ED Coding and Reimbursement Alert

CMS has proposed a reimbursement policy change that would allow hospitals to submit facility charges for Medicare beneficiaries admitted to observation status. This proposal, published in the Aug. 24, 2001, issue of the Federal Register, signals a reversal of Medicare's current policy not to pay these facility charges. The Final Rule, which many ED coding professionals expect to include virtually all of CMS' proposed changes, is anticipated in early November.
 
According to Jim Blakeman, senior vice president for coding quality assurance with Healthcare Business Resources Inc. in Bala Cynwyd, Pa., CMS has proposed  a new code, APC 0339 (observation), with a payment rate of $375.21. Patients would be allowed to remain under observation for a minimum of eight hours, but no more than 48.  In addition, CMS will pay only for the first 24 hours of observation care no matter how long the patient remained in observation status.

 
This new classification would be highly regulated, with reimbursement paid only under specified circumstances. "For instance, the proposal lists only three conditions that would support the medical necessity of observation care chest pain, asthma and congestive heart failure," Blakeman says. Within these categories, CMS has proposed 19 specific diagnosis codes.
 
These restrictions are intended to prevent abuses that had plagued facility claims for observation in the past. "A number of years ago, observation status was blatantly being overused," Blakeman says. "Physicians would admit patients to observation following simple surgical procedures, for example, when all they truly needed was time in the recovery room. This allowed the hospital to bill for both the surgical recovery time and observation." Medicare responded to practices like this by eliminating reimbursement for observation care altogether.
 
Further supporting this cautionary position, the new APC will also require that the hospital furnish specific diagnostic studies to ensure that the patient's condition truly requires the level of care provided in observation. "This makes sense," Blakeman says. "The reason an emergency physician admits patients to observation is to evaluate whether they require inpatient care and to determine what treatments make most sense. Diagnostic tests are key to this process."

 
Among the factors in the proposal is a requirement that an emergency department (APC 0610, 0611 or 0612) or outpatient visit (APC 0600, 0601 or 0602) be billed with observation care, he says. Another plus is the absence of requirements for a specific number of nursing assessments during the patient's stay. "In the past, these assessments needed to be done twice in the first hour and once ever hour after that. The proposal simply states periodic assessments must be done, but doesn't indicate how many," Blakeman says.
 
Additional requirements include documentation of:
 

date and time the physician admitted the patient to observation;
 

condition that necessitated the admission;
 

risk stratification criteria used by the admitting physician; and
 

discharge orders and plan.

 
The likely opportunity to bill facility charges does not change the manner used to bill ED physician observation services. However, policy differences between the two components affect reimbursement.
 
"Coders cannot bill both ED services and observation care on the same day when submitting the ED physician's charges, for example," says Kathy Pride, CPC, CCS-P, coding specialist for Martin Memorial Health Systems in Stuart, Fla. "In fact, any E/M services provided by the same physician on the date of admission to observation are considered included in the observation fee schedule. Under the new CMS proposal, however, payment for both ED visits and observation care would be allowed on the facility side."
 
While this discrepancy favors facility billing, two other differences bolster physician claims. First, physician services for observation care involve two different series of codes (see below: observation care codes 99234-99236; plus initial care codes 99218-99220 and discharge code 99217), so professional coding is more flexible. Second, the list of diagnosis codes supporting medical necessity is much longer for Medicare Part B than for Part A. A patient may come to the ED with kidney pain (788.0, renal colic) due to kidney stones (592.0, calculus of kidney), for example. The physician admits the patient to observation and administers medication to help eliminate the stone. Part A would not pay for this service because these diagnosis codes aren't allowable under the proposed change. On the other hand, Part B charges might be reimbursed, depending on the local Medicare carrier policy.

 
For Medicare claims, coders determine which of several codes to assign based on the calendar dates of admission and discharge, Pride says. In addition, a specific order from the ED physician stating the need for observation must be recorded in the patient's chart. 

Same-Date Admission and Discharge

 
"If the patient is admitted and discharged on the same calendar date, code series 99234-99236 (observation or inpatient hospital care) would be appropriate, depending on the level of service provided, Pride says. These codes are assigned a higher relative value unit than other observation codes because they include both the admission and discharge component. To assign them, the patient must remain in observation status for a minimum of eight hours, and the physician must see the patient twice during the stay," If a patient remains in observation for fewer than eight hours, but is nonetheless admitted and discharged on the same calendar date, the coding changes. "In this instance, the ED physician would assign only an observation admission code (99218-99220, initial observation care). No discharge code would be reported," she explains.

 
Often a Medicare beneficiary is admitted on one date and discharged on another, which requires a different set of codes. "Initial admission would be reported with 99218-99220," Pride says. "Code 99217 (observation care discharge) is then used for discharge on a subsequent date."
 
In the unusual situation when the observation stay is longer than two calendar dates, the ED physician would bill the appropriate-level E/M code for the middle day. For instance, a patient complaining of chest pain is admitted to observation at 9 p.m. on Tuesday, but is not discharged until 8 a.m. on Thursday a total of 35 hours. The ED physician would report an admission code for Tuesday (99218-99220), an outpatient visit code for Wednesday (99212-99215) and the discharge code for Thursday (99217).

 
Pride adds that when patients are admitted as inpatients from observation status by the same physician on the same calendar date, only the inpatient code would be billed (99221-99223, initial hospital care): "In this case it would not be appropriate to also report the observation admission code." It would be rare for an ED physician to admit the patient in this instance, she adds. When another specialist admits the patient to inpatient status from observation, the ED would report the observation admission code and the specialist would report the inpatient admission code. If the patient was admitted to the hospital from observation on a subsequent day, the ED physician may report (in those rare instances) two admission codes: 99218-99220 for observation and 99221-99223 for inpatient status. In neither instance would the ED physician bill for discharge from observation.

 
Medicare policy is at odds with CPT coding instructions, which state that 99234-99236 should be used "to report observation or inpatient hospital-care services provided to patients admitted and discharged on the same date of service." In other words, CPT doesn't require the stay to be eight hours or more to bill 99234-99236, as Medicare does.
 
Traditionally, many local Medicare carriers including Nationwide Medicare Services, the carrier for Ohio and West Virginia, and Empire Medicare Services of New Jersey have followed CPT coding instructions and allowed ED physicians to report 99234-99236 when a patient is admitted and discharged on the same day, regardless of the amount of time spent in observation. However, coding experts expect these local medical review policies to be brought into line with the national policy soon because they have discretion to establish local policy only in the absence of a national policy. Where national policy exists, Medicare carriers are expected to abide by it.