Download Observation Services - Texas Hospital Association

Advanced Observation Services:
Issues & Answers
Presented By:
Duane C. Abbey, Ph.D., CFP
Abbey & Abbey, Consultants, Inc.
[email protected]
http://www.aaciweb.com
http://www.APCNow.com http://www.HIPAAMaster.com
Version 9.6 - 2010
Notes © 1999-2010, Abbey & Abbey, Consultants, Inc.
CPT Codes – © 2009-2010 AMA
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 1
Presentation Faculty
Duane C. Abbey, Ph.D., CFP – Dr. Abbey is a healthcare consultant and educator with over 20
years of experience. He has worked with hospitals, clinics, physicians in various specialties,
home health agencies and other health care providers.
His primary work is with optimizing reimbursement under various Prospective Payment
Systems. He also works extensively with various compliance issues and performs
chargemaster reviews along with coding and billing audits.
Dr. Abbey is the President of Abbey & Abbey, Consultants, Inc. A wide range of consulting
services is provided across the country including charge master reviews, APC compliance
reviews, in-service training, physician training, and coding and billing reviews.
Dr. Abbey is the author of eleven books on health care, including:
•“Non-Physician Providers: Guide to Coding, Billing, and Reimbursement”
•“Emergency Department: Coding, Billing and Reimbursement”, and
•“Chargemasters: Strategies to Ensure Accurate Reimbursement and Compliance”.
His most recent books are:
“Compliance for Coding, Billing & Reimbursement A Systematic Approach to
Developing a Comprehensive Program”, “Introduction to Healthcare Payment
Systems”, and “The Medicare Recovery Audit Contractor Program” are available from
the CRC Press a Division of Taylor and Francis.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 2
Disclaimer
This workshop and other material provided are designed to provide accurate and
authoritative information. The authors, presenters and sponsors have made every
reasonable effort to ensure the accuracy of the information provided in this
workshop material. However, all appropriate sources should be verified for the
correct ICD-9-CM Codes, ICD-10 Diagnosis and Procedure Codes, CPT/HCPCS
Codes and Revenue Center Codes. The user is ultimately responsible for correct
coding and billing.
The author and presenters are not liable and make no guarantee or warranty;
either expressed or implied, that the information compiled or presented is errorfree. All users need to verify information with the Fiscal Intermediary, Carriers,
other third party payers, and the various directives and memorandums issued by
CMS, DOJ, OIG and associated state and federal governmental agencies. The
user assumes all risk and liability with the use and/or misuse of this information.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 3
Observation Services – Special Topics
Introduction
 A Workshop Concerning Complex Issues for Observation Services
 Presume That Participants Have a Background Relative to Observation
Services
• Brief Introductory Material Is Provided In This Presentation So That
The Fundamentals of Observation Are Reviewed
 Focus and Depth of Discussion on Difficult Topics
• This presentation concentrates on a number of special topics that
relate to observation services.
 Observation services seems to represent an ongoing issue in which
guidance continues to morph over time.
• Whenever CMS provides guidance, additional questions are raised.
• Also, this is a serious compliance area for government auditors as
well as the RACs (Recovery Audit Contractors)
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 4
Observation Services – Special Topics
Objectives
 Observation Services - Objectives
• To briefly review the observation concept and payment for
observation services.
•To discuss the Utilization Review Committee involvement in
observation services including the UR Physician.
•To understand the critical role of physicians and nursing staff in
documenting and supporting observation services.
•To review various Medicare rules and regulations concerning
observation services including counting hours, Condition Code 44, and
documentation requirements.
•To address the anticipated RAC involvement in observation services.
•To review the O’Connor Hospital Ruling from the Medicare Appeals
Council.
•To understand how to handle short-stay inpatient admissions that
should have been observation.
•To understand how to audit observation services.
•To appreciate special training needs for medical staff.
•To review special situation including non-physician practitioners, DRG
Pre-Admission Window, and ancillary services provided during
observation.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 5
Observation Services – Special Topics
Changes for 2010 - Synopsis
 November 20, 2009 Federal Register
 ‘Observation Status’ versus ‘Observation Services’
 Composite Payment/Grouping Changes
 CMS Side-Steps Addressing Other Issues/Questions
 APC Update Transmittals
 Transmittal 1872 – December 11, 2009  I/OCE Update
 Transmittal 1882 – December 21, 2009  APC Update
• Transmittal 1882 Replaced Transmittal 1871
 CMS FAQs – January 2010
 # 9973 – Condition Code 44 – Counting Time Back To Beginning of
Episode of Care
 # 9974 – Infusions and injection during observation – Counting Time
 Terminology – ‘Admit to Observation’ versus ‘Referral to Observation’
 See Transmittal 107, May 22, 2009, MBPM – See also ‘status’.
