Observation Services - Facility
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Defines reimbursement requirements and billing rules for outpatient hospital observation services and who is eligible for reimbursement under the health plan.
Updated language with guidelines for reimbursement, and nonreimbursement; added code list.
Updated Definitions section by adding Type of Bills and updating Observation.
Observation Service Reimbursement Criteria
Observation reimbursement criteria
Observation services are eligible for reimbursement when all required ordering, documentation, billing, and clinical criteria are met.
ALL of the following
- Ordered by a physician or other individual authorized by state licensure law and facility bylaws to admit members to the hospital or order outpatient tests; order must be written and clearly state 'admit to observation'.
- Medical record documentation demonstrates observation services are required by stating the specific problem, the treatment and/or frequency of the skilled service expected to be provided.
- Designated observation service status documented as at least 8 hours and no more than 48 hours (see state exemption notes).
Georgia exemption: observation service duration must not exceed 24 hours (see Definitions/Exemptions).
- All observation services billed on one claim line with no date span and the total number of hours spent in observation is documented on that line.
- Revenue code 0762 billed with an appropriate type of bill (013X, 078X, or 085X) and billed with HCPCS G0378 on the claim when observation exceeds 8 hours and is less than 48 hours.
- When observation exceeds 8 hours and is less than 48 hours, include G0378 along with applicable ED/observation provider codes (e.g., 99281-99285, G0380-G0384, G0463, 99291) or G0379 on the claim as appropriate; HCPCS G0379 cannot be billed on the same claim with CPT 99281-99285, G0380-G0384, G0463, or 99291.
Clinical scenarios that may meet criteria (ONE OR MORE):
- Active care or further observation is needed following emergency room care to determine if the member is stabilized.
- Member has a complication from an outpatient surgical procedure that requires additional recovery time that exceeds the normal recovery time.
- Member care required is initially at or near the inpatient level.
- Member requires further diagnostic testing and/or observation to make a diagnosis and establish appropriate treatment protocol.
- Member requires short-term medical intervention of facility staff which requires the direction of a physician.
- Member requires observation to determine if admission into the facility is required.
Inappropriate uses (NOT eligible):
- Observation for physician, member, or family convenience.
- Routine preparation and recovery for diagnostic, therapeutic, or surgical procedures; routine recovery and post-operative care after outpatient surgery; standing orders following outpatient surgery; observation following an uncomplicated treatment or procedure.
- Social issues or blood administration.
- Cases routinely cared for in the Emergency Room or Outpatient Department.
Observation and Related Codes
| G0378 | Hospital observation service, per hour |
| G0379 | Direct admission of patient for hospital observation care |
| G0380 | Level 1 hospital emergency department visit (type B) |
| G0381 | Level 2 hospital emergency department visit (type B) |
| G0382 | Level 3 hospital emergency department visit (type B) |
| G0383 | Level 4 hospital emergency department visit (type B) |
| G0384 | Level 5 hospital emergency department visit (type B) |
| G0463 | Hospital outpatient clinic visit for assessment and management |
| 99281 | ED visit, lowest level |
| 99282 | ED visit, low level |
Orders, Documentation, and Billing Requirements
Order must be by authorized clinician and include written 'admit to observation' order with clinical justification
Observation services must be ordered by a physician or other individual authorized by state licensure law and facility staff bylaws to admit members to the hospital or order outpatient tests. The member's medical record must include a written order that clearly states, "admit to observation," and documentation that states the specific problem, the treatment and/or frequency of the skilled service expected. Failure to provide the written 'admit to observation' order and required clinical documentation risks denial of reimbursement.
- Order must be by a physician or other individual authorized by state licensure law and facility bylaws.
- Member record must include a written order clearly stating "admit to observation."
- Documentation must state the specific problem, the treatment and/or frequency of the skilled service expected.
- Designated observation service duration must be at least 8 hours and no more than 48 hours (documentation must reflect total hours billed on a single claim line with no date span).
Definitions and Type of Bill
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