Transcript Observation Services - Texas Hospital Association

Observation Issues:
Clearing the Confusion
Presented By:
Duane C. Abbey, Ph.D., CFP
Abbey & Abbey, Consultants, Inc.
[email protected]
http://www.aaciweb.com
http://www.APCNow.com http://www.HIPAAMaster.com
Version 9.7 - 2010
Notes © 1999-2010, Abbey & Abbey, Consultants, Inc.
CPT Codes – © 2009-2010 AMA
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 1
Presentation Faculty
Duane C. Abbey, Ph.D., CFP – Dr. Abbey is a healthcare consultant and educator with over 20
years of experience. He has worked with hospitals, clinics, physicians in various specialties,
home health agencies and other health care providers.
His primary work is with optimizing reimbursement under various Prospective Payment
Systems. He also works extensively with various compliance issues and performs
chargemaster reviews along with coding and billing audits.
Dr. Abbey is the President of Abbey & Abbey, Consultants, Inc. A wide range of consulting
services is provided across the country including charge master reviews, APC compliance
reviews, in-service training, physician training, and coding and billing reviews.
Dr. Abbey is the author of eleven books on health care, including:
•“Non-Physician Providers: Guide to Coding, Billing, and Reimbursement”
•“Emergency Department: Coding, Billing and Reimbursement”, and
•“Chargemasters: Strategies to Ensure Accurate Reimbursement and Compliance”.
His most recent books are:
“Compliance for Coding, Billing & Reimbursement A Systematic Approach to
Developing a Comprehensive Program”, “Introduction to Healthcare Payment
Systems”, and “The Medicare Recovery Audit Contractor Program” are available from
the CRC Press a Division of Taylor and Francis.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 2
Disclaimer
This workshop and other material provided are designed to provide accurate and
authoritative information. The authors, presenters and sponsors have made every
reasonable effort to ensure the accuracy of the information provided in this
workshop material. However, all appropriate sources should be verified for the
correct ICD-9-CM Codes, ICD-10 Diagnosis and Procedure Codes, CPT/HCPCS
Codes and Revenue Center Codes. The user is ultimately responsible for correct
coding and billing.
The author and presenters are not liable and make no guarantee or warranty;
either expressed or implied, that the information compiled or presented is errorfree. All users need to verify information with the Fiscal Intermediary, Carriers,
other third party payers, and the various directives and memorandums issued by
CMS, DOJ, OIG and associated state and federal governmental agencies. The
user assumes all risk and liability with the use and/or misuse of this information.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 3
Observation Services
Objectives
 Observation Services - Objectives
Just What Is Observation?
How Do We Differentiate Inpatient from Outpatient?
Confused About Whether Observation Is A Status or Location?
What Needs To Be Documented for Observation Services?
When Does Observation Start and Stop?
Why Do Hospitals Have Difficulty With Observation?
How Can We Audit Observation Services
How Do We Code/Billing Injections/Infusions for Observation?
How Does Nursing Staff Influence Observation Status to Ensure
Proper Payment?
Do We Need to Have An Observation Log?
How Does the ED Fit Into Observation?
How Should We Handle Post-Operative Surgery?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 4
Observation Services
Changes for 2010 - Synopsis
 November 20, 2009 Federal Register
 ‘Observation Status’ versus ‘Observation Services’
 Composite Payment/Grouping Changes
 CMS Side-Steps Addressing Other Issues/Questions
 APC Update Transmittals
 Transmittal 1872 – December 11, 2009  I/OCE Update
 Transmittal 1882 – December 21, 2009  APC Update
• Transmittal 1882 Replaced Transmittal 1871
 CMS FAQs – January 2010
 # 9973 – Condition Code 44 – Counting Time Back To Beginning of
Episode of Care
 # 9974 – Infusions and injection during observation – Counting Time
 Terminology – ‘Admit to Observation’ versus ‘Referral to Observation’
 See Transmittal 107, May 22, 2009, MBPM – See also ‘status’.
 Other Questions – See physician supervision concerns for inpatients that
are subsequently converted to outpatients through Condition Code 44.
New physician supervisions rule interpretation – inpatient vs. outpatient.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 5
Observation Services
Fundamental Questions
 What is Observation?
 Medicare vs. Private Third-Party Payers
 How do we count the hours of observation?
 Start Time, Stop Time and Intervening Services
 What is Condition Code 44?
 How should we use Condition Code 44?
 How do we count time (hours) using Condition Code 44?
 Differences between Medicare and Private Third-Party Payers?
 How should we bill for Observation?
 8 Hours – Minimum  48 Hours – Maximum
 Direct Admits
 How do we know that we are in compliance?
 Where do the RACs fit into the Observation picture?
 Where do physicians fit into the Observation picture?
