Observation Medicare and Medicaid

The Ins and Outs of Coding and BillingJune 2, 2014

Jean C. Russell, MS, RHIT518-369-4986

jrussell@epochhealth.com

• Background• NY Medicaid Observation• Medicare – IPPS 2014 Final Rule• Rebilling Denied Part A as Part B• Medicare – Current Billing Requirements for

Observation• Medicare – OPPS 2014 Changes• Questions / Discussion

Agenda

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Background

• Outpatient Status– Outpatient care

• For example – Clinic, Emergency department, Outpatient surgery Extended surgical recovery over-night

– Observation service– Medicare Part B– Paid on APCs (Medicare) and APGs (Medicaid)

• Inpatient Status– Medicare Part A– Paid on MS-DRGs (Medicare) and APR-DRGs (Medicaid)

Level of Care

MedicareObservation Vs. Inpatient Stay

• Observation is Part B, Inpatient is Part A– Part A has a single deductible (co-pay) for a hospital stay– Part A covers most of the cost of the stay

• Part B has individual co-pays for each of the procedures performed (e.g., x-rays, MRIs, ED visit, drug administrations)– The cap on each individual co-pay is set at the Medicare

inpatient cap• But the sum of the co-pays can be significant

• Cost to patient may well be higher as observation

MedicareObservation Vs. Inpatient Stay

• Certain services covered in a Part A visit are not covered under Part B– E.g., self-administered drugs– Services that did not meet medical

necessity (e.g., radiology)

• SNF coverage under Medicare requires a medically necessary 3 day admission prior to the SNF

Observation Cases Increasing• According to a recent article:

– The use of observation status has nearly doubled in the past six years

– Observation stays of more than 48 hours have increased from 3% to 8%

– Number of patients in the hospital for at least three days that could not qualify for SNF due to observation was over 600,000 last year alone

• Shorter stay inpatients cases are closely scrutinized• Sometimes observation is a fallback to ensure the visit

will be covered

Source: http://www.npr.org/blogs/health/2013/09/04/218633011/for-hospital-patients-observation-status-can-prove-costly

• Increasing scrutiny by private payers and auditors• Target of Office Inspector General (OIG) and Office of

Medicaid Inspector General (OMIG) audit plans• Focus of Medicare’s PEPPER• Reviewed by Medicaid Integrity Contractors (MIC) and

Medicare Recovery Auditors• Reviewed by the Medicare Administrator Contractor

(MAC) – NGS for New York• And now subject to the Two Midnight Rule

Short Stay Inpatient Admission Reviews

NY Medicaid Observation Coding, Billing

and Payment

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• Effective April 1, 2011– Medicaid began coverage of

emergency room observation services– However, the requirements for billing

for the service were strict, including:• Waiver requirement• Distinct observation unit

NY Medicaid and Observation

NY State Medicare Update, May 2011, http://www.health.ny.gov/health_care/medicaid/program/update/2011/may2011mu.pdf

• Observation Waiver Requirements:– Distinct physical space (not scatter bed

model)– Unit can only be used for observation– Patients should require 8-24 hours of care– Overseen by the ER– Patients must come through the ER

April 2011 Requirements

NY State Medicare Update, May 2011, http://www.health.ny.gov/health_care/medicaid/program/update/2011/may2011mu.pdf

February 2012 Changes• Effective January 11, 2012, observation units

had to be established in compliance with Title 10, Section 405.19, rather than through a waiver

• Hospitals that previously provided services under the waiver had 24 months of the effective date of the regulation change (i.e., January 11, 2014) to be in compliance with the regulations

NY State Medicare Update, February 2012, http://www.health.ny.gov/health_care/medicaid/program/update/2012/2012-02.htm#health

Changes Effective April 1, 2013• Impacts NY Medicaid, including FFS, Medicaid

Managed Care and Family Health Plus• Expanded coverage of Observation Services• Observation services are designed for patients for that

cannot be treated and released in the ED, but should reasonably be expected to be discharged within 48 hours

• A patient must be in observation at least eight hours (with clinical justification)

• This is in addition to time spent in the ED prior to receiving observation services

April 2013 Changes• Observation services may now be provided in:

– An approved unit that has an existing waiver– An existing observation unit in compliance with 10

NYCRR 405.19– New distinct observation unit in compliance with 10

NYCRR 405.19– Inpatient bed (i.e., “scatter bed”)– The ED (for CAH or sole community hospitals)

• Observation services may be provided up to 48 hours, after which the patient should be admitted or transferred or discharged

