According to the November 2005 Outpatient Prospective Payment System Final Rule, changes will be made to the coding of observation services for CY 2006. The changes were made in response to comments received by the Centers for Medicare & Medicaid Services (CMS) regarding the continuing administrative burden on hospitals when attempting to differentiate between packaged and separately payable observation services. While CMS did not make payment policy changes for observation services, coding has been simplified.
CMS has received incomplete and unreliable data as a result of inconsistent hospital reporting. Some hospitals reported observation services per day and others reported each hour of observation services as one unit.
The CY 2006 changes will shift the administrative burden for determining separately payable observation services from hospitals to the outpatient code editor (OCE).
The following HCPCS codes are discontinued:
- G0244 Observation care by facility to patient
- G0263 Direct admission with congestive heart failure, chest pain or asthma
- G0264 Assessment other than congestive heart failure, chest pain or asthma
The three deleted G codes above are replaced by two new HCPCS codes to report all observation services, whether separately payable or packaged, and direct admission for observation care, whether separately payable or packaged. The new HCPCS codes are:
- G0378 Hospital observation services, per hour
- G0379 Direct admission of patient for hospital observation care
Hospitals are to report code G0378 when observation services are provided to any patient admitted to observation status regardless of the patient’s condition. The OPPS claims processing logic will then determine whether or not the observation services are separately payable. The units of service reported with this code would equal the number of hours the patient is in observation status.
Hospitals should report code G0379 when observation services are the result of a direct admission to observation status without an associated emergency department visit, outpatient clinic visit or critical care service on the day of, or day before, the observation services.
It’s important for hospitals to consistently report these codes whether the observation would be packaged or separately payable. Data available from the reporting of these codes will assist CMS in developing consistent and complete hospital claims data regarding the utilization and costs of observation services.
Reporting direct admission to observation
Claims for direct admission to observation where the patient is seen by a physician in the community and is then directly admitted into a hospital for outpatient observation care that is not separately payable are paid a rate equal to that of a low-level clinic visit (APC 0600). In order to receive separate payment for a direct admission into observation, the claim must show both HCPCS codes G0378 (hourly observation) and G0379 (direct admit to observation) with the same date of service. No services with a status indicator of “T” or “V” or critical care (APC 0620) may be provided on the same day of service as HCPCS code G0379. Facilities are encouraged to view future CMS transmittals for instructions on how to appropriately report both HCPCS codes G0378 and G0379.
Payment for separately payable observation services (APC 0339)
For CY 2006, CMS will continue applying the existing CY 2005 criteria to determine if hospitals may receive separate payment for medically necessary observation care provided to a patient with congestive heart failure (CHF), chest pain, or asthma. Payment for all other observation services will continue to be packaged into the payments for the separately payable services with which the observation service is reported.
Criteria for separately payable observation services include documentation of specific ICD-9-CM diagnosis codes, the length of time a patient is in observation status, hospital services provided before, during, and after the patient receives observation care, and ongoing physician evaluation of the patient’s status.
1. The appropriate ICD-9-CM diagnosis code for one of three qualifying medical conditions must be reported as the reason for visit (form locator 76) or as the principal diagnosis (form locator 67), or both.
2. The length of observation care time must be documented in the medical record with the number of units reported with HCPCS code G0378 equaling or exceeding 8 hours. The counting of a beneficiary’s time in observation for hospital billing begins with the patient’s admission to an observation bed, and ends when all clinical or medical interventions have been completed.
Medical or clinical interventions may take place after a physician has written the discharge order for the patient to be released or admitted as an inpatient. However, CMS does not expect reported observation time to include the time the patient remains in the observation area after treatment is finished for reasons such as waiting for transportation home.
3. The following hospital services provided before, during and after the patient receives observation care must be reported on the same claim on the same day or the day before the observation stay:
- Emergency department visit (CPT codes 99281-99285),
- Clinic visit (CPT codes 99201-99205, 99211-99215, 92421-99245, 99271-99275),
- Critical care (CPT code 99291), or
- Direct admission to observation service (HCPCS code G0379)
4. Ongoing physician evaluation is required as evidenced by
- Admission, discharge and other appropriate progress notes that are timed, written and signed by the physician
- Documentation of explicit assessment of patient risk determining that the patient would benefit from observation care.
CMS’ response to APC Advisory Panel recommendations on observation care
The APC Advisory Panel met in August 2005 and made several recommendations for clarification of the observation care policy.
In response to the panel’s recommendation for clear coding and billing guidance for observation services, CMS will provide additional detailed guidance in an upcoming Internet-only manual update and “Medlearn Matters” article.
CMS also will provide additional clarification regarding the issuance of an Advanced Beneficiary Notice (ABN). According to the November 2005 final rule, all hospital observation services, regardless of the duration of the observation care, that are medically reasonable and necessary, are covered by Medicare. An ABN should not be issued for reasonable and medically necessary observation services, whether packaged or not.
The APC panel recommended that CMS re-evaluate expanding the list of conditions eligible for separate payment for observation. CMS believed it was premature to expand the list of conditions at this time.
However, CMS believes that the coding changes for CY 2006 outlined in the final rule will result in more consistent and accurate hospital claims for further future analysis.