 August 3, 2010 Federal Register – ‘Nonsurgical Extended Services’ which
includes observation. Initial supervision followed by general supervision.
 Other Questions – See physician supervision concerns for inpatients that
are subsequently converted to outpatients through Condition Code 44.
New physician supervision rule interpretation – inpatient vs. outpatient.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 6
Observation Services – Special Topics
Review - Fundamental Questions
 What is Observation?
 Medicare vs. Private Third-Party Payers
 How do we count the hours of observation?
 Start Time, Stop Time and Intervening Services (Interrupted Services)
 What is Condition Code 44?
 How should we use Condition Code 44?
 How do we count time (hours) using Condition Code 44?
 Differences between Medicare and Private Third-Party Payers?
 How should we bill for Observation?
 8 Hours – Minimum  48 Hours – Maximum
 Direct Admits
 How do we know that we are in compliance?
 Where do the RACs fit into the Observation picture?
 Where do physicians fit into the Observation picture?
 Why is this such a difficult topic?
 Why do the RACs concentrate on short-stay inpatient admissions?
 Why are the RACs interested in the DRG Pre-Admission Window?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 7
Observation Services – Special Topics
Review - Fundamental Questions
 Is observation a ‘bed’ or a ‘status’ or what?
 What is observation not?
 When does observation start and when does it stop?
 So the number of hours is measured from start time to stop time?
 Don’t physicians control this whole issue?
 How do nurses fit into the observation picture?
 What needs to be documented in order to justify payment for observation?
 Where, in the hospital, can observation services be provided?
 How does the Medicare Program pay for observation services?
 What is all this concern about Status Indicator “T” services provided in
connection with observation services?
 Conceptually, observation is a simple concept. Why do we have all of
these coding, billing, documentation, and compliance issues with
observation?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 8
Observation Services – Special Topics
Basics-ED Observation Flow
Patient Presents
Triage/Preliminary MSE
ED Physician/Attending
Physician Assess and
Workup - Full MSE
Decision To Hold
Longer Than
24 Hours
Less Than
24 Hours
Special Care
Path
Follow Care Path
Protocol
Chest Pain
CHF
Other
Admit As
Inpatient
Admit To
Observation
Monitor In
Observation
Assess For
Inpatient Admit
or
Discharge Home
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 9
Observation Services – Special Topics
Basics-Post OP Surgery Flow
Outpatient Surgical Procedure
Regular Recovery
Anesthesia Use
Special Recovery
Conscious Sedation
4-6 Hours
Recovery Time
1-3 Hours
Recovery Time
Discharge
Home
Yes
Patient Ready
For Discharge
Yes
Discharge
Home
No
Continue
Regular
Recovery
No
Unexpected
Occurrence
No
Continue
Special
Recovery
Yes
Admit To
Observation
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 10
Observation Services – Special Topics
Observation Log
• Documentation Considerations – Continued
•It is highly recommended that an “Observation Log” be maintained for
each observation case regardless of the location of service. At a
minimum The Observation Log should contain:
Patient’s Name
Physician’s Name(s)
Date and Time of Admission
Date and Time of Discharge
Condition(s) Requiring Observation Status
Information Pointing To Location Of Documentation
Number Of Hours In Observation Status
Number Of Units Billed
Charges Made For The Observation Services
 Time/Activities Interrupting Observation Services During Stay
Utilization Review Notes
Note that some of this information is clinical, while other parts relate to
billing. This Observation Log is intended to aid auditing personnel in
making assessment about the propriety of the observation services.
The process for developing an Observation Log should be carefully
documented in a Coding/Billing Policy and Procedure.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 11
Observation Services – Special Topics
Payment System Considerations
 Coding For Observation Services
 Physician Professional Billing
 Physicians have several different CPT codes that
can be used to code and bill for observation services.
 For regular observation services:
CPT=99218/99219/99220 – Admit To Observation
CPT=99217 – Discharge From Observation
 For Same Day Admits/Discharges
CPT=99234/99235/99236 – Observation or Inpatient
Hospital Service – Admit/Discharge Same Date
Of Service
 Hospital Facility Billing
 RCC=762 – Observation Services Is Used
 The Units = The number of hours in observation.
 Charges are by the hour.
 For APCs to pay, there must be at least 8 units of G0378.
 G0379 used for direct admits to observation.