April 2013 Changes• Required documentation for Medicaid

payment for observation includes:– A clinical justification for observation

status– A working diagnosis– Tests/treatments administered– Progress notes by physician or mid-level,

and– Final disposition of the patient

April 2013 Changes• Must be assigned from the ED or hospital OP

department if the facility does not have an ED• Service is billed with HCPCS code G0378, hospital

observation per hour• Groups to APG 450• Units reported should be number of hours, up to 48• Will only be reimbursed if units exceed 8 (that is 8 to

48 hours)– Should still be reported even if less than 8

April 2013 Changes• Observation ends when patient is either

discharged or admitted• If patient is admitted, only the inpatient

claim should be submitted for payment– Charges from the outpatient part of the

visit are included on the inpatient claim

• If the patient is transferred, the ED and observation services may be submitted for payment

April 2013 Changes• Time away from observation should be

excluded from the observation time Significant procedures such as MRI, PET

and CT scans will result in G0378 being packaged (i.e., not paid)

• Low level ancillaries will allow observation to be paid separately

April 2013 Changes• Discrete observation unit established in compliance

with 10 NYCR 405.19 reported with the UC modifier – reimbursed at an enhanced rate (20% higher)

• Scatter bed services reported without the UC modifier • Order for observation must be clear and must clearly

identify observation as outpatient • Patient must be advised that they are outpatient and

the stay does not meet Medicare inpatient requirements for SNF services

Source: May 2013 Medicaid Update, http://www.health.ny.gov/health_care/medicaid/program/update/2013/2013-05.htm#osl

3M EAPG October 2013 Changes

• APGs 500-502 are new in 2013• APG 492 is EAPG Type Incidental• APG 450 is EAPG Type Ancillary • APGs 500-5012 are EAPG Types Medical

APG Logic for New Observation APGs

• G0378 maps to APG 450

• G0379 and other observation CPTs map to APG 492

• Billed with G0378, Hospital observation service, per hour – Paid with units >= 8, should be <= 48– UC modifier if discrete unit

• Typical rate code 1402, Emergency department• Must have a medical visit (e.g., 99285)• Groups to APG 450, Observation

– Relative Weight = 0.1563 (down from 2.1949, but now is per hour)

– Payment $24 (upstate) to $31 (downstate) per hour– Paid in addition to ED visit, packaged with significant

procedures

Ancillary Observation – APG 450

Medical Observation – APGs 500, 501, 502

• Medical observation APG assignment– Must be reported:

• A CPT or HCPCS code assigned to APG 492 (e.g., G0379)• Plus G0378 which is assigned to ancillary observation APG 450

– EAPG 492 changes to one of three medical EAPGs (if all criteria met)

• 500 ENCOUNTER/REFERRAL FOR OBSERVATION - OBSTETRICAL• 501 ENCOUNTER/REFERRAL FOR OBSERVATION - OTHER DIAGNOSES• 502 ENCOUNTER/REFERRAL FOR OBSERVATION - BEHAVIORAL HEALTH

– Final medical observation APG assignment is determined by primary dx code

• APG 450 is packaged• Observation is packaged if a significant procedure is

reported, e.g., 59025 – Fetal Stress Test

Medicare IPPS Final Rule Changes

Effective 10/1/2013

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Inpatient Versus Observation• Order - Inpatient order must be clear “admit

to inpatient” or “admit as an inpatient” – cannot be vague such as “admit to C5”– The word “admit” alone is not sufficient

• Length of Stay - Presumed to be medically necessary if the stay crossed two midnights for “medically necessary services”– Order must document the expectation– Less than two midnights would be

presumed to not meet inpatient criteria

Medical Review Policies• Two midnight benchmark

– Begins when the patient starts hospital care (i.e., comes into the ED)

• Two midnight presumption– Presumed to meet medical necessity

if the stay was at least two midnights• Reviews will focus on inpatients with

stays less than two midnights

Physician Certification• Physician certification required

– Authentication of the order to admit– Provides the reason for the inpatient services– Estimates the time the patient will need to be in

the hospital and– The plans for post-hospital care

• The physician certification must be completed, signed, and dated and in the medical record prior to discharge

• A specific format is not required

Recent Clarifications• For patients transferred in, the receiving hospital can

take into account the time spent at the transferring hospital when determining whether the patient met the 2-midnight benchmark

• Off-campus ED’s are still considered part of the hospital and time spent in these departments would count into the 2-midnight calculation

• CMS has requested re-reviews of denials made during the probe audit to ensure they are consistent with these clarifications

Source: http://www.cms.gov/Research-Statistics-Data-and-Systems/Monitoring-Programs/Medicare-FFS-Compliance-Programs/Medical-Review/InpatientHospitalReviews.html

Rebilling Opportunities• When an inpatient stay has been deemed not

medically necessary after the beneficiary has been discharged – Could be due to a RAC denial, a MAC denial, a

prepayment review, or the provider review itself

• Bill all services up to the inpatient order as Part B OPPS (bill type 13x)

