CMS Condition Code 44: Requirements, Rebilling, and Patient Notice

CMS Condition Code 44 is a Medicare billing code that lets a hospital reclassify a patient from inpatient to outpatient while the patient is still in the hospital, so the entire stay can be billed under Medicare Part B instead of Part A. It applies when the hospital’s Utilization Review committee decides the admission didn’t meet inpatient criteria and the treating physician agrees. The code itself doesn’t change how much Medicare pays; CMS uses it to monitor how often hospitals are reversing their own admission decisions.¹

For the patient, the switch is not a paperwork detail. It changes cost-sharing, and it can wipe out eligibility for Medicare-covered skilled nursing care after discharge.

The Four Requirements

A hospital can use Condition Code 44 only when all four of these are true at the same time:¹

The patient has not yet been discharged.
The hospital has not yet submitted a Part A claim for the stay.
The Utilization Review committee has determined the admission did not meet inpatient criteria.
A physician concurs with that determination, and the concurrence is documented in the medical record.

Miss any one and the code is off the table. The window closes the moment the patient walks out the door or the Part A claim is transmitted, whichever comes first.

Who Makes the Call

Every Medicare-participating hospital is required to maintain a Utilization Review committee. It must include at least two practitioners, and at least two members must be physicians.² The committee reviews the medical necessity of admissions, length of stay, and professional services for Medicare and Medicaid patients.

Two independence rules keep the review honest. A committee member with a direct financial interest in the hospital, such as an ownership stake, cannot review a case. And no member can review a case if they were professionally involved in the patient’s care.²

The clinical benchmark the committee typically applies is CMS’s two-midnight rule. An inpatient admission is generally appropriate when the admitting physician expects the patient to need hospital care spanning at least two midnights, based on the medical record at the time of admission rather than hindsight.³ When the record doesn’t support that expectation, the UR committee has grounds to conclude inpatient criteria were not met.

When the Physician Won’t Concur

Physician concurrence is a prerequisite, not a formality. If the treating physician refuses to agree, the hospital cannot use Condition Code 44.¹

The regulations require the committee to consult the practitioners responsible for the patient’s care and let them present their views before making a determination. If the attending physician contests the decision, at least one other physician member of the committee must review the case, and if two physician members agree that inpatient care is not medically necessary, that determination stands.² Even so, if the treating physician still will not concur with a status change for billing purposes, the hospital cannot invoke Condition Code 44. It must either submit the inpatient claim and take its chances with Medicare review, or use the narrower self-denial billing route described below.

How the Stay Gets Rebilled

Once the UR committee has made its finding, the physician has concurred, and the patient has been notified, the hospital treats the episode as though the inpatient admission never happened.¹

The unsent Part A claim is canceled. The hospital submits a single outpatient claim using Type of Bill 13X or 85X, with Condition Code 44 entered in Form Locators 24-30. Every service delivered from the moment of the original admission order forward is billed under Part B. Observation hours are reported under Revenue Code 0762.

What the Switch Costs the Patient

Moving from Part A to Part B changes the patient’s cost-sharing, and the change often runs against the patient.

Under Part A, an inpatient stay in 2026 carries a single deductible of $1,736 per benefit period, which covers the first 60 days of inpatient hospital care.⁴ For a short admission, that deductible is often the patient’s entire bill.

Under Part B, the patient owes the $283 annual deductible (if not already met for the year) plus 20% coinsurance on the Medicare-approved amount for every covered outpatient service.⁵ A brief observation-style stay may come out cheaper under Part B. A stay involving multiple tests, imaging, or procedures usually does not, because the 20% coinsurance stacks on each item. Patients also pick up the cost of self-administered medications, which Part A would have absorbed as part of the inpatient stay but Part B does not cover.

