FAQs on Observation, Condition Code 44

from the CMS website


QUESTION: May a hospital report drug administration services, such as therapeutic infusions, hydration services, or intravenous injections, furnished during the time period when observation services are being reported?

ANSWER: The Medicare Claims Processing Manual (Pub 100-4), chapter 6, section 290.2.2 states that “observation services should not be billed concurrently with diagnostic or therapeutic services for which active monitoring is a part of the procedure (e.g., colonoscopy, chemotherapy).” In situations where such a procedure interrupts observation services and results in two or more distinct periods of observation services, hospitals should record for each period of observation services the beginning and ending times during the hospital outpatient encounter. Hospitals should add the lengths of time for the periods of observation services together to determine the total number of units reported on the claim for the hourly observation services under HCPCS Code G0378 (Hospital observation service, per hour).

The hospital must determine if active monitoring is a part of all or a portion of the time for the particular drug administration services received by the patient. Whether active monitoring is a part of the drug administration service may depend on the type of drug administration service furnished, the specific drug administered, or the needs of the patient. For example, a complex drug infusion titration to achieve a specified therapeutic response that is reported with HCPCS codes for a therapeutic infusion may require constant active monitoring by hospital staff. On the other hand, the routine infusion of an antibiotic, which may be reported with the same HCPCS codes for a therapeutic infusion, may not require significant active monitoring. For concerns about specific clinical situations, hospitals should check with their Medicare contractors for further information.

If the hospital determines that active monitoring is part of a drug administration service furnished to a particular patient and separately reported, then observation services should not be reported with HCPCS G0378 for that portion of the drug administration time when active monitoring is provided.


QUESTION: How should the hospital report observation services when the patient’s status is changed from inpatient to outpatient using Condition Code 44? May the hospital report observation services from the beginning of the hospital outpatient encounter?

ANSWER: The use of Condition Code 44 pertains to the entire patient encounter, the patient’s status, and the hospital bill type submitted. Medicare does not recognize a separate patient status called “observation;” all hospital patients are either inpatients (if they are admitted as inpatients on the order of a physician) or outpatients (registered by the hospital as outpatients). When Condition Code 44 is appropriately used, the hospital reports on the outpatient bill the services that were ordered and provided to the patient for the entire patient encounter. Reporting of individual HCPCS codes on an outpatient claim must be consistent with all applicable instructions and CMS guidance.

However, in accordance with the general Medicare requirements for services furnished to beneficiaries and billed to Medicare, even in Condition Code 44 situations, the hospital cannot report hours of observation services using HCPCS code G0378 (Hospital observation service, per hour) for the time period during the hospital encounter prior to a physician’s order for observation services. Medicare does not permit retroactive orders or the inference of physician orders. Like all hospital outpatient services, observation services must be ordered by a physician and the reporting requirements specific to observation services are discussed in detail in the Medicare Claims Processing Manual (Pub. 100-04), chapter 4, section 290.2.2. The clock time begins at the time that observation services are initiated in accordance with a physician’s order.

While hospitals may not report observation services under HCPCS code G0378 for the time period during the hospital encounter prior to a physician’s order for observation services, in Condition Code 44 situations, as for all other hospital outpatient encounters, hospitals may include charges on the outpatient claim for the costs of all hospital resources utilized in the care of the patient during the entire encounter.


QUESTION: May a hospital change a patient’s status using Condition Code 44 when a physician changes the patient’s status without utilization review (UR) committee involvement?

ANSWER: No, 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. For Condition Code 44 decisions, in accordance with 42 CFR 482.30(d)(1), one physician member of the UR committee may make the determination for the committee that the inpatient admission is not medically necessary. This physician member of the UR committee must be a different person from the concurring physician for Condition Code 44 use, who is the physician responsible for the care of the patient. For more information, see the Medicare Claims Processing Manual (Pub. 100-04), chapter 1, section 50.3.2 (When an Inpatient Admission May Be Changed to Outpatient Status).

Click for the CMS FAQ Web page.



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