Inpatient Facility Coding & Compliance Alert

Tip: Watch for the 5 most common care paths.

Observation services are a vital part of hospital care, but can lead to coding confusion because of all the potential factors involved. Read on for expert advice on what to look for when coding a patient’s short-term care.

Starting point: Duane Abbey, Ph.D., president of Abbey and Abbey Consultants, Inc., in Ames, Ia., shares this as what he calls a simplistic definition of observation services: Outpatient services occur when the patient is being held to determine if he or she should be admitted to the hospital, discharged home, or sent to another provider.

Understand What Leads to Observation

Certain criteria must be met before a patient can be admitted to observation care, most of which depends on the physician. Nursing staff also get involved with observation care through direct referrals and provision of the actual services.

"Direct referrals to observation occur when a physician sends a patient to the hospital with an order to place the patient in observation," Abbey explains. "Nursing staff will perform a thorough evaluation and develop appropriate documentation. The hospital can then code G0379 (Direct admission of patient for hospital observation care), and thus gain reimbursement for the service."

Careful: Don’t assume that direct admissions to observation are simple services. Remember two important factors when coding observation care:

The referral to observation must come from a physician or qualified practitioner who is practicing in a freestanding clinic (meaning, a clinic that is not provider-based). If the patient was sent to the hospital from a provider-based clinic, then the assessment and evaluation would already have been accomplished by the hospital through the hospital’s provider-based clinic. The provider-based clinic’s E/M level would then drive the observation payment.

Code G0379 is separately paid only under unusual circumstances. Note that the APC (Ambulatory Payment Classification) payment for G0379 was increased for CY2013 to a high level E/M payment, which is at $175.79 nationally. While this increase seems to provide significantly more payment, the APC status indicator for G0379 is ‘Q3,’ which means that if more than eight hours of observation are reported (see G0378, Hospital observation per hour), payment for G0379 is packaged. Thus, the only time that G0379 is separately payable is when there is a direct referral to observation and the patient is provided less than eight hours of observation care.

"While referral to observation can be through a request from a physician’s office, the more typical circumstances that lead to observation are through the ED and sometimes for a patient that has received an outpatient surgical procedure," Abbey says. "Care paths are often developed for the more frequent conditions that occur through the ED and for which observation care is often provided."

The most typical areas for observation care paths are:

Chest pain/acute angina

Abdominal pain

Congestive heart failure

Asthma

Pneumonia.

Next month: Ensure that admissions to observation care are justified by having supportive documentation in place.

Editor’s note: Among the many transmittals and Federal Register discussions, you can find the latest CMS definitions and directives regarding outpatient services in Transmittal 1445 to Publication 100-04 and Transmittal 82 to Publication 100-02.