Awareness : Newsletter Articles

Observation Services

“Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short- term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital.”

Section 20.6, Chapter 6 of the Medicare Benefit Policy Manual (MBPM) (Pub. 100–02)

Outpatient observation services are not to be used as a substitute for medically necessary inpatient admissions.

It is also important to remember that observation services are covered only when provided by the order of a physician or another individual authorized by State licensure law, and hospital staff bylaws, to admit patients to the hospital or to order outpatient services.

Outpatient observation services are not to be used for the convenience of the hospital, its physicians, patients, or patient’s families, or while awaiting placement to another facility.

Calculating Observation Time

Observation time begins at the clock time documented in the patient’s medical record, which coincides with the time that observation care is initiated in accordance with a physician’s order. Hospitals should round to the nearest hour.

Observation time ends when all medically necessary services related to observation care are completed.

Observation services should not be billed concurrently with diagnostic or therapeutic services for which active monitoring is a part of the procedure.  Hospitals should not report as observation care services that are part of another Part B service, such as postoperative monitoring during a standard recovery period (e.g., 4-6 hours).

Additionally, there must be medical necessity for observation beyond the usual recovery period (4 to 6 hours) of the usual recovery time associated with procedures are reimbursed as part of the procedure.

The medical necessity for observation services must be documented in the medical record.

Observation is not to be used as a substitute for recovery room services. The need for observation care should be determined by the patient’s condition during the postoperative recovery period, not prior to surgery. General standing orders for observation services following all outpatient surgery are not recognized.

Patients must be in the care of a physician during the period of observation, as documented in the medical record. The medical record must also include documentation of Physician assessment of the need for continued observation care or determination of inpatient admission or discharge after the first 24 hours of observation and again at 48 hours of observation care.

The following are NOT considered Observation services:

✔  Recovery from outpatient surgery or procedure
✔  Chemotherapy
✔  Blood transfusion
✔  Short stays for in-patient only procedures