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Observation Coding Guidelines

Policy ID: NDRP_GC_022
Section: Observation Coding Guidelines
Effective Date: January 01, 2020
Last Reviewed: April 02, 2020

Description:

This policy provides the coding and billing guidelines for Observation Care Professional and Institutional Providers.

Policy:

Observation care is considered an outpatient service. Observation time starts at the time documented in the nurse’s notes as to when the patient entered an observation status. Observation time ends at the time documented in the physician’s discharge orders or the time documented by the nurse or other appropriate clinical staff documenting the physician’s discharge order. This time should coincide with the end of the patient’s treatment in observation.

Professional Providers

All related Evaluation and Management (E&M) services provided on the same date of service (DOS) by the performing provider are considered integral to the observation care E&M code. Providers billing for unrelated E&M services provided on the same DOS from the same performing provider must append modifier 25 when the service is separately distinct and unrelated to the observation care.

Similarly, all related E&M services, including observation care, provided on the same DOS by the same performing provider are considered integral to an Inpatient E&M admission code. Practitioners providing observation care may report a valid Observation E&M CPT code for the professional service(s) on a CMS-1500 Claim Form when the patient is not subsequently admitted as an inpatient on the DOS. Reimbursement will be the lesser of charges or the fee schedule rate.

Institutional Providers

Hospital observation codes should be reported whether the observation service is separately payable or packaged. The observation codes must be used when submitting UB-04 claims for outpatient observation services.

Hospital observation must be reported with HCPCS codes G0378 (Hospital Observation Services, Per Hour) and G0379 (Direct Admission of Patient for Hospital Observation Services). Hospitals should not report the procedure codes for physician observation when reporting hospital observation services. Observation services may not be billed on the same claim as pre-labor monitoring services on revenue code 072x (excluding 0723). When both the 0762 and 072x revenue codes (excluding 0723) are billed on the same claim the claim will be rejected to the provider.

G0378 must be billed with revenue code 0762 with the number of hours the individual is in an observation status on one line. Providers will not be allowed to bill more than one line of 0762 on the UB-04. Observation time for direct referrals begins after the patient arrives at the facility and it is documented in the medical record that observation time has started. Hospitals should round to the nearest hour when reporting observation care; however, the total time should exclude any “carved out” time that carry an inherent time component for the service being billed (e.g., emergency room services, infusion services, services rendered billed exclusively by time, surgical, diagnostic, therapeutic services, etc.).

G0379 is used when an individual is referred directly to observation care after being seen by a practitioner in the community and without an associated Emergency Room (ER) visit, hospital outpatient clinic visit, or critical care service on the same DOS as the initiation of observation care. G0379 may be reported with only one unit and must be billed in conjunction with G0378. There will be no separate payment made for G0379 as it is included in the observation payment rate.

If a patient has two distinct observation stays on the same or overlapping days, separate claims may be submitted for each stay. However, if documentation supports that an early discharge resulted in the second stay, the charges for the Observation Care may be combined onto one claim.

Reimbursement will be the lesser of charges or the fee schedule rate. The uniform payment rate will be based on the number of hours the patient is in an observation status. Separate rates have been established for 0-5 hours, 6-36 hours, 37-72 hours and > 72 hours. When observation care is present on a surgical claim, the observation room charges will continue to be included in the surgical roll-up methodology. Other services rendered in conjunction to Observation Care need to be billed separately.

Billing and Coding Guidelines

The below guidelines outline the correct billing for professional and facility claims based on the individual scenario.

Guideline

CMS-1500 Claim Form

UB-04 Claim Form

Observation Care and Inpatient Admission occurs on same DOS with inpatient admission spanning more than one DOS

  • Performing provider may not separately report any E&M codes for evaluations related to the inpatient admission
  • Date of Admission - Report Initial Hospital Care E&M (99221 – 99223)
  • Subsequent Inpatient Admission Date - Report Initial Hospital Care E&M (99231-99233)
  • Discharge Date - Report Initial Hospital Care E&M (99238 – 99239)
  • Place of Service – 10
  • Submit all charges on Inpatient 111 TOB (Type of Bill)
  • Report Observation Care charges under revenue code 0762 and no procedure code

Observation Care and Inpatient Admission occurs on same DOS with inpatient discharge on same DOS

  • Performing provider may not separately report any E&M codes for evaluations related to the inpatient admission
  • Report Initial Observation or Inpatient Care Services (Including Admission and Discharge Services) E&M (99234 – 99236)
  • Place of Service – 19 or 22
  • Submit all charges on Inpatient 111 TOB
  • Report Observation Care charges with revenue code 0762 and no procedure code

Observation E&M not resulting in an inpatient admission

  • Performing provider may not separately report any E&M codes for evaluations related to the Observation Care
  • Observation Care for one DOS
    • Report Initial Observation or Inpatient Care Services (Including Admission and Discharge Services) E&M (99234 – 99236)
    • Place of Service – 19 or 22
  • Observation Care spanning two DOS
    • Report Initial Observation Care E&M (99218-99220)
    • Report discharge day of Observation Care E&M (99217)
    • Place of Service – 19 or 22
  • Observation Care spanning multiple DOS
    • Report Initial Observation Care E&M (99218-99220)
    • Report each subsequent day of Observation Care E&M (99224-99226)
    • Report discharge day of Observation Care E&M (99217)
    • Place of Service – 19 or 22
  • Submit all charges on Outpatient 131 TOB
  • Report Observation hour charges with:
    • Revenue code 0762 and Procedure code G0378 – Units must list total hours patient was in observation care status
  • Revenue code 0760, 0761, or 0769 and Procedure code G0379
    • Report when patient is admitted directly from community to observation care status
    • Must be reported with one unit and be billed on same date as G0378

Limitations and Exclusions:

While reimbursement is considered, payment determination is subject to, but not limited to:

  • Group or Individual benefit
  • Provider Participation Agreement
  • Routine claim editing logic, including but not limited to incidental or mutually exclusive logic, and medical necessity
  • Mandated or legislative required criteria will always supersede.

In instances where the provider is participating, based on member benefits, co-payment, coinsurance, and/or deductible shall apply.

Revision Date

History

1/8/2020

Moved Hospital Observation Codes - Institutional coding guidelines from Healthcare News Article 398 to reimbursement policy. Added additional correct coding guidelines for further clarification.

3/26/2020

Updated policy to reference performing provider instead of billing provider.

4/2/2020

Added reference to reimbursement for > 72 hours.