ED Coding and Reimbursement Alert

CMS has proposed a reimbursement policy change that would allow hospitals to submit facility charges for Medicare beneficiaries admitted to observation status. This proposal, published in the Aug. 24, 2001, issue of the Federal Register, signals a reversal of Medicare's current policy not to pay these facility charges. The Final Rule, which many ED coding professionals expect to include virtually all of CMS' proposed changes, is anticipated in early November.
 
According to Jim Blakeman, senior vice president for coding quality assurance with Healthcare Business Resources Inc. in Bala Cynwyd, Pa., CMS has proposed  a new code, APC 0339 (observation), with a payment rate of $375.21. Patients would be allowed to remain under observation for a minimum of eight hours, but no more than 48.  In addition, CMS will pay only for the first 24 hours of observation care no matter how long the patient remained in observation status.
Proposal Restricts Medical Necessity  
This new classification would be highly regulated, with reimbursement paid only under specified circumstances. "For instance, the proposal lists only three conditions that would support the medical necessity of observation care chest pain, asthma and congestive heart failure," Blakeman says. Within these categories, CMS has proposed 19 specific diagnosis codes.
 
These restrictions are intended to prevent abuses that had plagued facility claims for observation in the past. "A number of years ago, observation status was blatantly being overused," Blakeman says. "Physicians would admit patients to observation following simple surgical procedures, for example, when all they truly needed was time in the recovery room. This allowed the hospital to bill for both the surgical recovery time and observation." Medicare responded to practices like this by eliminating reimbursement for observation care altogether.
 
Further supporting this cautionary position, the new APC will also require that the hospital furnish specific diagnostic studies to ensure that the patient's condition truly requires the level of care provided in observation. "This makes sense," Blakeman says. "The reason an emergency physician admits patients to observation is to evaluate whether they require inpatient care and to determine what treatments make most sense. Diagnostic tests are key to this process."
What Charges Are Allowable?  
Among the factors in the proposal is a requirement that an emergency department (APC 0610, 0611 or 0612) or outpatient visit (APC 0600, 0601 or 0602) be billed with observation care, he says. Another plus is the absence of requirements for a specific number of nursing assessments during the patient's stay. "In the past, these assessments needed to be done twice in the first hour and once ever hour after that. The proposal simply states periodic assessments must be done, but doesn't indicate how many," Blakeman says.
 
Additional requirements include documentation of:
  date and time the physician admitted [...]