bservation Billing Guidelines

1. bservation Billing Guidelines Module 1 Background Developed by Mary Askew, Healthcare Consultant

2. Learning Outcomes • Define and explain the need for observation services. • Interpret observation services by reading physician orders so that documentation for reimbursement is accurate and correct. • Discuss rules and regulations for Cost Reports for Medicare related to observation services.

3. What is observation • 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. Medicare Claims Processing Manual Chapter 4 – Section 290.1

4. What is observation • 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. Medicare Claims Processing Manual Chapter 4 – Section 290.1

5. What is observation • 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. Medicare Claims Processing Manual Chapter 4 – Section 290.1

6. Coverage of observation • 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 services. Observation services must also be reasonable and necessary to be covered by Medicare. Medicare Claims Processing Manual Chapter 4 – Section 290.1

7. Coverage of Observation • Generally, a person is considered a hospital inpatient if formally admitted as an inpatient with the expectation that he or she will remain at least overnight. When a hospital places a patient under observation, but has not formally admitted him or her as an inpatient, the patient initially is treated as an outpatient.

8. Distinct Part v. Commingled • Observation services may be performed in an acute care hospital bed that is commingled or mixed with other beds of the hospital. • The hospital may have a separate observation unit which segregates observation patients from inpatients.

9. How are the services charged? • Observation services are generally charged by the hour. • In some cases hospitals determine the hourly rate as follows: • Inpatient Daily Rate / 24 hours

10. What documentation is needed? • Documentation in the medical chart should include: • Admission time to observation status • Discharge time from observation status • Reason for observation • Charting of all medical interventions during observation status

11. What documentation is needed? • The physician order must be clear and concise: • “Admit to observation” or “Placed in outpatient observation” • Reason for admission to observation must also be documented

12. Observation v. Recovery • Observation is NOT standard recovery time from a surgical procedure.

13. Observation v. Recovery • In order for recovery time to be covered as observation, the patient must have experienced a complication that requires an observation period beyond the typical recovery time for the procedure. This will require supporting documentation in the medical record.

14. bservation Guidelines If you have any questions or concerns regarding this course, please contact Mary Askew at maskew@draffin-tucker.com.