 Composite APCs – 8002 ($381.34) and 8003 ($705.27)
 E/M Coding Requirements – ED and Clinic
 Status Indicator “T” Idiosyncrasy
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 12
Observation Services – Special Topics
Condition Code 44
 Observation Compliance Concerns – Continued
 When can you change the status of a patient from ‘inpatient’ to
‘outpatient’ observation?
 This is what Condition Code 44 is supposed to handle.
Transmittal #299 for publication 100-04, Medicare Claims Processing
Manual, dated September 10, 2004. These instructions were effective
on October 12, 2004.
CMS is indicating that the following criteria must be achieved in
order to use Condition Code 44 and thus indicate that a service was
moved from an inpatient admission to an outpatient status, typically
observation:
The change in patient status from inpatient to outpatient is made
prior to discharge or release, while the beneficiary is still a patient
of the hospital;
The hospital has not submitted a claim to Medicare for the
inpatient admission;
A physician concurs with the utilization review committee’s
decision; and
The physician’s concurrence with the utilization review
committee’s decision is documented in the patient’s medical
record.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 13
Observation Services – Special Topics
Condition Code 44
 Observation Compliance Concerns – Continued
Note: Transmittal 1803, August 28, 2009 updates and discusses the
requirements surrounding utilizing Condition Code 44 for Medicare. The
four criteria above remain essentially the same.
The NUBC definition for Condition Code 44:
For use on outpatient claims only, when the physician ordered inpatient
services, but upon internal utilization review performed before the
claim was originally submitted, the hospital determined that the services
did not meet its inpatient criteria.
 Exercise: Discuss the differences between the CMS requirements and
the NUBC definition for Condition Code 44.
See Utilization Review Committee’s Involvement
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 14
Observation Services – Special Topics
Condition Code 44
 For Q&A #9973 the question is:
 How should the hospital report observation services when the patient's
status is changed from inpatient to outpatient using Condition Code
44? May the hospital report observation services from the beginning of
the hospital outpatient encounter?
 Answer  The use of Condition Code 44 pertains to the entire patient encounter,
the patient's status, and the hospital bill type submitted. Medicare does
not recognize a separate patient status called "observation;" all
hospital patients are either inpatients (if they are admitted as inpatients
on the order of a physician) or outpatients (registered by the hospital
as outpatients). When Condition Code 44 is appropriately used, the
hospital reports on the outpatient bill the services that were ordered
and provided to the patient for the entire patient encounter. Reporting
of individual HCPCS codes on an outpatient claim must be consistent
with all applicable instructions and CMS guidance.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 15
Observation Services – Special Topics
Condition Code 44
 Question #9973 – Answer Continued
 However, in accordance with the general Medicare requirements for
services furnished to beneficiaries and billed to Medicare, even in
Condition Code 44 situations, the hospital cannot report hours of
observation services using HCPCS code G0378 (Hospital observation
service, per hour) for the time period during the hospital encounter
prior to a physician's order for observation services. Medicare does not
permit retroactive orders or the inference of physician orders. Like all
hospital outpatient services, observation services must be ordered by a
physician and the reporting requirements specific to observation
services are discussed in detail in the Medicare Claims Processing
Manual (Pub. 100-04), Chapter 4, Section 290.2.2. The clock time begins
at the time that observation services are initiated in accordance with a
physician's order.
 While hospitals may not report observation services under HCPCS
code G0378 for the time period during the hospital encounter prior to a
physician's order for observation services, in Condition Code 44
situations, as for all other hospital outpatient encounters, hospitals
may include charges on the outpatient claim for the costs of all hospital
resources utilized in the care of the patient during the entire encounter.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 16
Observation Services – Special Topics
Counting Hours for Observation
 Counting Hours – Interrupted Observation
 From Chapter 4, §290.2.2 –
• Observation services should not be billed concurrently with
diagnostic or therapeutic services for which active monitoring is a
part of the procedure (e.g., colonoscopy, chemotherapy). In
situations where such a procedure interrupts observation services,
hospitals would record for each period of observation services the
beginning and ending times during the hospital outpatient
encounter and add the length of time for the periods of observation
services together to reach the total number of units reported on the
claim for the hourly observation services HCPCS code G0378
(Hospital observation service, per hour).
 Note that CMS has moved from therapeutic to diagnostic and
therapeutic.
 Time away from the observation bed is easy, but services provided
while the patient is receiving observation services.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 17
Observation Services – Special Topics
Counting Hours for Observation
 The second recent question, from Q&A #9974, is:
 May a hospital report drug administration services, such as therapeutic
infusions, hydration services, or intravenous injections, furnished
during the time period when observation services are being reported?