• Bill all services after the inpatient order as Inpatient Part B (bill type 12x)

Source: NGS website release 5/7/2012 http://www.ngsmedicare.com/wps/portal/ngsmedicare/!ut/p/c4/VU27DsIwDPwWhsxJoRMbdIClHSgSj800pli0cZW65fdJUjEgSz77znfWdx3KwUwtCLGDTl_17dP02wHkpbINKFMd6hItNeCxYCfo5I9T5oQjT77BUZkzczeqbG3A2QglCHqCwJmiA0_PYIl_orb0enr0JEKujVs4oj4FXF6Y9PDS0s9SsMWIeZ42Tyk9zkeYk1KxRNjj4i5R9PDerb6jtAtv/

Medicare Timely Filing• Subject to the Timely Filing Rule• Medicare defines the timely filing period as no later

than 12 months after the date of service• Inpatient claims denied later than this are past the

timely filing limit and cannot be corrected and rebilled• Unfortunately, many times auditor denials are after

the timely filing, in which case the Hospital has no option for recouping payment

• Changes the March 13, 2013 CMS ruling

Chapter 1, Medicare Claims Processing Manual, Section 70 – Time Limits for Filing Part A and Part B Claims

Rebilling Steps • Steps to follow:1. Submit an inpatient no-payment claim for the

inpatient stay using bill type 1102. Submit an inpatient Part B claim for the billable

services that occurred during the inpatient stay using bill type 12X– That is an Inpatient Part B claim for services provided after

the inpatient admit order– Final rule expanded this to include just about all services

except services that have to be outpatient such as medical visit services (ED /Observation /G0379), diabetic self management training (DSMT)

IP Claim - Cancelled

•Bill type 110•ICD-9 Dx Codes•And Procedures

IP Part B

•Bill type 121•Post IP Order•CPT Procedures

OP Claim

•Bill type 13x•CPT Pre IP Order Procedures

Clarification

3. Submit an outpatient claim(s) for the outpatient preadmission services that occurred prior to the non-covered inpatient stay using bill type 13X

– Based on the fact that the submission of outpatient preadmission services is permitted when there is no Part A payment made for the inpatient stay

– That is, the outpatient services are not bound by the 72 hour rule

– Would include the ED or clinic visit that occurred prior to the order to admit

Source: http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM7672.pdf andhttp://www.medicarenhic.com/pa/billing/ConditionCode44.pdf

IP Claim - Cancelled

•Bill type 110•ICD-9 Dx and Procedures

IP Part B

•Bill type 121•Post IP Order•CPT Procedures

OP Claim

•Bill type 13x•CPT Pre IP Order Procedures

The Beneficiary• Beneficiaries are entitled to receive information about

coinsurance and deductibles• Inform beneficiaries in writing that the inpatient stay

is not going to be billed to Medicare as a covered claim and why

• Beneficiary may be responsible for coinsurance (for the 12X bill and for the 13X bill) instead of an inpatient deductible

• If the inpatient deductible has already been paid, it is the responsibility of the provider to make a refund as appropriate

Rebilling for Denied Part A• Chapter 3 of the Medicare Claims

Processing Manual states that hospitals have to bundle most outpatient services performed within 72 hours of an inpatient stay “when Part A payment can be made on the inpatient stay”

• But this does not apply when no Part A payment can be made on the inpatient claim

Source: http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM7672.pdf

Inpatient Part B Expansion• Expansion of services that can be billed now includes

most services, even PT/OT/ST• Does not apply for other circumstances when there is

no Part A payment such as when Part A benefits have been exhausted

• Does not include observation since unless there is an order for observation prior to the order for inpatient (in which case it would be billed on the 13x bill)

• List of rev codes not covered, see MLN Matters SE1333, http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE1333.pdf

Inpatient Observation• Must occur Prior to Discharge

– CM / UR physician advisor / Attending physician all involved in decision– Should be relatively rare– Requires signature of both UR and Attending physicians

• Must notify the patient (signed document suggested) what it means to be an observation case

• Observation time starts with the observation order change– Often not w/ the required 8 hours

• Result is a bill type 131 outpatient claim

Condition Code 44 Order

Current MedicareRules

Observation Coding, Billing and Payment

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• Reported by the hour – rounded to the nearest hour• Starts: physician order time and date and observation treatment

has started– Clear order to admit as inpatient Vs. refer to observation– Nursing documentation indicating observation care has started

• Ends: physician order time and date to discharge from observation or hospital and medical treatment has ended– Note that “discharge after consult” or other critical, but delayed

medical test should be clearly documented – “Waiting for a ride” is not considered part of observation time

Observation is a Timed Service

Chapter 4, Medicare Claims Processing Manual, http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf

