Physician's Coding Strategist-How are you using your observation codes?

Do an analysis to pinpoint problem areas

When you are looking at your ambulatory payment classification (APC) preparation, you might want to check the utilization of your observation codes and how you bill for chemotherapy.

First, do an analysis to determine which physicians are always ordering observation, advises Danelle Kelly, RN, CPC, CPC-H, a consultant with D J Kelly & Associates in Schaumburg, IL. What type of diagnoses are most common for these physicians?

"I like to give this example: What if you have 10 cardiologists on staff and two of them are always admitting patients for observation?" she asks. "Why don't the other eight? How many truly become inpatient? How many go home? It's important to do an analysis of what your observation usage is now."

Medicare's reimbursement for observation is up to 48 hours, Kelly says. "They prefer 24, but they do say you can do 48."

The problem is that many observation claims do not meet the criteria for reimbursement by Medicare. "That's where we are seeing a lot of abuses," she says.

To receive reimbursement for observation, Medicare requires the following:

• Providers must show active observation and evaluation. "You can't write 'condition stable, vitals per routine' and then turn around and order a.m. labs for the next day," Kelly says.

• Providers cannot show an intent to keep the patient overnight.

• Providers cannot use observation for chemotherapy and blood transfusions.

• Providers must have post-surgery patients in recovery for four to six hours before making the decision to admit them to observation. "You can't decide two hours into your recovery period," she explains.

(Those criteria are general rules. Check with your local fiscal intermediary or carrier for more details.)

Use the J code

As for reimbursement for chemotherapy, providers should have all of their chemotherapies "J-coded" according to the dosage amount, she says. "Make sure you are billing in the same amount as the J code. That's probably going to be different than the amount you're going to be dispensing."

The providers will have to bill in units, Kelly explains. "For example, the J code might be 30 mg, but you are giving 90 mg of the drug. If you don't bill three units of the 30, you will lose two-thirds of your reimbursement if you bill the total amount at once. You need to do it according to the description in the HCPCS [Health Care Financing Adminis tra tion's common procedure coding system] book."