Inpatient Facility Coding & Compliance Alert

Take this primer and stay clear of RACs by correctly classifying patients.

If you're fuzzy on the distinctions between inpatient and outpatient status, it's likely that you're headed straight for audit scrutiny. Understand the answers to these four questions to ensure you won't gain extra RAC (recovery audit contractor) attention by filing too many claims changing a patient's status from inpatient to outpatient.

Why it matters: When a patient is admitted to a hospital and receives inpatient services, the hospital is paid through MS-DRGs, explains Duane Abbey, Ph.D., president of Abbey and Abbey Consultants, Inc., in Ames, IA. If auditors later determine that the inpatient admission wasn't justified, the RAC demands that the hospital return payment. "The hospital can't bill for what should have been observation care because Condition Code 44 wasn't used originally," Abbey says.

1. What Does Condition Code 44 Mean?

If you determine that a patient has changed from inpatient status to outpatient, you'll need to classify the claim with Condition Code 44 (Inpatient admission changed to outpatient). The situation occurs when the physician orders inpatient services, but internal utilization review (UR) before claim submission shows that the services did not meet the hospital's inpatient criteria. If Condition Code 44 is applied at that point, the hospital can treat the entire episode of care as an outpatient encounter and receive payment under the outpatient prospective payment system.

According to CMS, a patient generally is considered an inpatient if he or she has been formally admitted to the hospital because the physician expects the patient to need hospital care for 24 hours or longer, or because the patient needs services only available in an inpatient environment.

Example: A total abdominal hysterectomy (58150, Total abdominal hysterectomy [corpus and cervix], with or without removal of tube[s], with or without removal of ovary[s]) and arthrodesis with laminectomy (22630, Arthrodesis, posterior interbody technique, including laminectomy and/or discectomy to prepare interspace [other than for decompression], single interspace; lumbar) must be inpatient procedures.

The physician or other practitioner responsible for the patient's care is responsible for deciding whether the patient should be admitted as an inpatient or placed in outpatient observation. Several factors come into play when determining whether an admission is medically necessary, according to coding and compliance expert Elin Baklid-Kunz, MBA, CPC, CCS:

• Severity of signs and symptoms of the patient
• Medical prediction of adverse outcome involving the patient
• The need for diagnostic studies that appropriately are outpatient services to assist in assessing whether the patient should be admitted
• Availability of diagnostic services at the time and location where the patient presents.

"CMS recognizes that inpatient status versus outpatient status is a problem area," Abbey says. "There are also extensive RAC audits in this area. The RAC auditors could use Condition Code 44 as a selection mechanism, but the RACs are much more interested in those cases where Condition Code 44 should have been used, but wasn't. Thus, one of the main RAC selection criterion is short, inpatient stays. These cases tend to pick up situations in which Condition Code 44 should have been used."

2. When Does Condition Code 44 Apply?

CMS guidelines state that hospitals should use Condition Code 44 to address those relatively infrequent occasions when internal review determines that an inpatient admission does not meet hospital criteria and that the patient would have been registered as an outpatient under ordinary circumstances.

The situation must meet four criteria before Condition Code 44 applies:

• The change in patient status from inpatient to outpatient is made prior to discharge or release, while the beneficiary is still a patient of the hospital
• The hospital has not submitted an inpatient claim for the inpatient admission
• The practitioner responsible for the care of the patient and the utilization review (UR) committee concur with the decision
• The concurrence of the practitioner responsible for the care of the patient and the UR committee is documented in the patient's medical record.

Example: Mrs. Smith is admitted as an inpatient and stays at the hospital for a day. Before her discharge, the UR committee determines that the inpatient admission wasn't justified. The committee contacts her physician, Dr. Johnson. He agrees to the change and writes an order for observation care. Mrs. Smith's status changes to outpatient and she is discharged four hours later. The change (and reasoning for it) is documented in her patient record with a notation of Condition Code 44.

Payment: Medicare only pays for the patient's care from the time of the physician's order (four hours in Mrs. Smith's case). APCs only pay for observation that lasts a minimum of eight hours. In Mrs. Smith's situation the hospital receives no APC payment for the observation, but can bill all ancillary services (injections, infusions, lab tests, etc.).

3. How Do You Report Condition Code 44?

When Condition Code 44 requirements are met, bill the entire episode of care as an outpatient episode of care. Outpatient services that were ordered and furnished should be billed as appropriate.

Documentation: The hospital is required to report Condition Code 44 on the outpatient claim in one of Form Locators 24-30. Your other option is to report it in the ANSI X12N 837 I in Loop 2300, HI segment, with qualifier BG (Condition qualifier), on the outpatient claim.

"If the status cannot be changed to outpatient, you must file the claim as inpatient/Part B only," Baklid-Kunz says. "Medicare will make payment for the 'Part B only' services such as diagnostic x-rays, laboratory tests, splints, surgical dressings, and certain other items. Payment will be determined under the Outpatient Prospective Payment System."

4. How Do We Handle Corrections?

Hospitals cannot expunge or delete medical record entries " records must be retained in their original forms. Corrections or clarifications, however, might sometimes be necessary.

"If a patient's status changes in accordance with the requirements for use of Condition Code 44, the change must be fully documented in the medical record, complete with orders and notes that indicate why the change was made, the care that was furnished to the beneficiary, and who made the decision to change the patient's status," Baklid-Kunz says.

Example: An order states "Admit to 4 North" and notes the responsible physician. The case manager should contact the physician prior to patient discharge to verify his intent regarding the patient's status. An addition to the record such as, "Order clarification " intended admit to inpatient status," better documents the situation and will stand up to scrutiny. Verbal clarification from the physician could be documented as, "Clarification of status: intent is for inpatient, verbal order from Dr. ______." The case manager or person responsible for obtaining the clarification would initial or sign the note.

Resource: Check out the webinar by Erin Baklid-Kunz, "Condition Code 44: Know It All" through Audio Educator. Visit www.audioeducator.com and search for "condition code 44" to learn more.