(Medicare Claims Processing Manual)

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.   b. Hospital billing for observation services begins at the clock time documented in the patients medical record, which coincides with the time that observation services are initiated in accordance with a physicians order for observation services.   c. A beneficiary's time receiving observation services (and hospital billing) 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 released or admitted as an inpatient.  d. The number of units reported with HCPCS code G0378 must equal or exceed 8 hours.  3. Additional Hospital Services   a. The claim for observation services must include one of the following services in addition to the reported observation services.  The additional services listed below must have a line item date of service on the same day or the day before the date report ed for observation:    An emergency department visit (APC 0609, 0613, 0614, 0615, 0616) or   A clinic visit (APC 0604, 0605, 0606, 0607, 0608); or   Critical care (APC 0617); or   Direct referral for observation care reported with HCPCS code G0379 (APC 0604); must be reported on the same date of service as the date reported for observation services.   b. No procedure with a T status indicator can be reported on the same day or day before observation care is provided.  4. Physician Evaluation  a. The beneficiary must be in the care of a physician during the period of observation, as documented in the medical record by outpatient registration, discharge, and other appropriate progress notes that are timed, written, and signed by the physician.  b. The medical record must include documentation that the physician explicitly assessed patient risk to determine that the beneficiary would benefit from observation care.   Only observation services that are billed on a 13X bill type may be considered for a separate APC payment.   Hospitals should bill all of the other services associated with the observation care, including direct referral for observation, hospital clinic visits, emergency room visits, critical care services, and T status procedures, on the same claim so that the claims processing logic may appropriately determine the payment status (either packaged or separately payable) of HCPCS codes G0378 and G0379.  If a bill for observation care does not meet all of the requirements listed above, then payment for the observation care will be packaged into payments for other separately payable services provided to the beneficiary in the same encounter.   290.5 - Billing and Payment for Observation Services Furnished on or After January 1, 2008 (Rev. 1445, Issued:  02- 08-08; Effective:  01 -01-08; Implementation:  03 -10-08)  290.5.1 - Billing and Payment for Observation Services Furnished Between January 1, 2008 and December 31, 2015  (Rev. 3425, Issued: 12- 18-15, Effective: 01 -01-16, Implementation: 01 -04-16)  Observation services are reported using HCPCS code G0378 (Hospital observation service, per hour).  Beginning January 1, 2008, HCPCS code G0378 for hourly observation services is assigned status indicator N, signifying that its payment is always packaged.  No separate payment is made for observation services reported with HCPCS code G0378, and APC 0339 is deleted as of January 1, 2008.  In most circumstances, observation services are supportive and ancillary to the other services provided to a patient.  From January 1, 2014 through December 31, 2015, in certain circumstances when observation care was billed in conjunction with a clinic visit, high level Type A emergency department visit (Level 4 or 5), high level Type B emergency department visit (Level 5), critical care services, or a direct referral as an integral part of a patients extended encounter of care, payment may be made for the entire extended care encounter through APC 8009 (Extended Assessment and Management Composite) when certain criteria are met.  Prior to January 1, 2014, in certain circumstances when observation care was billed in conjunction with a high level clinic visit (Level 5), high level Type A emergency department visit (Level 4 or 5), high level Type B emergency department visit (Level 5), critical care services, or a direct referral as an integral part of a patients extended encounter of care, payment could be made for the entire extended care encounter through one of two composite APCs (APCs 8002 and 8003) when certain criteria w ere met. APCs 8002 and 8003 are deleted as of January 1, 2014 and APC 8009 is deleted as of January 1, 2016. For information about payment for extended assessment and management composite APC, see 10.2.1 (Composite APCs) of this chapter.   There is no limitation on diagnosis for payment of APC 8009; however, composite APC payment will not be made when observation services are reported in association with a surgical procedure (T status procedure) or the hours of observation care reported are less than 8.  The I/OCE evaluates every claim received to determine if payment through a composite APC is appropriate.  If payment through a composite APC is inappropriate, the I/OCE, in conjunction with the Pricer, determines the appropriate status indica tor, APC, and payment for every code on a claim.   All of the following requirements must be met in order for a hospital to receive an APC payment for an extended assessment and management composite APC:   1.  Observation Time   a. Observation time must be documented in the medical record.   b. Hospital billing for observation services begins at the clock time documented in the patients medical record, which coincides with the time that observation services are initiated in accordance with a physicians order for observation services.   c. A beneficiary's time receiving observation services (and hospital billing) 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 released or admitted as an inpatient.  d. The number of units reported with HCPCS code G0378 must equal or exceed 8 hours.  