 Answer –
 The Medicare Claims Processing Manual (Pub 100-4), Chapter 6,
Section 290.2.2 states that "observation” services should not be billed
concurrently with diagnostic or therapeutic services for which active
monitoring is a part of the procedure (e.g. colonoscopy,
chemotherapy)." In situations where such a procedure interrupts
observation services and results in two or more distinct periods of
observation services, hospitals should record for each period of
observation services the beginning and ending times during the
hospital outpatient encounter. Hospitals should add the lengths of time
for the periods of observation services together to determine the total
number of units reported on the claim for the hourly observation
services under HCPCS Code G0378 (Hospital observation service, per
hour).
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 18
Observation Services – Special Topics
Counting Hours for Observation
 Q&A #9974 – Answer Continued
 The hospital must determine if active monitoring is a part of all or a
portion of the time for the particular drug administration services
received by the patient. Whether active monitoring is a part of the drug
administration service may depend on the type of drug administration
service furnished, the specific drug administered, or the needs of the
patient. For example, a complex drug infusion titration to achieve a
specified therapeutic response that is reported with HCPCS codes for a
therapeutic infusion may require constant active monitoring by hospital
staff. On the other hand, the routine infusion of an antibiotic, which
may be reported with the same HCPCS codes for a therapeutic infusion,
may not require significant active monitoring. For concerns about
specific clinical situations, hospitals should check with their Medicare
contractors for further information.
 If the hospital determines that active monitoring is part of a drug
administration service furnished to a particular patient and separately
reported, then observation services should not be reported with HCPCS
G0378 for that portion of the drug administration time when active
monitoring is provided.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 19
Observation Services – Special Topics
UR Committee – Interpretive Guidelines
 See the State Operations Manual, CMS Publication 100-07
 Appendix A is for hospitals and there is a discussion of the Utilization
Review Committee relative to:
• Inpatient Admission, and
• Extended Stay.
 Correlates with possible use of Condition Code 44
• If the UR Committee determines that the inpatient admission was
not appropriate, then a process must be undertaken to address this
with the admitting physician or qualified practitioner.
• Who can make this determination?
 Non-Physician
 Single UR Physician
 Two RU Physicians
• “In no case may a non-physician make a final determination that a
patient’s stay is not medically necessary or appropriate.” A-0656
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 20
Observation Services – Special Topics
UR Committee – Interpretive Guidelines
 UR Committee Determinations – Interpretive Guidelines A-0656
 (1) The determination that an admission or continued stay is not
medically necessary• (i) May be made by one member of the UR committee if the
practitioner or practitioners responsible for the care of the patient,
as specified of §482.12(c), concur with the determination or fail to
present their views when afforded the opportunity; and
• (ii) Must be made by at least two members of the UR committee in
all other cases.
 (2) Before making a determination that an admission or continued stay
is not medically necessary, the UR committee must consult the
practitioner or practitioners responsible for the care of the patient, as
specified in §482.12(c), and afford the practitioner or practitioners the
opportunity to present their views.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 21
Observation Services – Special Topics
UR Committee – Interpretive Guidelines
 (3) If the committee decides that admission to or continued stay in the
hospital is not medically necessary, written notification must be given,
no later than 2 days after the determination, to the hospital, the patient,
and the practitioner or practitioners responsible for the care of the
patient, as specified in §482.12(c);
 Interpretive Guidelines §482.30(d)
 When other than a doctor of medicine or osteopathy makes an initial
finding that the written criteria for extended stay are not met, the case
must be referred to the committee, or subgroup thereof which contains
at least one physician. If the committee or subgroup agrees after
reviewing the case that admissions, or extended stay is not medically
necessary or appropriate, the attending physician is notified and
allowed an opportunity to present his views and any additional
information relating to the patient’s needs for admissions or extended
stay. When a physician member of the committee performs the initial
review instead of a non-physician reviewer, and he finds that
admissions or extended stay is not necessary no referral to the
committee or subgroup is necessary and he may notify the attending
practitioner directly.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 22
Observation Services – Special Topics
UR Committee – Interpretive Guidelines
 Interpretive Guidelines §482.30(d) - Continued
 If the attending practitioner does not respond or does not contest the
findings of the committee or subgroup or those of the physician who
performed the initial review, then the findings are final.
