CurrentBlue Cross Blue Shield - TexasPolicy CPCPOO1

Observation Services Policy

Governance of reimbursement, billing and coding for hospital observation services provided to Blue Cross and Blue Shield of Texas members across all facilities; affects providers submitting claims for observation care.

Policy Summary

PayerBlue Cross Blue Shield - Texas

PolicyObservation Services Policy

Policy CodePolicy CPCPOO1

Change TypeNo material change

Effective DateDec 22, 2025

Next Review DateN/A

Key ActionDo not require prior authorization for observation services, but submit an inpatient authorization request if the member converts from observation to inpatient.

SourceLink

POLICY UPDATE CHANGES

No material clinical or coverage changes in this revision.

72 hoursMax eligible hours

48 hoursGenerally not appropriate after

G0378/G0379Facility HCPCS

CPCPO02, CPCPO38Related policies

Observation Services Coverage and Billing Criteria

Observation coverage and billing criteria

Policy Summary

PayerBlue Cross Blue Shield - Texas

PolicyObservation Services Policy

Policy CodePolicy CPCPOO1

Change TypeNo material change

Effective DateDec 22, 2025

Next Review DateN/A

Key ActionDo not require prior authorization for observation services, but submit an inpatient authorization request if the member converts from observation to inpatient.

SourceLink

On This Page

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ALL of the following

Observation services are eligible for reimbursement only when provided under a physician's order or the order of an authorized practitioner who may admit members and order outpatient testing; services must be member-specific and not part of standard facility protocol.
Observation care is appropriate for short-term evaluation, treatment, or monitoring (including repeat testing or re-evaluation) as an alternative to inpatient hospitalization when the member does not meet inpatient level of care.
Observation time must be documented in the medical record from the time the qualified provider's order initiates observation care through completion/discharge; care provided before the order or after an inpatient admission order is excluded from observation time.
Supporting documentation must include the attending physician's order for observation with clock time (or nurse's observation admission note with time), physician admission/progress notes, diagnostic/ancillary test reports, admission progress notes with clock time, and discharge notes with clock time; member must be under the care of a physician or qualified nonphysician practitioner during observation care.

Observation services beyond 72 hours are not eligible for reimbursement; policy notes services beyond 48 hours are generally not appropriate and some contracts may preclude these circumstances.

ALL of the following

If the member converts to inpatient status, the provider should submit an inpatient authorization request as required; all observation services provided are included on the inpatient claim and observation dates should be reflected on the UB-04 FROM date per policy example.

ALL of the following

Billing requirements (ONE of):
- Hospitals must bill HCPCS G0378 for facility observation service per hour with revenue code 0762 and units equal to the number of observation hours; only one line of revenue code 0762 is allowed on the UB-04 for observation status.
- HCPCS G0379 is used for direct admission to observation after evaluation by a community practitioner without an ER/outpatient visit on the same date; G0379 may be reported with only one unit and must be billed in conjunction with G0378 as specified.

Hospitals should not report physician CPT observation E/M codes on the UB-04 when billing facility observation services; observation E/M codes apply to professional providers per policy guidance.

The plan reserves the right to request supporting documentation; claims are subject to code edits, claim review, benefit terms, provider contract language, and applicable clinical payment and coding policies.

Observation is not appropriate for specified services including (but not limited to): chemotherapy administration; lack of or delay in transportation; provision of a medical exam when skilled services are not required; routine pre/post-op recovery; routine recovery after ambulatory surgery; services for convenience; planned overnight stays when criteria not met; general standing orders after outpatient surgery; services that would normally require inpatient stay; uncomplicated post-procedure services; services concurrent with procedures where active monitoring is part of the procedure; services when an inpatient is discharged to observation status; services not reasonable and necessary for care; and services beyond 48 hours (noting some contracts may preclude this circumstance).

Facility and E/M Codes for Observation

Observation facility and related E/M codesCPT | HCPCS | mixedCovered

G0378	Hospital observation service, per hour
G0379	Direct admission of observation care after ambulatory/community practitioner without ER or outpatient visit same day
99221-99223	Initial hospital inpatient or observation care E/M codes
99231-99233	Subsequent hospital inpatient or observation care E/M codes
99234-99236	Observation care and inpatient admission on same date E/M codes
99238-99239	Hospital discharge day management

G0378 units

G0378 billing unitsUnits must equal the number of hours the member is in observation status (reported in the claim 'units' field).

Revenue code restrictionOnly one revenue line using revenue code 0762 is allowed for observation status on the UB-04 claim form.

G0379 usage noteG0379 is used for direct admission to observation from a community practitioner without an ER, outpatient clinic visit, or critical care service on the same date; G0379 may be reported with only one unit and must be billed in conjunction with G0378.

Provider Responsibilities and Prior Authorization

Prior Authorization

Prior authorization for observation conversion

Observation does not require prior authorization. If a member converts from observation to inpatient, the provider should submit an inpatient authorization request because the admission may require prior authorization; all observation services provided are included on the inpatient claim when the member is subsequently admitted as an inpatient.

If conversion to inpatient occurs, submit an inpatient authorization request per policy.
When a discharged-from-observation member is later admitted as inpatient, include all observation services on the inpatient claim and use the inpatient FROM date on the UB-04 as instructed.

Definitions — Observation Services and Time

Observation services (definition)

DefinitionShort-term evaluation, treatment, or monitoring provided under a physician's or authorized practitioner's order when the member does not meet inpatient level of care; considered an alternative to inpatient hospitalization.

Order requirementMust be ordered by a physician or another licensed practitioner authorized by state licensure and the provider organization's bylaws to admit members and order outpatient testing.

Member-specific requirementServices must be member-specific and not part of a standard operating procedure or facility protocol for a given diagnosis or service.

Appropriate usesMay be appropriate for short-term evaluation, treatment of a known condition, monitoring for recovery, repeat testing, or re-evaluation to determine diagnosis and care needs.

Observation time (definition and exclusions)

Start-to-end timingObservation time begins at the time documented in the medical record when the member entered observation status per the qualified provider's order and ends when observation services are completed (discharge orders).

Excluded periodsCare provided before the provider's order for observation or after the provider's order for inpatient admission or discharge is excluded from total observation time.

Claim reportingObservation stay hours must be documented in the 'units' field on the claim form; if a procedure interrupts observation, each observation period's times are recorded and summed to determine total units for G0378.

Conversion to inpatientIf condition warrants inpatient admission during observation, provider should submit an inpatient authorization request and observation services are included on the inpatient claim (UB-04 FROM date example provided).