 Why is this such a difficult topic?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 6
Observation Services
Introduction
 Observation Services Represents A Very Difficult Area
 Definition Of ‘Observation’ Is Not Always Clear
 Physicians Drive The Entire Process
 Billing For Services Creates Compliance Concerns
 Documentation Is The Key In This Area
 Nursing Service Challenges – Documentation, Direct Admits,
Infusions and Injections
 What Is ‘Observation’?
A simplistic definition might be:
Observation services are outpatient services where the patient is
being held to determine if the patient should be admitted,
discharged home or sent to another provider.
 Why Does Medicare Have Such A Problem With Observation?
Medicare ‘believes’ that hospital have been cheating by
inappropriately billing for observation services. With the
implementation of APCs, over the period of nine years, CMS has
constantly changed the coding, billing and payment process.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 7
Observation Services
Introduction
 How Do Other Third-Party Payers View Observation?
 How Did Observation Services Come Into Being?
 What Has To Be Synchronized In Order To Fully
Handle Provision, Documentation and Billing For Observation?
 What Is The Difference Between Professional
Component Billing And Technical Component Billing?
 Can We Avoid All The Problems By Just Not Billing
For Observation?
 Our QIO Is Heavily Reviewing Same Day Admits And
Discharges – Is It OK To Make Them Observation?
 What Is The Difference Between ‘Inpatient’ And ‘Outpatient’?
 Does Nursing Staff Know When Patient Is In Observation?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 8
Observation Services
Introduction
 What Observation Is NOT
 A Substitute for an Inpatient Admission
 For Continuous Monitoring
 For Medically Stable Patients Who Need Diagnostic Testing or
Outpatient Procedures
 For Patients Who Need Therapeutic Procedures (e.g., blood
transfusion, chemotherapy, dialysis) that are routinely provided in an
outpatient setting
 For Patients Waiting Nursing Home Placement
 To Be Used as a Convenience to the patient, his or her family, the
hospital, or the attending physician
 For Routine Prep or Recovery Prior to or Following Diagnostic or
Surgical Services
 A Routine “Stop” Between the Emergency Department and an
Inpatient Admission
• The above is from the December 2002 issue of the Medical
Director’s Corner - AdminaStar
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 9
Observation Services
Introduction
 CMS – Changes for Observation Starting In CY2008
“In summary, we are adopting our proposal to package payment for
observation care reported with HCPCS code G0378 for CY 2008, with a
modification to establish two new composite APCs for extended assessment
and management. For CY 2008, payment for observation services reported with
HCPCS code G0378 will remain packaged with status indicator “N.” We are
creating two composite APCs for extended assessment and management, of
which observation care is a component. In addition, we will not require a
qualifying diagnosis for composite APC payment, but for the purposes of
composite APC payment, will retain all other criteria, including a minimum
number of eight hours; a qualifying visit, direct admission, or critical care; and
no “T” status procedure reported on the day before or day of observation
services. Additionally, we are retaining the general reporting requirements for
all observation services, whether fully packaged or included in the composite
APC payment. These are criteria related to the physician order and evaluation,
documentation, and observation beginning and ending times. These are the
more general requirements that ensure the proper reporting of observation
care on correctly coded hospital claims that reflect the charges associated with
all hospital resources utilized to provide the reported services.” Page 906
CMS-1392-FC (Examination Copy)
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 10
Observation Services
Basics
Just, What Is Observation?
While there are different interpretations, for Medicare from HIM-10 §455
(Pub. 100-2, Medicare Benefits Policy Manual, Chapter 6, §70.4):
Observation services are those services:
(a) Furnished on a hospital’s premises
(b) Includes use of a bed and periodic monitoring by
nursing or other staff
(c) Reasonable and necessary
(d) To evaluate an outpatient’s condition
(e) Determine the need for possible admission as
an inpatient
(f) Ordered by physician or qualified NPP
(g) Usually do not exceed one day
(h) May go for up to 48 hours
(i) Under unusual circumstances may exceed 48 hours
Note: §70.4 No longer exists. See next slide for slightly updated
information.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 11
Observation Services
Basics
 Just What Is Observation? See Transmittal 1445 to Publication 100-04 and
Transmittal 82 to Publication 100-02 for updated definitions and directives.
 Observation care is a well-defined set of specific, clinically appropriate
services, which include ongoing short term treatment, assessment, and
reassessment before a decision can be made regarding whether patients
will require further treatment as hospital inpatients or if they are able to
be discharged from the hospital. Observation status is commonly
assigned to 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.
Observation services are covered only when provided by the order of a
physician or another individual authorized by State licensure law and
hospital staff bylaws to admit patients to the hospital or to order
outpatient tests. 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. In only rare and
exceptional cases do reasonable and necessary outpatient observation
services span more than 48 hours.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 12
Observation Services
Basics
 Observation Is A Status (?) Or Is It A Bed (?)
 How Does A Patient Get Into Observation?
 A Physician Must Order
 There Must Be Medical Necessity
 Proper Documentation Must Be Provided
 Note: These are all dependent upon the physician!
 How does nursing staff become involved in observation?
