PROFESSIONAL BILLING COMPLIANCE TRAINING PROGRAM

MODULE 5OUTPATIENT OBSERVATION

SERVICES

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Definition of Observation Care

• Medicare defines observation care* as: “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.”

• Commonly assigned to patients who present to emergency departments and who then require a significant period of treatment or monitoring in order to decide whether to admit to inpatient or discharge.

• Physicians can also directly admit patient to outpatient observation status.

• Observation is an admission status, not a place (can be in ER, floor, ETC). Level of care dictates admission, not physical location of the bed.

*Outpatient Observation care is not a covered benefit under Medi-Cal.

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Purpose of Outpatient Observation Care

Outpatient Observation is for:• Evaluating a patient for possible inpatient admission (provider not sure

if inpatient necessary and requires time to assess, provide short-term treatment and reassess)

• Treating patients expected to be stabilized and released in 24 hours.• Extended recovery following a complication of an outpatient

procedure, for example:– Poor pain control– Intractable vomiting– Delayed recovery from anesthesia– Abnormal post operative bleeding– Electrolyte imbalance – Arrhythmias

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Outpatient Observation Length of Stay

• A decision to discharge the patient from the hospital or admit the patient to inpatient should be made within 24 hours.

• In unusual circumstances and with appropriate documentation evidencing the need for continued observation, Medicare may reimburse for outpatient observation beyond 24 hours.

NOTE: California law requires all outpatient services to be provided in less than 24 hours.*

• While Medicare may reimburse for atypical stays when there is clear evidence of medical necessity, some private insurances and managed care organization often terminate observation at 24 hours. Medi-Cal does not provide this benefit.* See California Code of Regulations, Title 22, Section 70525.

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Outpatient Observation Length of Stay(continuation)

• Outpatient status begins when there is a physician’s order for outpatient observation which coincides with time patient is placed in bed for observation and ends when all medically necessary services related to observation care are complete (such as when patient is discharged or admitted as an inpatient).

• Observation time does not include time patient remains in observation area after treatment is finished (such as waiting for transportation), but may include follow up care provided after the discharge order, but before discharge.

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Examples of Conditions that May Qualify for Outpatient Observation

• Chest pain, r/o MI• Mild CHF• Hypertension• Weakness, dizziness, syncope• Vomiting• Altered mental status

• TIA• Anemia• Mild Asthma/COPD• Back pain• Dehydration

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Services Not Covered As Outpatient Observation Services

• Routine stays for normal post-op recovery time.• Convenience of the patient, the patient’s family, or physician

(e.g. waiting nursing home placement)• Routine preparation services furnished prior to diagnostic testing and

recovery (e.g. sedation prior to MRI for claustrophobic patients)• When observation and active monitoring is part of the procedure

(e.g. post cardiac catherization, colonoscopy, chemotherapy).• A routine “stop” between the Emergency Department and an inpatient

admission.

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Significance of Outpatient Observation

• If outpatient observation status is utilized correctly it can help avoid medically unnecessary inpatient admissions. Allows time to determine if inpatient level of care necessary.

• It is the responsibility of the attending/admitting physician to understand and appropriately use outpatient observation admit status. The difference in costs and reimbursement can be significant.

• Outpatient observation may be progressed to inpatient status by physician order when it is determined that patient’s condition requires an inpatient level of care.

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Significance of Outpatient Observation(continuation)

• While an inpatient admission may also be converted to outpatientobservation status, the process is more difficult.

• In order for a hospital to be reimbursed optimally under Medicare, there must be a determination documented by the physician that the admission does not meet an inpatient level of care before the patient is discharge. Otherwise only Medicare Inpatient Part B will reimburse for Part B hospital services (e.g., Lab, no room charge).

• ONLY the physician who admitted to observation status and was responsible for the patient during his/her stay in observation may bill outpatient observation care codes.

• Other physicians providing consult services will bill outpatient evaluation and management (E/M) codes while the patient is admitted to observation.

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Outpatient Observation Documentation Requirements

Physician documentation in medical record must include:• A clearly written order admitting the patient to outpatient observation,

which must be signed, dated and timed. (as time is critical in establishing period of observation, documentation of time is essential)

• Medical necessity for observation care (provider assessed risk and determined that patient would benefit from observation care)

• The billing physician was present and personally performed the services

• Admission, progress and discharge notes written by the billing physician, which specify the number of hours the patient remained in observation care status.

The record must be in addition to any record prepared as a result of an ERor outpatient clinic encounter, and nursing notes evidencing services must be included.

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Outpatient Observation Orders

Appropriate Order: • Admit to Outpatient Observation status.• Place patient in Outpatient Observation

Inappropriate Order: [where order would be interpreted as an inpatient order]

• Admit for Observation• Admit to observe patient• Admit to telemetry for observation

REMEMBER: To be valid, physician order must be signed with date/time.