 If the attending physician contests the committee or subgroup findings,
or if he presents additional information relating to the patient’s need for
extended stay, at least one additional physician member of the
committee must review the case. If the two physician members
determine that the patient’s stay is not medically necessary or
appropriate after considering all the evidence, their determination
becomes final. Written notification of this decision must be sent to the
attending physician, patient (or next of kin), facility administrator, and
the single State agency (in the case of Medicaid) no later than 2 days
after such final decision and in no event later than 3 working days after
the end of the assigned extended stay period.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 23
Observation Services – Special Topics
UR Committee – Interpretive Guidelines
 OK, So What Does This Mean for Condition Code 44?
 Need to follow the directives of the Interpretive Guidelines
• How is your UR Committee set up?
• How does it function?
 Need to have documentation in place that substantiates adherence to
these guidelines.
• How is this being handled with Condition Code 44?
 What if a physician simply wants to correct a mistake in the admission
status?
• In other words, to use Condition Code 44, must you go through the
UR Committee process?
• If there is simply an ‘error correction’, then Condition Code 44 does
not need to be used?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 24
Observation Services – Special Topics
O’Connor Hospital Ruling
 RAC Recoupment of Short Stay Inpatient Admission
 Case from 2004 working its way through the appeals process.
• Medicare Appeals Council – Decided Not To Change ALJ Ruling
• Next Step – Federal Court  Will CMS take this to court?
 Basic Facts – Short stay inpatient admission that was inappropriate.
• RAC claimed full repayment because service not medically
necessary as an inpatient admission.
 ALJ Ruling
• Inpatient admission was not justified, BUT observation services
were fully justified.
• Ruling directs CMS and Medicare Administrative Contractor to work
with hospital to properly develop, file and adjudicate the claim as
observation services.
• This ALJ directive is quite different from CMS’s current guidance
that indicates that observation can’t be billed until it is ordered.
 Will CMs Appeal?
• Whether or not, this ruling is well worth reading with care.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 25
Observation Services – Special Topics
O’Connor Hospital Ruling
 Language from the Ruling (or Non-Ruling)
 “In its referral memorandum to the Council, CMS asserts that the ALJ
erred as a matter of law by ordering Medicare payment for “the
observation and underlying care” provided to the beneficiary because
those services are not separately billable under Part A.”
 “The Council does not agree that the case contains an error in law. The
position advanced by CMS in its memorandum is inconsistent with the
guidance set forth in the CMS Manuals.”
 “CMS has expressly stated that Part B payment may be made if Part A
payment is denied.”
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 26
Observation Services – Special Topics
O’Connor Hospital Ruling
 Language from the Ruling (or Non-Ruling)
 “In this case, the provider submitted a timely claim for services which
was paid under Part A. When the RAC reopened the determination on
the initial claim at issue here, it had the same plenary authority to
process and adjust the claim as it did when that claim was first
presented and paid. The RAC’s revised initial determination states that
the beneficiary met the criteria for outpatient observation status.”
 “Consistent with the CMS manual provisions discussed above, the
contractor shall work with the provider to take whatever actions are
necessary to arrange for billing under Part B, and thus, offset any Part
A overpayment. The contractor shall issue a new initial determination
upon effectuation.”
 Question: How does this or could this affect the use of
Condition Code 44?
 Could the DRG Pre-Admission Window become involved?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 27
Observation Services – Special Topics
Physician Supervision – OP vs. IP
 A New Compliance Issue – Physician Supervision
 During CY2008 and CY2009, CMS discussed and provided (clarifying)
guidance concerning physician supervision requirements under the
Provider-Based Rule (PBR).
• Starting January 1, 2010, the supervision requirements have been
(sort-of) liberalized and mid-levels can meet the requirement.
• As a part of these discussion it appears that outpatient services,
even in the hospital, must meet the supervision requirements.
 Case Study – The Apex Medical Center is a small rural hospital with a
limited number of inpatient beds. At night nursing staff remains in the
hospital, but the physician/practitioner may be on call to the hospital
and also the ED. A patient has been in the hospital for a day and a half
and Utilization Review, along with the physician, determine that the
stay should have been observation. The physician writes an order for
observation and the charges for the day and a half are charged as
outpatient. BUT did Apex meet the physician/practitioner supervision
requirement?
• What about post-operative recovery that is provided in an inpatient
bed? Could physician/practitioner supervisions be a question?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 28
Observation Services – Special Topics
Physician Supervision – Critical Access Hospitals
 With all of the changes occurring with the interpretation of ‘physician
supervision’, a challenge has arisen with Critical Access Hospitals (CAHs).
 We can argue what constitutes ‘qualified’ and how close the
practitioner must be, but this new (or newly interpreted) requirement
can create new challenges.
