Outpatient observation services defined:
“The use of a bed for physician periodic monitoring and active monitoring by the hospital’s nursing or other ancillary staff, for the patient care which are reasonable and necessary to evaluate an outpatient’s condition or determine the need for an inpatient admission.
Observation services must be patient specific and not part of the facility’s standard operating procedures. For example, post-procedural recovery and monitoring would not be billable as observation. In certain instances, specific clinical situations may arise and additional outpatient services, or an inpatient admission, may be medically necessary. However, this would have to be outside the standard recovery and monitoring periods for the procedure rendered.
Observation services are not considered medically necessary when the patient’s current medical condition does not warrant observation, or when there is not an expectation of significant deterioration in the patient’s medical condition in the near future.
Observation services generally are not expected to exceed 48 hours in duration. Observation services greater than 48 hours in duration are seen as rare and exceptional cases. If medically necessary, Medicare will cover up to 72 hours of observation services. Observation services rendered beyond 72 hours is considered medically unlikely and will be denied as such. The appeals process must be followed to have observation services exceeding 72 hours to be considered for payment. A patient in observation status is either:
Admitted as an inpatient based on the patient’s condition or;
An outpatient and released when the physician determines observation is no longer medically necessary
A physician’s order is required when placing a patient in observation. Lack of documentation can lead to claim errors and payment retractions. A lack of documentation for an inpatient admission does not warrant retroactive observation billing. An order to admit the patient as an inpatient is also required when billing for an inpatient stay. Again, lack of documentation that clearly indicates the order for admission is grounds for a claim error and payment retraction. For example, and order simply documented as “admit” will be treated as an inpatient admission. A clearly worded order such as “inpatient admission” or “place patient in outpatient observation” will ensure appropriate patient care and prevent hospital billing errors. It is imperative that there is a continued focus on lowering the CERT rate and facility involvement is a key component to this goal.
Are observation codes submitted by the hour or by the calendar date?
Observation codes are for calendar dates. If your patient is admitted and discharged on the same date if service, submit the appropriate code from the CPT code Observation or Inpatient Care Services range 99234 to 99236. If your patient is admitted on one date and discharged on another, submit an CPT code Initial Observation Care code from 99218 to 99220 for the first date and code the discharge date with Observation Care Discharge CPT code 99217.
Observation Service Billing Requirements
As discussed; observation services are outpatient services
Therefore when the facility is billing for observation services, an outpatient claim will be submitted under a 13X or 85X Type of Bill (TOB). Observation is reported with revenue code 0762 and HCPCS code G0378.
Because observation may span multiple calendar dates you might be wondering how is this billed following line item billing guidelines? Observation is not split by calendar days per line item. Observation is billed on one line including the total accumulation of observation time with the date that observation care began.
Institutions are to follow typical billing requirements, reporting all appropriate and applicable ancillary revenue codes and HCPCS / CPT codes along with all applicable diagnosis codes associated with the outpatient service.
Billing and Payment for All Hospital Observation Services Furnished Between January 1, 2006 and December 31, 2007
Since January 1, 2006, two G-codes have been used to report observation services and direct referral for observation care. For claims for dates of service January 1, 2006 through December 31, 2007, the Integrated Outpatient Code Editor (I/OCE) determines whether the observation care or direct referral services are packaged or separately payable. Thus, hospitals provide consistent coding and billing under all circumstances in which they deliver observation care.
Beginning January 1, 2006, hospitals should not report Procedure codes 99217-99220 or 99234-99236 for observation services. In addition, the following HCPCS codes were discontinued as of January 1, 2006: G0244 (Observation care by facility to patient), G0263 (Direct Admission with congestive heart failure, chest pain or asthma), and G0264 (Assessment other than congestive heart failure, chest pain, or asthma).
The three discontinued G-codes and the Procedure codes that were no longer recognized were replaced by two new G-codes to be used by hospitals to report all observation services, whether separately payable or packaged, and direct referral for observation care, whether separately payable or packaged:
• G0378- Hospital observation service, per hour; and
• G0379- Direct admission of patient for hospital observation care.
The I/OCE determines whether observation services billed as units of G0378 are separately payable under APC 0339 (Observation) or whether payment for observation services will be packaged into the payment for other services provided by the hospital in the same encounter. Therefore, hospitals should bill HCPCS code G0378 when observation services are ordered and provided to any patient regardless of the patient’s condition. The units of service should equal the number of hours the patient receives observation services.
