Sept. 10, 2004 was a landmark day for hospitals. That was the day that the Centers for Medicare & Medicaid Services (CMS) issued Change Request 3444 and MLN Matters SE0622, establishing guidelines for the use of Condition Code 44 to change a hospitalized patient’s status from inpatient to outpatient when it was determined that there was no medical necessity for an inpatient admission. The Condition Code 44 process required involvement of the utilization review (UR) committee, and there were four required conditions to make such a change: the patient must still be in the hospital, the hospital may not have submitted a claim for the services, the attending physician must concur, and the concurrence must be documented in the medical record. Furthermore, 42 CFR 482.30(d) requires that the patient be notified of this change. If the four conditions of Condition Code 44 are not met, the patient’s status remains inpatient and the hospital must bill the inpatient stay as provider-liable (and then it has the option of rebilling the claim to part B as outlined in MLN Matters SE8445).

Providers have asked CMS and many of the Medicare Administrative Contractors (MACs) many times if the attending physician can unilaterally change status from inpatient to outpatient if he or she made a mistake or changed his or her mind, and their answers have always been “No.” CMS was asked this and in Q&A No. 9972 indicated that “the policy for changing a patient’s status using Condition Code 44 requires that the determination to change a patient’s status be made by the UR committee with physician concurrence. The hospital may not change a patient’s status from inpatient to outpatient without UR committee involvement. The conditions for the use of Condition Code 44 require physician concurrence with the UR committee decision.”

Because CMS answered this by saying “the hospital may not…” to clarify this further, NHIC, the current DME MAC and previously a MAC for jurisdiction K, was asked specifically about a physician making the change. They responded: “No; an attending physician may not make a unilateral decision, (as the) -CC-44 definition requires UR involvement.”

So it seems clear that once a patient is admitted as an inpatient, his or her status can only be changed using the Condition Code 44 process. The next logical step is to ascertain what constitutes the point of admission. Most define the point of admission as the point at which inpatient services begin for a patient who has a valid inpatient order. The time of inpatient admission is actually location-independent. These services could even begin in the ED if there is no bed available in the hospital. Once formally admitted, a patient must be presented with the “important message” from Medicare, and admission also bestows upon the patient appeal rights. But the point of admission was addressed by CMS in their Jan. 30 hospital inpatient order and certification document, in which the agency indicated that “inpatient status begins at the time of formal admission by the hospital pursuant to the physician order, including an initial order (under (B)(2)(a)) or a verbal order (under (B)(2)(b)) that is countersigned timely, by authorized individuals, as required in this section.”

While this at first glance may seem consistent with standard practice, CMS then throws a wrench in the works by going on to note that “if the physician or other practitioner responsible for countersigning an initial order or verbal order does not agree that inpatient admission was appropriate or valid (including an unauthorized verbal order), he or she should not countersign the order and the beneficiary is not considered to be an inpatient. The hospital stay may be billed to Part B as a hospital outpatient encounter.” CMS also has noted during open door forum calls that if the verbal admission order is not properly authenticated prior to discharge, the inpatient admission “never took place and the hospital should bill the entire stay as outpatient part B.”

This means that if the attending physician does not sign the verbal admission order issued by him or her (or a covering associate), then the patient who was told that he or she is an inpatient with appeal rights is now an outpatient with no appeal rights. That also means that if a patient is admitted with a verbal admission order and later determined not to meet medical necessity for inpatient admission, the change from inpatient to outpatient can be made simply by instructing the attending physician not to authenticate the admission order. Furthermore, by this logic, the physician also then can order observation services, and observation hour billing can begin with that order. Per CMS direction, just by leaving the admission order unauthenticated, the hospital can submit an outpatient part B bill and get paid for observation if those services exceed eight hours, meaning the patient assumes liability for outpatient copayments and self-administered medication costs, with no notification at all.

Using CMS’s logic, Condition Code 44 therefore only would be needed if the original admission order was written or entered elctronically by the admitting physician himself (or promptly authenticated by the admitting physician after being entered by another person). By extension, there is no reason a hospital could not request that all admission orders that have not been reviewed by case management staff and a physician advisor be placed as verbal orders until they are reviewed further, avoiding the need to use Condition Code 44 if it is determined that inpatient status is not warranted.

In an informal poll of an online user group, all respondents said they will continue to use the Condition Code 44 process when an admission is determined to be not medically necessary, even if the attending makes that determination themselves and the admission order is not yet authenticated. Not one respondent believed that not authenticating the admission order makes the whole inpatient admission disappear. All felt that unless Condition Code 44 is leveraged, the admission is not payable under part A – but it remains an inpatient admission, eligible for part B rebilling only.

Furthermore, if one takes CMS’s position on unauthenticated admission orders to heart, if a patient who is hospitalized for 10 days with a stroke goes to a skilled nursing facility (SNF), but the attending physician never authenticated the admission order, the patient never truly had an inpatient admission and payment for their part A SNF stay is therefore in jeopardy. Multiple attempts to get clarification from CMS have failed; hospitals should take this information and talk to their compliance departments. But I would not advise disregarding an admission order, even if it is not authenticated.

About the Author

Ronald Hirsch, M.D., is a vice president of the Regulations and Education Group at Accretive Physician Advisory Services at Accretive Health. Dr. Hirsch’s career in medicine includes many clinical leadership roles at healthcare organizations ranging from acute care hospitals and home health agencies to long-term care facilities and group medical practices. In addition to serving as a medical director of case management and medical necessity reviewer throughout his career, Dr. Hirsch has delivered numerous peer lectures on case management best practices and is a published author on the topic.

He is a member of the American Case Management Association and a Fellow of the American College of Physicians.

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