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Your facility may have a handle on the Outpatient Observation HCPCS codes and eligible ICD-9 diagnosis codes required for separate payment of observation service, but are 100 percent of cases admitted to outpatient observation reviewed by the Utilization Review/Case Management department? Is your UR department familiar with both the inpatient and outpatient guidelines?
Industry standard Utilization Review guidelines (e.g. Inter-Qual) provide a set of outpatient observation guidelines as well as acute care inpatient admission guidelines. In order for a claim to be certified and billed at the appropriate level of care, industry standard guidelines, Fiscal Intermediary Coverage Determinations and the Center for Medicare and Medicaid Services (CMS) inpatient and outpatient rules and regulations all need to be reviewed and understood. One-hundred percent of cases admitted to observation services should undergo the hospital's Utilization Review process.
The CMS's Medical Director's Observation services guidelines include the following:
Outpatient Observation is to be used for:
- Evaluating a patient for possible inpatient admission.
- Treating patients expected to be stabilized and released in 24 hours (with appropriate documentation, patients can stay in observation more than 24 hours).
- Extended recovery following a complication of an outpatient procedure (e.g., abnormal postoperative bleeding, poor pain control, intractable vomiting, delayed recovery from anesthesia).
Outpatient Observation is NOT to be used for:
- A substitute for an inpatient admission.
- Continuous monitoring.
- Medically stable patients who need diagnostic testing or outpatient procedures.
- Patients who require therapeutic procedures (e.g., blood transfusion, chemotherapy, dialysis) that are routinely provided in the outpatient setting.
- Patients awaiting nursing home placement.
- A convenience to the patient, his or her family, the hospital, or the attending physician.
- Routine prep or recovery prior to or following diagnostic or surgical services.
- Routine "stop" between the emergency department and an inpatient admission.
Outpatient observation services BEGIN AND END with a physician's order. There are occasional circumstances under which a beneficiary may be admitted inappropriately to inpatient status. If, prior to discharge, the attending physician determines that the appropriate level of service is outpatient observation and not inpatient status, the attending physician may change the inpatient admission order to outpatient observation.
For compliance purposes Utilization Reviews for observation cases should be performed timely to ascertain that the case is being certified at the appropriate level of care. The level of care cannot be changed after the patient is discharged. The Appeals Coordinator needs to track all of the outpatient observation denials and continuously update the Utilization Review team of denial types received so the responsible party can take the appropriate action to prevent future denials. Tracking and trending this type of information is critical to the overall process improvement initiatives for these services.
Riverbend's Local Coverage Determination (LCD) for Acute Care: Inpatient, Observation and Treatment Room Services (L1281) states the following:
"Certain diagnoses and procedures generally do not support an inpatient admission and fall within the definitions of outpatient observation. Specific medical necessity for both admissions and observation, though, is always determined on a case-by-case basis. Uncomplicated presentations of chest pain (rule out MI), mild asthma/COPD, mild CHF, syncope and decreased responsiveness, atrial arrhythmias and renal colic are all frequently associated with the expectation of a brief (less than 24-hour) stay unless serious pathology is uncovered. Routine cardiac catheterization, electrophysiologic mapping, and renal dialysis are usually performed with a similar short stay expectation and are thus usually outpatient procedures."
The Utilization Reviewers/Case Managers spend an inordinate amount of time providing daily reviews to insurance companies for inpatient stays. The utilization review process for outpatient observation services may be a low priority for an over burdened Utilization Review/ Case Management department. Facilities may also have Case Manager/Utilization Review Coordinators and Clinical Appeals Coordinators who are not trained and educated in the out-patient guidelines or the financial implications regarding observation services.
By actively including all observation admissions in the Utilization Review process hospitals are also protecting themselves against inappropriately admitting a patient to observation when the patient's presenting conditions would warrant an inpatient stay. Inappropriately admitting a patient to observation when the patient meets inpatient criteria carries significant lost revenue opportunities as well as standard of care issues.
Observation services continues to be a complex process and needs to be reviewed in its entirety to ensure compliance with Medicare billing guidelines. Implementing a quality observation services program takes a team effort that includes the clinical staff, Utilization Review and/or Case Management, physicians, coding and the Patient Business Office.
For more information, please contact MaryBeth Ballesteros at 732-392-8248 or via email at MBallesteros@beslerconsulting.com.
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