the observation report - hcpro · the observation report guidelines and tips for coding the new...

The ObservationReport

Guidelines and tips for

coding the new observation

APCby Carol Dodd, RHIT

The ObservationReport

Guidelines and tips for

coding the new observation

APCby Carol Dodd, RHIT

A publication of Opus Communications

The Observation Report2

This special report was written by Carol Dodd, RHIT, senior coding consultant with MedQuist,Inc., ofGibbsboro, NJ. Dodd is a contributing writer for several of HCPro’s publications, including Briefings onAPCs and the APC Answer Letter.

Robert W. Kottman, MD, FACEP, president of Alamo Physicians’ Services, Inc. in Universal City, TX, anda practicing clinician in the Baptist Health System in San Antonio, and Jugna Shah, MPH, president ofNimitt Consulting in St. Paul, MN, and contributing editor to HCPro’s family of APC publications, providedresources and shared their expertise.

To learn more about HCPro’s growing line of APC, Health Insurance Portability and Accountability Act of1996, and medical records publications, contact our Customer Service Department at 800/650-6787 oronline at www.himinfo.com.

Sincerely,

Kim Raines Penny RichardsManaging Editor Managing Editor

Table of contents

Observation overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Demystifying the final rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Documentation requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Risk stratification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Billing for observation services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Final thoughts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Resources and Web links for your APC tool kit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Diagnosis codes by condition required to bill the observation APC . . . . . . . . . . . . . . . . . . . . . .18

The Observation Report 3

CMS gives separate billing for some observation servicesNo one, from the federal government on down,ever argued that observation services are not a val-id method of determining whether a patient requiresadmission to a hospital and continuation of care.

The problem CMS identified with the observationprocess was that it didn’t have good data to analyze.It was impossible to tell whether these services werebeing used appropriately and effectively, and thatthey did not overlap with or take the place of moreefficient treatment scenarios.

APCs were based on data from claims filed in 1995.Although physicians had been billing observationservices for some time, there was little facility-basedinformation available that could serve as a basis fora cost-benefit analysis of the service. Everyone hasheard the horror tales about misuse of observationservices. These misuses are most likely the excep-tions, not the rule. Still, CMS had virtually no data touse to develop an APC for observation service, orthe best-practice treatment modalities for a patientin observation.

CMS never refused to pay for observation under APCsand the OPPS rules. Observation services have alwaysbeen packaged into facility payment for the differ-ent initial levels of service that resulted in a patient’sadmission to observation, and hospitals continuedto collect data on these services. Facilities were en-couraged to continue reporting observation servicesand the charges incurred in the delivery of the serv-ice to provide data for future decisions concerningthe separate reimbursement.

Coding choicesThere are a number of coding choices in CPT-4physicians use to report observation for their ownreimbursement. The codes are based on the docu-mentation of physician cognitive and physical services.Unfortunately, these codes give little to no informa-tion about the services rendered by other personnel,or the resources the facility expends to monitor and

Observation overview

care for the observation patient.

CMS asked facilities to report observation servicesby revenue center, leaving open the option to in-clude the CPT-4 codes. It asked that the chargesincurred be clearly identified with the observationservices.

The data was used to form a more complete pic-ture of how the services were being used, the typesof patients most likely to require continued moni-toring, and what best-practice treatment modalitiesand diagnostic monitoring would be required foroptimal use of the service.

From this picture, CMS settled on three conditionsit felt were most likely to respond favorably tocontinued treatment and monitoring in an obser-vation setting. The conditions are asthma, conges-tive heart failure (CHF), and chest pain (whichare explained later in this report). CMS clearly de-fined how the observation APC can be charged,and the amount of payment it felt was appropri-ate for this new APC.

Diagnostic monitoring“Frequently, beneficiaries are placed in ‘observa-tion status’ in order to receive treatment or bemonitored before making a decision concerningtheir next placement (that is, admit to the hospitalor discharge to home).”—Federal Register, Novem-ber 30, 2001

In essence, that says it all. Admission to observationservices implies that the patient’s condition requiresmore study and treatment before a final dispositionis made. In this statement, CMS clearly precludesthe use of observation services for convenience, oras a continuation of surgical services, and disallowspayment under the APC when patients are simplywaiting for transfer or placement elsewhere.

