(Medicare Claims Processing Manual)

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 o ne 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 comp leted, 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 s ame day or the day before the date reported 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 sig ned 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 st atus 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 requireme nts 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 Janu ary 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 p ayment 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 d epartment 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 em ergency 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 were 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 re ported 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 st atus indicator, 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 physici ans 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 tha t 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 reported 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, critic al 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 separatel y 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 inform ation 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 (Dire ct referral for hospital observation care) are reported with the same date of service.