You Down with CfC?

Anyone who has worked within the scope of hospital case/utilization management for any period of time has heard of the Centers for Medicare & Medicaid Services (CMS) Conditions of Participation (CoPs).

For those who are not familiar, these are processes related to health, safety, and quality standards meant to protect patients. Hospitals and many other healthcare facilities are required to have these standards in place in order to participate in the Medicare and Medicaid programs. Failure to follow the CoPs can result in corrective action plans, sanctions, or monetary fines with the most egregious fallouts, leading to exclusion of the facility from participating in Medicare, Medicaid, or TRICARE (and therefore, rendering them unable to be reimbursed for care of patients covered by those governmental plans). 

The CoPs for hospitals can be found in the Code of Federal Regulations, Title 42, Chapter IV, Subchapter G, Part 482. The CoPs include direction regarding hospital medical staff, patient rights, medical records, utilization review, and much more. In particular, the CoPs involving utilization review include the rules related to one if not two physician members of a hospital’s utilization review committee being involved with changes in patient status from inpatient to outpatient (in other words, the processes related to Condition Code 44 and Condition Code W2 scenarios).

But are you familiar with the CMS Conditions for Coverage (CfCs)? 

Sometimes referred to as “conditions of payment,” these requirements must be met in order for federal health plans to pay a healthcare facility for their submitted claim.  Some of the CfCs reside in the Code of Federal Regulations, just like the CoPs (Title 42, Chapter IV, Subchapter B, Part 424) and are referred to as “Conditions for Medicare Payment.”  However, they are also found in sections of the Medicare Benefit Policy Manual and the Medicare Program Integrity Manual. 

Some situations involve both CoPs and CfCs. For example, payment of an inpatient hospital claim requires a signed inpatient status order placed by a clinician. But many forget that CoPs associated with patient notices are not part of the CfCs. Notices called out in the CoPs include the Important Message from Medicare (IMM), Medicare Outpatient Observation Notice (MOON), and notification related to Condition Code 44 situations. 

Taking Condition Code 44 as an example, the CoPs within the Code of Federal Regulations state that if a hospital’s utilization review committee decides that an inpatient hospitalization is not medically necessary, notification must be given to the patient no later than two days after the determination is made.

Yes, there’s a Medicare fact sheet titled “Medicare Hospital Benefits,” last revised in March 2024, which includes “…the hospital must tell you in writing – while you’re still a hospital patient, before you’re discharged – that your hospital status changed from inpatient to outpatient.”  But this is from a publication created for beneficiary education, and is superseded by the weight of the Code of Federal Regulations, which specifies that patient notification is required within two days of the decision. 

Keeping this in mind, let’s get back to the misconception many have about claims billing in the event of a Condition Code 44.  While many if not most of us follow the direction from the CMS patient fact sheet and strive to inform patients of their change in status from inpatient to “not-inpatient” before discharge, per the CoPs, this isn’t actually required! The CoPs say the patient needs to be notified within two days. So, if the change is made on the day of discharge, the hospital technically has until two days after discharge to provide the notification. Additionally, remember, the CoPs are not CfCs, or, conditions of payment. This being the case, even if the hospital didn’t follow through with notification of the patient within two days, this simply means the hospital failed to meet the CoPs, in that case. Nothing in the CfCs demand notification of the patient of the change in status.

As such, as long as there’s an observation order from the clinician placed before discharge, the hospital can proceed with a Part B claim with APC 8011 for Comprehensive Observation Services if at least eight hours of observation services were required before discharge.

If you’re transitioning to a self-denial, Condition Code W2 is used for patients when the Condition Code 44 process was met – including an outpatient order, with or without observation services – but if the patient was not notified before leaving the hospital, consider stopping this practice.

Yes, put a process in place to secure notification to the patient within two days, but don’t let the fallout lead to a more time-consuming Part B rebilling scenario. Your outpatient or observation order is valid, and you should proceed with Part B billing from the start. 

Programming note:

Listen live today when Dr. Juliet Ugarte Hopkins reports this story during Talk Ten Tuesday with Chuck Buck, 10 Eastern.