2.  Additional Hospital Services   a. The claim for observation services must include one of the following services in addition to the reported observation services.  The additional services listed below must have a line item date of service on the same day or the day before the date report ed for observation:    A Type A or B emergency department visit (CPT codes 99284 or 99285 or HCPCS code G0384); or    A clinic visit (HCPCS code G0463 beginning January 1, 2014; CPT code 99205 or 99215 prior to January 1, 2014); or    Critical care (CPT code 99291); or    Direct referral for observation care reported with HCPCS code G0379 (APC 0633) must be reported on the same date of service as the date reported for observation services.   b. No procedure with a T status indicator can be reported on the same day or day before observation care is provided.  3.  Physician Evaluation  a. The beneficiary must be in the care of a physician during the period of observation, as documented in the medical record by outpatient registration, discharge, and other appropriate progress notes that are timed, written, and signed by the physician.  b. The medical record must include documentation that the physician explicitly assessed patient risk to determine that the beneficiary would benefit from observation care.   Criteria 1 and 3 related to observation care beginning and ending time and physician evaluation apply regardless of whether the hospital believes that the criteria will be met for payment of the extended encounter through extended assessment and management  composite payment.  Only visits, critical care and observation services that are billed on a 13X bill type may be considered for a composite APC payment.  Non-repetitive services provided on the same day as either direct referral for observation care or observation services must be reported on the same claim because the OCE claim -by-claim logic cannot function properly unless all services related to the episode of observation care, including hospital clinic visits, emergency department visits, critical care services, and T status procedures, are reported on the same claim.  Additional guidance can be found in chapter 1, section 50.2.2 of this manual.  If a claim for services provided during an extended assessment and management encounter including observation care does not meet all of the requirements listed above, then the usual APC logic will apply to separately payable items and services on the claim ; the special logic for direct admission will apply, and payment for the observation care will be packaged into payments for other separately payable services provided to the beneficiary in the same encounter.   290.5.2 - Billing and Payment for Direct Referral for Observation Care Furnished Beginning January 1, 2008  (Rev. 3425, Issued: 12- 18-15, Effective: 01 -01-16, Implementation: 01 -04-16)  Direct referral for observation is reported using HCPCS code G0379 (Direct referral for hospital observation care). Prior to January 1, 2010, the code descriptor for HCPCS code G0379 was (Direct admission of patient for hospital observation care).  Hospita ls 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, or critical care service on the day of initiation of observation service s. Hospitals should only report HCPCS code G0379 when a patient is referred directly to observation care after being seen by a physician in the community.   Payment for direct referral for observation care will be made either separately as a hospital visit under APC 5013 (Level 3 Examinations & Related Services) or packaged into payment for comprehensive APC 8011 (Comprehensive Observation Services) or packaged into the payment for other separately payable services provided in the same encounter. For information about comprehensive APCs, see 10.2.3 (Comprehensive APCs) of this chapter.   The criteria for payment of HCPCS code G0379 under either APC 5013 or APC 8011 include:   1. Both HCPCS codes G0378 (Hospital observation services, per hr.) and G0379 (Direct referral for hospital observation care) are reported with the same date of service.   2. No service with a status indicator of T or V or Critical Care (APC 5041) is provided on the same day of service as HCPCS code G0379.   If either of the above criteria is not met, HCPCS code G0379 will be assigned status indicator N and will be packaged into payment for other separately payable services provided in the same encounter.  Only a direct referral for observation services billed on a 13X bill type may be considered for a comprehensive APC payment through the Comprehensive Observation Services APC (APC 8011).  290.5.3 - Billing and Payment for Observation Services Furnished Beginning January 1, 2016  (Rev. 3425, Issued: 12- 18-15, Effective: 01 -01-16, Implementation: 01- 04-16)  Observation services are reported using HCPCS code G0378 (Hospital observation service, per hour).  Beginning January 1, 2008, HCPCS code G0378 for hourly observation services is assigned status indicator N, signifying that its payment is always packaged.  No separate payment is made for observation services reported with HCPCS code G0378, and APC 0339 is deleted as of January 1, 2008.  In most circumstances, observation services are supportive and ancillary to the other services provided to a patient.  Beg inning January 1, 2016, in certain circumstances when observation services are billed in conjunction with a clinic visit, Type A emergency department visit (Level 1 through 5), Type B emergency department visit (Level 1 through 5), critical care services, or a direct referral as an integral part of a patients extended encounter of care, comprehensive payment may be made for all services on the claim including, the entire extended care encounter through comprehensive APC 8011 (Comprehensive Observation Services) when certain criteria are met. For information about comprehensive APCs, see 10.2.3 (Comprehensive APCs) of this chapter.