of care are provided. Thus, getting to the correct status earlier in the admission, rather than just before discharge, is advantageous.

When inpatient status is unsupported with screening, the UR team alerts the physician advisor to the potential need for an order change to observation and supporting documentation. One should verify when care truly started, identify conditions justified by a physician’s acumen, review for potential Medicare reasons for a short stay (death, transfer, rapid improvement, mechanical ventilation, and hospice), and, barring any surprises, confirm with staff. If indicated by the discussion, staff can take this opportunity to improve documentation to clearly support the patient’s inpatient stay – as auditors can’t infer.

Here’s where the billing of Code 44 became unexpectedly linked to the UR process. CMS tracks Code 44s to confirm UR review of medical necessity and continued stays. The UR process for a status change on patients with Medicare and non-contracted MA plans requires all of the following: a) the change must be made before the discharge is effectuated; b) the hospital has not yet billed Medicare for the inpatient stay; c) the physician concurs with the decision by a physician on the UR committee; and d) this concurrence is documented in the chart. (CMS Manual System Pub.100-04, Medicare Claims Processing Transmittal 299)

What are potential missteps in the UR process?

  1. It can’t be done after discharge. There is no opportunity to place an order, write a note, or notify the patient. One should speak with the treating physician to request clarifying documentation protecting the short inpatient stay, or get permission to self-deny.
  2. The hospital can’t have submitted the bill. With a process pause, the hospital can self-deny and rebill with a condition code W2 to recapture some costs if no bill has been placed.
  3. The attending physician cannot unilaterally change a patient’s status. The patient remains in inpatient status until discussion with UR, if time permits. These cases should be caught before billing to allow the self-denial. Systems might implement a “pause” if a status change order is entered concurrently with a discharge order to allow time to work their UR process.
  4. The physician does not agree with the change recommended. A supporting second physician reviewer from UR can overrule the attending. However, the admission remains inpatient, and the facility has to self-deny. If this happens frequently, despite provider education, referral to the respective department may be necessary to obtain lasting quality-of-care improvements.
  5. Concurrence for the status change must be documented prior to discharge. Written documentation of a status change should be sent to the physician, hospital, and patient within two days.
  6. Hospitals should avoid creating policies more restrictive than CMS, as they may be held to them, creating an increased chance of failure.

Lastly, Medicare does require all MA plans and hospitals to use a billing Code 44 on claims with a change. Only hospitals can obligate themselves during MA contracting to perform the full UR process, which is required by Medicare and applicable to non-contracted MA plans. If the MA plan requests the status change, not the UR Committee, no Code 44 needs to be done.  The plan must furnish the patient a notice of denial of medical coverage (NDMC, or payment, NDP). If the MA plan fails to deliver a NDMC/NDP during the stay, they are obligated to pay the hospital. MA plans try to avoid patients’ appeals of these decisions, which are reportable to CMS. However, patients can’t appeal the status change to observation by the hospital.

As the UR process can be complex, time-sensitive, and an audit risk, Medicare patients with potential status changes should be high-priority. When time constraints prevent full review, a post-discharge and a pre-bill UR step reviewing short-stay inpatient Medicare patients may narrow gaps and retain revenue. While the billing Code 44 and the required UR process have become intertwined, we must untangle them and perform the UR process selectively, while letting the billing department apply Code 44 to the claims of all Medicare and Medicare Advantage patients. The remaining question is: what should this process be called, when stripped of the Code 44 verbiage?


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