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OBSERVATION CARE: Open Your Eyes to Separate Observation Payment

The complexity and time involved in coding separately reimbursable observation claims often means hospitals avoid the issue and lose compensation, but remembering four key components documentation, setting, direct admission, and included services will help you submit correct, efficient claims and ensure your time spent pays off.
In order to bypass the extra administrative work involved in admission to observation status, says Kate Haggerty, CCS, CCS-P, quality assurance trainer and coding internship coordinator for Lomalinda University Medical Center in Lomalinda, Calif., providers often choose between keeping patients in the emergency department (ED) or admitting them as inpatients. While easier in the short-term, this strategy costs hospitals thousands of dollars in unclaimed Medicare reimbursement.
If You Didn't Write It, You Didn't Do It
"Documentation is our biggest problem," asserts Haggerty, and the same is true at hospitals nationwide. Physicians frequently mark diagnoses as "possible" or "probable" terms that leave room for payers to doubt medical necessity and consequently deny claims. Communication between providers and coders is crucial to understanding when to bill separate observation charges, so employers must make sure providers know CMS requirements and how to chart in exact, coder-friendly language.
Look for these key elements in documentation when coding observation claims:

The purpose for transfer to observation status & a clear order for transfer


Proof that patient is under physician supervision admission, discharge, and progress notes with doctor's signature


Medical necessity


Evidence of uninterrupted monitoring


Orders & findings for necessary diagnostic services

If these details are ambiguous or missing altogether, talk to the physician.
The Right Place at the Right Time
Where

According to Valerie Rinkle, MPA, revenue cycle director for Asante Health System in Medford, Or., separate payment requires that the patient enter observation through one of four paths the ED, a clinic, critical care services, or direct admission each of which merits a different evaluation and management (E/M) code. Keep track of the patient's status: if the physician decides to admit him as an inpatient, you cannot convert that admission back to outpatient and get reimbursed for subsequent observation, Rinkle stresses. "Some recent letters from CMS to congressmen indicate that [CMS] thinks, ironically, that that can happen, so there seems to be some confusion even at CMS about that issue."
In the ED, hospitals often have too few beds to keep patients under observation, so many facilities transfer patients to another unit, such as nursing or critical care. However, since expenses in [...]

- Published on 2003-04-01