The statement also implies that after a finite periodof time, a decision will be made as to whether thepatient is to be admitted or discharged. continued on p. 4


During the comment period before the final rule wasadopted, some practitioners argued that the list ofeligible diagnoses was too narrow, and CMS hasagreed to look at further diagnoses as more databecomes available. Before the final rule was estab-lished, CMS did agree to broaden the code rangesfor conditions under the list, but for now these threeconditions are the only ones that will be paid sepa-rately. The question that remains is whether separatepayment under the observation APC (0339) will reallyyield the type of reimbursement that will adequatelycompensate facilities for services.

It is unlikely that separate payment for observationservices will make separate observation units in fa-cilities economically feasible. CMS isn’t concernedabout this detail, and reiterates that observation serv-ices can take place in any part of the hospital.

As CMS quietly but clearly reminds us, it isn’t asthough separate payment under this APC representsany additional monies paid under OPPS. Instead, somedollars will be shaved from the payment rates forother services, most notably those for clinic and EDAPCs. This is in keeping with the zero-balance phi-losophy that CMS has used to adjust other paymentrates, most notably those items that were formerly

high-ticket passthroughs.

Determining the needsFacilities must develop strategies to use, document,and bill observation services correctly under the finalrule. And they must also collect the necessary datato provide CMS with an evaluation of the rule andtheir recommendations for revision or expansion.

The APC concept is based on resources and per-sonnel, and on strategies for the correct utilizationof facility resources. We stand in a unique positionto determine where the real needs lie and to assistwith the development of a comprehensive plan tomeet those needs. The data collected during thenext year on the effectiveness of this new APC arecrucial to the development of future policies regard-ing observation services.

Good documentation and careful utilization of obser-vation services is a crucial step in the justification ofMedicare dollars for observation services. Facilitiescan assist CMS to further study the service, with apossible expansion of services/reimbursement for ob-servation by meticulous recordkeeping and docu-mentation that supports the need for observation aswell as correctly billing for the service.

Observation overview continued from p. 3

If you’d like to order extra copies of this special report, please use the coupon below or call customer service at 800/650-6787. Extra copies are $39 each.

Need more copies? That’s easy

❑ I’d like ________ copies. The price is $39 each.❑ Payment enclosed.❑ Please bill me. ❑ Please bill me using PO # _____________

Charge ❑ AmEx ❑ MasterCard ❑ VISASignature ____________________________________________

Card # _____________________________ Expires _________

(Required for authorization)

(Your credit card bill will reflect a charge to “Opus Communications.”)

Name & Title ___________________________________________

Organization ___________________________________________

Address _______________________________________________

City __________________________ State ____ ZIP ___________

Phone ( ) ________________ Fax ( ) ________________

E-mail ________________________________________________________

Mail to: Opus Communications, a division of HCPro

P.O. Box 1168, Marblehead, MA 01945

Call: 800/650-6787

Fax: 800/639-8511

E-mail:[email protected]

Internet: www.hcmarketplace.com

R0001


Identifying the errorsMost of us are well aware of the miscalculations inthe November 30, 2001, Federal Register that led tothe three-month delay in implementation. There arealso many typos in the final rule, including severalin the text that dealt with observation services. Forexample, on p. 59883, there are two glaring errorsthat caused a great deal of confusion. The first isregarding identification of the HCPCS code that cor-responds with APC 0339. Two different codes areidentified for billing observation. The correct codeis the second code mentioned on p. G0244.

Additionally, CMS had been convinced to add severalother codes to the list for congestive heart failure(CHF). The final rule inadvertently listed it underthe heading of chest pain. A complete list of all di-agnosis codes is found in the back of this report.

The inclusion of the rheumatic codes and the com-bination codes make perfect sense to most coders,from the standpoint of data capture. There will cer-tainly be many instances in which the three maincodes originally proposed by CMS (428.0, 428.1 and428.9) will not be listed according to correct codingguidelines, while CHF may be present.