 Example – Critical Access Hospitals – Patient is in observation. CoPs
(Conditions of Participation) only require that a nurse be present at the
hospital and thus the new supervisory requirement may not be met.
• CMS’s ‘Fix’ for This Situation
 Will not enforce this rule for CHAs (March 15, 2010), and
 Create a new service category – ‘nonsurgical extended
duration’ (infusions, injections, observation)
o Does NOT include chemotherapy and blood transfusions.
 Direct supervision is required only for the initiation of the
service, after the patient is stable, general supervision applies.
o Note: This new proposed guidance appears to apply to all
hospitals. See the August 3, 2010 Federal Register. (75 FR
46306-46308)
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 29
Observation Services – Special Topics
DRG Pre-Admission Window
 DRG Pre-Admission Window – Basic Directives  See Recent Changes
 Window – 3 Dates of Service prior to inpatient admission
• 72-Hour Rule is a misnomer
 Certain services must be rolled into the inpatient billing
• All diagnostic services, and
• Related therapeutic services.
 Exact Principal to Primary Diagnosis Code Match
 Outpatient services provided in the hospital, at provider-based clinics
and/or owned and operated clinics (possibly freestanding).
 Operational Difficulties Encountered in Addressing the Window
 Observation Interface to DRG Pre-Admission Window
 Are you properly bundling (or not) any observation services and other
associated services into the inpatient billing?
 If you are incorrectly bundling observation services, then the DRG may
be elevated inappropriately.
 Note: On June 25, 2010 the SSA was changed so that the
definition of ‘related’ is (or will be) much more liberal.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 30
Observation Services – Special Topics
Cost Reports
 Where Do The Cost Reports Fit Into The Observation Situation?
There are relatively few true cost-based situations. CAHs, FQHCs and a
very few other situations are reimbursed for these kinds of services
based on costs.
However, hospitals still must prepare and submit cost reports since this
data is used to rebase payment system like DRGs and APCs.
Care should be taken to set up the Charge Master correctly with RCC=762.
In some cases RCC=760 has also been used which is problematic
unless directed specifically by a given third-party payer.
In the next section we will look at compliance issues surrounding
observation services. What if a hospital were providing observation
services but not billing for these services? Would this skew the cost
reporting process? Is this a compliance issue?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 31
Observation Services – Special Topics
ABN/HINN Considerations
 Where Do ABNs/NEMBs Fit Into The Observation Situation?
 See the new “-GX” Modifier
 ABNs – Advance Beneficiary Notices (Now ABNNs??)
 Used when the hospital suspects that the claim may be denied due
to lack of medical necessity.
 Patient is informed in advance and requested to sign the ABN form.
 Many special considerations in using ABNs including modifiers and
special billing requirements.
 Use is required if the Hospital is to collect from the beneficiary –
Hospital should have Known (!)
 NEMBs – Notice of Exclusion from Medicare Benefits
 Used when the service or item be provided is excluded from
Medicare coverage
 Use is voluntary – Beneficiary is supposed to know what is or is
not covered (!)
 How do ABNs/NEMBs work with observation?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 32
Observation Services – Special Topics
Medical Staff Considerations
 Physicians Drive the Entire Observation Process
 Physician Must Order
• Establish Standard Notations for Orders
• Still Have the Concept of Inpatient Observation
 Physician Must Justify – Clear, Concise, Convincing Documentation
• Medical Necessity Must Be Present
 Physician Must Provide Care – How often? Work with nursing staff.
 Physician Must Interact with the UR Committee As Appropriate
 Medical Staff Organization (MSO)
 Establish Observation As Part of Standard Protocols and Care Paths
 Ongoing MSO Training
• Review Observation Cases for Problem Areas
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 33
Observation Services – Special Topics
Auditing
 Internal Observation Auditing
 Observation involves significant compliance challenges.
 Observation is also a difficult area for coding/billing ancillary services
such as injections and infusions.
 Coding and Billing Team  Review each case to make certain properly
coded and that the number of hours charged is appropriate.
 Utilization Review  Review each case in real time to determine the
appropriateness of inpatient admissions and observation services.
 External Observation Auditing
 Observation can be included in routine outpatient and/or inpatient
audits.
 Special audits can be conducted if volumes appropriately justify.
• Note: Auditors will really like the Observation Log discussed
earlier.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 34
Observation Services – Special Topics
Exercises/Case Studies
1.
Sarah is scheduled to have cataract surgery on an
outpatient basis. Due to her nervousness, general
anesthesia is performed. Her surgery is performed
at 9:00 a.m. She goes to recovery at 9:45 a.m.
