New policy changes regarding observation are boon to emergency medicine
[This quarterly column is written by Caral Edelberg, CPC, CPMA, CAC, CCS-P, CHC, president of Edelberg Compliance Associates, Baton Rouge, LA.]
Several substantive changes were made to policies for hospital observation in 2016 that benefit emergency medicine. The Centers for Medicare & Medicaid Services (CMS) reimburses hospitals for observation using a “composite” ambulatory payment classification (APC) when the service is provided in conjunction with an appropriate type A or B ED visit, critical care, clinic visit, or a direct referral to observation. This composite APC furthers CMS’ efforts to increase the packaging of related services under the Outpatient Prospective Payment System (OPPS). Under OPPS, observation is defined as “extended assessment and management composite” services. The 2016 payment for observation is $2,174.14. The observation composite APC is listed with a status indicator of Q3, which is defined as codes that may be paid through a composite APC and includes services that are paid under OPPS.
In the past, when observation care was provided in conjunction with a high-level visit, critical care or a direct referral to observation was an integral part of a patient’s extended encounter of care, and payment was made for the entire encounter through one of two composite APCs. For 2016, observation continues to be paid under a composite APC titled, “Comprehensive Observation Services (COS) (APC 8011).” To qualify for COS payment, billing must include:
- Any procedure that is assigned Status Indicator “T”;
- Any claim containing eight or more units of services described by HCPCS code G0378 (observation services, per hour);
Claims that contain services provided on the same date of service or one day before the date of service for HCPCS code G0378 and described by one of the following codes:
- G0379 (Direct referral of patient for hospital observation care) on the same date of service as HCPCS code G0378;
- 99281 (ED Level 1);
- 99282 (ED Level 2);
- 99283 (ED Level 3);
- 99284 (ED Level 4);
- 99285 (ED Level 5);
- G0380 (Type B ED visit Level 1);
- G0381 (Type B ED visit Level 2);
- G0382 (Type B ED visit Level 3);
- G0383 (Type B ED visit Level 4);
- G0384 (Type B ED visit Level 5);
- 99291 (critical care);
- G0463 (Hospital outpatient clinic visit for assessment and management of a patient);
- Claims that do not contain a service that is described by a HCPCS code to which status indicator “J1” has been assigned.
Observation services are, by definition, outpatient services, so transfer into observation status must be specifically ordered at a time when it is uncertain if an inpatient admission will be necessary (chapter 1, section 50.3.2 of the Medicare Claims Processing Manual). Providers will report the ED or clinic visit code, or, if applicable, G0379 (direct referral to observation) and G0378 (hospital observation services, per hour) and the number of units representing the hours spent in observation (rounded to the nearest hour) for all Medicare observation services.
The Medicare Outpatient Code Editor (OCE) will determine if the service qualifies for reimbursement under a composite APC. To qualify, there must be a physician order to place the patient in observation. For Medicare payment, a HCPCS Type A ED visit code 99281, 99282, 99283, 99284, 99285, or G0384 Type B ED visit code, critical care (99291), or a G0463 HCPCS clinic visit code is required to be billed on the day before or the day that the patient is placed in observation.
If the patient is a direct referral to observation, the G0379 may be reported in lieu of an ED or clinic code. In addition, the E/M code associated with these other services must be billed on the same claim form as the observation service and the E/M must be billed with a modifier -25 if it has the same date of service as the observation code G0378.
The observation stay must span a minimum 8 hours and these hours must be documented in the “units” field on the claim form. For facility billing of observation, the “clock” starts at the time that observation services initiate in accordance with a practitioner’s order for placement of the patient into observation status. The patient must be under the care of a physician or non-physician practitioner during the time of observation care, and this care must be documented in the medical record with an order for observation, admission notes, progress notes, and discharge instructions (notes), all of which are timed, written, and signed by the physician.
A non-physician practitioner who is licensed by the state and approved by internal credentialing and bylaws to supervise patients in observation may do so. This observation end time is when all clinical or medical interventions have been completed, including the nursing follow-up care performed after the physician’s observation discharge orders are written.