• Does not include time that is:– Concurrent with diagnostic testing or

therapeutic services that includes active monitoring, “(e.g., colonoscopy, chemotherapy)”, or

– Services that are part of another service (e.g., PACU)• Need to implement a system to extract other

procedural time from observation hours

Observation is a Timed Service

Reporting Observation• If a period of observation spans more than

one (1) calendar day, all of the hours for the entire period of observation must be included on a single line and the date of service for that line is the date that observation care begins

Source, Medicare Claims Processing Manual, Chapter 4 - http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf

Reporting Infusions“Drug administration services are to be reported with a line item date of service on the day they are provided. In addition, only one initial drug administration service is to be reported per vascular access site per encounter, including during an encounter where observation services span more than 1 calendar day.”Source, CMS Medicare Claims Processing Manual, Chapter 4, Section 230.2, http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf

• Medicare reporting – Revenue code 762, observation – G0378, Hospital observation service, per hour – Units - The number of hours

• Time must be calculated• Suggest a documentation review required to

ensure accurate reporting of units• If calculated automatically, perform an internal

audit on at least a select number of cases

Reporting Observation

Observation Coverage

• Should not be billed for monitoring and care during standard postoperative recovery period (e.g., 4-6 hrs)

• Can be billed for complications requiring extended post-surgical recovery care• But will not be reimbursed for the

composite rate when there is a surgery prior to the observation

• Needs to be ordered

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• Extended Assessment and Management composite payment that covers an episode of care involving more intense assessment and management, includes:– A high-level clinic or ED visit, direct referral

to observation, or critical care service– 8 hours or more of observation services – Other associated services (packaged)

Observation Payment

Observation Changes for 2014• Significant increase in packaged services

(e.g., lab and stress tests)• Reduction of clinic E/M codes to a single

G code (G0463)• Required changes to observation

composites

Extended Assessment and Management Composite (EAM)

• In 2013 there were two composite EAMs – 8002 and 8003

• G0378 (8 or more units)• Revenue code 762 (observation)• Reported with:

– G0379 (direct referral) on the same date of service, or– 99205 / 99215 (level V clinic visit) on the same date or day

before• Reported without a surgical (Status T) procedure on the same day

or day before• National APC Rate (2013) = $440.70

• No diagnosis requirement

Level I Extended Assessment and Management - APC 8002

• G0378 (8 or more units)• Revenue code 762 (observation)• Reported with:

– 99284 / 99285 (high-level ED visit), or– 99291 (critical care), or– G0384 (high level Type B ED visit)– On the same day or day before the observation

• Reported without a surgical (Status T) procedure on the same day or day before

• National APC Rate (2013) = $798.47

• No diagnosis requirement

Level II Extended Assessment and Management APC 8003

High Level E/M

Extended Assessment and Management Composite (EAM)

• Effective 1/1/2014 there will be only one composite EAM – 8009– G0378 (8 or more units), revenue code 762

(observation) with no diagnosis requirement– Reported with an E/M service:

• 99284 / 99285 (high-level ED visit) 99291 (critical care)• G0384 (high level Type B ED visit) G0463 (clinic E/M)• Or G0379 (direct referral to observation from physician

ofc)• On the same day or day before the observation

– Reported without a surgical (Status T) procedure on the same day or day before

– National APC Rate (2014) = $1,198.91

Observation Payment

G0379 – Direct Referal• G0379 – Direct referral to observation, moved

to APC 608, payment increased to $327.85 (2014) from $175.79 (2013)– 2012 - reimbursed as a 99211 (APC 604)– 2013 - reimbursed as a 99205 – new patient clinic

level V– 2014 – reimbursed between a level IV and V ED E/M

• Paid only when observation is not paid • Improved reflection of the cost associated with direct referrals to observation

What this means to Medicare Observation

• Increased composite reimbursement• Extensive bundling of services• Add-ons, ancillaries, lab and drugs not

separately paid• Composite payment increases, but

packaging of services increases as well

Summary• Observation is payable by both Medicare

and Medicaid as an outpatient service• Impacts reimbursement for hospital and

cost for patients• There are specific requirements that

must be met to bill observation correctly• Significant changes started in October• More changes were made in January

Questions/Discussion

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Contact UsRichard Cooley

Phone: 518-430-1144Email: rcooley@epochhealth.com

Matthew LawneyPhone: 845-642-6462Email: mlawney@epochhealth.com

Jean RussellPhone: 518-369-4986Email: jrussell@epochhealth.com

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DisclaimerInformation and opinions included in this presentation are provided based on our interpretation of current available regulatory resources. No representation is made as to the completeness or accuracy of the information. Please refer to your payer or specific regulatory guidelines as necessary.