How to Bill for Observation

On Aug. 1, Medicare stopped paying facilities for observation services. Although facilities can make a compelling argument that observation care saves money in the long run and helps them provide better treatment, the Health Care Financing Administration (HCFA) was not swayed.

Its essentially bundled under the service code, says John Turner, MD, PhD, medical director for documentation and coding compliance, healthcare financial services, for TeamHealth, a medical staffing company in Knoxville, Tenn. There will be no separate ambulatory payment classification (APC) for observation care.

Although the short-term outlook is bleak, HCFA has left open the possibility for future coverage of observation services. HCFA has said that if you want to code for it 99217-99220 (hospital observation services, per day), 99234-99236 (observation or inpatient hospital care provided to patients admitted and discharged on the same date of service) theyll look at it for a year or two, and theyll consider it later, says Sam Roberts, MD, FACEP, president of Third Coast Emergency Physicians, an emergency department (ED) staffing network in Austin, Texas.

According to Chapter V: Outpatient PPS Payment Calculations of HCFAs APC Edits, outpatient observation must be billed under revenue code 762 for CPT codes 99217-99220. Claims must list the number of hours the patient occupied the bed in the units field on the claim form. But for now, if you code for it, you wont get reimbursed, Roberts says.

Most emergency departments use some form of observation for patients admitted for less than a day, Turner says. Although observation isnt technically an admission, the status allows hospitals to keep some patients in the facility for monitoring without incurring the extra costs and meeting the extra standards of admission.

Observation care has become more popular over the last five years, Roberts says. But thanks to the changes through APCs, I think its going to be deleted by many facilities.

Through its denial of observation care, HCFA is saying, in effect, that any condition that requires a patient to be admitted for more than a few hours in the emergency department should require a full admittance for a hospital stay, and that would be paid under diagnosis-related groups (DRGs), Roberts says. The problem here is that they still have admission criteria, and theyll retrospectively look and say, He wasnt sick enough to be admitted.

For now, the only solution is to charge a visit code. Unfortunately, the traditional reimbursements for observation care are far larger than those for visit codes, and hospitals that serve a lot of Medicare patients will feel a revenue bite. The good news is that facilities can still bill observation for other payers.

Facilities not satisfied with the reimbursement for 99281-99285 visit codes should take some action. [...]

- Published on 2000-09-01