She has difficulty in recovery with some cardiac
problems. At 11:00 a.m. her physician decides
to admit her to the hospital. At 6:00 p.m. she has
completely recovered and is asymptomatic. She
is discharged and sent home with her daughter.
Utilization Review indicates that this should be
treated as an outpatient observation case as
opposed to a hospital admission.
Comments?
Be certain to include possible RAC audit concerns, O’Connor
Hospital Ruling and the DRG Pre-Admission Window concerns.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 35
Observation Services – Special Topics
Exercises/Case Studies
2.
An elderly patient is scheduled for an outpatient
surgery. While an overnight stay is not typically
necessary for this surgery, the patient is requesting
that he be allowed to stay overnight. The surgery is
successful with no complications. The patient stays
overnight in observation.
Comments? What does the Apex Medical Center
need to do to protect itself in this situation?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 36
Observation Services – Special Topics
Exercises/Case Studies
3.
It is the middle of Winter. Sarah presents to the
ED on a cold, snowy night. The ED physician does
an assessment. Sarah appears to be suffering from
the flu and she is somewhat dehydrated. An IV is
started. The ED physician calls Dr. Smith, also of the
Acme Medical Clinic, and they confer over the phone.
The ED physician does not have admitting privileges to
observation status so the paperwork is filled out in
Dr. Smith’s name. He will see her in the morning.
Comments?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 37
Observation Services – Special Topics
Exercises/Case Studies
4.
Sam has been having some difficulty for several
days with cough, congestion and fever. He goes to the
Apex Medical Center’s Urgent Care Clinic on
Wednesday. Laboratory tests, x-rays and a general
assessment are performed. He is given medication
and sent home. That evening he presents to the ED and
is placed in observation. On Thursday afternoon he
appears to be much better and he is sent home.
However on Friday evening he presents with the
same symptoms only much worse. He is admitted
to the hospital.
Comment on the correct way to bill for these services.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 38
Observation Services – Special Topics
Exercises/Case Studies
5.
Sam presents to the ED in the evening with some
cardiac complaints. A careful assessment is made
and the cardiologist is called in for a consultation.
Sam needs to have therapeutic cath lab services.
While the Apex Medical Center does diagnostic
cath lab services, therapeutic services are not
provided. Sam’s condition is such that he will be
transported to a larger hospital in the morning for the
needed services. He is placed in observation over
the night.
Comment on the correct way to bill for these services.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 39
Observation Services – Special Topics
Exercises/Case Studies
6.
Sam has been experiencing chest pains. His daughter-in-law drives
him to the Apex Medical Center’s ED. Upon getting out of the car,
he does injure his hand, a simple laceration.
In the ED Sam is examined, his laceration is sutured, and he is given a
battery of tests. A definitive diagnosis cannot be made, but he is put on
the ‘Chest Pain Protocol’ and is kept in observation for 36 hours. He is
then discharged home.
Comment to the coding for this case and the payment that will be
received by the Apex Medical Center.
What if Sam was admitted to the hospital, stayed 36 hours and after he was
discharged, Utilization Review determined the inpatient admission was
incorrect, Condition Code 44 was not used.
Comment to coding and billing for this case and the payment that will
be received by the Apex Medical Center.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 40
Observation Services – Special Topics
Exercises/Case Studies
7.
Sylvia is the head of UR/QA at the Apex Medical
Center. She is reviewing a case in which one of the
physicians admitted a patient to inpatient status
during the evening and then turned around and
discharged the patient the next afternoon.
In Sylvia’s opinion, the documentation provided does
not support the medical necessity for admission to
inpatient status. She is thus changing the status
prior to any billing or claims being filed for this service.
Is this the correct way to handle this?
Where does the UR Committee fit into this picture?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 41
Observation Services – Special Topics
Exercises/Case Studies
8.
Samantha is the Charge Master Coordinator at the Apex
Medical Center. Concern has been expressed by the
nursing staff relative to observation patients that
have surgical procedures performed. Also, billing
staff do not know how to handle these claims. Some of
these surgical procedures are actually performed at
the bedside while the patient is in observation, while
others involve taking the patient to a treatment room
or one of the minor surgical suites. Nobody seems to
know how to code or bill for these situations.
How should this situation be handled?
Can the patient continue to be charged for observation when the patient
away from the ‘observation bed’?
Will there be any APC difficulties?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 42
Observation Services – Special Topics
Exercises/Case Studies
9.