Chest painIt is estimated that each year 11,000 people are senthome from ED visits with a misdiagnosed myocar-dial infarction. This unfortunate statistic includes ahigher death rate (25%) for those individuals whoare not hospitalized and treated in this immediateperiod while the infarct evolves.

It is equally unfortunate that the signs and symp-toms do not always correlate with positive laborato-ry results during the one to two hours of the typicalED visit. This is the rationale that supports separatepayment for observation services for patients whoare experiencing chest pain.

While the patient is observed, further documenta-tion must depict the process by which a definitivediagnosis is made. CMS requires further diagnostic

tests to be performed during the observation periodto validate that the patient is truly being observedfor a worsening condition, and not simply waitingfor an inpatient bed.

CMS has stated that it will develop the softwarecapability to identify whether the testing took placeas part of the ED visit or during the observationperiod. This is crucial.

During the observation period, at least two sets ofcardiac enzymes and two electrocardiograms (EKGs)must be documented to ensure that the patient hascontinued to receive diagnostic services. Thus a setof cardiac enzymes, drawn and read during the EDvisit, will not be considered a valid part of the ob-servation protocol.

CHFThe Merck Manual asserts that “no definition ofCHF is entirely satisfactory.” There are so many eti-ologies, and so many complications associated withthe disease, that a careful assessment of patient sta-tus is critical, as well as continued monitoring to en-sure that symptoms are under control. Since CHF islargely a symptom, rather than a disease, the initialresponse to treatment is not always predictive ofthe long-term outcome.

When a patient is admitted to observation services forCHF, CMS requires that a chest x-ray, pulse oximetry,and an EKG be used to monitor the patient’s progress.These should be documented on the observation rec-ord, noting the time each test was performed, to differ-entiate these from earlier ED or clinic testing.

AsthmaAlthough asthma presents less of a diagnosticchallenge to the physician than either CHF orchest pain, it often proves refractory to initialtreatment and this factor is what makes asthma aprime candidate for observation services. Physi-cians monitor not only the causes and etiologiesinvolved, but also the patient’s response to treat-ment modalities.

Demystifying the final rule

continued on p. 6


Initially, CMS required nebulizer treatments as partof the observation scenario for asthma patients. Itreversed this decision in the November 30, 2001,Federal Register, when clinicians argued that nebu-lizer treatments were not diagnostic procedures. Itis likely that the initial rule had intended to monitorthe patient’s response to treatment as much as diag-nostic efforts.

In the revised directions, CMS requires documenta-tion of the peak expiratory flow rate (PEFR) usingcode 94010, or 94760, pulse oximetry.

There is some argument about using the code 94760,status indicator N, which isn’t billed by many hospi-tals. In truth, this code should always be reportedwhen the procedure is performed, since status indi-cator N codes can be used to validate transitionaland outlier payments even though they are packagedinto the E/M level of service for the visit. Facilitiesshould update their chargemasters to reflect thisprocedure, as well as other CPT codes with statusN indicators.

The importance of time reportingAmid considerable argument from commenters,CMS stuck to its guns and insisted that an eight-hour period is the minimum acceptable for separatepayment under APC 0339. Observation periods thatdo not meet the time criteria are packaged into theE/M level of service from the ED clinic as they havealways been since the August 2000 implementationof OPPS.

There is some method to this madness. CMS sets thesetime requirements in accordance with its estimation ofwhat is appropriate utilization for observation cases.

In effect, CMS feels that observation should appro-priately last approximately eight to 24 hours, andthat data supports this. So that is what they’re goingto pay for. If you cannot meet the time criterion,anything less will be paid by the original ED or clin-ic E/M, and anything over 24 hours will be packagedinto the observation APC payment.

Many commenters have argued that even a high-end E/M level doesn’t begin to cover the resourcesexpended and personnel who attend to a patientwho must be observed for any additional period oftime. The same is true for longer periods of obser-vation. For example, for an 18-hour stay, the sepa-rate reimbursement will be insufficient to cover thecosts of prolonged observation. All clinical argumentsto the benefits of shorter or longer periods of timewere firmly denied.

