(Medicare Claims Processing Manual)

Beginning with the implementation of OPPS, non- RHC/FQHC services provided by the hospital based RHC/FQHC, including RHCs/FQHCs that are parts of CAHs or other exempted or excluded (from OPPS) hospitals, must be billed under the host hospitals provider num ber, using hospital billing procedures and bill types.  These services are not covered or paid as RHC/FQHC services but instead may be covered hospital outpatient services and paid under the applicable methodology for the hospital.  The RHC/FQHC services remain subject to the encounter rate payment methodology and are billed using the RHC/FQHC provider number, bill type and revenue codes. See the Medicare Benefit Policy Manual for a description of covered RHC/FQHC services.   See chapter 9, in this manual for billing instructions for provider based and independent RHC/FQHC services.   290 - Outpatient Observation Services  (Rev. 1, 10- 03-03) A3-3663, A3- 3112.8.D, A -01-91  290.1 - Observation Services Overview  (Rev. 1760, Issued:  06- 23-09; Effective Date:  07 -01-09; Implementation Date:  07-06-09)  Observation care is a well -defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment, that are furnished while a decision is being made regarding whether patients will require further  treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation services are commonly ordered for patients who present to the emergency department and who then require a significant period of treatment or monitoring in order to make a decision concerning their admission or discharge.  Observation services are covered only when provided by the order of a physician or another individual authorized by State licensure law and hospital staff bylaws to admit patients to the hospital or to order outpatient services.   Observation services must also be reasonable and necessary to be covered by Medicare. In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours.  In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours.  290.2 - General Billing Requirements for Observation Services  (Rev. 787, Issued: 12- 16-05, Effective: 01 -01-06, Implementation: 01- 03-06)  290.2.1 - Revenue Code Reporting  (Rev. 1760, Issued:  06- 23-09; Effective Date:  07-01-09; Implementation Date:  07-06-09)  Hospitals are required to report observation charges under the following revenue codes:   Revenue Code  Subcategory  0760 General Classification category  0762 Observation Room   Other ancillary services performed while the patient receives observation services are reported using appropriate revenue codes and HCPCS codes as applicable.   290.2.2 - Reporting Hours of Observation  (Rev.  2234, Issued: 05- 27-11, Effective: 07 -01-11, Implementation: 07- 05-11)  Observation time begins at the clock time documented in the patients medical record, which coincides with the time that observation care is initiated in accordance with a physicians order.  Hospitals should round to the nearest hour.  For example, a pati ent who began receiving observation services at 3:03 p.m. according to the nurses notes and was discharged to home at 9:45 p.m. when observation care and other outpatient services were completed, should have a 7 placed in the units field of the reported  observation HCPCS code.   General standing orders for observation services following all outpatient surgery are not recognized.  Hospitals should not report as observation care, services that are part of another Part B service, such as postoperative monitoring during a standard rec overy period (e.g., 4 -6 hours), which should be billed as recovery room services.  Similarly, in the case of patients who undergo diagnostic testing in a hospital outpatient department, routine preparation services furnished prior to the testing and recove ry afterwards are included in the payments for those diagnostic services.  Observation services should not be billed concurrently with diagnostic or therapeutic services for which active monitoring is a part of the procedure (e.g., colonoscopy, chemotherapy).  In situations where such a procedure interrupts observation services, hospitals may determine the most appropriate way to account for this time. For example, 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 services 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 time ends when all medically necessary services related to observation care are completed.  For example, this could be before discharge when the need for observation has ended, but other medically necessary services not meeting the definition of observation care are provided (in which case, the additional medically necessary services would be billed separately or included as part of the emergency department or clinic visit).  Alternatively, the end time of observation services may coincide with the time the patient is actually discharged from the hospital or admitted as an inpatient.  Observation time may include medically necessary services and follow -up care provided after the time that the physician writes the discharge order, but before the p atient is discharged.  However, reported observation time would not include the time patients remain in the hospital after treatment is finished for reasons such as waiting for transportation home.   If a period of observation spans more than 1 calendar day, all of the hours for the entire period of observation must be included on a single line and the date of service for that line is the date that observation care begins.   290.3 - Reserved  (Rev. 1882, Issued:  12- 21-09; Effective Date:  01 -01-10; Implementation Date:  01-04-10)  290.4 - Billing and Payment for Observation Services Furnished Between January 1, 2006 and December 31, 2007  (Rev. 1445, Issued:  02- 08-08; Effective:  01 -01-08; Implementation:  03 -10-08)  290.4.1 - Billing and Payment for All Hospital Observation Services Furnished Between January 1, 2006 and December 31, 2007  (Rev. 1760, Issued:  06- 23-09; Effective Date:  07 -01-09; Implementation Date:  07-06-09)  Since January 1, 2006, two G -codes have been used to report observation services and direct referral for observation care.  