Medicare Change-of-Status Process: New Questions and Answers

The information blackout from the Centers for Medicare & Medicaid Services (CMS) continues, so for now, some unanswered questions about the new appeal process for certain patients that we have been discussing will continue to go unanswered.

So instead, let me address some of the questions that have come up during discussions for which I do have answers – sort of.

First, an astute case manager asked “What if a patient appeals their change to outpatient, stays in the hospital awaiting the decision, and then wins their appeal? Do we now need to give them the Important Message from Medicare (IMM)?”

The answer is yes, their appeal victory restores their inpatient status, so that means if more than two calendar days have passed since the first IMM, you now must deliver the second copy to the patient, assuming they are still stable for discharge.

And, as I mentioned in the past, since the Quality Improvement Organization (QIO) restored their inpatient status, if you gave an Advance Beneficiary Notice (ABN) to hold them financially liable for the time they remained in the hospital awaiting the appeal decision, that ABN is now invalid, and they cannot be charged. And now, with the second IMM, they can appeal their discharge and get another two days of care without any financial obligation. Boy, CMS sure is generous giving away our services.

But let me remind you, I expect hospitals to win 100 percent of these appeals. You all have been making proper status determinations on Medicare patients using the Two-Midnight Rule for over 10 years, and if one slips through, your utilization review (UR) process to execute a compliant Condition Code 44 change is hard-wired – and I know you are not going to change a patient back to outpatient unless it is truly warranted.

The other question that often comes up is whether to stop doing Condition Code 44 changes completely and simply self-deny and rebill, sometimes called the W2 process, so that a Medicare Change of Status Notice (MCSN) never needs to be given out. I know many hospitals already consider the code 44 process to be too onerous, so they leave all those admissions for rebilling after discharge.

But I am a code 44 advocate; it is easier to notify the patient when they are in the hospital, rather than having to send a letter; it is easier for the billing staff to generate one claim, rather than three; it gets the hospital their money much sooner, and in some cases you may be able to capture the eight hours of observation to get the full observation payment (base rate for 2025 is $2,647.73) rather than the few hundred dollars for ancillary services.

Last week I decided to read the regulation from 2013 to never do a Condition Code 44 change and only do W2 self-denials was compliant. And while I found that there is no direct prohibition, CMS’s wording in CMS-1599-F does raise some ambiguity, as with many CMS regulations.

For instance, when discussing the self-denial process, there is the caveat “if the determination is made after discharge that the beneficiary should have been treated as a hospital outpatient instead of admitted as a hospital inpatient.” What does that mean? If an admission is flagged as an inappropriate inpatient admission during the stay, is that considered “the determination?”

If so, are you required to do a Condition Code 44? Or does “the determination” only occur when the UR committee physician and attending agree that inpatient was not appropriate as step 2 of the Condition Code 44 process, and simply flag the admission for post-discharge self-denial, not constituting “a determination”? I guess we may never know, unless of course a patient complains about the loss of appeal rights due to hospital manipulation of the regulation and we get a formal determination from CMS or a court.   Well, for now, we all just have to decide what is best for our institutions and for our patients – and proceed in good faith.