Hospitals should report G0379 when observation services are the result of a direct referral for observation care without an associated emergency room visit, hospital outpatient clinic visit, critical care service, or hospital outpatient surgical procedure (status indicator T procedure) on the day of initiation of observation services. Hospitals should only report HCPCS code G0379 when a patient is referred directly for observation care after being seen by a physician in the community (see §290.4.2 below)
Some non-repetitive OPPS services provided on the same day by a hospital may be billed on different claims, provided that all charges associated with each procedure or service being reported are billed on the same claim with the HCPCS code which describes that service. See chapter 1, section 50.2.2 of this manual. It is vitally important that all of the charges that pertain to a non-repetitive, separately paid procedure or service be reported on the same claim with that procedure or service. It should also be emphasized that this relaxation of same day billing requirements for some non-repetitive services does not apply to non-repetitive services provided on the same day as either direct referral to observation care or observation services because the OCE claim-by-claim logic cannot function properly unless all services related to the episode of observation care, including diagnostic tests, lab services, hospital clinic visits, emergency department visits, critical care services, and status indicator T procedures, are reported on the same claim. Additional guidance can be found in chapter 1, section 50.2.2 of this manual.
Separate and Packaged Payment for Direct Referral for Observation Services Furnished Between January 1, 2006 and December 31, 2007
In order to receive separate payment for a direct referral for observation care (APC 0604), the claim must show:
1. Both HCPCS codes G0378 (Hourly Observation) and G0379 (Direct Admit to Observation) with the same date of service;
2. That no services with a status indicator T or V or Critical care (APC 0617) were provided on the same day of service as HCPCS code G0379; and
3. The observation care does not qualify for separate payment under APC 0339.
Only a direct referral for observation services billed on a 13X bill type may be considered for a separate APC payment.
Separate payment is not allowed for HCPCS code G0379, direct admission to observation care, when billed with the same date of service as a hospital clinic visit, emergency room visit, critical care service, or “T” status procedure.
If a bill for the direct referral for observation services does not meet the three requirements listed above, then payment for the direct referral service will be packaged into payments for other separately payable services provided to the beneficiary in the same encounter.
A.Who May Bill Observation Care Codes
Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment, that are furnished while a decision is being made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation services are commonly ordered for patients who present to the emergency department and who then require a significant period of treatment or monitoring in order to make a decision concerning their admission or discharge.
In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours. In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours.
Contractors pay for initial observation care billed by only the physician who ordered hospital outpatient observation services and was responsible for the patient during his/her observation care. A physician who does not have inpatient admitting privileges but who is authorized to furnish hospital outpatient observation services may bill these codes.
For a physician to bill observation care codes, there must be a medical observation record for the patient which contains dated and timed physician’s orders regarding the observation services the patient is to receive, nursing notes, and progress notes prepared by the physician while the patient received observation services. This record must be in addition to any record prepared as a result of an emergency department or outpatient clinic encounter.
Payment for an initial observation care code is for all the care rendered by the ordering physician on the date the patient’s observation services began. All other physicians who furnish consultations or additional evaluations or services while the patient is receiving hospital outpatient observation services must bill the appropriate outpatient service codes.
For example, if an internist orders observation services and asks another physician to additionally evaluate the patient, only the internist may bill the initial and subsequent
observation care codes. The other physician who evaluates the patient must bill the new or established office or other outpatient visit codes as appropriate.
For information regarding hospital billing of observation services, see Chapter 4, §290.
B.Physician Billing for Observation Care Following Initiation of Observation Services
Similar to initial observation codes, payment for a subsequent observation care code is for all the care rendered by the treating physician on the day(s) other than the initial or discharge date. All other physicians who furnish consultations or additional evaluations or services while the patient is receiving hospital outpatient observation services must bill the appropriate outpatient service codes.
When a patient receives observation care for less than 8 hours on the same calendar date, the Initial Observation Care, from CPT code range 99218 – 99220, shall be reported by the physician. The Observation Care Discharge Service, CPT code 99217, shall not be reported for this scenario.
When a patient is admitted for observation care and then is discharged on a different calendar date, the physician shall report Initial Observation Care, from CPT code range 99218 – 99220, and CPT observation care discharge CPT code 99217. On the rare occasion when a patient remains in observation care for 3 days, the physician shall report an initial observation care code (99218-99220) for the first day of observation care, a subsequent observation care code (99224-99226) for the second day of observation care, and an observation care discharge CPT code 99217 for the observation care on the discharge date. When observation care continues beyond 3 days, the physician shall report a subsequent observation care code (99224-99226) for each day between the first day of observation care and the discharge date.
When a patient receives observation care for a minimum of 8 hours, but less than 24 hours, and is discharged on the same calendar date, Observation or Inpatient Care Services (Including Admission and Discharge Services) from CPT code range 99234 – 99236 shall be reported. The observation discharge, CPT code 99217, cannot also be reported for this scenario.
