Use condition code 44 with care to avoid becoming a RAC target

by Betty B. Bibbins, MD, FACOG, CHC, C-CDI, CPEHR, CPHIT

Condition code 44 is difficult to implement because CMS does not provide clear guidance regarding its usage. For example, CMS has not yet answered these important questions:

What is the purpose of condition code 44?
What do physicians need to know regarding documentation of these equivocal patient status cases?
How can hospitals maintain compliance?

Yet despite this lack of guidance, hospitals must have a plan in place to ensure compliance, particularly in light of the national recovery audit contractor (RAC) program set to roll out in March.
One reason why hospitals struggle with condition code 44 is because CMS does not clearly define observation status. Instead, it only uses the following two terms to describe patient status:


There is no classification of ‘outpatient observation’ status. Thus, this question arises: Does the term outpatient only encompass ambulatory care (e.g., care provided in the ED or a clinic), or does it also include a greater depth of care, such as outpatient observation?
CMS provides the following definitions:

Inpatient admission: This occurs when a licensed practitioner provides an order for inpatient admission. This practitioner must be permitted by the state to do so.
Outpatient status: This refers to a person who has not been admitted as an inpatient but who is registered as an outpatient and who receives services (rather than supplies only) directly from the hospital.

Know the reasons to report code 44
In some instances, a physician may order an inpatient admission, but upon subsequent review, staff members determine that the inpatient level of care does not meet the hospital’s admission criteria. The National Uniform Billing Committeeissued condition code 44 to identify cases when this scenario occurs and hospitals must change the patient’s status from inpatient to outpatient.

Providers should use this code on outpatient claims only. Condition code 44 allows hospitals to treat the entire episode of care as an outpatient encounter and to receive payment under the outpatient prospective payment system.
Providers should not use code 44 as a “catch-all” solution at the end of short stays when medical necessity is subsequently deemed unjustified after a patient is discharged. Rather, providers are expected to use condition code 44 for specific scenarios.

CMS set the policy for the use of condition code 44 to address those relatively infrequent occasions, such as a late-night weekend admission when no case manager [or hospital personnel whose responsibility is determine whether inpatient criteria have been met] is on duty to offer guidance. In these kinds of extenuating circumstances, when an internal review subsequently determines that an inpatient admission does not meet hospital criteria and that the patient would have been registered as an outpatient under ordinary circumstances, it would be appropriate to use condition code 44.
Take these steps to ensure compliance
Providers must take the following steps before reporting condition code 44:

A utilization review (UR) committee (i.e., two or more practitioners) must determine whether admission criteria have been met once the clinical documentation improvement or case management team raises the question of whether the inpatient admission was appropriate. The UR committee may review the medical record for inpatient admission criteria before, during, or after hospital admission. At least two members of the committee must be doctors of medicine or osteopathy. The following individuals do not have the authority to change a patient’s status from inpatient to outpatient:

Case managers
Other types of utilization management staff members who are not licensed practitioners permitted by the state to admit patients to a hospital
Doctors of medicine or osteopathy who do not have the authority to change a patient’s status from inpatient to outpatient

The UR committee must consult with the practitioner(s) responsible for the patient’s care and allow them to present their views before making a determination. It may also be appropriate to include the practitioner who admitted the patient if this is a different person. In the end, these physicians must agree with the decision to append condition code 44, and this agreement should be documented in the patient’s medical record.
Two members of the UR committee must determine whether an admission or continued stay is medically necessary. One member of the UR committee may make this decision only when the practitioner(s) responsible for the patient’s care either concurs with the determination or fails to present his or her views when afforded the opportunity to do so.
When the UR committee determines that the admission is not medically necessary, it must give written notification—within two days of the determination—to the hospital, the patient, and the practitioner responsible for the patient’s care.
The UR committee must make the change in patient status from inpatient to outpatient prior to discharge or release, and before the hospital submits the claim to Medicare.

In summary
Considering the CMS explanations that include comparing and monitoring one day admissions to outpatient status, it strongly suggests that the conversion to outpatient observation status may be an appropriate equivalent conversion when the term “outpatient” is used as long as the medical record contains the appropriate documentation.
With the increased scrutiny in today’s regulatory environment of one-day admissions, UR and CDI personnel need to be diligent in reviewing physician documentation regarding appropriate inpatient criteria to support their admitting diagnosis.

