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Facility Reporting of Observation Services
00.01.19e

Policy

Observation services, which must be ordered by a professional provider, are eligible for reimbursement separate from the emergency room (ER) visit when treatment and/or evaluation requires eight or more hours. However, the reimbursement for the ER visit is inclusive of the first seven hours of observation care.

Observation services are indicated when, in the professional provider’s opinion, the individual's clinical condition is either unchanged or has not sufficiently improved to permit discharge, and additional monitoring and/or treatment is required until a disposition decision is rendered. A disposition decision is expected to be made within 24 hours.

The full observation length of stay may be eligible for reimbursement consideration when the individual is directly entered to observation without an ER visit.

The Company does not provide separate reimbursement for observation services for any of the following. (This list is not all-inclusive.)
  • Standing orders following outpatient surgery
  • Extended observation following a procedure
  • Services provided concurrently with chemotherapy
  • Routine preparation prior to, and recovery after, diagnostic testing
  • Routine recovery and post-operative care after same-day surgery
  • Awaiting transfer to another facility
  • Outpatient blood administration (e.g., blood transfusion)
Observation services begin at the time the professional provider writes the order for outpatient observation. If the observation stay results in an inpatient admission, the inpatient admission begins at the time of the admission for observation services. The inpatient claim should include all charges incurred during the stay. In this situation, observation services will not be considered for reimbursement.

REQUIRED DOCUMENTATION

The individual's medical record must reflect the medical necessity for the care provided. These medical records may include, but are not limited to, the following: records from the professional provider's office, hospital, nursing home, home health agencies, therapies, and test reports.

The Company may conduct reviews and audits of services to our members, regardless of the participation status of the provider. All documentation is to be available to the Company upon request. Failure to produce the requested information may result in a denial for the service.

Guidelines

The Company does not require authorization for observation services. It is expected that facilities adhere to the policy criteria when billing for observation services.​ ​

B​ENEFIT APPLICATION

Subject to the terms and conditions of the applicable benefit contract, observation services are covered under the medical benefits of the Company's products.

Description

Observation services involve the use of a bed and periodic monitoring by the facility's nursing or other ancillary staff in order to evaluate and treat an individual's condition or determine the need for possible inpatient admission. Observation services are considered an outpatient service and generally do not exceed 24 hours. These services can be provided in any location within a facility, whether in a specific observation unit, in an emergency department, or on a hospital floor. Observation services should be patient-specific and are not part of the facility's standard operating procedure or protocol for a given diagnosis or service. Observation determinations made by protocol without consideration of the applicability to the specific patient are not clinically appropriate.

There are certain diagnoses and procedures that generally do not support an inpatient admission but may be appropriate for outpatient observation. However, the medical necessity determination for either admission or observation is always made on a case-by-case basis, depending on the severity of illness and intensity of service requirements.

References

American College of Emergency Physicians (ACEP). Observation Services Toolkit. [ACEP Web site]. Available at:
https://www.acep.org/by-medical-focus/observation-medicine/observation-services-toolkit/#sm.00019fq7fpdk6dr3rcr1ghj2zj25j Accessed October 4, 2022.

American College of Emergency Physicians (ACEP). Observation - physician coding FAQ. [ACEP Web site]. 04/25/2017. Available at:
https://www.acep.org/administration/reimbursement/observation---physician-coding-faq/#sm.000015rcfo8yldeiww715h08towzm Accessed October 4, 2022.

Centers for Medicare & Medicaid Services (CMS). Medicare Claims Processing Manual Chapter 4: Part B Hospital (Including Inpatient Hospital B and OPPS). [CMS Web site]. 12/22/2017. Available at:
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c04.pdf. Accessed October 4, 2022.

Centers for Medicare & Medicaid Services (CMS). Medicare Benefit Policy Manual Chapter 6: Hospital Services Covered Under Part B. [CMS Web site]. 12/18/2015. Available at:
https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/bp102c06.pdf. Accessed October 4, 2022.

Centers for Medicare & Medicaid Services (CMS). Medicare Claims Processing Manual Chapter 12: Physicians/Nonphysicians practitioners. [CMS Web site]. 05/31/2018. Available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c12.pdf. Accessed October 4, 2022.

Company Hospital Manuals.

Company Provider Manuals.

Novitas Solutions, Inc. Local Coverage Determination (LCD). A52985. Acute care: Inpatient, observation and treatment room services. [Novitas Solutions Web site]. Original: 10/01/2015. (Revised: 01/01/2018). Available at:
https://www.cms.gov/medicare-coverage-database/details/article-details.aspx?articleId=52985&ver=31&Date=10/19/2018&SearchType=Advanced&ContrId=&DocID=A52985&bc=JAAAABgAAAAA& Accessed October 4, 2022.​​

Coding

CPT Procedure Code Number(s)
N/A
ICD - 10 Procedure Code Number(s)
N/A
ICD - 10 Diagnosis Code Number(s)
N/A
HCPCS Level II Code Number(s)
N/A
Revenue Code Number(s)
0762 Specialty Services - Observation Hours



Coding and Billing Requirements

Policy History

REVISIONS FROM 00.01.19e:
11/02/2022The policy has been reviewed and reissued to communicate the Company’s continuing position on Facility Reporting of Observation Services.
01/04/2021This version of the policy will become effective 01/04/2021. The intent of this policy remains unchanged, but the policy has been updated to clarify current benefts and facility reporting guidelines.

REVISIONS FROM 00.01.19d:
01/01/2019This version of the policy will become effective 01/01/2019.

This policy has been updated to increase the number of observation hours that are eligible for reimbursement separate from an emergency room visit from six or more to eight or more.

REVISIONS FROM 00.01.19c:
08/29/2018This policy was reviewed and reissued in accordance with the Company's Policy Confirmation Review track. The references were updated accordingly. The policy was updated to be consistent with current template wording and format.

Policy language was clarified to confirm that observation stays of five hours or less are included in the reimbursement rate for the ER visit, not six hours or less.

Effective 10/05/2017 this policy has been updated to the new policy template format.


1/4/2021
1/4/2021
00.01.19
Claim Payment Policy Bulletin
Commercial
No