Codapedia is now a division of Find-A-Code

Hospital Observation Services

August 28th, 2013 - Dorothy Steed
Categories:   Audits/Auditing   Billing   Claims   Coding   Collections  
0 Votes - Sign in to vote or comment.

Hospital observation services are considered outpatient services.  They are typically used when a period of time is needed to evaluate the progress or regression.  This may include effectiveness of medication/ infusions, results of diagnostic results or other reasons deemed as medically necessary. This period of time will be used to determine whether the patient needs inpatient admission, transfer to another facility, or may be discharged.  It is not appropriate for observation to be used as a routine post operative extended recovery time.  Observation is not determined by any specific unit or bed, but is based upon the physician order.

Several rules apply to observation services.  This is where you will need to be very familiar with your payer's requirements for time and reimbursement.

Medicare will allow 48 hours in observation, or until all ordered interventions have been completed.  Example:  IV has been ordered at hour 45, infusion not complete until hour 49.  Many managed care payers will only cover observation up to 23 hours.  Observation time must be documented in the medical record.  Time begins with the patient's admission to an observation bed.  It is generally expected that observation time will be at least 8 hours.  The patient is typically admitted to observation  through the hospital's emergency department, or by direct admit from a physician office. 

Some common problems with reporting observation services are:  Case management should follow these patients closely and be in contact with the physician as the time deadline approaches.  If the observation status needs to be converted to inpatient, the physician should issue a new order that reflects the status change.  If the patient remains for, say 4-5 days, with no order change, the hospital will likely lose the revenue for time over 48 hours for Medicare patients.  Managed care contracts should state specifically how claims will be reimbursed when both emergency department charges (revenue code 450), and observation charges (revenue code 762) appear on the claim.  Unless this is clearly defined in the contract, the payer will often default to emergency services payment rather than the observation payment rate. 

Keep in mind that Medicare patients who do not have Part B coverage will not have the observation service covered.  This is not an inpatient stay unless the physician specifically changes the order to inpatient status. 

 

###

Questions, comments?

If you have questions or comments about this article please contact us.  Comments that provide additional related information may be added here by our Editors.


Latest articles:  (any category)

Should ROM Testing be Reported with Evaluation and Management Services?
January 9th, 2018 - Aimee Wilcox, CPMA, CCS-P, CST, MA, MT
Reporting the performance of range of motion testing (95851-95852) at the same encounter of an Evaluation and Management (EM) service, produces an NCCI edit resulting in payment for the EM service and denial of the ROM testing. Read the article to learn what other codes ROM testing is considered incidental to.
OIG Advisory Opinion Recinded - Lessons Learned
December 21st, 2017 - Wyn Staheli
In the compliance world, it is important to know when the OIG makes an advisory opinion on a subject. For example, the advisory on Time of Service or Prompt Pay Discounts helps to ensure that providers are creating policies and procedures which will meet the standards of the OIG in the case ...
Specialty Exceptions — 2018 PE RVU Changes
December 13th, 2017 - Raquel
Some specialties are not included in the new PPIS PE/HR RVU changes
Escharotomy Procedural Cross-Walking CPT to ICD-10-PCS
November 10th, 2017 - Brandon Dee Leavitt CPC, QCC
An Escharotomy is used for "local treatment of burned surface" per the AMA Guidelines, when incisions are performed on the burn site. Notice, when cross-walking 16035 or 16036 to inpatient codes, Find-A-Code crosswalks lead to Body System H, Operation 8 - Division of the skin, and Operation N -...
Four Final Rules Affecting CMS Payments for 2018
November 7th, 2017 - Wyn Staheli
It’s a season for changes. CMS just finalized four rules which directly impact the following payment systems: Physician Fee Schedule Final Policy, Payment, and Quality Provisions for CY 2018 Hospital OPPS and ASC Payment System and Quality Reporting Programs Changes for 2018 HHAs: Payment Changes for 2018 Quality Payment Program Rule for Year 2 This ...
CMS Proposes to Revise Evaluation & Management Guidelines
October 26th, 2017 - BC Advantage
According to the recently released 2018 Physician Fee Schedule Proposed Rule, published in the Federal Register, dated July 21, 2017, the Centers for Medicare & Medicaid Services (CMS) acknowledges that the current Evaluation and Management (E/M) documentation guidelines create an administrative burden and increased audit risk for providers. In response, ...
Summary of OIG Reports for Chiropractic
October 23rd, 2017 - Evan M. Gwilliam DC MBA BS CPC CCPC QCC CPC-I MCS-P CPMA CMHP
The Office of the Inspector General was created to protect the integrity of the U.S. Department of Health and Human Services. They investigate fraud, waste, and abuse in HHS programs and make recommendations to various enforcement agencies. Every few years they investigate chiropractic services. Here is a summary of the reports the ...



About Codapedia & Find-A-Code Contact Us Terms of Use Privacy Policy Advertise with Us

Codapedia™/Find-A-Code™ - 62 E 300 North, Spanish Fork, UT 84660 - Phone 801-770-4203 (9-5 Mountain) - Fax (801) 770-4428

Copyright © 2009-2018 Find A Code, LLC - CPT® copyright American Medical Association