The medical record must include documentation that the physician used “risk stratification” criteria to determine that the patient would benefit from observation care. (These criteria may be either published generally accepted medical standards or established hospital-specific standards). All related services provided to the patient should be coded in addition to the observation code G0378.
For physician payment for observation care under CPT, there are no procedural restrictions or specific preceding visit level requirements similar to Medicare’s policies for facilities. Physician observation services are billed in lieu of Emergency Department or other Evaluation/Management CPT codes, except for certain exemptions (e.g., Critical Care).
Medicare has an 8-hour minimum for physicians reporting the observation same-day-discharge codes 99234-99236. This 8-hour minimum does not apply to an observation stay that spans 2-calendar days (99217-99220). CPT lists typical observation times a practitioner could spend at the bedside and on the patient’s hospital floor or unit as follows:
- 99218: initial observation care per day, 30 minutes bedside/floor/unit time.
- 99219: initial observation care per day, 50 minutes bedside/floor/unit time.
- 99220: initial observation care per day, 70 minutes bedside/floor/unit time.
- 99234: observation or inpatient hospital care, 40 minutes bedside/floor/unit time.
- 99235: observation or inpatient hospital care, 50 minutes bedside/floor/unit time.
- 99236: observation or inpatient hospital care, 55 minutes bedside/floor/unit time.
- 99224: subsequent observation care, 15 minutes bedside/floor/unit time.
- 99225: subsequent observation care, 25 minutes bedside/floor/unit time.
- 99226: subsequent observation care, 35 minutes bedside/floor/unit time.
For 2016, CMS will again pay for a direct referral to observation using code G0379 (now recognized under APC 5013). CMS expects that hospitals will bill this service in addition to G0378 when a patient is referred directly to observation care after visiting a physician in the community. Hospitals should not bill HCPCS code G0379 (APC 5013) for a direct referral to observation care on the same day as a hospital clinic visit, ED visit, critical care, or after a “T” status procedure that is related to the subsequent admission to observation care. If observation criteria are met, the composite APC 8011 will be paid. If observation time related to direct referral does not meet observation guidelines, the payment for G0379 is $480.69.
Facilities should report intravenous infusions and injections in addition to observation service for all payers, including Medicare. Most infusion and injection procedures are status indicator “S” procedures and are paid separately. If an infusion begins in the ED or clinic visit preceding observation, subsequent or concurrent hours of infusion may be coded in observation. The initial service codes would not be coded a second time, unless there was an initiation of a second IV infusion site.
CMS directs facility providers to follow CPT rules for coding injections and infusions. Separate payment is allowed for services with status indicators S (significant procedure not subject to discounting) and X (ancillary service) when billed with G0378. The payment policy is the same for many non-Medicare payers.
As in years before, payment in 2016 is not allowed if a surgical procedure or any service that has a status indicator of “T” occurs on the day before or the day that the patient is placed in observation. However, all services related to the observation services should be coded. The OCE logic will determine payment.
- Composite APC payment is based on OPPS composite-specific payment criteria. Payment is packaged into a single payment for specific combinations of services.
- In other circumstances, payment is made through a separate APC payment or packaged into payment for other services.
One of CMS’ goals for OPPS is to increase the packaging of interrelated services into a primary service. Packaged services include a limited number of additional ancillary services, in particular certain minor procedures and pathology services, except for cochlear implant and auditory implant programming services. CMS will also package payment for a few drugs that function as supplies in a surgical procedure.
In EDs and clinics, most lab work will be packaged and not paid separately in 2016. In addition, many add-on codes will be packaged in 2016. An add-on code is a procedure performed in addition to a primary procedure and is never reported alone. Examples of packaged add-on codes include: 99292 — critical care, each additional 30 minutes; 99145 and 99150 — moderate sedation codes; debridement add-on codes; removal of nail plate add-on codes; and immunization add-on codes. Injections and infusions are not packaged. Drug administration add-on codes are not packaged. Infusion add-on codes 96368 (concurrent infusion) and 96376 (IV push same drug) continue to be packaged in 2016 under status indicator “N.”
The key lies in understanding how the changes affect coding, billing practices.
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