Knowledge Base Article

Question:

How do you change a patient’s status from inpatient to observation?

Answer:

First, CMS has made clear that observation is a service and not a status.  Therefore, an inpatient would be changed to an outpatient status.  Per recent Medicare FAQs and Cahaba education, there must be involvement of the Utilization Review (UR) committee to change a patient’s status from inpatient to outpatient.  A physician’s order to revise a patient’s status from inpatient to outpatient, in and of itself, is not sufficient to change a patient’s status from inpatient to outpatient.  
Inpatient to outpatient status changes must meet all the requirements of Condition Code 44.  These include:

• Change in patient status is made prior to discharge or release;
• Hospital has not submitted an inpatient claim to Medicare;
• A physician concurs with the UR committee’s decision; and
• Physician concurrence with the UR committee’s decision is documented in the patient’s medical record.

For Condition Code 44 decisions, 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.  The medical record should contain documentation of these interactions including the concurrence of the treating physician.  For more information, see the Medicare Claims Processing Manual (Pub. 100-04), Chapter 1, Section 50.3.2.

Changes in patient status must be fully documented in the medical record, complete with orders and notes that indicate the following:

• Why the change was made;
• The care that was furnished to the beneficiary; and
• The participants making the decision to change the patient’s status.

If the patient requires medically necessary observation services after the change to outpatient status, the attending/treating physician should write an order for the observation services.  Cahaba GBA strongly encourages providers to document a separate order for observation when it is applicable, in addition to the order to revise the patient’s status from inpatient to outpatient, subsequent to Condition Code 44 guidelines.  It is important to note that the hospital may not bill for observation prior to the time of a physician order for observation.  The hospital should begin billing for observation services at the time documented in the patient's medical record that observation services are initiated in accordance with a physician's order for observation services. 

If an inpatient does not meet inpatient medical necessity criteria and the hospital is unable to follow the CC 44 criteria for a status change, the hospital may submit a Type of Bill 12X for covered “Part B Only” furnished services.  See the Medicare Benefits Policy Manual (Pub. 100-02), Chapter 6, Section 10.