Medicare sees increase in observation payments
[This quarterly column on coding in the ED is written by Caral Edelberg, CPC, CCS-P, CHC, president of Edelberg Compliance Associates, Baton Rouge, LA. If there are coding issues you would like to see addressed in this column, contact Edelberg at phone: (225) 454-0154. EFAX: (225) 612-6904. E-mail: [email protected].]
Steady growth in Medicare dollars paid for outpatient observation services indicates that the introduction of "composite payments" in 2008 received the attention of hospitals. Medicare saw an increase of $73 million in payments for observation from 2007 to 2008.
The increase has been attributed to the introduction of the composite payment methodology for visits and observation services. Termed "extended assessment and management composite," this methodology bases payment for observation on the level of ED, clinic, or critical care billed in addition to the observation status. It no longer requires listing of specific diagnoses for separate payment of observation.
For 2010, the Centers for Medicare & Medicaid Services (CMS) plans to continue recognizing the composite ambulatory payment classification (APC) process for outpatient observation billing. CMS officials believe that observation services generally are supportive and ancillary to other services provided during the patient encounter. How does Medicare recognize that you provide observation services?
First, Extended Assessment and Management is billed as either a "direct admit from a physician office or clinic" (Extended Assessment Level I) or "direct admit from the ED, clinic, critical care service or high-level Type B ED" (Extended Assessment Level II). To qualify for the Level II Extended Assessment composite payment, ED visit level 99284, 99285, critical care 99291, or Type B Level 5 Emergency Department Visit must be billed at the same visit with eight or more units (hours) of extended assessment and management (observation). This rule is a dramatic departure from the one governing how physicians identify observation services, which requires coding of the observation service or the ED evaluation and management service, but not both.
Medicare plans to revise the descriptors for observation from "admission to observation" to "direct referral for hospital observation care." Observation services are defined as "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." (Medicare Benefit Policy Manual Pub. 100-02, Chapter 6, Section 10.6A.) Services include bed care and periodic monitoring by nursing or other staff to evaluate the patient's condition and/or determine the need for a possible admission to the hospital as an inpatient. Patients are considered "outpatient" until formally admitted as an inpatient. The term "admission" has been controversial as it generally describes admission to the hospital rather than admission to observation status. For Medicare purposes, "observation" is not an official patient status. According to Medicare, patient status only relates to inpatient, outpatient, or nonpatient. Thus, inappropriate billing of observation with inpatient stays has received recent attention and indicates that observation associated with inpatient admission might require additional attention.
TrailBlazer, the Medicare administrative contractor (MAC) for Jurisdiction 4, denied 98.8% of claims in a targeted review that included denials for inpatient care that was considered to be observation and not inpatient care. Confusing documentation contributes to these types of coding errors. Physician documentation of "admit" is considered as an admission to inpatient status, not outpatient observation, and observation resources can be erroneously identified as inpatient services. Providers should indicate that the patient was either an "inpatient admission" or "placed in outpatient observation" to avoid billing errors. Those patients progressing from outpatient observation to inpatient care must meet medical necessity guidelines, particularly if complications from outpatient surgery necessitate inpatient admission. Providers are cautioned to ensure that documentation "addresses problems identified in the history and physical, treatment initiated, patient's response to treatment, major changes in the patient's condition and action taken, status of unresolved problems, discharge planning, and follow-up."
The basic purpose of observation is to determine the need for admission. Observation must be ordered prospectively by the physician. Outpatient prospective payment system (OPPS) observation services are billed on a per-hour basis. Observation time starts with the clock time documented in the patient's record and is noted as the time that observation services begin, consistent with the physician's order. It cannot be assigned retrospectively for those patients who remain in the ED for an extended period of time. Observation includes the initiation of observation status, supervision of the care plan for observation, and performance of periodic reassessments.
To ensure your observation is paid appropriately, documentation of ED observation should include:
- history, physical examination, and medical decision making;
- order to place patient in observation;
- timed progress notes throughout the observation period;
- summary of clinical course while patient is in observation;
- final examination with diagnosis;
- discharge or admission plan;
- and because OPPS observation requires an ED service level of 99284, 99285, or critical care, be sure your facility documentation and nursing criteria correctly recognize these levels. If not, you'll be losing considerable revenue for these valuable "add-on" observation services.
You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
- Award-winning Medical Content
- Latest Advances & Development in Medicine
- Unbiased Content