CurrentquartzPolicy RP09

Facility Observation Services

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Defines Quartz's reimbursement rules for facility observation services (use of observation status, billing codes, time limits) applicable to commercial and specified Medicare-related lines of business for providers submitting claims to Quartz.

Policy Summary

Payerquartz

PolicyFacility Observation Services

Policy CodePolicy RP09

Change TypeNo material changes

Effective DateJul 1, 2026

Next Review Date

Key ActionDocument a physician's written order 'Admit to Observation' and record the specific problem, treatment and frequency of skilled service; use HCPCS G0378/G0379 and do not report inpatient CPT codes for observation billing.

SourceLink

POLICY UPDATE CHANGES

No material clinical or coverage changes in this revision.

48hstandard maximum observation reimbursement duration

72hpossible extended observation duration with documentation

8hminimum reimbursable observation service duration

G0378/G0379primary HCPCS codes required for observation billing

0762observation room revenue code

Coverage criteria for facility observation services

Coverage stance and criteria for facility observation services

Quartz will reimburse facility observation services under the following conditions and limitations:

Observation services reimbursed up to 48 hours; may be extended to 72 hours in rare, carefully documented circumstances

Observation services billed for less than 8 hours will not be reimbursed

Medical record must include a written physician order documented as 'Admit to Observation' and must state the specific problem, treatment and/or frequency of the skilled service

Observation time and billing begin when the beneficiary is admitted to an observation bed and end when all clinical or medical interventions, including follow-up care provided by hospital staff and physicians, are completed

Billed units must equal the number of hours the patient receives observation services

Use HCPCS codes G0378 (hospital observation service, per hour) and G0379 (direct admission of patient for observation care) to report observation services; report revenue code 0762 for observation room

Do not report CPT codes 99221-99223 or 99231-99239 for observation services

When observation is provided on the day of, or immediately prior to, an inpatient admission, report the observation services on the inpatient claim; reimbursement is included in the inpatient payment

Observation services do not apply to clinics, physician offices, urgent care centers, mental health or substance abuse care and cannot be used for a planned or elective admission

Administrative actions

Quartz may conduct post-payment reviews or audits and may reject or deny claims or recoup payments for noncompliance; providers must submit supporting documentation upon request

Policy applies to Commercial, Level Funded, Medicare Advantage, Medicare Select, and Medicare Supplement plans

Billing codes, revenue codes, and time limits

Observation service billing codesHCPCS | CPTCovered

G0378	Hospital observation service, per hour
G0379	Direct admission of patient for observation care
99221-99223	Initial hospital inpatient care (do not report for observation services)
99231-99239	Subsequent hospital inpatient care (do not report for observation services)

Revenue codesRevenueCovered

0762	Observation Room revenue code

Minimum reimbursable hours — 8 hours

Minimum reimbursable observation durationObservation services billed for less than 8 hours will not be reimbursed.

ApplicationApplies to facility observation services billed as observation status (not clinics, physician offices, urgent care, mental health, or substance abuse).

Billing unitsBilled units should equal the number of hours the patient receives observation services.

Standard maximum reimbursable hours — 48 hours (up to 72 hours in rare, well-documented cases)

Standard maximum reimbursable durationQuartz will consider reimbursement for observation services up to 48 hours.

Extended duration (rare)In rare and carefully documented circumstances, the limit may be increased to 72 hours.

When billed with inpatient admissionIf observation occurs on the day of or immediately prior to an inpatient admission, report on the inpatient claim and reimbursement is included in the inpatient payment.

Documentation and billing requirements for providers

Documentation Required

Documentation and billing requirements for observation services

Document a physician’s written order stating 'Admit to Observation' in the medical record and ensure the record specifically states the problem, treatment, and/or frequency of any skilled service provided; begin and end observation time based on admission to an observation bed and completion of all clinical/medical interventions. Use HCPCS G0378 for per-hour observation services and G0379 for direct admissions, report revenue code 0762, do not report CPT 99221-99223 or 99231-99239 for observation services, and bill units equal to the number of hours the patient actually received observation services. Observation services billed for less than 8 hours will not be reimbursed; services are reimbursed up to 48 hours (may be extended to 72 hours in rare, well-documented cases). When observation occurs on the day of or immediately prior to an inpatient admission, report the observation on the inpatient claim (reimbursement included in the inpatient payment). Submit clinical documentation upon request for post-payment review or audit.

Physician written order documented in the medical record: 'Admit to Observation' (required).
Medical record must state the specific problem, treatment, and/or frequency of skilled service provided.
Begin observation time when admitted to an observation bed; end when all clinical/medical interventions and follow-up care are completed.
Bill units equal to the number of hours the patient receives observation services; claims < 8 hours will not be reimbursed.
Use HCPCS G0378 (hospital observation service, per hour) and G0379 (direct admission for observation); report revenue code 0762.
Do not report CPT codes 99221-99223 or 99231-99239 for observation services.
If observation is on the day of or immediately prior to inpatient admission, report on the inpatient claim; reimbursement is included in the inpatient payment.
Provide supporting clinical documentation when requested for post-payment review or audit.

Key definitions

Observation services — definition

DefinitionFacility services to monitor and evaluate whether inpatient admission is required; reimbursable when billed as observation status with required documentation and within time limits.

Reporting codesReport observation services with HCPCS code G0378 (hospital observation service, per hour) and revenue code 0762 (Observation Room).

ExclusionsDoes not apply to clinics, physician offices, urgent care centers, mental health or substance abuse care; cannot be used for planned or elective admissions.

Admission to Observation — physician order and initiation of billing

Required orderA written physician order must be clearly documented in the medical record indicating 'Admit to Observation' to initiate observation time and billing.

Medical record contentDocumentation must indicate the specific problem, treatment and/or frequency of the skilled service that necessitates observation.

Start/end of observation timeTime in observation begins with admission to an observation bed and ends when all clinical or medical interventions, including follow-up care by hospital staff and physicians, have been completed.

Policy Summary

Payerquartz

PolicyFacility Observation Services

Policy CodePolicy RP09

Change TypeNo material changes

Effective DateJul 1, 2026

Next Review Date

SourceLink

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