On April 1, 2004, the National Uniform Billing Committee (NUBC) issued Condition Code 44 (CC44) to be appended on outpatient Medicare claims when an inpatient admission is being changed to outpatient through the Utilization Review (UR) process. As we all know, the use of CC44 as initiated by the Utilization Management (UM) committee or its representatives requires, among several other items, written patient notification, no later than two days after the determination, to the hospital, the patient, and the practitioner responsible for the care of the patient. Recall that because the patient was initially an inpatient, they should have also received the Important Message from Medicare (IMM) notifying them that they had appeal rights to their inpatient discharge. At that time, if the encounter was changed from inpatient to outpatient, the patient had no appeal rights, but this was not spelled out to the patient, nor was it required in the CC44 documentation.
This written CC44 patient notification has historically been operationally problematic for facilities because the Center for Medicare and Medicaid Services (CMS) did not provide a notification form. When the Medicare Outpatient Observation Notice (MOON) was enacted in 2015, many facilities adopted this form for patient notification in a CC44 situation. However, as the title implies, the MOON is to notify the patient that they are receiving outpatient observation services, and their financial liability for hospital services provided under Medicare Part B. While CC44 may be used to downgrade an inpatient encounter to outpatient with observation services, there are many situations when an encounter is downgraded to outpatient without observation services, such as in the case of post-procedural overnight recovery, when use of the MOON would be inappropriate. In addition, the MOON does not address patient appeal rights.
Finally, CMS-4204-F, effective February 14, 2025 introduced the Medicare Change of Status Notice (MCSN). This notification advises patients of their appeal rights should their encounter be changed from inpatient to outpatient WITH observation services being billed (HCPCS G0378). The primary purpose of this notice is to give the patient an opportunity to appeal and restore Part A benefits in order to access their Skilled Nursing benefit, which requires a three-day inpatient encounter. Specifically, patient notification is required with the MCSN form when the encounter has been changed from inpatient to outpatient observation and:
The patient has Medicare Part B, and their hospitalization was at least three (3) days.
For beneficiaries with Medicare Part B, the MCSN must be delivered as soon as possible after the hospital reclassifies the beneficiary from inpatient to outpatient receiving observation services and the third day in the hospital has been reached.
The patient does not have Medicare Part B.
For beneficiaries without Medicare Part B coverage, hospitals must deliver the notice as soon as possible after the change in status from inpatient to outpatient receiving observation services because a three-day hospital stay is not required for these beneficiaries to be eligible for this expedited appeals process.
Note that this form is only to be used in the above circumstances because it is notifying the beneficiary of their rights to appeal. Should an encounter be changed from inpatient to observation status, without the patient receiving observation services, this notification form is not to be used.
Where does this leave us? If a UM committee determines that an inpatient encounter is not medically necessary, and changes the encounter to observation, the facility must ensure that the CC44 process be compliantly followed and the MCSN notice provided only in the certain circumstances listed above. This of course adds another layer of complexity to the entire process and the already overwhelmed staff who issue these notices. Importantly, it does not give facilities a formal means to notify patients of the downgrade in situations that fall outside of the MCSN, such as inpatient to outpatient, leaving it up to the facility to decide how to notify these patients. Developing a formal work flow for UM and the Business Office to ensure appropriate use of IMM, MOON and now MCSN is critical to ensure success.
Additionally, having a formal UM process with well-trained UM staff and adequate access to physician advisors or physician members of the UM committee is the best defense in that facilities place the patient in the right status from the start thereby mitigating level of care changes.
If have any questions concerning the Two-Midnight Rule Exceptions, please contact:
Vonda Moon, Senior Principal at vondamoon@sunstoneconsulting.com
Joli Fitzgibbons, Senior Director at jolifitzgibbons@sunstoneconsulting.com
Laura Ehrlich, Senior Clinical Specialist at lauraehrlich@sunstoneconsulting.com
References:
A link to the MCSN and accompanying directions is:
https://www.cms.gov/medicare/forms-notices/beneficiary-notices-initiative-bni/ffs-mcsn
Medicare Claims Processing Manual, Chapter 30, Section 450
MLN Matters Number MM13846 Medicare Change of Status Notification