February 15, 2010 | | Comments 17
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Carving out procedure time from observation hours

Last week was a very light week for any issuances from the Federal Government – most likely due to the weather related closures in Washington, D.C. and Baltimore.  In light of that, let’s take a look at a Frequently Asked Question (FAQ) that we reported in our February 2 issue of the Medicare Weekly Update.

Facilities continue to work on developing efficient processes for carving out procedure time from billable observation hours. Some procedures are obvious and the documentation can clearly support this process. This includes services such as endoscopy, surgery, chemotherapy, and transfusions. In Chapter 4 of the Medicare Claims Processing Manual (Section 290.2.2), it states that “observation services should not be billed concurrently with diagnostic or therapeutic services for which active monitoring is a part of the procedure.” In these situations, hospitals should add the times together for each period of observation that is supported by the documented beginning and ending times to determine the total number of units reported under HCPCS code G0378 (observation per hour). All of the time related to the procedure, including pre- and post-operative preparation, monitoring and recovery, is inclusive in the procedure itself and should not be billed separately.

Other procedures such as MRIs and CTs with contrast and therapeutic drug infusions are not quite as clear. On January 27, CMS responded with FAQ 9974 regarding a question about drug administration services and observation. CMS replied that the hospital must determine if active monitoring is a part of the time for the drug administration services for that patient. This determination may depend on the type of drug administration, the drug itself or the needs of the patient. The FAQ goes on to compare a complex and a routine drug infusion using the same drug HCPCS code – one situation requiring active monitoring and not in the other. It also advises hospitals to check with their Medicare contractors with questions about specific clinical situations. The FAQ response seems to correlate with a similar question that was asked on the October 2009 Hospital Open Door Forum call.

Hospitals need to increase their own “active monitoring” of billable observation hours, making sure that procedure times and actively monitored drug administration times are deducted from the total units of observation hours. Hospitals that rely on their information systems to automatically calculate observation hours based on changing the patient’s service type to and discharging from observation are at particular risk for including procedures requiring active monitoring in their total time. Unfortunately, all observation services will most likely need to be reviewed using clinical staff and a manual process based on documentation times, clinical criteria and individual patient needs  – once again, adding to the “costs” of providing observation care and delaying billing of the services.

Note: In the FAQ #9974 response, CMS incorrectly stated Chapter 6, section 290.2.2 of the Medicare Claims Processing Manual. The chapter that should be cited is Chapter 4 and the section remains the same.

Entry Information

Filed Under: Coding


Debbie Mackaman About the Author:

Debbie is an instructor for HCPro’s Medicare Boot Camp®—Hospital Version. She has over 18 years of experience in the healthcare industry, including both inpatient and outpatient Prospective Payment Systems (IPPS, OPPS) and Critical Access Hospital (CAH) coding and reimbursement issues. She most recently held the position of the Compliance Officer and Director of Health Information Services for a healthcare system.

She consults with hospitals, physicians and other healthcare providers on a wide range of coding and billing issues. She assists in the development of compliance programs, with a focus on high risk areas including RAC topics, documentation improvement, coding and billing audits, and chargemaster maintenance.

She is an active participant with state and national organizations and task forces on coding and payment policies, privacy and continuing education. She is accredited as a Registered Health Information Administrator (RHIA) and a Certified Healthcare Compliance Officer (CHCO). She is a member of the American Health Information Management Association (AHIMA) and is the past president of the Montana Health Information Management Association (MHIMA).

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  2. Debbie Mackaman

    According to the Medicare Benefit Policy Manual, Chapter 6, Section 20.6 CMS states that in only rare and exceptional cases so reasonable and necessary outpatient observation services span more than 48 hours. Some FIs/MACs have edits in place that will reject hours greater than 48 hours on one claim for one episode of observation. With that said and using your scenario assuming that the patient had not signed an ABN for the hours beyond the covered 48, you could bill the charges for the additional 18 hours of observation in the non-covered column to be written off by the hospital or the hospital could choose not to bill the non-covered hours to the FI/MAC at all.

  3. I understand the carving out of specific services provided during an observation stay; but my question is–when a patient is in observation status, is it against policy/billing rules, etc., to bill for a physicial therapy evaluation if a physician orders one? Our FI said a PT evaluation and services provided are not payable for patients in observation status. We know when the eval and pt services are being done–the time is carved out from billable observation hours. Has anyone else experienced this??

