Corporate Compliance

How does Medicare define outpatient observation?

Compliance Monitor, November 19, 2004

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CMS defines outpatient observation services as follows:

  • Observation services are those services furnished by a hospital on the hospital's premises, including use of a bed and periodic monitoring by a hospital's nursing or other staff, which are reasonable and necessary to evaluate an outpatient's condition or determine the need for a possible admission to the hospital as an inpatient.

  • Such services are covered only when provided by order of a physician or another individual authorized by state licensure and hospital staff bylaws to admit patients to the hospital or to order outpatient tests.

  • Most observations do not exceed one day. Some patients, however, may require a second day of outpatient observation services. In only rare and exceptional cases do outpatient observation services span more than two calendar days.

    Source: CMS



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