The Two-Midnight Rule and Condition Code 44

How to stay compliant with code 44.

This is certainly a topic that could result in literally hours of presenting, as there is a lot of content, and there seems to always be a misunderstanding of the processes of Condition Code 44 being associated with the Two-Midnight rule. These two factors and the Conditions of Participation are intimately connected. Let’s review some of the basics, starting with the two-midnight rule.

The Centers for Medicare & Medicaid Services (CMS) first issued the rule in August 2013, in an attempt to bring clarity to the circumstances in which an inpatient admission is considered appropriate for Medicare Part A payment. Before this, CMS, via the Recovery Audit Contractor (RAC) program, had identified high rates of inpatient admissions that were not medically necessary and should have instead been billed as outpatient cases. In October 2015, CMS released the 2016 Hospital Outpatient Prospective Payment System (OPPS) final rule, which finalized changes to the two-midnight rule, which took effect that Jan. 1.

There are two components to the two-midnight rule, the benchmark, and the presumption, according to the relevant Inpatient Prospective Payment System (IPPS) Final Rule:

  • “Benchmark of two midnights”
    • “The decision to admit the beneficiary should be based on the cumulative time spent at the hospital, beginning with the initial outpatient service. In other words, if the physician decides to admit after the beneficiary arrived at the hospital and began receiving services, he or she should consider the time already spent receiving those services in estimating the beneficiary’s total expected length of stay.”
  • “Presumption of two midnights”
    • “Under the two-midnight presumption, inpatient hospital claims with lengths of stay greater than two midnights after formal admission following the order will be presumed generally appropriate for Part A payment, and will not be the focus of medical review efforts absent evidence of systematic gaming, abuse or delays in the provision of care…”

Over the years I have frequently gotten the question: does every patient need a review? There is no regulation dictating that all cases have to be reviewed, but in line with the provisions of the False Claims Act, all billing claims must be accurate. How best to do that? By utilizing a compliant, consistent utilization review (UR) process.

So, what does one do when a patient is admitted as an inpatient and is found after review to not certified as such? This is where Condition Code 44 comes into play. The National Uniform Billing Committee (NUBC) issued Condition Code 44, effective April 1, 2004, to identify cases when this occurs.

There are four qualifying factors, according to CMS Medicare Claims Processing Transmittal 299:

1.     The change must be made before the discharge is effectuated;

2.     The hospital has not yet billed Medicare for the inpatient stay;

3.     The physician concurs with the decision by a physician on the UR committee; and

4.     This concurrence is documented in the medical record.

Two facts to keep in mind:

  • A common misconception is that the change is to observation. It is a change to outpatient, as an order for observation is required before this level of care can be instituted.
  • Note that the attending physician may not unilaterally change a Medicare patient from inpatient to outpatient without invoking the UR process.

There may be significant financial consequences for the Medicare beneficiary with this process, so where do they stand? CMS has added a notation that patients whose status is changed from inpatient to outpatient via the Condition Code 44 process do not have expedited appeal rights. It should be noted that a case pending in federal court (previously known as Alexander v. Azar, but now known as Bagnall v. Becerra) involves petitioners attempting to require patients whose status has changed from inpatient to outpatient to be permitted to appeal their status change.

Condition Code 44 continues to be an enigma.

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