Notification

Facility Reporting of Observation Services


Notification Issue Date: 11/30/2018

This 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.



Medicare Advantage Policy

Title:Facility Reporting of Observation Services
Policy #:MA00.040a

This policy is applicable to the Company’s Medicare Advantage products only. Policies that are applicable to the Company’s commercial products are accessible via a separate commercial policy database.


The Company makes decisions on coverage based on the Centers for Medicare and Medicaid Services (CMS) regulations and guidance, benefit plan documents and contracts, and the member’s medical history and condition. If CMS does not have a position addressing a service, the Company makes decisions based on Company Policy Bulletins. Benefits may vary based on contract, and individual member benefits must be verified. The Company determines medical necessity only if the benefit exists and no contract exclusions are applicable. Although the Medicare Advantage Policy Bulletin is consistent with Medicare’s regulations and guidance, the Company’s payment methodology may differ from Medicare.

When services can be administered in various settings, the Company reserves the right to reimburse only those services that are furnished in the most appropriate and cost-effective setting that is appropriate to the member’s medical needs and condition. This decision is based on the member’s current medical condition and any required monitoring or additional services that may coincide with the delivery of this service.


This Policy Bulletin document describes the status of CMS coverage, medical terminology, and/or benefit plan documents and contracts at the time the document was developed. This Policy Bulletin will be reviewed regularly and be updated as Medicare changes their regulations and guidance, scientific and medical literature becomes available, and/or the benefit plan documents and/or contracts are changed.



Policy

Coverage is subject to the terms, conditions, and limitations of the member's Evidence of Coverage.

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.
Policy Guidelines

While the Company does not require authorization for observation services, it is expected that facilities adhere to the policy criteria when billing for this service.

InterQual Guidelines are available upon request.

This policy is consistent with Medicare's coverage determination. The Company's payment methodology may differ from Medicare.

BENEFIT APPLICATION

Subject to the terms and conditions of the applicable Evidence of Coverage, observation services are covered under the medical benefits of the Company's Medicare Advantage 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 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. The Company uses InterQual Guidelines, a nationally recognized source, to assist with medical necessity decision-making regarding observation services or admission criteria.
References

American College of Emergency Physicians (ACEP). Observation - Physician Coding FAQ. [ACEP Web site]. Available at:
https://www.acep.org/by-medical-focus/observation-medicine/observation-services-toolkit/#sm.00019fq7fpdk6dr3rcr1ghj2zj25j Accessed October 19, 2018.

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.000015rcfo8yldeiww715h08towzm Accessed October 19, 2018.

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 November 21, 2018.

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 November 21, 2018.

Centers for Medicare & Medicaid Services (CMS). Medicare Claims Processing Manual Chapter 12: Physicians/Nonphysicians practitioners. [CMS Web site]. 05/31/18. Available at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/clm104c12.pdf Accessed October 19, 2018.

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%2f19%2f2018&SearchType=Advanced&ContrId=&DocID=A52985&bcJAAAABgAAAAA& Accessed October 19, 2018.



Coding

Inclusion of a code in this table does not imply reimbursement. Eligibility, benefits, limitations, exclusions, precertification/referral requirements, provider contracts, and Company policies apply.

The codes listed below are updated on a regular basis, in accordance with nationally accepted coding guidelines. Therefore, this policy applies to any and all future applicable coding changes, revisions, or updates.

In order to ensure optimal reimbursement, all health care services, devices, and pharmaceuticals should be reported using the billing codes and modifiers that most accurately represent the services rendered, unless otherwise directed by the Company.

The Coding Table lists any CPT, ICD-9, ICD-10, and HCPCS billing codes related only to the specific policy in which they appear.

CPT Procedure Code Number(s)

N/A


Professional and outpatient claims with a date of service on or before September 30, 2015, must be billed using ICD-9 codes. Professional and outpatient claims with a date of service on or after October 1, 2015, must be billed using ICD-10 codes.

Facility/Institutional inpatient claims with a date of discharge on or before September 30, 2015, must be billed with ICD-9 codes. Facility/Institutional inpatient claims with a date of discharge on or after October 1, 2015, must be billed with ICD-10 codes.


ICD - 10 Procedure Code Number(s)

N/A


Professional and outpatient claims with a date of service on or before September 30, 2015, must be billed using ICD-9 codes. Professional and outpatient claims with a date of service on or after October 1, 2015, must be billed using ICD-10 codes.

Facility/Institutional inpatient claims with a date of discharge on or before September 30, 2015, must be billed with ICD-9 codes. Facility/Institutional inpatient claims with a date of discharge on or after October 1, 2015, must be billed with ICD-10 codes.


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 MA00.040a
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 MA00.040
08/29/2018The policy has been reviewed and reissued to communicate the Company’s continuing position on facility reporting and billing of observation services.

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.
01/01/2015This is a new policy.







Version Effective Date: 01/01/2019
Version Issued Date: 12/31/2018
Version Reissued Date: N/A