The nursing staff at the Apex Medical Center have been struggling
with properly documenting services. While they concentrate on
clinical documentation there are increasing demands to document
more completely other services. Their concerns are:

Does the actual stop time for an infusion need to be documented or
is it OK to calculate the stop time based on the amount of the drug
and the rate of administration?

When a patient is taken from an observation bed to another location
for services, how should the time be documented?

Should the nursing documentation for a direct admit (from a
physician’s office) be the same as an admit to observation through
the ED?

How frequently should there be nursing assessments of observation
patients?

Does the physician have to see the patient during their observation
stay?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 43
Observation Services – Special Topics
Exercises/Case Studies
10. Utilization review personnel at the Apex Medical Center has requested
a meeting with the compliance department and have included coding,
nursing and patient financial services. The main question has to do with
NOT using Condition Code 44 when the physician requests that the status
of the patient be changed from inpatient to outpatient observation.
The argument is that the physician is simply correcting a mistake and that
Condition Code 44 is used only when the hospital determines that the
status should be observation and requests that the physician agrees.

What do you think?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 44
Observation Services – Special Topics
Exercises/Case Studies
11. Condition Code 44 – Billing - A physician admitted Sarah through the ED as
an inpatient because of an electrolytic imbalance. Sarah is doing quite well
and it is now 28 hours into her stay. Utilization review has been checking
the documentation and has asked to meet with the physician. A
conference is held and it is determined that Sarah should have been an
outpatient observation patient. The physician writes an order for
observation care and Sarah is discharged 6 hours later.
 Discuss how this should be billed and also how Medicare will pay for
these services.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 45
Observation Services – Special Topics
Exercises/Case Studies
12. IV Injection - During her observations stay Sarah received a slow IV push.
The push is provided over about 5 minutes. The nurse remains with Sarah
for another 5 minutes to see if there is any reaction.
 Discuss how this type of situation should be handled in view of the
recent update guidance from CMS.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 46
Observation Services – Special Topics
Exercises/Case Studies
13. Telemetry Observation – Sylvia, the Chargemaster Coordinator at the Apex
Medical Center, has been reviewing the new information about ‘active
monitoring’ in subtracting time from observation. She is wondering about
telemetry services. Her main question is whether or not this constitutes
constant attendance is that there is a nurse that monitors in real-time, the
telemetry data.
What do you think?
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 47
Observation Services – Special Topics
Exercises/Case Studies
14. In the afternoon, Sam, a retired rancher, has been brought to the Apex
Medical Center’s ED. He is complaining of chest pains and a severe
headache. An extensive workup is provided at the ED including laboratory
testing, cardiology testing and extensive radiology tests including a CAT
scan. Sam’s attending physician decides to admit him as in inpatient due
to a probable cardiac event.
The next morning, Sam is feeling much better. Virtually all of his
symptoms are now abated. Additional testing indicates no problems and
Sam is discharged just before lunch.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 48
Observation Services – Special Topics
Exercises/Case Studies
15. Sarah, an elderly patient from Anywhere, USA has presented to the Apex
Medical Center’s ED complaining of cough, congestion, fever and general
lack of energy. Her primary care physician in connection with the ER
physician decide to place Sarah in observation. Hydration and
medications are commenced.
On the second day of her stay, she suffers an apparent stroke. The ER I
contacted and her primary care physician also comes to the hospital. The
decision is made to admit Sarah to the hospital as an inpatient. She is
there for five days and makes a remarkable recovery.
Discuss how this should be coded, billed and how payment will be made.
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 49
Observation Services – Special Topics
Summary & Conclusion

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


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Coding, Billing & Documenting Observation Services Represent A Very
Real Challenge
Physicians Drive The Entire Process  See Also Nursing Involvement
“Medical Necessity” And The Associated Documentation Is Critical
CMS Continues To Change the Way in Which Observation Services Are
or Are Not Paid  See the new composite APCs starting in CY2008.
It Is Recommended To Use An Observation Log To Help Document
Observation Services And To Assist Reviewers And Auditors
Condition Code 44 Utilization Is Difficult
Utilization Review Committee Activities Also Involve Observation
Counting Hours for Interrupted Observation Services Is A Difficult
Operation Issue
The DRG Pre-Admission Window Can Also Involve Observation
Services  See Changed Rules
See Also Various RAC Audit Issues Surrounding Observation vs. IP
Status
Note That On-Going Guidance Continues to be Issued by CMS and This
Guidance Is Morphing Over Time  See Nonsurgical Extended Duration
Concept with Initial Supervision and then General Supervision
© 1996-2010 Abbey & Abbey, Consultants, Inc.
Slide # 50