 Direct Admits
 Provision of Services
 Where Are Observation Services Provided?
The Medicare definition requires the use of a ‘bed’ and nursing services.
In theory the bed can be any place.
Typical location is a nursing unit. We’ll discuss others.
What about ‘observation in critical care’?
Does telemetry qualify for observation?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 13
Observation Services
Basics
 The Doctor’s Order Just Says “Admit”. How Can We Tell Whether It Is
Inpatient Or Observation?
This is an area of great difficulty. The doctor needs to be quite explicit
as to whether this is an “admit to observation” or an “admit to the
hospital”.
For short stays (less than 48 hours) it can be difficult to distinguish.
Note: The determination of the status of the patient must be made at the
front-end, not after the fact.  Nurses need to assist physicians in being
explicit!
 Inpatient Admissions - See HIM-10 §210 (Publication 100-2, Medicare
Benefit Policy Manual, Chapter 1, §10):
An inpatient is a person who has been admitted to a hospital for bed
occupancy for the purposes of receiving inpatient hospital services.
Physician must make the decision as to whether the patient should be
admitted as an inpatient.
The physician should use a 24-hour period as a benchmark. Anticipate
more than 24 hours  inpatient;
Anticipate less than 24 hours  outpatient.
See also Medical Staff Bylaws, admission policies and patient’s
diagnoses.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 14
Observation Services
Basics
 Inpatient Admissions – Continued
“Day Patients” are generally considered to be outpatients.
There are a number of situations where there is a tendency to classify
patients after the fact to be outpatient, observations, when it was initially
intended that they be inpatients. For example, patient presents and is
admitted for an inpatient (only) surgical procedure. The patient is prepared
but the surgery is cancelled and the patient is sent home several hours
after presenting. Same-day admit/discharge or observation??
 Sources For Observation Admissions
 Through Or In Conjunction With The ED
 Directly From A Clinic/Physician’s Office (Freestanding vs. ProviderBased) – So-Called ‘Direct Admit’
 Post-Outpatient Surgery
 Summary Of Basics For Observation
The physicians must order, justify and document the observation services.
The decision as to whether the admit is observation or inpatient is to be
made at the time the decision is made by the physician.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 15
Observation Services
Basics-ED Observation Flow
Patient Presents
Triage/Preliminary MSE
ED Physician/Attending
Physician Assess and
Workup - Full MSE
Decision To Hold
Longer Than
24 Hours
Less Than
24 Hours
Special Care
Path
Follow Care Path
Protocol
Chest Pain
CHF
Other
Admit As
Inpatient
Admit To
Observation
Monitor In
Observation
Assess For
Inpatient Admit
or
Discharge Home
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 16
Observation Services
Basics-Post OP Surgery Flow
Outpatient Surgical Procedure
Regular Recovery
Anesthesia Use
Special Recovery
Conscious Sedation
4-6 Hours
Recovery Time
1-3 Hours
Recovery Time
Discharge
Home
Yes
Patient Ready
For Discharge
Yes
Discharge
Home
No
Continue
Regular
Recovery
No
Unexpected
Occurrence
No
Continue
Special
Recovery
Yes
Admit To
Observation
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 17
Observation Services
Clinical Aspects
 Medical Decision Making
 Decision To Admit Or Place In Observation
 Care And Review During Observation Services
Question: Must the physician see and care
for the patient while the patient is in
observation?
Decision To Discharge From Observation
Question: Is this a service that the physician
must perform? Are nursing discharges “by
criteria” sufficient?
 Basic Decision Making Parameters
 Decision To Place Patient In Observation Status
 Decision To Keep Patient In Observation Status
 Decision To Discharge Patient
 Decision To Admit Patient To Hospital
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 18
Observation Services
Clinical Aspects
 Extended Medical Decision-Making Process
 Care Paths/Critical Pathways/Clinical Pathways
This comprises rather extensive templates or protocols guiding the
decision-making of the physician(s) and clinical staff. The
development of these processes can require significant resources and
the medical staff must buy into the process and resulting care paths.
The fact that there is no specific care path does not mean that
observation services cannot be ordered and justified by the physician
for other purposes.
The most typical areas for Observation Care Paths
are:
 Chest Pain/Acute Angina
 Abdominal Pain
 Congestive Heart Failure
 Asthma
 Pneumonia
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 19
Observation Services
Clinical Aspects
 Prior to CY2008 CMS provided three very basic care paths for separately
payable observation services. The requirements for separate payment
have variably depended upon certain diagnosis codes and/or diagnostic tests.
 Congestive Heart Failure (CHF)
 Asthma
 Chest Pain
 Starting in CY2008 CMS has moved to a composite payment process by
blending observation payment in with ER visits and/or high level clinic visits.
 Certain diagnosis codes and/or specific tests are no longer specifically
required.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 20
Observation Services
Clinical Aspects
 Documentation Considerations
 Signed Physician Order
This is typically placed in the patient’s chart. It should be quite
explicit and the doctor should order the patient placed in
observation status. Different wording may be used such as “24 hour
hold” or some equivalent.
