Case Management

Your observation services questions answered

Case Management Monthly, January 1, 2011

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In a recent HCPro audio conference titled “ Observation Services v. Inpatient Admission: Assign Proper Level of Care and Prevent Denials,” Deborah K. Hale, CCS, president of Administrative Consultant Service, LLC, in Shawnee, OK, and Gregory Palega, MD, JD, physician advisor for MedManagement in Birmingham, AL, answered listeners’ questions about proper use of observation services. 

For more information about this audio conference, visit www.hcmarketplace.com/prod-8960.

Q. If an observation patient stays more than 24 hours, and possibly up to 40 hours, can you bill for that full 40 hours? 

A. Yes. Medicare says that all medically necessary observation hours are covered. The key is the words “medically necessary.” 

If the patient should have been an inpatient instead of an observation patient, that would not be a covered observation service. If the patient is there for the convenience of the patient, the family, or the physician, those hours would not be covered. 

The carve-outs for observation hours can be fairly time-consuming. You need to carve out any time that was not medically necessary or any time in which the patient was receiving another Part B service. 

For example, if the patient was getting a blood transfusion, you would carve out that time because that’s separately payable under Part B. If the patient was having an esophagogastroduodenoscopy or a colonoscopy, you would have to carve out those observation hours because that’s a separately payable Part B service that requires active monitoring. Remember, just because the patient comes in and leaves in 40 hours does not necessarily mean you get to bill all 40 hours. You have to go through and do the carve-outs. 

This is an excerpt from a member only article. To read the article in its entirety, please login or subscribe to Case Management Monthly.

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