Condition Code 44 Confusion – Stuff Happens

I am happy to report that there is no major controversy to report on this week. So let me address issues that came up with two questions I received last week related to Condition Code 44.

The first person stated that they recently had a Medicare patient whose status was changed from inpatient to observation following the required process, but the last step was missed, as “the staff did not deliver the MOON (Medicare Outpatient Observation Notice) to the patient.” As a result, the billing staff would not process the claim as a Condition Code 44, but instead were going to process it as a self-denial and then rebill. They asked if that is correct.

And my answer was no.f

First, when doing a Condition Code 44 change, the requirement is that the patient be given written notification of the status change. The MOON is only required if they will receive 24 or more hours of observation service after the change.

So, it is not clear whether a MOON was even required. Save your staff time and effort by using a plain “Condition Code 44 notice to patient,” as can be found on my webpage.  

But even if no written notification was given to the patient during the stay, they can still process the claim as outpatient Part B, being as delivery of the written notification is not a Medicare condition of payment. Not delivering the patient notice may result in a citation from your survey organization for violating a condition of participation, but that’s different. I would recommend mailing it to the patient so they are informed.

Now, let’s say the hospital decides that non-delivery of the notice means the Condition Code 44 change was improper; could the billing staff simply reprocess as a self-denial? Well, using the same logic, a self-denial must follow, pursuant to 42 CFR 482.30(d), with the notice delivered within two days, so that window has closed. That means this admission must “start again” and be referred back to the utilization review (UR) committee for review; the attending’s opinion must be solicited, and written notification must be sent to the patient in a timely manner.

The second case was a patient who was admitted as an inpatient, but then the next day it was determined that the admission decision the previous day was not appropriate without documentation to support a two-midnight expectation (or one of the exceptions). But now on day 2, the patient continued to receive necessary hospital care and was not anticipated to go home that day. The case manager asked what to do.

Is the hospital required to perform the Condition Code 44 and then get a new inpatient admission order, or can they just leave them as inpatient since now they will meet the two-midnight benchmark? Sadly, we have no formal guidance from the Centers for Medicare & Medicaid Services (CMS). But it makes no sense to switch them back and then admit them again. Can you imagine the patient’s confusion if they got a Condition Code 44 notification telling them they are now an outpatient, and then minutes later were handed a new Important Message from Medicare (IMM) telling them they are inpatient?

And for Inpatient Prospective Payment System (IPPS) hospitals, leaving them as inpatient will not result in any additional revenue, so it is not really a false claims issue. So, the only questionable part is that the patient now has one extra day to help them qualify for the Part A Skilled Nursing Facility (SNF) benefit (if they ended up needing SNF care).

My advice to this case manager was to first ensure that the second midnight was truly medically necessary and well-documented, and then just leave them as inpatient. And in fact, it is a good rule of thumb that if you are considering doing a Condition Code 44 change on day 2, be sure the patient is not going to need that second midnight.

If they might stay depending on the result of a diagnostic test or ongoing treatment, it might be better to wait and see the result before you switch them to outpatient.