For claims for dates of service January 1, 2006 through December 31, 2007, the Integrated Outpatient Code Editor (I/OCE) determines whether the observation care or direct referral services are packaged or separately payable.  Thus, hospitals provide consistent coding and billing under all circumstances in which they deliver observation care.   Beginning January 1, 2006, hospitals should not report CPT codes 99217- 99220 or 99234- 99236 for observation services.  In addition, the following HCPCS codes were discontinued as of January 1, 2006:  G0244 (Observation care by facility to patient), G0263 ( Direct Admission with congestive heart failure, chest pain or asthma), and G0264 (Assessment other than congestive heart failure, chest pain, or asthma).   The three discontinued G -codes and the CPT codes that were no longer recognized were replaced by two new G -codes to be used by hospitals to report all observation services, whether separately payable or packaged, and direct referral for observation care, w hether separately payable or packaged:    G0378-  Hospital observation service, per hour; and   G0379-  Direct admission of patient for hospital observation care.   The I/OCE determines whether observation services billed as units of G0378 are separately payable under APC 0339 (Observation) or whether payment for observation services will be packaged into the payment for other services provided by the hospital in the same encounter.  Therefore, hospitals should bill HCPCS code G0378 when observation services are ordered and provided to any patient regardless of the patients condition. The units of service should equal the number of hours the patient receives observati on services.   Hospitals should report G0379 when observation services are the result of a direct referral for observation care without an associated emergency room visit, hospital outpatient clinic visit, critical care service, or hospital outpatient surgical procedure (status indicator T procedure) on the day of initiation of observation servi ces.  Hospitals should only report HCPCS code G0379 when a patient is referred directly for observation care after being seen by a physician in the community (see 290.4.2 below)   Some non- repetitive OPPS services provided on the same day by a hospital may be billed on different claims, provided that all charges associated with each procedure or service being reported are billed on the same claim with the HCPCS code which describes that service.  See chapter 1, section 50.2.2 of this manual.  It is vitally important that all of the charges that pertain to a non -repetitive, separately paid procedure or service be reported on the same claim with that procedure or service. It should als o be emphasized that this relaxation of same day billing requirements for some non- repetitive services does not apply to non- repetitive services provided on the same day as either direct referral to observation care or observation services because the OCE claim -by-claim logic cannot function properly unless all services related to the episode of observation care, including diagnostic tests, lab services, hospital clinic visits, emergency department visits, critical care services, and status indicator T proc edures, are reported on the same claim.  Additional guidance can be found in chapter 1, section 50.2.2 of this manual.  290.4.2 - Separate and Packaged Payment for Direct Referral for Observation Services Furnished Between January 1, 2006 and December 31, 2007  (Rev. 1760, Issued:  06- 23-09; Effective Date:  07 -01-09; Implementation Date:  07-06-09)  In order to receive separate payment for a direct referral for observation care (APC 0604), the claim must show:   1. Both HCPCS codes G0378 (Hourly Observation) and G0379 (Direct Admit to Observation) with the same date of service;   2. That no services with a status indicator T or V or  Critical care (APC 0617) were provided on the same day of service as HCPCS code G0379; and   3. The observation care does not qualify for separate payment under APC 0339.  Only a direct referral for observation services billed on a 13X bill type may be considered for a separate APC payment.   Separate payment is not allowed for HCPCS code G0379, direct admission to observation care, when billed with the same date of service as a hospital clinic visit, emergency room visit, critical care service, or T status procedure.   If a bill for the direct referral for observation services does not meet the three requirements listed above, then payment for the direct referral service will be packaged into payments for other separately payable services provided to the beneficiary in the same encounter.   290.4.3 - Separate and Packaged Payment for Observation Services Furnished Between January 1, 2006 and December 31, 2007  (Rev. 1760, Issued:  06- 23-09; Effective Date:  07 -01-09; Implementation Date:  07-06-09)  Separate payment may be made for observation services provided to a patient with congestive heart failure, chest pain, or asthma.  The list of ICD -9-CM diagnosis codes eligible for separate payment is reviewed annually.  Any changes in applicable ICD -9-CM diagnosis codes are included in the October quarterly update of the OPPS and also published in the annual OPPS Final Rule.  The list of qualifying ICD -9-CM diagnosis codes is also published on the OPPS Web page.   All of the following requirements must be met in order for a hospital to receive a separate APC payment for observation services through APC 0339:   1. Diagnosis Requirements   a. The beneficiary must have one of three medical conditions: congestive heart failure, chest pain, or asthma.   b. Qualifying ICD -9-CM diagnosis codes must be reported in Form Locator (FL) 76, Patient Reason for Visit, or FL 67, principal diagnosis, or both in order for the hospital to receive separate payment for APC 0339. If a qualifying ICD -9-CM diagnosis code(s)  is reported in the secondary diagnosis field, but is not reported in either the Patient Reason for Visit field (FL 76) or in the principal diagnosis field (FL 67), separate payment for APC 0339 is not allowed.  2. Observation Time   a. Observation time must be documented in the medical record.