 Medical Necessity
Appropriate diagnostic statements and/or indications must be
provided that justify the observation services being provided.
ED Physician – It is late, I’m placing the patient in observation
because there is no one to take care of this patient at home.
Surgeon – Post OP Surgery – The surgery was delayed, it is now
11:30 p.m. and there is no way for the patient to return home. Keep
in observation until tomorrow.
 Overall
Documentation  Clear, Concise And Convincing
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 21
Observation Services
Clinical Aspects
 Documentation Considerations – Continued
It is highly recommended that an “Observation Log” be maintained for each
observation case regardless of the location of service. The Observation Log
should contain:
Patient’s Name
Physician’s Name(s)
Date and Time of Admission
Date and Time of Discharge
Condition(s) Requiring Observation Status
Information Pointing To Location Of Documentation
Number Of Hours In Observation Status
Number Of Units Billed
Charges Made For The Observation Services
Time/Activities Interrupting Observation Services During Stay
Utilization Review Notes
Note that some of this information is clinical, while other parts relate to billing.
This Observation Log is intended to aid auditing personnel in making
assessment about the propriety of the observation services.
The process for developing an Observation Log should be carefully
documented in a Coding/Billing Policy and Procedure.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 22
Observation Services
Clinical Aspects
 Documentation Considerations – Continued
One of the on-going controversies concerning keeping track of time in
observation status is when observation starts and stops. The following is
taken from PM A-02-129:
Observation time begins at the clock time appearing on the nurse's
observation admission note, which should coincide with the initiation of
observation care or with the time of the patient's arrival in the observation unit.
Observation time ends at the clock time documented in the physician’s
discharge orders, or, in the absence of such a documented time, the clock
time when the nurse or other appropriate person signs off on the physician's
discharge order. This time should coincide with the end of the patient's
period of monitoring or treatment in observation.
Additionally, some variable language is provided in some of the associated
Federal Register entries. The approach listed above is probably the safest.
If there is a need to vary the way the start and stop times are measures, then
be certain to document an appropriate policy and a procedure.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 23
Observation Services
Clinical Aspects
 Documentation Considerations – Continued
In the November 15, 2004, Federal Register, CMS provided
a little more guidance which does little to really answer
the question as to when observation starts and stops.
See page 65831.
Discharge Time: Comment: Several commenters supported our
proposal to change how we define ending time or ‘‘discharge’’
from observation care. However, those commenters also
requested further clarification of what we mean by ‘‘discharge.’’
Response: Specifically, we consider the time when a patient is
‘‘discharged’’ from observation status to be the clock time when
all clinical or medical interventions have been completed,
including any necessary follow-up care furnished by hospital
staff and physicians that may take place after a physician has
ordered that the patient be released or admitted as an inpatient.
However, observation care does not include time spent by the
patient in the hospital subsequent to the conclusion of
therapeutic, clinical, or medical interventions, such as time spent
waiting for transportation to go home.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 24
Observation Services
Clinical Aspects
 Documentation Considerations – Continued
Start Time: Comment: A few commenters requested clarification of the starting time for
observation. One commenter recommended that CMS make it clear that observation
time begins with the patient’s placement in the bed and initiation of observation care,
regardless of whether the bed is in a holding area or is in an actual observation bed or
unit, as long as appropriate observation care is being provided. Another commenter
asked if CMS will allow providers to document observation start time on any applicable
document in the medical record and not limit the start time documentation to
the nurse’s observation admission note.
Response: We have stated in past issuances and rules that observation time begins at
the clock time appearing on the nurse’s observation admission note, which coincides
with the initiation of observation care or with the time of the patient’s arrival in the
observation unit (66 FR 59879,November 30, 2001; Transmittal A–02– 026 issued on
March 28, 2002; and Transmittal A–02–129 issued on January 3, 2003.) In the August 16,
2004 proposed rule, we stated that observation time must be documented in the
medical record and begins with the beneficiary’s admission to an observation bed
(69 FR 50534). We agree with the commenter on the need for clarification, and we will
reiterate in provider education materials developed for the CY 2005 OPPS update that
observation time begins at the clock time documented in the patient’s medical record,
which coincides with the time the patient is placed in a bed for the purpose of initiating
observation care in accordance with a physician’s order.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 25
Observation Services
Clinical Aspects
 Documentation Considerations – Continued
November 10, 2006 Federal Register (70 FR 68693) – CMS
continues to attempt to refine and explain start and stop
times. (Reiterated in CY2008 Final Update FR Entry)
Observation Time
a. Observation time must be documented in the medical record.
b. A beneficiary’s time in observation (and hospital billing)
begins with the beneficiary’s admission to an observation bed.
c. A beneficiary’s time in observation (and hospital billing) ends
when all clinical or medical interventions have been completed,
including follow-up care furnished by hospital staff and
physicians that may take place after a physician has ordered
the patient be released or admitted as an inpatient.
d. The number of units reported with HCPCS code G0378
must equal or exceed 8 hours.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 26
Observation Services
Clinical Aspects
 Documentation Considerations – Continued
 Transmittal 1445 - Observation time begins at the clock time
documented in the patient’s medical record, which coincides with the
time the patient is placed in a bed for the purpose of initiating
observation care in accordance with a physician’s order. Hospitals
should round to the nearest hour. For example, a patient who was
placed in an observation bed at 3:03 p.m. according to the nurses’
notes and discharged to home at 9:45 p.m. should have a “7” placed in
the units field of the reported observation HCPCS code.
