More on condition code 44 and observation
We have received many questions on the articles we have published on the counting of hours of observation in cases where condition code 44 is used to convert an inpatient to an outpatient after UR review. A couple weeks ago I wrote about this issue following contact by a National Government Services representative, encouraging providers to contact their local MAC for more information.
I recently received some further clarification from National Government Services and wanted to update you. As you know, I’ve advised that hospitals should not be counting the time between the inpatient order and the change to outpatient status as observation – rather, I said, the observation time should begin with the change in status to outpatient when the observation order is written (assuming the appropriate level of care). NGS’ recent clarification, confirmed to me in an email exchange, is as follows:
As you are aware, the recent regulation changes resulted in many questions. We received confirmation from our CMS representative that indeed, a written order for observation status is required and that the inpatient stay can not be converted to observation time when CC 44 is applicable. If the physician (or UR committee in conjunction with the physician) deems the patient meets observation criteria after conversion to outpatient status, then observation time may be billed if the level of care is met. But observation time would begin when the order is written; and the previous (although incorrect) inpatient time could not be billed as observation. The services rendered while the patient was placed in inpatient status would be billed as outpatient services, but no observation time could be billed.
NGS is relying on their CMS central office contact for this clarification and not just their individual interpretation. Therefore, if any of you have received conflicting advice from your MAC, I would encourage you to provide them with this information and continue to use caution in billing any hours of observation without a proper order for observation services.
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Bev Leier | Jul 14, 2009 | Reply
I disagree with that. If the order is written as: “Change status to Observation from 7/14/2009 at 1345″ (the time the patient was palced in their room), thats the time you began billing for Observation services.
Judi Bouchard | Jul 14, 2009 | Reply
Because there was still some confusion around the topic, the Vermont hosptial Patient Financial Managers met with our MAC 14 POE representatives last Friday to get further clarification. We were told as long as the Observation criteria was met, we could bill the entire stay as Observation Services.
Michelle Knotts | Jul 14, 2009 | Reply
So if the order to convert to observation status and a discharge order are written at the same time, then you can not attach any observation hours to the claim? You would have to bill the entire stay as outpatient? If that is the case then how does code 44 truely help?
Rita McCarty | Jul 14, 2009 | Reply
The regulation states that the inpatient order would be treated as if it did not exist under the condition code 44. If it was determined that observation was appropriate at the time of admission–that is how I interpret this. Observation level of care was provided from the time of admission.
Looks like a question for the hospital open door forum.
“Q5. How does a hospital bill using Condition Code 44?
A5. When the hospital has determined that it may submit an outpatient claim according to the conditions
applicable to the use of Condition Code 44, the hospital should report the entire episode of care as an
outpatient encounter, as though the inpatient admission never occurred.”
Ann Powers | Jul 14, 2009 | Reply
I do have a question regarding reporting hours of observation. Could you give specific examples re: “Hospitals should not report as observation care, services that are part of another Part B, such as postoperative monitoring…similarly, in the case of patients who undergo diagnostic testing in a hospital outpatient department, routine preparation services furnished prior to testing and recovery afterwards are included in the payments for those diagnostic services. Observation services should not be billed concurrently with dagnostic or therapeutic services for which … Could you give specific examples of these procedures other than colonoscopy, chemotherapy, or stress tests? Thank you
Connie Susich | Jul 15, 2009 | Reply
So this would assume the recent revised MAANUAL language: “OBV begins when the services are initiated per the order of the physician” would be null and void if OBV from admit is the physician (and UM physicians)intent! This, despite the fact that CMS emphasizes physician intent is primary. This would furhter assume that providers are encouraged to utilize the process and inherent resources to complete Condition 44 only to categorize an IP LOC that (per all internal parties)is incorrect and does not meet acute LOC?? This is ludicrous and over zealous; it taints accurate data (so coveted by CMS), it is inconsistent w/CMS language and misrepressents the basic tenets of healthcare. Missed determinations by physicians who are willing to acquiese should be as they order! Who are you and exactly what is your state-by-state role?
Anita Smith | Jul 16, 2009 | Reply
Could we get more clarification on the TOB that should be used? Also if our UR department reviews and finds the stay does not meet inpt criteria and then we review this info with the Dr. If he agrees and documents such would this be sufficient?
