Inpatient Facility Coding & Compliance Alert

Tip: Get 3 things in writing, or billing observation care won’t fly.

Observation coding and billing is a complex prospect for every hospital, with many factors to consider before submitting codes like G0379 (Direct admission of patient for hospital observation care) for a patient. Here’s how to know that your admissions to observation care have the necessary supporting documentation in place.

Ensure That Physicians Do 3 Things

The physician must fulfill three duties prior to the patient’s observation status, says Duane Abbey, Ph.D., president of Abbey and Abbey Consultants, Inc., in Ames, Ia.: 

• Write an order referring the patient to observation care; 
• Document medical necessity for the observation services; and 
• Document the reasoning and care adequately.  

Terminology: “The reason for using the term ‘referral’ instead of ‘admission’ is that CMS wants to call this process a referral as opposed to an admission, which generally implies inpatient status,” Abbey explains. “Patients in observation are in an outpatient status as opposed to observation status. Use of the word ‘admission’ for observation care is still very common, however.” 

Signed order: The patient’s chart must include a signed physician note for the service. “It should be quite explicit and the doctor should order the patient placed in observation,” Abbey says. “Different wording may be used, such as ’24 hour hold’ or something equivalent.” 

Medical necessity: The physician must provide appropriate diagnostic statements and/or indications that justify placing the patient in observation care. In some cases, physicians will document reasons for observation that do not provide for justification. For example, an ED physician might justify observation with, “It is late; I’m placing the patient in observation because there is no one to take care of this patient at home.” The surgeon might justify observation after a procedure with, “The surgery was delayed; it is now 11:30 p.m. and there is no way for the patient to return home. Keep in observation until tomorrow.” 

Caveat: In both of these cases, in order to justify observation services the physician must document medical necessity as opposed to social reasons. “There are cases in which this distinction becomes blurred,” Abbey explains. “For example, an individual may be brought to the hospital, generally the ER, with family members simply indicating that they cannot handle the behavior of the individual. While a medical diagnosis may be difficult, observation services may be justified.” 

Shore Up Front-End Documentation

“There’s no uniform standard for documenting medical necessity for observation care, but the physician should document the reasoning for the care being given,” Abbey says. 

Tip: If at all possible, the physician should summarize the clinical indications for observation services when he provides the orders for observation services. Including the word “because” can be used as a catalyst for the physician to delineate the reasons for the observation services. Request that physicians place something in the record starting with, “I’m placing this patient in observation because …”

Watch point: One significant compliance concern is that a patient might be admitted as an inpatient when observation services should have been provided instead. 

Example: Mrs. Brown is admitted to the hospital for a possible small bowel obstruction. However, during the course of treatment, her physician diagnoses gastroenteritis. At that point, Mrs. Brown should be reclassified as an outpatient observation case. (Learn more about these situations and how Condition Code 44 applies in “Get Answers to Your Top Condition Code 44 Questions” in Vol. 1, N. 1 of Inpatient Facility Coding and Compliance Alert.) Generally establishing medical necessity for observation when the patient is reclassified from an inpatient admission should not be a major challenge, Abbey says.

Track Care With Observation Logs

Abbey and other compliance experts recommend that facilities maintain an observation log for each case, regardless of the service location. While there are no requirements for this from the Medicare program, the log should contain details such as: 

• Patient name 
• Physician name(s)
• Date and time of referral
• Date and time of discharge 
• Condition(s) requiring observation status 
• Information pointing to location of documentation [can you explain this to me? Is it as simple as listing the patient chart number, or is it something more detailed?] 
• Number of hours in observation status 
• Number of units billed for observation care 
• Charges made for observation services 
• Times/activities interrupting observation services during the patient’s stay 
• Utilization review notes. 

“Note that some of this information is clinical, while other parts relate to billing,” Abbey says. “The log is intended to aid auditing personnel when they’re assessing the propriety of the observation services. The process for developing an observation log should be carefully documented in a coding/billing policy and procedure.” 

Next month: Look for an article in the next issue on ensuring that you count the time associated with observation care correctly.