 Observation time ends when all medically necessary services related to
observation care are completed. For example, this could be before
discharge when the need for observation has ended, but other
medically necessary services not meeting the definition of observation
care are provided (in which case, the additional medically necessary
services would be billed separately or included as part of the
emergency department or clinic visit). Alternatively, the end time of
observation services may coincide with the time the patient is actually
discharged from the hospital or admitted as an inpatient.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 27
Observation Services
Clinical Aspects
 Documentation Considerations – Continued
 Transmittal 1445 - General standing orders for observation services
following all outpatient surgery are not recognized. Hospitals should
not report as observation care, services that are part of another Part B
service, such as postoperative monitoring during a standard recovery
period (e.g., 4-6 hours), which should be billed as recovery room
services. Similarly, in the case of patients who undergo diagnostic
testing in a hospital outpatient department, routine preparation
services furnished prior to the testing and recovery afterwards are
included in the payments for those diagnostic services. Observation
services should not be billed concurrently with diagnostic or
therapeutic services for which active monitoring is a part of the
procedure (e.g., colonoscopy, chemotherapy). In situations where such
a procedure interrupts observation services, hospitals would record for
each period of observation services the beginning and ending times
during the hospital outpatient encounter and add the length of time for
the periods of observation services together to reach the total number
of units reported on the claim for the hourly observation services
HCPCS code G0378 (Hospital observation service, per hour).
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 28
Observation Services
Clinical Aspects
 Documentation Considerations – Continued
 Start and Stop Times Have Gone Through A Mutation Over the Years
 Currently – Publication 100-04, Chapter 4, §290.2.2 (See Transmittal
1760, June 23, 2009)
• Start Time - Observation time begins at the clock time documented
in the patient’s medical record, which coincides with the time that
observation care is initiated in accordance with a physician’s order.
 Notice the movement from the bed concept.
• End Time –
 Observation time ends when all medically necessary services
related to observation care are completed.
 Alternatively, the end time of observation services may
coincide with the time the patient is actually discharged from
the hospital or admitted as an inpatient.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 29
Observation Services
Clinical Aspects
 Service Locations
 Observation Is A Status – Thus, in theory, it
can be provided anywhere there is a bed.
 In The ED
 Adjacent To The ED – Special ED Observation Unit
 Through The ED – Up To A Nursing Unit On The Floor
 Distinct Part Observation Unit
 Specialized Observation Units – Large Hospitals
o Adult
o Pediatric
o Cardiac
 Telemetry Unit
 Critical Care (?)
 Other – For Example Obstetrics
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 30
Observation Services
Clinical Aspects
 Nursing Staff Considerations
 Direct Admissions – Process and Documentation
 Injections and Infusions
 Documentation
 Coding/Billing  Charge Entry vs. Professional Coding
 Encounter  May Involve 3 Dates of Service
Frequency and Level of Services
Bed-Side Procedures
 Condition Code 44
 Use of Advance Beneficiary Notices (ABNs)
 Patient Taken Elsewhere for Procedure
 Working With UR, QA and Social Workers
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 31
Observation Services
Clinical Aspects
 Nursing Staff Considerations
 Injections and Infusions
o Nurses routinely provide clinical documentation
 Drugs Provided
 Timing on Infusions and Injections
oHow should the coding and billing be accomplished?
• Nursing Staff –
•If so, then special training will have to be provided
• Coding Staff –
•Code and bill from the clinical record provided by
nursing staff
o There is no easy solution to this challenge!
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 32
Observation Services
Payment System Considerations
 Payment Systems And Associated Third-Party
Payers Vary Widely In The Area Of Observation Services
 Coding For Observation Services
 Physician Professional Billing
Physicians have several different CPT codes that
can be used to code and bill for observation services.
For regular observation services:
CPT=99218/99219/99220 – Admit To Observation
CPT=99217 – Discharge From Observation
For Same Day Admits/Discharges
CPT=99234/99235/99236 – Observation or Inpatient
Hospital Service – Admit/Discharge Same Date
Of Service
There are several coding delimitations. The main
delimitation is that the physician billing for the
observation care cannot charge other E/M visits.
For example, an ED physician providing observation
care can bill for either the ED level or the
observation level, but not both.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 33
Observation Services
Payment System Considerations
 Hospital Billing For Observation Services
Is Generally Straightforward As Long As The Services
Are Properly Documented
 RCC=762 – Observation Services Is Used
 The Units = The number of hours in observation.