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Outpatient Observation Documentation Requirements (continuation)

The Physician:• Must satisfy the Observation E/M documentation Guidelines (History,

Examination and Medical Decision Making) for admission to and discharge from Observation Care.

• Observation Service Codes:99218 – 99220 (Initial Observation Care)*99234 – 99236 (Admission and Discharge, same day)*99217 – Discharge day management

* See next two slides for documentation requirements.

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Outpatient Observation Documentation Requirements (continuation)

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Outpatient Observation Documentation Requirements (continuation)

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Observation Care Service Code Guidelines• For a patient admitted for observation care for less than 8 hours on the

same calendar date, the physician shall report:

Do not report Observation Care Discharge Service code 99217 for this.

• For a patient admitted for observation care for a minimum of 8 hours, but less than 24 hours and discharged on the same calendar date, the physician shall report:

Do not report Observation Care Discharge Service code 99217 for this scenario.

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Observation Care Service Code Guidelines (continued)

• For a patient admitted for outpatient observation care and then discharged on a different calendar date, the physician shall report:

• In rare and exceptional circumstances, when a patient is held in observation status for more than 2 calendar dates, the physician shall bill a visit using the Office or Other Outpatient Service visit codes.

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Observation Care Service Code Guidelines (continued)

• If the same physician who admitted a patient to outpatient observation care also admits the patient to inpatient status on the same calendar date, bill only:

The physician may not bill an initial observation care code for services on the date that he/she admits the patient to inpatient care.

• If the patient is admitted to inpatient status from observation subsequent to the date of admission to observation, the physician must bill:

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Reimbursement of Outpatient Observation Services

• Observation services are covered ONLY when a physician orders patient be placed under observation, the patient’s status is that of an outpatient.

• Observation services must be reasonable and necessary.

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• No specific physician order and time in the medical record for outpatient observation.

• No documentation to support medical necessity and/or that patient was treated/assessed by the physician.

• Physician orders for observation status prior to or just after outpatient surgery when no complication is documented.

• Level of E/M code billed did not meet documentation requirements.

• Physician billing of observation inconsistent with hospital’s billing.

Potential Risk Issues

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Case Study 1:

85 year old female with nausea, diaphoresis, weakness, s/p recent pacemaker for 3° block

• Hx of recent syncope, HTN, large hiatal hernia, peptic ulcer, chronic anemia, thrombocytopenia

• Normal VS and CBC, abnormal K • Tx: IV with KCl, telemetry

Would you put the patient under:a. Hospital Admission Statusb. Outpatient Observation Status

Observation Service Assessment –Question 1

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The answer is b (Outpatient Observation Status).

If the patient’s condition can be evaluated and treated within 24 hours or if rapid improvement anticipated within 24 hours, then observation admission is appropriate. Here vital signs are normal. The patient will receive IV with KCL and should stabilize.

Observation Services Assessment -Answer

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Observation Services Assessment –Question 2

Case Study 2:

50 year old female with extreme fatigue, “back pain” after working in the garden and occasional palpitations.• PMH:HTN• VS: T 37, HR 94, Resp 26, BP 153/85• Lab: CBC, electrolytes, EKG WNL; “initial” cardiac enzymes (-)• MD Note: “warrants further workup as well as observation

overnight”

Would you put the patient under:a. Hospital Admission Statusb. Outpatient Observation Status

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Observation Services Assessment - Answer

The answer is b (Outpatient Observation Status).

If the patient’s condition can be evaluated and treated within 24 hours or if rapid improvement anticipated within 24 hours, then observation admission is appropriate. Here EKG was within normal limits and initial cardiac enzymes are negative. Additionally physician notes observation appropriate. Remember an outpatient observation may be progressed to inpatient status by a physician’s order if the patient does not improve within 24 hours.

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Observation Services Assessment –Question 3

Case Study 3:

A patient is scheduled is scheduled for outpatient cardiac catheterization. The procedure is completed without incident and the patient was sent to recovery in stable condition. The physician writes post-op orders and includes an order for observation status.

Would you put the patient under:a. Admit statusb. Outpatient Observation Statusc. None of the above

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Observation Services Assessment - Answer

The answer is c (none of the above).

Routine recovery from a procedure not considered observation. Since there was no mention of a complication in the scenario and patient was stable, outpatient observation status would not be appropriate. Observation and active monitoring is routine for normal post-op recovery time

Note: Observing/Monitoring patient does not equal outpatient observation status.

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References

• Medicare Claims Processing Manual, Chapter 12Physicians/Non-physician Practitioners, Section 30.6.8Correct Coding Policy, 07/18/08 and Chapter 4, Section 290.1 Observation Serviceshttp://www.cms.hhs.gov/home/medicare.asp

• Current Procedural Terminology (CPT) 2009 Professional Edition