Ask the Expert

This month’s selection:
When does a beneficiary’s time in observation begin: at the time of the beneficiary’s admission to an observation bed or at the time of physician’s order for observation?

Sherlyn Longhofer
Shattuck, Okla.

This is a big issue. Translation: Can we start billing for observation services when we stick the patient in the bed or do we have to wait until the doctor actually gets around to writing an order for observation services? (Guess which one is the answer.)

A related compliance issue: Are you billing for the total hours in observation? Are you subtracting hours when a patient is not truly being medically observed? Examples include while the patient is gone from the bed for radiology or other services and just keeping the patient overnight after a minor procedure so the doctor can release the patient during morning rounds.

From the “Conditions of Participation” (www.cms.gov/manuals/Downloads/bp102c06.pdf): “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 tests. 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. In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours.

“Hospitals may bill for patients who are directly referred to the hospital for outpatient observation services. A direct referral occurs when a physician in the community refers a patient to the hospital for outpatient observation, bypassing the clinic or emergency department (ED) visit. Effective for services furnished on or after January 1, 2003, hospitals may bill for patients directly referred for observation services.”

See Pub. 100-04, Medicare Claims Processing Manual, chapter 4, section 290, at www.cms.hhs.gov/manuals/downloads/clm104c04.pdf for billing and payment instructions for outpatient observation services.

From the Claims Processing Manual (www.cms.gov/manuals/downloads/clm104c04.pdf): All of the following requirements must be met in order for a hospital to receive an APC payment for an extended assessment and management composite APC:

1. Observation Time

a. Observation time must be documented in the medical record.

b. Hospital billing for observation services begins at the clock time documented in the patient’s medical record, which coincides with the time that observation services are initiated in accordance with a physician’s order for observation services.

There’s more information available, but these sources answer the question.

— Judy Sturgeon, CCS, is the clinical coding/reimbursement compliance manager at Harris County Hospital District in Houston and a contributing editor at For The Record. While her initial education was in medical technology, she has been in hospital coding and compliance for 21 years.