The Skilled Nursing Facility Problem

This is the consequence that hurts patients most, and it often surprises families. Medicare covers a skilled nursing facility stay only if the patient had a qualifying inpatient hospital stay of at least three consecutive days. The count is midnight to midnight, the discharge day doesn’t count, and time spent in the emergency department or in outpatient observation before admission doesn’t count either.⁶

When Condition Code 44 is applied, the entire stay is reclassified as outpatient. Every day that would have counted toward the three-day requirement stops counting. A patient who spent four days in a hospital bed under an inpatient order, expecting Medicare to cover a rehabilitation stay afterward, can end up with zero qualifying inpatient days. If they still need SNF care, they pay out of pocket or go without.

Notice to the Patient

A hospital that changes a patient’s status has to tell the patient. Patients who have Medicare Part B and were in the hospital for at least three days, or who lack Part B coverage entirely, must receive a Medicare Change of Status Notice (CMS-10868).⁷ The MCSN explains the switch from Part A to Part B billing, the consequences for patients without Part B (who may owe the full cost of the stay), the loss of the qualifying stay for SNF coverage, and the right to a fast appeal.

The notice must be delivered as soon as possible, and no later than four hours before discharge.⁷

A separate notice, the Medicare Outpatient Observation Notice (MOON), applies to Medicare patients who are placed in outpatient observation from the start of their encounter, not to patients whose status was changed under Condition Code 44. It’s issued no later than 36 hours after observation services begin, or upon release if that is sooner.⁸ In a Code 44 case, both can come into play: the MCSN at the moment of the status change, and the MOON once the patient is being treated as an outpatient in observation.

How Patients Appeal

A Medicare beneficiary whose status is switched from inpatient to outpatient can request a fast appeal through the state’s Beneficiary and Family Centered Care Quality Improvement Organization (BFCC-QIO). Filing while still in the hospital is better if possible, but appeals can be filed after discharge as well.⁹

The BFCC-QIO notifies the hospital, requests the medical records, gives the hospital a chance to explain the status change, and then rules. A decision typically arrives about two days after the appeal is filed.⁹

If the patient wins, the stay reverts to inpatient. The patient owes the standard Part A hospital deductible and may qualify for Medicare-covered SNF care within 30 days of discharge. If the appeal is denied, the patient owes Part B cost-sharing (or the full cost of the stay if they don’t have Part B) and will not qualify for SNF coverage based on that hospitalization.⁹

What Hospitals Do When Code 44 Isn’t Available

If any of the four requirements fails, the hospital loses Condition Code 44 and is pushed to a narrower billing pathway. The common triggers: the patient has already been discharged, the Part A claim has already gone out, or the physician refuses to concur.

In those cases, the hospital submits a no-pay Part A claim (Type of Bill 110) for the whole stay with all days and charges marked non-covered, along with an Occurrence Span Code M1 covering the dates of provider liability. Separately, it can bill a limited set of Part B services on Type of Bill 12X. The Part B services eligible for payment under this route are restricted to categories such as diagnostic tests, X-ray and radiation therapy, surgical dressings, prosthetic devices, and outpatient therapy services.

The gap is real. With Condition Code 44, the hospital rebills the entire episode as outpatient and gets paid for the full range of medically necessary Part B services. Without it, room, board, and nursing charges are unrecoverable, and only the narrow slice of Part B-eligible items is paid. That is why hospitals push hard to catch these cases before discharge and before the Part A claim is filed.

1
Centers for Medicare & Medicaid Services. Use of Condition Code 44, Inpatient Admission Changed to Outpatient
2
eCFR. 42 CFR 482.30 – Condition of Participation: Utilization Review
3
Centers for Medicare & Medicaid Services. Fact Sheet: Two-Midnight Rule
4
Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
5
Centers for Medicare & Medicaid Services. Medicare Deductible, Coinsurance and Premium Rates CY 2026 Update
6
Centers for Medicare & Medicaid Services. Skilled Nursing Facility 3-Day Rule Billing
7
Centers for Medicare & Medicaid Services. Medicare Change of Status Notice Instructions
8
Centers for Medicare & Medicaid Services. Medicare Outpatient Observation Notice (MOON)
9
Medicare.gov. Appeal When a Hospital Changes Your Status From Inpatient to Outpatient Getting Observation Services