Focus on Observation

New CPTs carry fraud and abuse potential

Pay special attention to 99234, 99235, and 99236

Observation status promises to be more and more of a challenge. This "orphan" group of patients falls into a gray area, and the ambiguity can subject your facility to intense scrutiny by regulatory agencies. Regulations can be confusing, and doctors don't always follow them, resulting in misclassification of patients. With a doctor billing Medicare under Part B and the hospital sending bills to different places, it is no surprise a government rule linking outpatient and inpatient services is routinely violated.

Your facility could expose itself to allegations of fraud and abuse when staffers make coding errors, whether intentionally or accidentally. If a physician is employed by the hospital, or if the facility provides coding and billing services for an independent contractor, the facility could be held liable for that mistake. "Fraud is when someone intentionally codes for a service and doesn't provide it. False claims and inaccuracies fall under abuse - on the civil side. There does not have to be intent for abuse to happen," says Peter Sawchuk, MD, a consultant working with MedAmerica, a physician practice management firm in Livingston, NJ.

The new observation codes may encourage more utilization of the service, and hospitals whose revenue from observation patients increases dramatically this year may find themselves scrambling to answer difficult questions about why patients were placed in this category.

Standing orders for observation are not covered under observation status, and neither are the following services:

· those in excess of 48 hours;

· those provided for the convenience of the patient, physician, or family;

· those covered by Medicare Part A;

· those provided in conjunction with therapeutic services;

· those ordered by the physician as inpatient but billed as outpatient.

When billing for observation services, hospitals should use Medicare Revenue Code 762, report the hours of care as "units," and round them to the nearest hour. Units in excess of 48 will be denied and paid only on appeal and if extraordinary circumstances are proven.

Observation services billed concurrently with treatment such as chemotherapy are not covered. If inpatient services such as complex surgery clearly requiring an overnight stay are billed as outpatient, they will be denied. Follow these guidelines:

· Observation patients must be identified prior to placement in beds.

· Criteria for transfer must be reviewed carefully prior to transfer.

· Appropriate charges as they relate to time must be developed.

· Processes for identifying and determining continued stay must be followed sufficiently before the 48-hour maximum time limit to allow arrangements for discharge to be made.

In Appendix B of the American Medical Asso ci ation's new CPT book, you'll find a summary of additions, deletions, and revisions. Get acquainted with the changes there, and then turn to page 19 of the main text for the section on Observation or Inpatient Care Services (including Admission and Discharge Services). The Health Care Financing Administration has clarified several current codes and added some. Pay special attention to the new 99234, 99235, and 99236 codes. Summarized below, they are used to report both observation and inpatient hospital care services provided to patients admitted and discharged on the same calendar date of service. When observation is initiated in the course of an encounter in another site of service, such as the emergency department, all evaluation and management services provided are considered part of the initial observation care as long as they were performed on the same date. (See chart on p. 70 comparing this year's codes with last year's.)

"I find it interesting that the codes are structured that way," says Rita A. Scichilone, MHSA, RRA, CCS, CCS-P, health information management consultant and coding and reimbursement specialist at Professional Management Midwest in Omaha, NE. "Each refers to both inpatient and outpatient services as long as they take place within one calendar date."

All three include the key components of history, exam, and medical decision making. Their use depends on the level of severity. Last year, 99217 was used only to report patient discharge services on a subsequent day following admission, along with codes 99218-99220. For one-day hospital stays, only initial hospitalization codes 99221-99223 could be reported. Now codes 99218-99220 will be used to report initial observation services only for patients held longer than one calendar date. For patients admitted and discharged on the same date, both observation and inpatient, use the new codes as follows:

· 99234 - This covers observation or inpatient hospital care for the evaluation and management of a patient, including transfer or admission and discharge on the same date. The presenting problems are of low severity. You must include these three key components:

- a detailed or comprehensive history;

- a detailed or comprehensive exam;

- medical decision making that is straightforward or of low complexity.

Counseling and/or coordination of care with other providers or agencies is provided consistent with the nature of the problem and the patient and family's needs.

· 99235 - The main distinction between this code and 99234 is that 99235 should be used for cases in which the presenting problems requiring transfer or admission are of moderate severity. This too requires the three key components.

· 99236 - Even higher on the scale of medical decision-making complexity is code 99236, because the presenting problems requiring transfer or admission are of high severity. Included are the three key components.

When a patient is admitted to the hospital from observation status on the same date, the physician should report only the initial hospital care code, and that should include the services related to observation. For patients admitted to observation or inpatient care and discharged on a different date, refer to codes 99218-99220 and 99217, or 99221-99223 and 99238-99239.

When a patient is admitted to the hospital from observation status on the same calendar date and is not discharged on that date, the initial hospitalization codes are used (99221-99223) rather than the new observation codes. The initial hospital care codes should include any services provided to the patient while in observation status.

When different calendar dates occur for observation services, the existing codes should be used, rather than the 1998 additions.

Last year, if a patient was in observation and was discharged on the same day, the physician could use only the initial day service 99218-99220 codes. It was improper to use these codes and then add another code for discharge on the same day. Also last year, if the patient stayed for two calendar days, the physician could use one of the 99218-99220 codes for the first day and then use a service coded 99217 - observation care discharge - for the second day of service. If a patient came in at 9 p.m. on day one and stayed till 8 a.m. the next morning, that service would be provided over two calendar days, and both codes could be used. But if the patient came in at 9 a.m. and went home at 8 p.m. that same day, the physician could use only the one code - initial day service.