Developing Story: Condition Code 44- Required, Except When it’s Not

Original story posted on: April 25, 2018

CMS has created a giant loophole that continues to perplex.

I get a lot of questions about status changes. To explain how even the seemingly simple questions are not always so easy, I want you to picture a patient. She is 75 years old and has a cough. She is insured by Medicare and has no supplemental plan. She presents to the emergency department (ED) at 9 a.m. on a Monday morning. The ED doc does a workup and finds that the patient has pneumonia. Antibiotics are started. The ED doc then calls the hospitalist to admit the patient at 10:30 am.

The hospitalist is upstairs in multidisciplinary rounds, so she logs in to the electronic health record (EHR), places an inpatient order, and activates the pneumonia protocol. Staff from the admitting office come to see the patient, explaining to her that she is being admitted as an inpatient, and they provide the first copy of the Important Message from Medicare (IMM) and get it signed. The patient is then transported upstairs.

After rounding on her ICU patients and seeing all her sick patients, the hospitalist finally gets to this patient at 3 p.m. Upon reviewing the chart, she realizes that the patient should have been placed in outpatient with observation services. The ED notes indicate that she was minimally hypoxic and not septic, and nothing in her presentation suggested she would need two midnights. She seeks out the case manager, who states that the condition code 44 process must be followed, so the utilization review (UR) committee physician is tracked down and agrees with the status change, written notification is provided to the patient, and a new order is written to change the status to outpatient with observation services.

The patient is upset because she was an inpatient six weeks ago for a hip replacement, and she would have no deductible for this admission since it was less than 60 days from her first admission. But she knows the rules are the rules, so she concentrates on getting better. She goes home the next day, and a month later gets the bill she expected for $470 for her outpatient coinsurance.

Now let’s look at this same patient presenting again with a cough. The ED doctor calls the hospitalist, who is again in multidisciplinary rounds with the physician advisor, but this time she asks the ED doctor to place a verbal admission order for her, which she will authenticate later. Once again, the patient gets the IMM and is happy she will have no costs, based on her prior admission.

The hospitalist then rounds at 3 p.m. and again, realizes that the patient should have been placed observation. She finds the case manager, who notes that the admission order was verbal and had not yet been authenticated. The case manager tells the hospitalist to enter an order for observation and never to sign that initial verbal order. Because the hospitalist expects the patient to go home the next morning, prior to 24 hours of observation passing, the Medicare Outpatient Observation Notice (MOON) was not required.

The patient goes home the next day. Six weeks later, she gets a bill for $470, which is listed as a coinsurance. She calls the billing office, livid. The billing office staff is perplexed and tells her they will investigate and call her back.

A week later, she is called and told that she was not notified because the Centers for Medicare & Medicaid Services (CMS) says that if a verbal admission order is not signed, it was never valid. And furthermore, there is no requirement for patient notification; even though she was told she was an inpatient and given an IMM, her admission vanished the second she was discharged without that verbal admission being signed.

This makes no sense.

CMS created condition code 44 in 2004 to allow a status change when inpatient admission was improper while at the same time protecting patient rights. In fact, in MLN Matters SE0622, CMS went to great lengths to explain why patient notification is required. But then in 2014, with the advent of the two-midnight rule and publication of “Inpatient Order and Certification” on Jan. 30, 2014, they went and created this giant loophole that violates patient rights.

This drives me crazy. CMS needs to either get rid of condition code 44 or require it for all changes.


Program Note
Listen to Dr. Hirsch every Monday on Monitor Mondays, 10-10:30 a.m. EDT.


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Ronald Hirsch, MD, FACP, CHCQM

Ronald Hirsch, MD, FACP, CHCQM is vice president of the Regulations and Education Group at R1 Physician Advisory Services. 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 Advisory Board of the American College of Physician Advisors, a member of the American Case Management Association, and a Fellow of the American College of Physicians. Dr. Hirsch is a member of the RACmonitor editorial board and is regular panelist on Monitor Mondays.

The opinions expressed are those of the author and do not necessarily reflect the views, policies, or opinions of R1 RCM, Inc. or R1 Physician Advisory Services (R1 PAS).

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