Meeting the criteria for observation timeThere are no guidelines in the final rule to determinehow hourly increments should be rounded, althoughthe Medicare Hospital Manual states in Section 455that observation hours should be rounded to thenearest hour. Charges for a portion of a “final hour”of observation should be pro-rated appropriately.This would give a much better assessment of theactual resources used. Don’t let the eighth hour ofobservation services be rounded up to meet theminimum requirement, however.

Some leeway is granted to facilities in that the ter-mination of observation time occurs when the nursepicks up the doctor’s order to discharge the patient.Facilities should develop an observation documen-tation form that records both of these times clearly.This may become part of an audit criteria for ob-servation reporting, and it seems likely that hugediscrepancies in the two times will be addressed byCMS in future versions of the rule.

Some patients just don’t need eight hoursCMS reiterated that observation periods of fewerthan eight hours’ time would be packaged into theE/M level for the ED or clinic visit as they have beensince August of 2000. Does that mean that these serv-ices should not be reported? Absolutely not.

Up until the implementation of the new observationAPC, hospitals were instructed to report observationcharges on a separate line on the UB-92, using rev-enue code 762. No CPT code is necessary, but thenumber of hours of observation must be stipulated

Final rule continued from p. 5


as well as the charges incurred. The appropriateemergency or clinic E/M level must be reported inaddition to the observation.

There will be no separate reimbursement for theseservices, but the information is critically important ifCMS is to evaluate whether to change the time re-quirement for observation reimbursement. This isespecially true in the case of observation for asthma,where many commenters had criticized the eight-hour requirement. In the final rule CMS states

“However, we will closely monitor the impact of the8-hour time requirement and, if appropriate, considerchanges for a future proposed rule.”

The only way they’re going to be able to do this iswith data.

There is also a chance that the additional chargesmay qualify the facility for some outlier payments,especially if these episodes occur frequently. Besure to capture all ancillary procedures performedduring this period as well, whether they have theirown APCs. In order to improve the reimbursementpicture for observation, we must prove both thecosts and the efficacy of the services rendered.

CMS hopes the eight-hour time requirement willhelp facilities develop protocols for the correct useof observation services and improve clinical utiliza-tion. This information is critical to the facility as wellas to CMS. Accurate reporting of resources and charg-es will be easily identified and retrieved for analysisby medical staff and the APC committee, to deter-mine best-practice initiatives.

Physician and nursing attendance requirementsCMS also requires that a patient in observation re-ceive further diagnostic workup and nursing careand monitoring during the observation period. Thisclearly differentiates the observation patient fromone who is admitted overnight as a matter of course,where, to quote the final rule: “they are placed in abed on a nursing unit, with vital signs taken every4 hours. This is not a service we recognize as observation.”

The use and documentation of more aggressivemonitoring and treatment is paramount to validat-ing the use of observation services. Facilities shoulddevelop standards of care for each type of observa-tion patient and documentation tools to prove thatthese measures have been taken.

Observation forms should be designed to verify thefollowing:• Risk stratification forms used to determine the

patient’s need for observation services (dis-cussed in a later section of this report)

• Physician documentation forms• Nursing documentation forms

Physician requirements:Physicians are required to provide an admission noteand a discharge note for all observation patients. Theseshould be timed and signed by the attending physi-cian and there should be room for progress noteson the patient’s condition where appropriate.

A section of these forms should provide space wherephysicians can report the results of each testing re-quirement for the conditions for which observationservices have been implemented. The form shouldalso allow room for comments, where appropriate,on the results of these tests and how they haveaffected decision making.

Nursing documentationThe nursing documentation should reflect activemonitoring of the patient’s condition. More important,it should contain the admission and discharge times,by which observation time reporting is actually based.

Separate forms should be provided for both physi-cians and nurses, although, arguably, standard nursingnotes or flow sheets may be adequate. But if obser-vation is to be seen and paid as a separate entity,the appropriate data should be clearly identifiable tocoders and billers to simplify verification of the claim,and will easily stand up to audit in the future.

The next story, “Documentation requirements,”should help to illustrate why a separate set ofobservation forms could be a very good idea.


