Outpatient observation services are covered only when provided by order of a physician or another individual authorized by state licensure and hospital staff bylaws to admit patients to the hospital or to order outpatient tests.
Do not order observation services for a future elective surgery or outpatient surgery cases. Neither pre-operative nor post-operative services meet the definition of observation care.
Observation services must be patient specific and not part of the facility’s standard operating procedures. If observation is required after an outpatient surgical procedure and the patient meets criteria for observation monitoring after the standard surgical recovery period, you can place the patient in outpatient observation; however, the observation care will be bundled into payment for the surgical procedure.
Observation services are not considered medically necessary when the patient’s current medical condition does not warrant observation, or when there is not an expectation of significant deterioration in the patient’s medical condition in the near future.
Outpatient; released when the physician determines observation is no longer medically necessary.
Physician’s order is required.
Lack of documentation can lead to claim errors and payment retractions.
An order simply documented as “admit” will be treated as an inpatient admission. A clearly worded order such as “inpatient admission” or “place patient in outpatient observation” will ensure appropriate patient care and prevent hospital billing errors.
Note: It is imperative that there is a continued focus on lowering the Comprehensive Error Rate Testing rate and facility involvement is a key component to this goal.
All patients receiving services in hospitals and clinical access hospitals (CAHs) must receive a Medicare outpatient observation notice (MOON) no later than 36 hours after observation services as an outpatient begin.
The MOON informs patients, who receive observation services for more than 24 hours, of the following:
They are outpatients receiving observation services and not inpatients.
Reasons for such status.
Hospitals and CAHs may deliver the MOON to a patient receiving observation services as an outpatient before the patient has received more than 24 hours of observation services but no later than 36 hours after observation services begin.
Not expected to exceed 48 hours in duration.
Greater than 48 hours in duration are seen as rare and exceptional cases.
Cover up to 72 hours if medically necessary.
Observation services rendered by non-OPPS providers beyond 72 hours is considered medically unlikely and should be submitted as non-covered on a second line of service (i.e., one revenue code line with 72 hours of covered observation units and charges, a second revenue code line with hours exceeding medically necessary observation services with non-covered units and charges).
Follow the appeals process to have observation services exceeding 72 hours considered for payment.
Observation services are outpatient services.
Type of bill 13X or 85X
Revenue code 0762
Healthcare Common Procedure Coding System (HCPCS) code
G0378: Hospital observation service, per hour. Report units of hours spent in observation (rounded to the nearest hour)
G0379: Direct admission of patient for hospital observation care
Report all services rendered while the patient is in observation with the appropriate revenue codes, HCPCS/Current Procedure Terminology codes, and diagnosis codes
Observation services should not be billed along with diagnostic or therapeutic services for which active monitoring is a part of the procedure. In situations where such a procedure interrupts observation services, hospitals may determine the most appropriate way to account for this time.
A hospital may record for each period of observation services, the beginning and ending times, during the hospital outpatient encounter and add the length of time for the periods of observation together to reach the total number of units reported on the claim for the hourly observation services HCPCS code G0378 (hospital observation service, per hour). A hospital may also deduct the average length of time of the interrupting procedure, from the total duration of time that the patient receives observation services.
Observation may span multiple calendar dates.
When outpatient observation services span more than one (1) calendar day:
The total accumulation of observation time for the entire period of observation must be included on a single line
The date of service would be the date observation care began
Note: For non-OPPS providers, if the total hours of observation exceed 72, a second line of observation should be billed and the additional hours, which are considered medically unlikely, should be billed as non-covered.
In the observation claim example below, notice that observation care spans two (2) calendar days.
The statement from and through dates will reflect the entire outpatient episode of care, in this instance 10/01/2020 through 10/02/2020.
The patient is placed in observation from 4:00PM on 10/01/2020 and remained until discharge at 6:00PM on 10/02/2020 for a total of 26 hours of observation time.
Report one line item with revenue code 0762, HCPCS code G0378, line item date of service 10/01/2020 and 26 units.
The total accumulation of observation time is included on one line with the date observation care began.
Observation services are provided on an outpatient basis.
Should be billed according to observation billing guidelines.
All hours of observation up to 72 hours should be submitted on a single line.
The date of service being the date the order for observation was written.
Orders for observation services are not considered to be valid inpatient admission levels of care orders.
When billing observation services, we expect the charges associated with those services to be billed as outpatient level of care services.
Observation ends when all clinical or medical interventions have been completed, including follow-up care furnished by hospital staff and physicians that may take place after a physician has ordered the patient be discharged home or admitted as an inpatient.
If the patient is admitted as an inpatient after observation, an order to admit is required.
Additionally, if the patient is discharged from observation and subsequently admitted as an inpatient, all services provided to the patient while in observation are included on the inpatient claim.
Since observation is considered an outpatient hospital service performed within 3 days of an inpatient admission, the services follow the 3-day/1-day payment window.