 Charges are by the hour.
 Charges are typically set so that after 12-14 hours
for a given date of service, the typical room rate is
achieved and the charge is capped. Otherwise,
pro-rate daily charge over 24 hours.
 Billing Personnel Need To Be Constantly Aware Of
Special Third-Party Payer Requirements
 Even Medicaid Has Idiosyncrasies With Observation
Services
 Program Memorandums and Transmittals
APC Grouping Logic  See Update Transmittals
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 34
Observation Services
Payment System Considerations
Let’s Consider CMS’s Approach Starting in CY2008 Under APCs
 Coding and Billing Remain The Same as CY2007
 Use G0378 on an hourly basis,
 Use G0379 for direct admits.  Will CMS change this?
 For coding, billing and chargemaster purposes, there is really no
change.
 What CMS has changed is the APC grouping logic
 There are two new ‘composite’ APCs
 APC=8002 – Level I Extended Assessment and Management
Composite, and
 APC=8003 – Level II Extended Assessment and Management
Composite.
• APC=8002  $381.34 ($375.70 – CY2009; $351.04 – CY2008)
• APC=8003  $705.27 ($674.73 – CY2009; $638.66 – CY2008)
“The OCE will evaluate every claim received to determine if payment
through a composite APC is appropriate.” Page 274 CMS-1392-FC
Examination Copy.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 35
Observation Services
Payment System Considerations
CMS’s Approach Starting in CY2008
“APC 8002 will be assigned when 8 or more units of HCPCS code G0378
(Hospital observation service, per hour) are billed—
● On the same day as HCPCS code G0379 (Direct admission of patient
for hospital observation care); or
● On the same day or the day after—
++ CPT code 99205 (Office or other outpatient visit for the
evaluation and management of a new patient (Level 5)); or
++CPT code 99215 (Office or other outpatient visit for the
evaluation and management of an established patient (Level 5)).”
Page 275 CMS-1392-FC Examination Copy, November 1, 2007
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 36
Observation Services
Payment System Considerations
CMS’s Approach Starting In CY2008
“APC 8003 will be assigned when eight or more units of HCPCS code
G0378 (Hospital observation service, per hour) are billed on the same day
or the day after CPT code 99284 (Emergency department visit for the
evaluation and management of a patient (Level 4)), 99285 (Emergency
department visit for the evaluation and management of a patient (Level 5));
or 99291 (Critical care, evaluation and management of the critically ill or
critically injured patient; first 30-74 minutes).” Page 275 CMS-1392-FC
Examination Copy
 Note that for both 8002 and 8003 the required E/M services are bundled
for payment. This is why they are called ‘composite’ APCs.
Note: For CY2009, the Level 5 Type B Emergency Department Visit also
justifies observation services. See HCPCS G0384.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 37
Observation Services
Payment System Considerations
CMS’s Approach Starting in CY2008

Questions:

Can you think of a situation in which the hospital would use
99205 or 99215 would be used?

Is the 99205 or 99215 a technical component code or a
professional component code?

Do hospitals always perform a nursing assessment (i.e.,
G0379) when a patient is directly admitted?

Will this process provide an incentive to perform E/M services
in order to insure observation payment?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 38
Observation Services
Payment System Considerations
Status Indicator “T” Bundling Background
 From the November 10, 2005 Federal Register (70 FR 68693)
“…, we believe that in most cases, where observation care is billed on a claim
on the same date as a ‘‘T’’ status procedure, the observation services are most
likely related to post procedural observation for which we do not make separate
payment.”
 From CMS-1392-FC, page 276, Examination Copy November 1, 2007
“If a hospital provides a service with status indicator “T” on the same date of
service, or one day earlier than the date of service associated with HCPCS code
G0378, the composite APC 8003 would not apply. Instead, payment for the ED
visit or critical care and any other separately payable services will be made
through the usual associated APCs, and payment for HCPCS code G0378 for
observation services will remain packaged because we consider the
observation care to be supportive and ancillary to whichever service(s) it
accompanies. There is no diagnosis requirement for purposes of this composite
APC either. Instead, patients with any diagnosis may trigger payment of APC
8003.”
 The Status Indicator “T” Bundling Continues to be Some Confusing, But the APC
Does Bundle the Observation Payment – See also the Q2 and Q3 Status Indicators.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 39
Observation Services
Compliance Considerations
 There Are Many Compliance Issues Surrounding Observation Services
 Medicare “Believes” That Hospital Have Committed Fraud By Filing Claims
For Observation Services That Were Not Medically Necessary (False Claims)
 Medicare Thus Does Not Generally Pay Separately For Observation Services
The Following Lists Some Of The Compliance Concerns – Several of these
concerns have already been discussed to some extent.
