Reader Question: Facility Observation Services

Question: How will ambulatory payment classifications (APCs) affect facility observation services?

Washington Subscriber

Answer: Payment for observation services (CPT 99234-99236, 99217-99220) will be bundled into APCs. The failure to allow the hospital separate payment for observation services by including all observation services within the single payment for a given APC will have a chilling effect on the hospitals willingness to allow observation services for Medicare patients.

Because the hospital will not be reimbursed more for a patient who has an emergency department visit and observation services than it would for a Medicare patient who only receives emergency department services, there might be strong pressure to admit Medicare patients who might have been able to be discharged after six to 20 hours of observation services.

The cost for a less-than-24-hour observation service is usually 30 percent to 40 percent less than the cost of one day of hospitalization. As such, the Health Care Financing Administration (HCFA) determination to roll all reimbursement for observation services into the APC payment for the emergency department visit makes little clinical sense to physicians.


- Published on 2000-05-01