Health Information Management

Q/A: Billing for routinely ordered post-op observation

APCs Insider, September 30, 2011

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Q. A physician at our facility routinely orders observation services following surgery. The physician writes the observation order before the surgery starts and usually discharges the patient the next morning. We have discussed this with him and he stated that he believes his patients need additional observation time following surgery because many are high risk and have multiple chronic conditions. Is it acceptable to report and charge for observation services (HCPCS G0378) after surgery as long as we have an order? 

A. Observation services after surgery may be warranted when the physician documents a medically necessary reason or reasons for the observation service. The Medicare Benefit Policy Manual (Pub 100-02), chapter 6, section 20.6b, states: “The purpose of observation is to determine the need for further treatment or for inpatient admission.”

Additionally, the Medicare Claims Processing Manual (Pub 100-04), Chapter 4, Section 290.2.2 states:
General standing orders for observation services following all outpatient surgery are not recognized. Hospitals should not report as observation care, services that are part of another Part B service, such as postoperative monitoring during a standard recovery period (e.g., 4-6 hours), which should be billed as recovery room services.

In order to meet both requirements, the documentation must reflect extenuating circumstances that support medical necessity for post-operative observation services. Examples include severe nausea or vomiting, uncontrollable pain, unstable blood pressure, or other complications. The documentation must also reflect physician evaluation to support observation services in accordance with Medicare Claims Processing Manual (Pub 100-04), Chapter 4, Sect 290 which states:

a. The beneficiary must be in the care of a physician during the period of observation, as documented in the medical record by outpatient registration, discharge, and other appropriate progress notes that are timed, written, and signed by the physician.

b. The medical record must include documentation that the physician explicitly assessed patient risk to determine that the beneficiary would benefit from observation care.

Based on the information you provided, the physician is planning to keep his patients longer than the “routine recovery” time and knows this prior to the surgical events. While this is perfectly acceptable for the care of the patients, it does not automatically create an observation service reportable with G0378.

There does not appear to be any signs, symptoms, or complications related to the surgical events that automatically justify the observation services. Rather, these extended stays are anticipated and may equate to recovery time or even an inpatient admissions. Medicare does not cover routine or standard post-operative observation, and as a result you should have the patients sign an advanced beneficiary notice (ABN). Information concerning ABNs related to observation services is located in the Medicare Benefit Policy Manual (Pub 100-02), Chapter 6, Section 20.6c

Editor’s note: Denise Williams, RN, CPC-H, director of revenue integrity services at Health Revenue Assurance Associates, Inc., in Plantation, FL, answered this question.

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