C.Documentation Requirements for Billing Observation or Inpatient Care Services (Including Admission and Discharge Services)
The physician shall satisfy the E/M documentation guidelines for furnishing observation care or inpatient hospital care. In addition to meeting the documentation requirements for history, examination, and medical decision making, documentation in the medical record shall include:
*Documentation stating the stay for observation care or inpatient hospital care involves 8 hours, but less than 24 hours;
*Documentation identifying the billing physician was present and personally performed the services; and
*Documentation identifying the order for observation services, progress notes, and discharge notes were written by the billing physician.
In the rare circumstance when a patient receives observation services for more than 2 calendar dates, the physician shall bill observation services furnished on day(s) other than the initial or discharge date using subsequent observation care codes. The physician may not use the subsequent hospital care codes since the patient is not an inpatient of the hospital.
D.Admission to Inpatient Status Following Observation Care
If the same physician who ordered hospital outpatient observation services also admits the patient to inpatient status before the end of the date on which the patient began receiving hospital outpatient observation services, pay only an initial hospital visit for the evaluation and management services provided on that date. Medicare payment for the initial hospital visit includes all services provided to the patient on the date of admission by that physician, regardless of the site of service. The physician may not bill an initial or subsequent observation care code for services on the date that he or she admits the patient to inpatient status. If the patient is admitted to inpatient status from hospital outpatient observation care subsequent to the date of initiation of observation services, the physician must bill an initial hospital visit for the services provided on that date. The physician may not bill the hospital observation discharge management code (code 99217) or an outpatient/office visit for the care provided while the patient received hospital outpatient observation services on the date of admission to inpatient status.
E.Hospital Observation Services During Global Surgical Period
The global surgical fee includes payment for hospital observation (codes 99217, 99218, 99219, 99220, 99224, 99225, 99226, 99234, 99235, and 99236) services unless the
criteria for use of CPT modifiers “-24,” “-25,” or “-57” are met. Contractors must pay for these services in addition to the global surgical fee only if both of the following requirements are met:
*The hospital observation service meets the criteria needed to justify billing it with CPT modifiers “-24,” “-25,” or “-57” (decision for major surgery); and
*The hospital observation service furnished by the surgeon meets all of the criteria for the hospital observation code billed.
Examples of the decision for surgery during a hospital observation period are:
*An emergency department physician orders hospital outpatient observation services for a patient with a head injury. A neurosurgeon is called in to evaluate the need for surgery while the patient is receiving observation services and decides that the patient requires surgery. The surgeon would bill a new or established office or other outpatient visit code as appropriate with the “-57” modifier to indicate that the decision for surgery was made during the evaluation. The surgeon must bill the office or other outpatient visit code because the patient receiving hospital outpatient observation services is not an inpatient of the hospital. Only the physician who ordered hospital outpatient observation services may bill for observation care.
*A neurosurgeon orders hospital outpatient observation services for a patient with a head injury. During the observation period, the surgeon makes the decision for surgery. The surgeon would bill the appropriate level of hospital observation code with the “-57” modifier to indicate that the decision for surgery was made while the surgeon was providing hospital observation care.
Examples of hospital observation services during the postoperative period of a surgery are:
*A surgeon orders hospital outpatient observation services for a patient with abdominal pain from a kidney stone on the 80th day following a TURP (performed by that surgeon). The surgeon decides that the patient does not require surgery. The surgeon would bill the observation code with CPT modifier “-24” and documentation to support that the observation services are unrelated to the surgery.
*A surgeon orders hospital outpatient observation services for a patient with abdominal pain on the 80th day following a TURP (performed by that surgeon). While the patient is receiving hospital outpatient observation services, the surgeon decides that the patient requires kidney surgery. The surgeon would bill the observation code with HCPCS modifier “-57” to indicate that the decision for surgery was made while the patient was receiving hospital outpatient observation services. The subsequent surgical procedure would be reported with modifier “- 79.”
*A surgeon orders hospital outpatient observation services for a patient with abdominal pain on the 20th day following a resection of the colon (performed by that surgeon). The surgeon determines that the patient requires no further colon surgery and discharges the patient. The surgeon may not bill for the observation services furnished during the global period because they were related to the previous surgery.
An example of a billable hospital observation service on the same day as a procedure is when a physician repairs a laceration of the scalp in the emergency department for a patient with a head injury and then subsequently orders hospital outpatient observation
services for that patient. The physician would bill the observation code with a CPT modifier 25 and the procedure code.