Inpatient to Outpatient Status Change

In some instances, patients are admitted as hospital inpatients but upon review it is determined that the patient does not meet inpatient criteria. If the determination occurs prior to discharge, and other criteria are met, the status may be changed to outpatient. If the criteria are not met, the status must remain inpatient.

Condition Code 44

When a physician orders an inpatient admission, but the hospital's utilization review committee determines that the level of care does not meet admission criteria, the hospital may change the status to outpatient only when certain criteria are met.


  • 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 a claim to Medicare for the inpatient admission;
  • A physician concurs with the utilization review committee's decision; and
  • The physician's concurrence with the utilization review committee's decision is documented in the patient's medical record.

Utilization Review Committee

  • Two or more practitioners must carry out the UR function. At least two members must be doctors of medicine or osteopathy.
  • The determination that an admission or continued stay is not medically necessary must either be made by:
    • one member of the UR committee if the practitioner(s) responsible for the care of the patient either concurs with the determination or fails to present their views when afforded the opportunity, or
    • two members of the UR committee in all other cases.
  • The UR committee must consult with the practitioner(s) responsible for the care of the patient and allow them to present their views before making the determination.
  • If the UR committee determines that the admission is not medically necessary, the committee must give written notification, no later than 2 days after the determination, to the hospital, the patient, and the practitioner responsible for the care of the patient.

All orders and all entries related to an inpatient admission must be kept in their original form. When an inpatient admission is changed to outpatient status, the change must be documented in the medical record along with:

  • Orders and notes that indicate why the change was made,
  • The care that was furnished, and
  • The participants in making the decision to change the status.

If all criteria for changing status from inpatient to outpatient are met:

  • Bill entire episode as though the inpatient admission never occurred
  • Type of bill 13X or 85X
  • Condition code 44
  • Include charges for services that were furnished per a physician order

Observation: Only services provided per a physician order can be billed on the outpatient claim. Therefore, providers may not begin counting observation hours until such time as an order for observation is given. Example: Patient A was admitted at noon on Sunday. On Monday afternoon it was determined that the patient didn't meet inpatient criteria, the physician concurred, and the status was changed to outpatient. The outpatient status is considered to have begun at noon on Sunday. However, observation hours cannot be billed until the physician has written an order for observation. If the order was written at 2 p.m. on Monday, the hospital would begin the observation hours at that time. No observation can be charged between noon on Sunday and 2 p.m. on Monday.

Other Cases

If the determination that the patient should not have been admitted is not made until after the patient has been discharged, or other criteria for use of condition code 44 is not met, or if the admission is denied due to lack of medical necessity, Medicare may still make payment for certain Part B services under inpatient Part B benefits. Payable services include:

  • Diagnostic x-ray tests, diagnostic laboratory tests, and other diagnostic tests;
  • X-ray, radium, and radioactive isotope therapy, including materials and services of technicians;
  • Surgical dressings, and splints, casts, and other devices used for reduction of fractures and dislocations;
  • Prosthetic devices (other than dental) which replace all or part of an internal body organ (including contiguous tissue), or all or part of the function of a permanently inoperative or malfunctioning internal body organ, including replacement or repairs of such devices;
  • Leg, arm, back, and neck braces, trusses, and artificial legs, arms, and eyes including adjustments, repairs, and replacements required because of breakage, wear, loss, or a change in the patient's physical condition;
  • Outpatient physical therapy, outpatient speech-language pathology services, and outpatient occupational therapy (CMS Internet Only Manual (IOM), Publication 100-02, Medicare Benefit Policy Manual, Chapter 15, "Covered Medical and Other Health Services," Sections 220 and 230);
  • Screening mammography services;
  • Screening pap smears;
  • Influenza, pneumococcal pneumonia, and hepatitis B vaccines;
  • Colorectal screening;
  • Bone mass measurements;
  • Diabetes self-management;
  • Prostate screening;
  • Ambulance services;
  • Hemophilia clotting factors for hemophilia patients competent to use these factors without supervision);
  • Immunosuppressive drugs;
  • Oral anti-cancer drugs;
  • Oral drug prescribed for use as an acute anti-emetic used as part of an anti-cancer chemotherapeutic regimen; and
  • Epoetin Alfa (EPO).

These services are billed under Type of Bill, 121 - hospital Inpatient Part B. A no-pay Part A claim should be submitted for the entire stay with the following information:

  • 110 Type of bill (TOB)
  • All days in non-covered
  • All units and charges non-covered
  • M1 Occurrence Span Code with the dates of provider liability
  • A remark stating that the patient did not meet inpatient criteria



Last Updated Apr 25 , 2023