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I recently received an email from a case manager who was questioning something I had said at a conference about condition code 44. She wrote, “We continue to have problems with our billing department that insists on ‘stop billing’ accounts where a compliant Condition Code 44 process was done but the order for observation was not signed until after the patient has physically left, even if the verbal order was obtained prior to them leaving.” 

This is a direct quote: “for it to be a valid OBS order and to meet Condition Code 44 criteria, the MD must sign the OBS order before discharge,” the case manager wrote. “I’ve tried to explain that because it is an outpatient order, that is not true, but they want proof. Can you direct me to where I can go for some supporting material?”

They want proof? How am I supposed to prove something that does not exist? Medicare regulations are vague enough with all we must do to be compliant, but I can guarantee you that they are never going to publish a manual devoted to things that one is not required to do.

But where did they even get this idea that the order must be authenticated prior to discharge? Let’s go to the rules. Chapter 421 of the code of federal regulations, section 482.24, states that verbal orders must be authenticated “promptly,” with no definition of “promptly” given. The interpretive guidelines for the conditions of participation likewise do not even mention timeliness of the authentication. Prior to 2012, the conditions of participation did include a 48-hour requirement on authentication, but that was eliminated.

But then along came the two-midnight rule, and the Centers for Medicare & Medicaid Services’ (CMS’s) wild idea to require the certification of all inpatient admissions. And in that guidance, CMS introduced the requirement that the inpatient admission order must be authenticated prior to discharge (and they labeled this a condition of payment). After a year of confusion, CMS did retract the certification requirements, but maintained the requirement that the admission order be authenticated prior to discharge.

Now, except in very rare circumstances, there must be an inpatient admission order, and it must be authenticated prior to discharge in order for the hospital to get paid for the admission. By the way, this does introduce a strange triad. If the order is signed prior to discharge, the admission is a payable as a Part A inpatient admission. If the order is signed after discharge, it is a non-payable Part A inpatient admission. And if the order is never signed, CMS says that inpatient admission never occurred, and it is a payable Part B outpatient stay. But I have gotten nowhere with CMS trying to explain how little sense that makes, so we’ll skip it for now.

So, how does this all apply to this case manager’s dilemma? In that case, a compliant condition code 44 process was performed, and as CMS says in MLN Matters SE 0622 “that inpatient admission never occurred.” The order to change the patient to observation is not an inpatient admission order, and there is no requirement for authentication of this order prior to discharge. It falls back on the hospital rules and state law. Violating those rules may get you in trouble if you are ever surveyed, but it does not mean the stay cannot be billed because they are not conditions of payment.

So my recommendation to this case manager was to turn around and ask the billing staff to prove that such a rule exists – and then sit back and watch them squirm.


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