  4. Debbie Mackaman

    I am not aware of any CMS guidance that says therapy cannot be performed when the patient is in observation. In fact, it could be clinically appropriate based on the patient’s diagnosis and appropriate discharge. An example would be an orthopedic injury for which PT was required for crutch training prior to discharge. Noridian Administrative Services, a J-3 MAC, published an Ask the Contractor document on observation earlier this year that stated just the opposite of your FI:
    Q19. Would the hours a patient is receiving therapy (PT, OT, or SLP) be subtracted from observation?
    A19. PT, OT, and SLP include direct monitoring of the patient. Therefore, hours of therapy services should not be reported as observation hours.

  5. Would the time that a patient spends receiving a Stress Echo be subtracted from observation? We are struggling at our facility with this. It appears as if some procedures are clear and some are not.

  6. Debbie Mackaman

    According to CMS rules, if the procedure requires “active monitoring”, the procedure time including the prep time and recovery time should be subtracted from the observation hours. Basically, you cannot bill concurrently for observation hours and a monitored procedure. See Frequently Asked Question (FAQ) #9974 for a related discussion of this concept.

  7. How should a facility go about creating a list of procedures that should be “carved out” of total observation hours? Another question would be how to establish the amount of time associated with each procedure since this varies greatly by patient.

  8. I have patient’s that have had PT for 20 minutes or sometime less. When the total time is less than one hour, do you carve out at least one hour?

  9. Debbie Mackaman

    According to CMS,a facility should add up all of the time that accumulates for procedures that are considered to be “actively monitored” during observation and subtract that total time from the concurrent observation hours. The regulations also state that observation hours must be rounded to the nearest hour. Basically, if the observaton time is less than 31 minutes during that hour increment, you would not be able to bill for that observation hour. Conversely, if the observation time is 31 minutes – 60 minutes after subtracting the procedure time, you would be able to bill for one hour of observation. For more information, see the Medicare Claims Processing Manual, Chapter 4, Section 290.2.2 for an explanation and example of rounding observation hours.

  10. It appears that each facility must define those procedures which they consider to require “active monitoring”. Basically, if there is a nurse or tech in attendance with the patient, is this considered active monitoring? For example: MRI, CT w/contrast, chest xray, stress test, ultrasound of abdomen…all of these will have a nurse or tech w/the patient at the time of the procedure. Would Medicare consider all these carve-out procedures? Thanks.

  11. Debbie Mackaman

    Each FI/MAC seems to have their own interpretation of what procedures are considered to be actively monitored based on minimal CMS guidance. One MAC has stated that “a service such as an x-ray or laboratory blood draw would not interrupt an observation service.” Without a definite list of services that meets CMS’ definition of active monitoring, I would suggest that you contact your FI/MAC for some written guidance to help your facility identify your “carve-out” procedures.

  12. Can observation hours be billed post endoscopy?

  13. Are we required to perform the observation carve outs on Managed Medicare Plans?

  14. We are a Critical Access Hospital and we are billing G0378 with 99284 25 for example and we are getting edits from SSI that states we cannot use more than 1 unit for G0378 – Does MCR want us to use 99218?? thanks.

  15. Debbie Mackaman

    I am not familiar with SSI edits; however, the Medicare Claims Processing Manual, Chapter 4, Section 290 describes how to bill G0378 Observation as a per hour service according to the HCPCS code description. Each hour of medically necessary observation should be billed regardless of being a CAH or a PPS hospital. 99218 should not be used for hospital billing. G0379 Direct Admission has an MUE = 1 and should only be used with G0378 if the direct referral is from a free standing clinic (not your provider based dept/clinic or your ER). Double check the edit to make sure that it is for G0378 instead of G0379. If the edit is set to G0378=1 than you will need to contact SSI to discuss that the edit may be set up incorrectly.

  16. Can you bill for procedures (i.e. CT Scan) if the patient has the procedure during the post 48 hours of stay (i.e. day 3 or 4 of observation services stay) even if you aren’t going to “bill” (separate line item of non-covered services) for “observation services” during that particular time (i.e. day 3 or 4)? If so, do you have any references so that we can show our financial department- they state to us that we cannot bill anything (i.e. procedures) and we don’t think that is correct.

  17. Debbie Mackaman

    Outpatient services are paid on a per line item and the date of service. As long as you have an order for the other outpatient services and they are medically necessary as shown in the medical record documentation, you would be able to bill for those services. I am not aware of any CMS regulation that says that any service provided after 48 hours of observation would be considered non-covered because in reality you may have those circumstances even though “observation beyond 48 hours is rare and exceptional” per CMS.

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