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ED Coding and Reimbursement Alert

The Right Path to Observation Code Payment

Published on Wed Jan 01, 2003

Walk the chosen path to observation care payment: Follow the "TAO" guidelines presented by James Blakeman, senior vice president of Healthcare Business Resources in Bala Cynwyd, Pa.

One way to make sure you can report observation care codes is to check that your documentation supports them. The mnemonic device "TAO" will help. Verify that documentation shows that all three "letters" apply:

T: Time taken for observation care was a diagnostic tool for determining further diagnosis and not a matter of convenience.

A: Admission or transfer was a real possibility, not foregone.

O: Order for observation care is written in the chart.

  • Time as a Tool: If documentation indicates that observation care was a tool for figuring out further diagnostic information, then you can bill for it. For example, an asthmatic may need two or three interventions before improvement. In between the interventions, the physician observes the patient. That counts as separately billable observation care.

    On the other hand, if the patient is spending time under observation care solely as a matter of convenience for the patient, the physician, or another provider, then you shouldn't report observation care codes. According to Blakeman, examples of when documented information does not support billing observation include:

  • The test results took a long time to come back.
  • It took a long time to clear an inpatient bed, so the patient is kept under observation care in the ED.
  • Your physician was waiting for another provider to see the patient.
  • The ED kept the patient until tests could be run in the morning, when the unit was available.
  • The ED was waiting on transportation availability or confirmation of destination, e.g., nursing home.
  • Admission: Medical necessity requires that deciding whether to admit or transfer the patient be included in observation care, Blakeman says. If the patient's condition indicates no likelihood of admission, then you can't bill observation care. Similarly, if admission is a foregone conclusion, then you can't bill. But otherwise, the final decision to admit after observation does not preclude payment, Blakeman says.

    In the medical decision-making portion of the E/M service, document the physician's concern with this decision, Blakeman says. Doing so will support the need for observation, he states. "Observation care is only cost-effective for payers when the extended stay in the ED might have ruled out admission," he says, so let your payers know that the physician needed observation time to make that decision.

  • Order for Observation: The physician must write down the order for observation care along with all other care, Blakeman says. The physician should also note the time, since it is necessary for accurate coding and will determine the payment amount if the patient stays overnight, Blakeman says. Simply summarizing the patient's stay by recording how long you observed the patient does not qualify as noting the time. Writing down the order and the time it was ordered makes clear that ordering observation care was deemed necessary for treatment at that time, Blakeman says.

    Most observation care patients require a level-five history and exam, Blakeman notes. Document all re-exams and a clear treatment plan with discharge instructions in the charts, he says. In addition, a discharge summary is required.

     

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