Inpatient Facility Coding & Compliance Alert

Get the scoop on the latest CMS stance on counting minutes.

Counting the time a patient spends in observation care is a critical piece of your coding and billing equation. Over the past ten years, the definitions of start and stop times have morphed, so be sure your facility is using up-to-date guidelines.

The facts: For the Medicare program, and most other third-party payers, observation services are reported by the hour using HCPCS G0378 (Hospital observation service, per hour).  APCs (Ambulatory Payment Classifications) will pay an observation composite (see APC 8002 and 8003) if the number of units of G0378 is eight or more.  This is a payment issue, not a billing issue.  If there are less than eight hours, then observation can still be reported; however APCs will not pay the composite if less than eight hours is indicated.

Match Your Starting Time

Observation time begins at the clock time documented in the patient’s medical record, which coincides with the time that observation care is initiated in accordance with a physician’s order.

“In the past, the Medicare program has equated observation to the concept of an observation bed,” says Duane Abbey, Ph.D., president of Abbey and Abbey Consultants, Inc., in Ames, Ia. “In this perspective, observation begins when the patient is placed in the observation bed. However, in reality, observation may be ordered while the patient is in the ER.  The patient may not be placed in the observation bed for hours.”

Result: CMS now accepts the fact that observation begins when the physician or other qualified practitioner orders the observation. In a perfect world, the time of the order would be contemporaneous with placement in the observation bed.

End When Service Is Complete

As with the start time for observation, there can be variations in determining the stop time.  The stop time for observation generally occurs when observation services have ceased.

Scenario: A physician may see a patient and write discharge orders. However, the actual discharge, and thus ending time for observation, may occur only after ordered services are complete. This may be several hours later.

If the physician sees the patient and then orders an inpatient admission, Abbey says the observation hours stop at the time the patient is officially admitted (i.e., physician dates, signs and indicates the time of the order). In this type of case, there may not even be a change in beds. 

Correctly Count the Number of Hours

While it appears trivial, actually counting the number of hours also deserves attention.  The simple process is to take the ending date and time and calculate the difference from the beginning date and time. In making such a calculation, your final time could be something odd like 37 hours and 21 minutes – which makes coders wonder whether to report 37 hours or 38. The facility should have a policy in place to guide these types of decisions.

Alternative: The Medicare program often uses what is called the half-time unit rule. The basic idea of this rule is that the last subsequent time-unit cannot be counted unless half of the time unit has been achieved.  While this little rule is used in areas such a physical therapy (15 minute time-units), there is an exception of counting the hour for cardiac rehabilitation in which the last hour can be counted only if the full hour is achieved.

“Whatever policy decision is made concerning the way in which to count the hours, be certain to document as a written policy and procedure,” Abbey advises.

Steer Clear of Overlaps With Other Services

CMS guidelines clearly state that observation services cannot be billed concurrently with diagnostic or therapeutic services. CMS has recently changed the rules in this area so that both diagnostic and therapeutic services are included in the stipulation.

“The basic idea is that if observation is being interrupted, then the time for the interrupting services should be subtracted from the overall hours for observation,” Abbey says. “While this concept is reasonably straightforward, actually applying this process in the real world can become enormously complex.”

Example 1: A simple example might involve a patient being taken to radiology for an MRI (magnetic resonance imaging) of some sort. The time that the patient leaves his bed (or room) to the time that he returns should be subtracted from the overall number of observation hours.

Probably the most complicated area regarding “carving out” other services from observation involves infusions and injections.

“CMS has indicated that for services involving active monitoring, the time should be subtracted,” Abbey says. “Just what is active monitoring and how should it be applied to infusions and injections? This remains an open question for which hospitals will have to develop associated policies and operating procedures.”

Example 2: Simple hydration may be deemed not to require active monitoring. Thus, when a physician orders hydration, the time for this service need not be subtracted. However, the infusion of a powerful antibiotic may be determined as requiring active monitoring and thus the time subtracted from the observation hours. CMS has suggested that hospital contact their MACs (Medicare Administrative Contractors) for further guidance in this area.