To boost quality-of-care efforts and provide physician support, consider implementing the following at your facility:

Application of hospital admission protocols and criteria by case management staff
Facilitation of communication between practitioners and the UR committee (or quality improvement organizations
Encouragement for practitioners to proactively assist the UR committee in the decision-making process
Continuous distribution and postings of the hospital’s criteria for inpatient admissions for practitioner education (including education regarding capturing the severity of illness through appropriate documentation to justify the intensity of resources used)

CMS expects providers to decrease their use of condition code 44 as they provide additional education and make efforts to staff departments around the clock. When hospitals routinely report the code, this could send up a red flag to a RAC that implies a lack of standards and protocols that help providers determine a suitable level of patient care.

Editor’s note: For more information, refer to the following resources:

Medlearn Matters article SE0622: Clarification of Medicare Payment Policy When Inpatient Admission Is Determined Not to Be Medically Necessary, Including the Use of Condition Code 44: “Inpatient Admission Changed to Outpatient”
Transmittal 299: Clarification of Medicare Payment Policy When Inpatient Admission Is Determined Not To Be Medically Necessary, Including the Use of Condition Code 44: “Inpatient Admission Changed to Outpatient”

Editor’s note: Betty B. Bibbins, MD, FACOG, CHC, C-CDI, CPEHR, CPHIT, is the president and chief medical officer at DocuComp LLC in Cape Charles, VA. E-mail her at


11 thoughts on “Use condition code 44 with care to avoid becoming a RAC target

  1. rod says:

    I was a patient at Baylor Dallas for a surgical procedure certified by my provider as inpatient and was admitted and discharged in 2.5 days. I learned after my discharge that the hospital changed my code to outpatient. I owed a 100 dollar co-pay with inpatient and 3000 dollars outpatient. How do I get the hospital to change the coding?

  2. Donna says:

    Report them to the OIG. Did anyone notify you that this would occur. This is fraud. Part of the federal regulations states that the patient must participate in his care and to do this would place you in financial liability.Plus pull your record, it was probably some person who was not licensed to practice medicine who did this. It should be documented in your chart.

  3. Donna says:

    This happened to a friend of mine. Under the code of federal regulations there is a list of things that must occur before your status can be changed from inpatient to outpatient at a hospital. one of those things is your doctor would have to concurred with the change and it must be documented that he accepted the decision. Check to see who was it. A casemanager or a U.R. staff member. They cannot change anything. They are not licensed to practice medicine.

  4. Robin Roberts says:

    Condition Code 44
    On page 2 of 4, indicates the UR committee may review the medical record for inpt admission criteria BEFORE, DURING AND AFTER HOSPITAL ADMISSION. This is the opposite of the “UR committee must make the change in patient status from inpatient to OP prior to discharge or release. ” As ususal everything from Medicare is confusing.

  5. It would be very unusual to remain an outpatient for 2.5 days. Normally day surgery patients must discharge within 24 hours, unless they become Observation patients if they have had some untoward event that they are observing. You should inquire to see if it was not a mistake. Also, if it was an outpatient procedure the provider should have known ahead of time.

  6. This happened to a friends husband, he went in to have two stints and a pace maker was there for over 24 hours. Billed a room and meals and coded it as outpatient leaving them with a 90,000 bill. They had 2 million in coverage as inpatient and only 15,000. in outpatient. Who is OIG?

  7. Toby says:

    I thought condition 44 was not used for elective outpatient (ambulaotry or 23 hour=obs period included) surgery. Patients are either dc or if medically unstable converted to outpatient? If a patient stays longer with delay in d/c and no qualifiers for acute inpatient the hosptial can only bill for the outpatient period and the surgery. If a condition 44 is utilized than the hosptial cannot bill for the outpatient surgery. It seems condtion 44 should not be used for patients coming in for elective surgery. Only medical admits. Any updates since 2009?

  8. Toby says:

    in the above comment :”Patients are either dc or if medically unstable converted to outpatient?” Meant to conclude with the Inpatient.

  9. Gary says:

    If hospital failed to comply with code 44 requirements would it negate the ability of the hospital to change inpatient to observation? If so where can this be found in the regulations?

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