Kimberly Hoy | Jul 17, 2009 | Reply
I know some of our posters have disagreed with earlier posts on this issue and with the clarification we got from National Government Services provided in this post. I would like to reiterate that the italicized portion of this post came directly from National Government Services, the MAC for jurisdiction 8 (Wisconsin and Indiana) and jurisdiction 13 (New York and Connecticut). They originally also wrote to us disagreeing with the position in earlier posts, and we offered to publish their official position. The italicized portion above was forward to us in response to that request, after they consulted their “CMS representative”. Again we published this as guidance from NGS, in support of prior posts I had made on this issue, and encouraged providers in other jurisdictions to clarify with their MACs.
Due to the controversy of this issue, I planned to ask a question yesterday on the Hospital Open Door Forum. Unfortunately, due to the lengthy discussion on the CY2010 proposed OPPS rule, there was limited time for questions and they only took 4 questions from the question queue. I am now forwarding the question to an individual at CMS who may be able to offer an official CMS position on this issue. In the mean time, I continue to be concerned that written guidance (outlined below) and the clarification received by NGS from CMS central office both indicate that time prior to the change in status is not billable as observation time. I continue to recommend caution billing hours of observation before the order is changed until further clarification can be received.
I also want to respond to another question in the blog that might help put this discussion in perspective. One responder questioned the utility of condition code 44 if the inpatient time could not be converted to observation time. The benefit is that the entire case is treated as outpatient, which means all services are billed for under the OPPS. If the provider could not do this, they are left with a medically unnecessary inpatient admission and are only able to bill very limited services under the 012X Part B for Inpatient billing methodology. Only certain diagnostic tests, surgical dressings, prosthetic devices and therapies are paid on a 012X TOB.
For example, if an inappropriate inpatient admission resulted from an ED visit that lead to a minor surgical procedure and condition code 44 were not followed, the provider would only be able to submit a 012X TOB and would not be paid for the ED visit or the surgery. They would only be paid for lab tests, xrays and the surgical dressing. However, using condition code 44, they would bill and be paid under OPPS for the ED visit, the surgery, payable drugs, labs, and x-rays as though the case was always outpatient. Interestingly, outpatient observation is packaged and no payment is made for it regardless of the number of hours, although more than 8 hours could lead to increased payment for Extended Assessment and Management if other criteria for that composite APC are met (note: in this example the surgical procedure prevents increased payment as a composite). Therefore, the importance of condition code 44 has never been about counting observation hours which only makes a minor reimbursement impact in a minority of cases, but rather is about billing the other services as outpatient services for payment under OPPS rather than lose reimbursement for them. This is why CMS emphasizes that the entire case is treated as outpatient.
I think the root of the controversy related to this issue is that condition code 44 guidance says bill as outpatient and I think people have assumed that an outpatient in a bed is an observation patient so that meant convert to observation status. However, the recent manual language change from the term observation status to observation service was intended, according to the CMS rep I spoke with, to avoid that misunderstanding, and the changes are clear that an order is required before you start counting time for observation.
If I receive further clarification on this issue, I will certainly include it in a future Medicare Mentor Blog. In the meantime as stated above, I believe there is good reason to use caution in carefully billing hours of observation prior to having the written order for observation services.
NOTE: As discussed above, the following is an excerpt from an email with NGS, in which I outline in more detail the written guidance on this issue:
I respectfully disagree that CMS written guidance says to convert to or bill observation. There is no written guidance that instructs providers to convert hours spent in inpatient status to hours of observation services or to bill for observation services for this period of time. The written guidance actually says, as you note, to treat the entire episode as outpatient. Converting to outpatient status is not the same thing as converting to observation services. After CMS’ most recent manual changes related to observation and condition code 44, I wrote a more recent article in which I explained how those changes support observation being a services that requires an order to be covered and billed. I am attaching a link for the article below. Specifically, both the Claims Processing Manual Chapter 4, Section 290.1 and the Benefit Policy Manual Chapter 6, Section 20.6 continues to say that “Observation services are covered only when provided by the order of a physician”. Additionally, recently revised Claims Processing Manual Chapter 4, Section 290.5.1, effective July 1st, specifically states that observation time begins when “observation services are initiated in accordance with a physician’s order for observation services” and Section 290.4.1 states “…hospitals should bill HCPCS code G0378 when observation services are ordered and provided…” I believe these sections support the idea that observation is a service that requires an order to be covered and billed. Even though the case can be converted to outpatient for the entire episode, there is simply no order for observation until that order is written after the status is changed to outpatient.
