ED Coding and Reimbursement Alert

Review the CMS requirements for observation care, because they are observing your code choices

CMS implemented the controversial “Two-Midnight Rule” that directs Medicare contractors to assume hospital admissions are reasonable and necessary for patients who stay in a hospital through two midnights. Hospital stays that are shorter are presumed legitimate if coded as outpatient observation proper documentation of admission to observation orders and the required minimum time thresholds.

Make Sure You Get Credit for Any Observation Time Prior To Admission

The two-midnight rule requires that patients admitted to the hospital are expected to be hospitalized over two midnights.  When this does not occur, Medicare will consider the outpatient services provided immediately in advance of the admission as evidence of the need for hospital admission.   

Strategy: Make sure your emergency physicians providing observation services document all information relevant to the patient risk stratification, signs and symptoms, current medical needs, patient risk factors for an adverse event and comorbidities that assist the admitting physician in making the decision to admit the patient, says Caral Edelberg, CPC, CPMA, CAC, CCS-P, CHC, AHIMA Certified ICD-10 Instructor and President of Edelberg and Associates in Baton Rouge, LA.  

Here’s How Medical Review Is Your Friend

Although the time a patient spends in the ED or observation prior to admission will not be initially considered as part of the two-midnight inpatient stay,  it will be considered during the medical review process for purposes of determining whether the two-midnight benchmark was met and, therefore, whether payment for the admission is generally appropriate under Medicare Part A.  Admitted patients who do not meet the two-midnight rule may be reclassified as observation, Edelberg explains.  

With passage of the Protecting Access to Medicare Act of 2014, CMS announced recovery auditors will wait until after March. 31, 2015 to start enforcement of claims under the two-midnight rule unless there is evidence of systematic gaming, fraud, abuse or demonstrated delays in the provision of care.

Take away: RACs can still continue to audit based on pre-2-midnight criteria, e.g., medical necessity, coding compliance.

MACs (Medicare Administrative Contractor) can audit based on the two-midnight rule, as well as medical necessity, coding compliance, etc.

The Clock Starts With The Order For Admission For Facility Observation Services. 

You’ll want to watch the clock for Medicare facility observation patients. According to CMS, the observation time starts at the clock time documented in the patient’s medical record, which “coincides with the time that observation services are initiated in accordance with a physician’s order for observation.”  Observation ends at the time when all medically necessary services related to observation care are completed. This observation end time should reflect the time when all clinical or medical interventions have been completed, including the nursing follow-up care performed after the physician’s observation discharge orders were written, so add up the hours before filing your claim. However, time a patient might spend waiting for transportation should not be included in the minimum required eight hours, warns Edelberg.

Don’t Forget: CPT® and Medicare payment policies for observation care differ between physician and hospital payments

For physician payment for observation care under CPT®, there are no procedural restrictions or preceding visit level requirements similar to Medicare’s policies for facilities. Physician observation services are billed instead of emergency department or other E/M codes when furnished by the same provider, except for certain exemptions, such as critical care Edelberg advises.

Medicare has an eight hour minimum for physicians reporting the observation same-day-discharge codes 99234-99236. This eight hour minimum does not apply to an observation stay that spans two calendar days (99217-99220), she adds.  

Check with Private Payers For Their Facility Observation Services Polices 

Non-Medicare payers have different policies so providers should check with these payers to determine their specific payment policies. Some payers require the reporting of only a revenue code and a charge; others may require CPT® Observation codes, some allow the reporting of Medicare’s G0378 HCPCS code, says Edelberg.