While supplies last! Free 2022 Coding Essentials for Infusion & Injection Therapy Services book with every RACmonitor webcast order. No code required. Order now >

A complex process is simplified in a tabular comparison.

Not infrequently, in the process of utilization review (UR), we run into situations in which, as physician advisors, we get to review Medicare cases that do not match their original “label” (i.e. the initial status selection was likely not a proper one).

And while patients initially placed into observation care can be easily admitted as inpatients simply by having an attending provider enter a valid (and ideally, signed) inpatient order, the reverse scenario is not as simple. The purpose of this article is to compare the nature and proper application of Condition Code 44 (CC44), as opposed to the Part A-to-Part B rebilling process. It is a fairly complex topic, so in order to make it easier for everyone, we have decided to present it in a simple two-table format.

First, let’s compare the regulatory references, definitions, and components of both processes in Table 1.

  Condition Code 44 Part A to B Rebilling
Regulatory source CMS Manual
Pub. 100-04 via Transmittal 299, published 9/10/04, implemented 10/12/04
Medicare Benefit Policy Manual Chapter 6, Par. 10, Rev.182, implemented on 04/21/14
Description “Condition Code 44–Inpatient admission changed to outpatient – For use on outpatient claims only, when the physician ordered inpatient services, but upon internal review performed before the claim was initially submitted, the hospital determined the services did not meet its inpatient criteria.” “Payments may be made under Part B for physician services and for the nonphysician medical and other health services as provided in this section when furnished by a participating hospital…to an inpatient of the hospital, but only if payment for these services cannot be made under Part A.”
Components of the process
  • The change in status from inpatient to observation is made prior to discharge or release, while the beneficiary is still in the hospital
  • The hospital has not submitted a claim to Medicare for the inpatient admission
  • A physician concurs with the UR committee’s decision
  • The physician’s concurrence with the UR committee’s decision is documented in the patient’s medical record
  • Appropriate patient selection:
    MCR FFS, 0-1 day LOS
  • Inpatient order validation
  • Initial review for two-midnight rule exemptions:
    • Inpatient-only procedures, unplanned ventilation, death, DC AMA, DC to hospice care, unplanned transfer for a higher level of care, unforeseen recovery
  • Time element confirmation:
    • Special attention to preceding outpatient care
  • Screening tool application
  • Second-level physician advisor review


Now, let’s compare the operational details and the downstream implication of the processes in Table 2.

  Condition Code 44 Part A to Part B Rebilling
Timing of the process Concurrent Retrospective
Final patient status Outpatient (could be outpatient observation) Inpatient
Relation to discharge order Ideally prior, but can be applied after DC order- if not effectuated After
Discharge effectuation Not completed Completed
Effect on readmissions’ reporting, PEPPER data None As any inpatient stay
Patient notification- timing Concurrent, prior to patient’s actual departure Retrospective, within two days of change
Patient notification- purpose Notification is required as a component of CC44 process Notification of change in billing
Provider notification- timing Concurrent, prior to discharge Retrospective, within two days of change
Provider notification- purpose Required to obtain an agreement with status change To provide an opportunity to contest the change/education
Billing rules OPPS-APC IPPS-DRG
Claim cycles Single – Part B Double, first, Part A no-pay claim, then Part B
Bill type 13x 12x
Use of occurrence span code 72 for billing Not applicable Voluntary, but recommended

As far as the auditing implications go, both the initial expectations and the final outcomes of both processes have to be scrutinized.

Even though the Centers for Medicare & Medicaid Services (CMS) anticipates that with appropriate education, “the need for hospitals to correct inappropriate admissions and to report Condition Code 44 should become increasingly rare,” the use of this option is highly resource-dependent. Use of Condition Code 44 notifies CMS of the ongoing concurrent review when the initial status application was corrected while the patient is still in the facility. As the final status becomes outpatient, such a case is not likely to be audited for any inpatient audit targets (i.e., short-stay audits, DRG validation audits, etc.)

Conversely, application of the Part A-to-Part B rebilling process (if the facility chooses to use Condition Code W2) notifies CMS that the UR process was applied retroactively and not concurrently. Since the final status of the patient remains inpatient, such a case would be subject to any potential inpatient type audits, as mentioned above. If the code W2 is not applied and all that is reported is an inpatient stay with a 0-1 day length of stay, the event would likely make the case subjected to short stay audits. In addition, these cases would definitely be captured by the PEPPER data for potential outlier risk for one-day medical and surgical stays.

In conclusion, we would strongly encourage the use of Condition Code 44 over Part A-to-Part B rebilling. The rationale for this recommendation is multifaceted (full disclosure: just in our opinion):

  • More transparent and compliant process
  • Better justifies the patient’s status and appropriate billing in real time
  • Shorter time to reimbursement (time value of money); no double-claim submission
  • If done promptly, with the capture of at least eight hours in observation care, likely better reimbursement
  • Improved finance and case management staff process flow
  • No effect on readmissions
  • Likely lessened audit risk
  • Exclusion from PEPPER one-day surgical/one-day medical reporting

Based on resource availability, such as UR representation in emergency departments, these factors should be considered in the management of the Medicare FFS population.



You May Also Like

Leave a Reply

Your Name(Required)
Your Email(Required)