Charlie | Jul 23, 2009 | Reply
I agree with the previous post that sites the regulation “the hospital should report the entire episode of care as an outpatient encounter, as though the inpatient admission never occurred”. While I also agree that under normal circumstances services cannot be billed without an order, Code 44 is telling CMS that these are not normal circumstances. The inpatient order was incorrect, here is the correct order and CMS is indicating that they will accept the corrected order, essentially backdated,(’as though the inpatient admission never occured’) in this case because all of the conditions for Code 44 have been met. This is my interpretation. CMS understands that we need to be paid for the medically appropriate care that we render to their benficiaries and occasionally stuff happens. They do not expect the Code 44 to be reported very frequently, as they state in the regulation.
Further, the observation hours do matter in non-OPPS states like Maryland because while we have to follow the OPPS billing rules, we are not paid by the OPPS methodology, and not being able to bill and get paid for those hours is a big deal.
Judith Kares | Jul 23, 2009 | Reply
I would like to add my support to Kimberly’s comments, particularly as to the limited difference converting those inpatient hours to “observation” will have on the hospital’s bottom line for services provided during the inpatient stay. As Kimberly noted, even when there is an initial physician order for outpatient observation services, only in relatively rare circumstances will the hospital receive any additional money for the “observation” services.
Observation services are generally packaged–that is, there is no separate payment for “observation.” There is, however, separate payment for other separately payable ancillary services that are provided during the period of observation care, assuming that the Medicare coverage guidelines are met for those otherwise separately payable ancillary services.
If applicable criteria are met, however, there may be additional payment under the Level I or Level II Extended Assessment and Management (EAM) composite APCs (8002 and 8003, respectively) when the hospital reports at least 8 hours of medically necessary observation care in conjunction with a high level clinic (99205 or 99215), ER (99284, 22985 or G0384) or critical care (99291) visit.
The additional reimbursement under one of the EAM composite APCs is only available if there is no other procedure provided by the hospital for that patient on the day of or the day before the initiation of observation services that has a status indicator of “T.”
Services with status indicator “T” are generally separately payable under the OPPS and include, but are not limited to, surgical services, colonoscopies and cardiac catheterizations. When a “T” procedure has been performed on the day of or the day before the beginning of observation services, the observation services are packaged into that “T” procedure. That is, there is no separate payment made for the observation services.
Even when a hospital has provided outpatient services that qualify for EAM composite payment, the additional amount they are eligible to receive ranges from a low of $200 to a high of $456, depending upon the level of visit provided in conjunction with the 8 or more hours of observation. In reality, the majority of the reimbursement a hospital receives for services provided during a period of observation is for the separately payable ancillary services provided, not for the observation services.
When a hospital follows the CC 44 change of status process, it is able to convert the inpatient stay to outpatient care. Presumably, that means that the hospital can go ahead and bill the services provided to Medicare during that inpatient stay on an outpatient 13X TOB, which will then be subject to all of the coverage criteria, edits, pricers, etc., that would otherwise apply to those services if they had actually been provided in the outpatient setting.
In any event, the primary reimbursement that the hospital receives for a CC 44 change of status claim will be for the ancillary services that were provided in the inpatient setting, even in those circumstances where it is possible to qualify the inpatient stay (or a portion of the inpatient stay) as “observation.”
suzanne rodriguez | Jul 28, 2009 | Reply
I would also like more information on this issue.
suzanne rodriguez | Jul 28, 2009 | Reply
I would also like more information on regarding reporting hours of observation. How do you determine which dagnostic or therapeutic services to exclude?
Jane Hamilton, RN | Jul 30, 2009 | Reply
I understand the explanations above, but one subject I did not see addressed was: Suppose the MD wrote ” to be in observation” in his admitting progress notes but a nurse wrote the admitting orders and put “admit to services of…? The pt clearly meets OBS but does not meet INPT, can that note be an object of consideration of true status/services?
Carol Kendall | Aug 18, 2009 | Reply
We were able to ask our FI, Palmetto GBA, about when to start counting observation hours in situations where an account was changed from inpatient to observation using condition code 44. We were told that we should start counting observation hours according to the date/time of the original inpatient order. I am trying to get that in writing. Of course, this will only help organizations whose MAC/FI is Palmetto GBA.
The issue of which hours to remove seems unclear to me. In addition to the well-known examples of chemo and colonoscopy, we also do not count hours during blood transfusion or dialysis (we do emergency outpt dialysis only – not an ESRD facility). I would be very interested in comments from others re how they count observation hours.
Has anyone ever been questioned re their observation hours calculation method? Would a QIO have done that in the past?
