The Two‑Midnight Rule & Condition Code 44: A Complete Guide to CMS in Medical Coding

Understanding how Medicare defines inpatient vs. outpatient care is essential for anyone working with CMS in medical coding. Two of the most important policies governing patient status are the Two‑Midnight Rule and Condition Code 44. These rules work together to ensure accurate billing, compliant documentation, and proper application of Medicare Part A and Part B services.

This page breaks down both policies in clear, practical terms — and explains exactly how they interconnect inside the broader framework of CMS in medical coding.

What Is the Two‑Midnight Rule?

The Two‑Midnight Rule is a CMS policy that determines when an inpatient admission is appropriate for Medicare Part A payment. It was created to reduce unnecessary inpatient admissions and provide consistent guidance for hospitals and medical coders.

Key Principles of the Two‑Midnight Rule

1. The Two‑Midnight Benchmark

A patient should be admitted as an inpatient when:

• The physician expects the patient to require hospital care spanning two midnights, and

• The medical record supports that expectation.

Time spent receiving outpatient services before the inpatient order counts toward the benchmark.

2. The Two‑Midnight Presumption

If a patient actually stays two midnights after the inpatient order:

• The admission is presumed appropriate for Part A

• Medical review is limited unless there is evidence of gaming or delays

3. Case‑by‑Case Exception

Even if the stay is less than two midnights, inpatient admission may still be appropriate when:

• The physician’s judgment supports the need for inpatient care

• Documentation clearly supports the decision

This exception is especially relevant in complex or high‑risk cases.

What Is Condition Code 44?

Condition Code 44 is a CMS mechanism used when a patient was admitted as inpatient, but the hospital later determines the inpatient criteria were not met.

It allows the hospital to change the patient’s status from inpatient to outpatient before billing.

When Condition Code 44 Can Be Used

All of the following must be true:

1. The patient is still in the hospital

2. No inpatient claim has been submitted

3. The UR committee physician agrees with the attending physician

4. The decision is documented in the medical record

Condition Code 44 does not automatically place the patient in observation. If observation is appropriate, a separate order must be written.

How the Two‑Midnight Rule and Condition Code 44 Work Together

These two CMS policies are deeply interconnected, and understanding their relationship is essential for anyone working with CMS in medical coding guidelines.

• The Two‑Midnight Rule determines when inpatient is appropriate.

• Code 44 corrects the status when inpatient was ordered but not justified.

  Compliance Risks & Best Practices

  Risks

  • Incorrect inpatient admissions

  • Failure to apply CC44 properly

  • Missing documentation of physician concurrence

  • Billing inpatient claims that should be outpatient

  Best Practices

  • Maintain a consistent UR process

  • Educate physicians on documentation requirements

  • Use real‑time UR reviews

  • Document expected length of stay clearly

  • Apply CC44 only when all criteria are me