More on condition code 44 and observation
UPDATE: Please read our more recent article on this topic for updated information.
This is an especially light week of publications from CMS, so I thought I would update you a bit on an issue we have included in recent postings, which has resulted in a number of questions from readers. In two recent articles related to use of condition code 44, we indicated that, based on the written manuals, it appeared inappropriate to report the hours from the beginning of the stay as observation when converting the stay to outpatient.
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Our understanding is based on the Medicare Claims Processing Manual, Chapter 1 § 50.3.2 instruction to treat the entire episode of care as outpatient when condition code 44 applies. Converting the entire episode to outpatient would mean billing the outpatient services provided with HCPCS codes for payment under the OPPS. Observation is an outpatient service and one of the potentially services billable for the stay; however, there would be no order for observation services at the beginning of the stay because the patient was initially an inpatient that was converted later to outpatient. Additionally, new guidance added recently to the Claims Processing Manual, Chapter 4 § 290.2.2, effective July 1, 2009, states that time for observation begins when “observation care is initiated in accordance with a physician’s order”.
Subsequent to the articles, I received correspondence from a representative of Health Care Excel, the Quality Improvement Organization for Indiana, who had been in contact related to this issue with National Government Services, the Medicare Administrative Contractor (MAC) for Jurisdictions 8 (which includes Indiana) and 13. Subsequently, I also received an email from the representative from NGS. Both emails seemed to indicate that they interpreted treating the entire episode as outpatient to mean the provider should bill for observation for the entire episode. I wrote to the NGS representative to ensure I understood her email correctly, confirming that it was NGS’ official position and seeking permission to reprint that interpretation of the written manuals. Unfortunately, I have not received a reply from her.
With this in mind, and considering that billing the additional hours would be substantially in the provider’s favor, I would encourage providers to contact their local MACs for their interpretation related to this issue. I also plan to ask CMS central office for their understanding of these issues on the next Hospital Open Door Forum call, and ask that they put in writing a more clear interpretation of how to treat this time for billing purposes. In the mean time, in the absence of further written guidance from the MAC for their jurisdiction or CMS Central Office, hospitals should use caution billing hours of observation for time the patient was originally ordered to be in inpatient status. Hospitals may be subject to audits and denials based on billing for observation in the absence of an order for the service of observation at that time.
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