 Documentation Requirements
 Signed, Dated Physician Order
 Diagnostic Conditions
 Documentation Of Care
 Medical Necessity Concerns
 Delayed Outpatient Surgery
 No Body To Care For Patient At Home
 ‘Normal’ Observation Services - Post Recovery Standing Orders
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 40
Observation Services
Compliance Considerations
 Observation Compliance Concerns – Continued
 Time Of Admission/Discharge
 Outside Clinic Admissions – Where is the
documentation?
 Physician Services During Observation – In other
words, the physician must see the patient.
 Nursing Discharges Based On Criteria
 Total Allowable Observation Time
 Observation versus Same Day Admits/Discharges
 Outpatient Surgery – When does extended
recovery become observation?
 Obstetric Observation – Is it really observation?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 41
Observation Services
Compliance Considerations
 Observation Compliance Concerns – Continued
 When can you change the status of a patient from ‘inpatient’ to
‘outpatient’ observation?
 This is what Condition Code 44 is supposed to handle.
Transmittal #299 for publication 100-04, Medicare Claims Processing
Manual, dated September 10, 2004. These instructions were effective
on October 12, 2004.
CMS is indicating that the following criteria must be achieved in
order to use Condition Code 44 and thus indicate that a service was
moved from an inpatient admission to an outpatient status, typically
observation:
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.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 42
Observation Services
Compliance Considerations
 Observation Compliance Concerns – Continued
Note: Transmittal 1803, August 28, 2009 updates and discusses the
requirements surrounding utilizing Condition Code 44 for Medicare. The
four criteria above remain essentially the same.
The NUBC definition for Condition Code 44:
For use on outpatient claims only, when the physician ordered inpatient
services, but upon internal utilization review performed before the
claim was originally submitted, the hospital determined that the services
did not meet its inpatient criteria.
 Exercise: Discuss the differences between the CMS requirements and
the NUBC definition for Condition Code 44.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 43
Observation Services
Exercises/Case Studies
1.
At the Apex Medical Center the standard procedure
when a pregnant lady presents after hours to the
ED is to send her immediately to Labor & Delivery.
The patient is assessed and then generally monitored
for a number of hours. If it turns out that the lady is
not in labor, she is discharged home. In some cases
this may take from four to eight hours. This is being
charged as “Observation” with RCC=762.
Comments?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 44
Observation Services
Exercises/Case Studies
2.
The ED physicians have raised a concern about
patients that are often in the ED for up to about
six hours. For a variety of reasons, these patients
are assessed, treated but kept in the ED to be
observed to make certain there are no adverse
reactions to treatment, drugs, etc. The ED physicians
want to charge this out as observation services.
Comments?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 45
Observation Services
Exercises/Case Studies
3.
Code the following scenarios for both the physician
and the hospital. Both Sarah and Sam are Medicare
patients.
a.
Dr. Brown admits Sarah to observation status at
10:00 p.m. on Monday. On Tuesday Sarah is
worse and Dr. Brown decides to admit her to
the hospital.
b.
Dr. Brown admits Sam to observation status for
a cardiac condition at 4:00 p.m. on Monday. On
Tuesday Dr. Brown assesses Sam and decides
to keep him in observation for another day. On
Wednesday morning Dr. Brown discharges Sam
from observation at 11:00 a.m.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 46
Observation Services
Exercises/Case Studies
4.
After an outpatient surgical procedure, a patient
goes to recovery. The normal recovery period
is exceeded and the physician is called to assess
the patient. The physician orders the patient placed
in observation. Orders are left with the nursing
staff to either contact the physician if the patient is
not doing better in a few hours. Otherwise they are
to discharge the patient if the patient recovers.
Comments?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 47
Observation Services
Exercises/Case Studies
5.
Sam is scheduled to have an outpatient surgical
procedure performed. He arrives at 8:00 a.m. but is
told that the surgeon has been delayed. He is to
return at 3:30 p.m. The surgery finally takes place
at 6:00 p.m. and lasts until almost 8:00 p.m. Sam is
taken to recovery. Since it is Friday evening, the
recovery room closes at 10:00 p.m. and Sam is taken
to the distinct part observation area where he
completes his recovery at about 1:00 a.m. the next day.
Since it is after midnight the nursing staff calls the
physician and obtains permission to keep him over
the night. He is discharged by nursing staff the next
morning.
Comments?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 48
Observation Services
Exercises/Case Studies
6.
Sarah is not feeling well today. She goes to the
Acme Medical Clinic to see Dr. Brown. Dr. Brown
does a fairly thorough assessment and decides that
Sarah should be placed in observation. She writes an
order for Sarah to be placed in observation. Sarah is
excited about going to the hospital, goes home and
packs a bag and then shows up at the Apex
Medical Center. She remain in observation for almost
two days and is then discharged.
Comments?
Discuss this both for pre-2008 and then post 2008.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 49
Observation Services
Exercises/Case Studies
7.
