Monitor observation status to make sure new codes are being used

Make sure admission status is appropriate, documentation is complete

The Centers for Medicare & Medicaid Services (CMS) has created a bevy of new payment classifications for fiscal year 2006, making it more imperative than ever for case managers to make sure procedures are documented properly.

The changes include new codes for observation status as well as major changes in codes for some orthopedic and cardiovascular services and for kidney disease, says Deborah Hale, CCS, president of Administrative Consultant Services, LLC, a health care consulting firm based in Shawnee, OK.

The changes eliminated seven CPT codes and 3 G-codes for observation status and replaced them with just two G-codes:

  • G0378: Hospital observation services, per hour.
  • G0379: Direct admission of patient for hospital observation care.

Hospitals should bill code G0378 when observation services are provided to any patient in observation status, regardless of condition. The units of service should equal the number of hours the patient is in observation status. (All of the billing instructions come from the Federal Register, Proposed and Final Rules for OPPS 2006.)

Hospitals should report G0379 when observation status is the result of a direct admission without an emergency department visit, hospital outpatient clinic visit, or critical care service on the day of the initiation of hospital observation services. This code should be reported only when the patient is admitted directly to observation care after being seen by a physician in the community.

Under the new system, the Medicare software outpatient prospective service claims processing logic will determine the payment status of observation and direct admission services and whether they will be packaged or payable separately, Hale points out.

"This makes things easier from a billing perspective, but it’s still up to the case managers to make sure that the services provided do meet the criteria so the hospital can be reimbursed," she says.

There are two parts to making sure that your hospital meets CMS reimbursement criteria, Hale reports:

  1. The patient must be appropriate for observation level of care and should be receiving observation services, rather than outpatient or inpatient services.
  2. You must have physician orders for observation status, provide the appropriate services, and document and bill them correctly to qualify for a payment.

"The case manager’s responsibility hasn’t changed at all. It is very important to monitor observation status and, when a patient is in observation status, to make sure the recognized standards of care are followed," Hale says.

Case managers should make sure that patients are admitted appropriately and that observation status is not overutilized or underutilized.

"CMS still expects hospitals to be very involved in monitoring the resource utilization and ensuring that the patient gets the appropriate diagnostic work-up, lab tests, and EKGs done," Hale says.

For instance, if a patient with chest pain is placed in observation status to rule out a myocardial infarction, the case manager should make sure that the right diagnostic studies are done, even though the reimbursement is no longer tied to this, Hale explains.

The billing must record the number of hours a patient is in observation status. After the order for observation is issued, the nurse’s notes should show when the actual observation process begins. "Observation can begin in the emergency department if the patient is waiting for a bed to transition from the ED. The nursing documentation should reflect this," she says.

Observation time ends when the patient is ready to go home or to be admitted as an inpatient. Under the old rule, observation time stopped when the physician issued (wrote) the discharge order, Hale says.

However, many times, the discharge order will say that the patient can be discharged after the IV is finished or patient education is completed. Under the new rule, a hospital can continue to bill until the observation care is completed. It does not include the time the patient remains in the observation area after treatment is finished. For example, the time a patient waits for transportation home should not be counted, according to Hale.

CMS also has made yet another change to how long observation status can last.

In October, CMS rescinded its notice of April 1, 2005, allowing observation status to exceed 48 hours as long as the care the patient was receiving was reasonable and necessary. Now observation status is strictly limited to 48 hours, according to an October notice posted to MedLearn Matters, Hale says.

She suggests that hospitals have a case manager in the emergency department who can educate emergency department physicians about observation vs. admission status. She suggests setting up a case management system to fast track observation patients so their stay will not exceed the 48-hour limits.

Develop a preprinted interdisciplinary observation form that includes physician documentation, an abbreviated history and physical, and the reason for observation, Hale suggests. The physician documentation should include the anticipated time frame for observation.

The physician must document the rationale for discharging the patient to home or converting to inpatient status. The nursing documentation should include traditional admission documentation, start and stop times for IV infusions, assessments, education provided, and the time observation is completed, Hale says.

CMS is continuing its practice of reimbursing hospitals only for patients placed in observation status with chest pain, congestive heart failure, and asthma.

Overuse of observation results in the loss of the three-day stay qualification for skilled nursing home admissions, a lower Medicare payment rate, and higher out-of-pocket expenses for the patient. In addition, it tends to increase the hospital’s length of stay, cost, and mortality rates in the public report cards, Hale says.

Underutilization of observation status raises the hospital’s risk of compliance and necessity of admission for one-day stays, she adds. Don’t resort to either extreme to manage the process. Each patient’s condition should be evaluated and the appropriate level of care determination made at the time of admission.