I know that we are all concerned about RAC and other retrospective reviews. In terms of the RAC, it seems highly unlikely that this would be an approved topic. The only real opportunity to return $$ to the Medicare Trust Fund would be in cases that meet all of the requirements for obs reimbursement AND where the LOS ends up being less than 8 hours. Sounds like looking for needles in haystacks to me. That being said, we certainly want to do this correctly – but it is difficult to do that without a precise set of rules.
Michael Iarrobino | Aug 19, 2009 | Reply
Carol — Very interesting. If it’s not too much trouble, please let us know if Palmetto provides that interpretation to you in writing.
Beverly Schnobrich | Aug 25, 2009 | Reply
Love to see Palmetto’s determination in writing as well.
Kay Larsen | Sep 2, 2009 | Reply
Carol, I, too, would be very interested in what Palmetto provides. Will you share, please? Thanks!
Marvin Mitchell | Sep 17, 2009 | Reply
I agree that CC 44 is meant only as a signal that patient type was changed from admission to observation. Ms. Hoy makes way to much of the clear language of Claims Processing Chpt 4, 290.4.3 (2). The time observation begins is when the head in is the bed (documeneted typically in the nurses notes as this is when and where care begins). The time and date of the MD order is not inferred as important, only that an order exists. To say otherwise is splitting hairs. My hospital has been paid all hours going back to the time the stay began under an inpatint admission order. So where’s the issue?
MH | Sep 22, 2009 | Reply
Did you ever receive any replies? I have the same question.
Kathy | Sep 29, 2009 | Reply
I need clarification regarding the CMS issued Transmittal 1803, specifically related to when our hospital should begin billing hours for OBS patients.
If a pt. was admitted on Sun. @ noon as IP, but on Mon. @ 10 am, a CM notes that pt. doesn’t meet IP InterQual criteria, nor any evidence based medical practice requiring pt. to be in an IP setting. Assuming all appropriate measures have been made to successfully change patient’s status from IP to OBS; am I correct that we would start billing OBS hours when the attending physician (and 1 UR committee physician)both sign chart regarding the status change from IP to OBS and a new order is obtained by the attending physician (or PA) for OBS services- likely at 11 AM on Monday? I understand that hours are not included for major surgeries and other procedures, e.g., colonoscopy. If I am incorrect, please advise.
Also, regarding hemodialysis, what if our hospital contracts out for techs to perform those services and our nurses provide all care- hourly rounds, repositioning, bedpans, pain meds, code blues, administration of any post hemo IV meds, etc. Do we still have subtract these hours from the OBS hours provided to the patient?
Thank you in advance for clarifying this for me. I think I was clear until I read the other comments, which I believe I have also read in other professional publication.
HELP!
Lisa | Oct 5, 2009 | Reply
When a pt has a qualified obs stay and ends up being admitted to the hospital, we will have an obs rev code and a room/board rev code on the same day. Do we need to remove the obs charges for the day the patient is admitted? or will the obs charges become a line item denial?
Pat Reiter | Oct 30, 2009 | Reply
Thank you for addressing these issues. My question is when a patient is in the ED and the ED doctor has discussed the care with the attending physician and a determination has been made to place the patient in an observation status, does the observation time start from when the decison was made by the attending physician or the time the patient was placed in an observation bed?
Carol Kendall | Nov 12, 2009 | Reply
I just wanted to let everyone know that I have not forgotten about posting the reply from Palmetto GBA on this question. There was supposeds to be an Ask the Contractor call today, and I was going to call with this question as another attempt to get clarification. Unfortunately, the call was canceled. Palmetto GBA said that they would accept FAXed questions (which I did) and would answer them in their daily emails. I will forward the response as soon as I receive it.
I continue to see what appears to be conflicting information. All of this being said, keep in mind that payment is at risk ONLY if the patient is in “true” obs status for less than 8 hours, but 8 or more hours were counted. Most of our obs stays are 15+ hours – so even with carving out some hours, the total would undoubtedly be 8 or more. We all want to report hours correctly, but until CMS is clearer in their definitions, who is to say what is/is not correct? This is very similar to the mess re physician supervision, in which CMS “presumed” what was happening without providing clear expectations.
It is interesting that observation is in the OIG Work Plan for 2010. I listened to a webinar on this subject where the speakers were OIG staff members. They said that this topic came up from Congressional staffers who had received complaints from constituents about observation vs. inpatient status, and specifically about getting billed for self-admin drugs. Concerns were raised about unclear rules. They could not say exactly would be evaulated, because the review has not started yet. How interesting that this has now become a political issue!
Sorry this is just a long post. What an annoying topic, esp. since the reimbursement is so low.