The ED physicians at the Apex Medical Center are
quite excited. A new suite has been added to the ED
with six beds to handle observation patients. The
ED physicians have recently been granted observation
admission privileges. In the past an attending
physician actually did the observation work on a
nursing unit floor. One of the motivations for the ED
physicians is that they will be able to generate more
revenue.
Comments?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 50
Observation Services
Exercises/Case Studies
8.
One of the coding staff at the Apex Medical
Center has been following a “listserv” on the Internet.
a. A question has been raised about the propriety of
the hospital billing a technical component for both the
ED visits and observation services. The logic is that
if the ED physicians are not allowed to charge both
an ED E/M and an Observation E/M then the hospital
should not be doing this either.
b. There is also indication that for Medicare
observation services longer than 48 hours that an
ABN must be issued.
Comments?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 51
Observation Services
Exercises/Case Studies
9.
An elderly patient is brought to the Apex Medical
Center’s ED at about 11:30 p.m. by a concerned
neighbor. The patient lives alone and was noted to
be wandering around their yard talking to themselves.
The ER physician does an assessment. Other than
the disorientation there appear to be no unusual
conditions. No social service agencies are available
at this time of the night, so the patient is placed in
observation until a social worker can see the patient.
Comment on the correct way to bill for these services.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 52
Observation Services
Exercises/Case Studies
10. Sam is not feeling well. He goes to the Acme Medical
Clinic and is seen by Dr. Brown. Dr. Brown does a
thorough assessment and decides that Sam should
be placed in observation status at the Apex Medical
Center. It is 1:20 p.m. Dr. Brown calls the hospital
only to find that no beds will be available for several
hours. Sam is instructed to go home with his daughter
and wait for the hospital to call so that Sam can be
put into observation. After three hours the hospital
calls and Sam goes into observation. He has the order
from Dr. Brown that is signed, dated and has a time
stamp. The nursing notes indicate that Sam went into
an observation bed at 4:40 p.m.
Comment on the correct way to bill for these services.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 53
Observation Services
Exercises/Case Studies
11. Stephen, another elderly resident of Anywhere, USA,
attended a party this evening and became somewhat
intoxicated. He has fallen and suffered a laceration to
the forehead. He is brought to the Apex Medical
Center’s ED at 11:00 p.m. He is assessed, the forehead
laceration is repaired, a CAT scan is performed along
with other diagnostic tests. At 2:00 a.m., with the
services completed, he is allowed to rest in a treatment
room until 8:00 a.m. when security takes him home.
Comment on the correct way to bill for these services.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 54
Observation Services
Exercises/Case Studies
12. You are a consultant performing some work at the
Apex Medical Center. You have been “invited” to a
meeting. There is some controversy concerning how
to bill for services. A patient presented to the ED at
10:00 p.m. and was provided services. At 2:00 a.m. the
next day, the attending physician orders that the
patient be admitted to observation. The patient stayed
in observation for 47 hours.
One group of participants thinks that the observation
services must be billed with a ‘from date’ of the date
that observation was ordered. Other think that the
‘from date’ for observation should be the date that
the patient presented to the ED.
Comment on the correct way to bill for these services.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 55
Observation Services
Exercises/Case Studies
13. Sydney, yet another elderly patient in Anywhere,
USA, has been in the hospital for the past ten days
recovering from a severe case of influenza.
The time has come for Sydney to move to a SNF
to complete the recovery process. Unfortunately,
there are no skilled beds anywhere in the area to
which Sydney can move.
As a result, Sydney is discharged from inpatient
status and moved to observation status. This goes on
for five days before a SNF bed becomes available.
Is this the proper way to handle this situation?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 56
Observation Services
Exercises/Case Studies
14. Observation Exceeding 48 Hours – Due to unusual circumstances the Apex
Medical Center has an observation case that went for 52 hours. Patient
financial services personnel want to know how this should be billed (i.e., 52
units of G0378) and also if there will be any problems in getting the claim to
go through.
 What do you think?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 57
Observation Services
Summary & Conclusion











Coding, Billing & Documenting Observation Services Represent A Very
Real Challenge
Physicians Drive The Entire Process  See Also Nursing Involvement
Distinguishing Between “Inpatient” Admissions And “Observation”
Admissions – Use Of The “24-Hour” Concept

See “Status” versus “Admission” versus “Referral”
Physician Coding & Billing Is Different From Hospital Coding & Billing In
This Area
“Medical Necessity” And The Associated Documentation Is Critical
Care Must Be Taken To Avoid “Social” or “Convenience” Circumstances
To Drive Observation Care
It Is Recommended To Use An Observation Log To Help Document
Observation Services And To Assist Reviewers And Auditors
CMS Continues To Change the Way in Which Observation Services Are
or Are Not Paid  See the new composite APCs starting in CY2008.
Formal Care Paths Can Assist With Observation Services
See Also Various RAC Audit Issues Surrounding Observation vs. IP
Status
Note That On-Going Guidance Continues to be Issued by CMS
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 58