Diagnosis-A note for codersWith only three conditions approved for observationservices, there are many codes available that qualifyfor separate reimbursement. But as every coder knows,sometimes a serious sign or symptom such as chestpain is transformed into another diagnosis after study.What to do when the chest pain is later found out tobe gastroesophageal reflux disease (GERD)?

If the coder follows correct coding guidelines, theGERD must be listed as the principle diagnosis forthe visit. Fortunately, CMS doesn’t require that thecondition that initiated the observation services bethe principle diagnosis on the bill. Chest pain is avalid secondary diagnosis in the outpatient setting,and should be coded in addition to the GERD. It isalso correct to list the chest pain in the admittingdiagnosis field where appropriate. This meets therequirement for “medical necessity” for observation. Physician query is always appropriate when a diag-nosis is unclear, but it cannot be used simply to val-idate the need for observation services. No matterwhat the final diagnosis indicates, the claim will bedenied unless one of the approved diagnoses ap-pear on the bill.

Documentation of ancillary proceduresOne of the benefits of having space on the obser-vation document for ancillary tests is that it can beclearly demonstrated that 1) these tests were per-formed during the observation period, and 2) thatthey were used to determine the patient’s need forfurther treatment or to clear the patient for discharge.This information is what CMS will be looking for whenit gets around to auditing these episodes in the com-ing months. The physician document for observa-tion should contain space where each of these testscan be checked off, with space for comments as tohow they affected patient care and medical deci-sion-making.

Admission requirements and notesEvery time a patient is admitted to observation, an APC for an ED visit or a clinic visit (APCs 0610,0611, 0612, 0600, 0601, and 0602) must accompany

APC 0339 on the same bill. This means that a phy-sician must be on hand to validate the need forobservation each time a patient is admitted to theservice.

Facilities that permitted direct admission for obser-vation from a provider’s office in the past must ex-amine this policy and find the means to complywith the new requirements. Hospitals may requirethat all observation patients be processed throughthe emergency room or clinic first if they wish tocontinue to provide observation services for outsideproviders, or require that the attending physicianbe physically present at the hospital when a patientpresents for direct admission to observation. A hos-pitalist or house physician might be assigned to meetthe patient and perform a low-level assessment sothat the E/M can be billed along with the observationservices. But however it is done, a physician mustbe on hand to check the patient in, and this mustbe reflected in the facility charges.

A dated and timed admission note must be writtenfor each observation episode, and appropriate testsmust be ordered, as well as instructions given formonitoring the patient during observation.

Interim progress notesCMS backed off somewhat on its stance that progressnotes should be written for observation patients. Inthe November 30, 2001, final rule, CMS amended itsrequirements to read:

“With regard to writing progress notes, we wish toemphasize that the requirement is only to write‘appropriate’ progress notes.”

The rule goes on to say CMS is aware that some-times only an admission or discharge note is reallynecessary, but adds that changes in the patient’scondition, and more important, the “length andcomplexity of care provided,” require further documentation.

This last statement can be viewed as the proverbial

Documentation requirements


word to the wise. It seems clear that the lack of aprogress note for a patient who is pushing the en-velope of the approved time period for observationcare (24 hours or more), will be an instantaneousred flag to an auditor.

Discharge notesDischarge notes should summarize the patient’sprogress and be dated and timed appropriately. If

no progress notes have been written, this summaryshould be as comprehensive as possible.

The observation period ends when the nurse hasremoved the order for discharge from the chart.Nursing documentation should clearly indicate thetime and date at which the order was removed,either by countersigning the physician’s document,or on a separate nurse’s note.

Risk stratification“With regard to documenting the use of risk stratifi-cation, we did not mean to require any extra docu-mentation in the medical record. We just wish toput physicians and hospitals on notice as to whattype of medical record evidence reviewers will usewhen reviewing claims for observation.”—FederalRegister, November 30, 2001

The Federal Register goes on to say that the mannerin which risk stratification documentation is made isentirely at the physician’s discretion. Unfortunately,the big hole in this premise lies in the understandingthat physicians are in agreement as to what type ofdocumentation is necessary, and that all physiciansnaturally document everything they think and do.

Any coder can tell you this is an unlikely scenario.Consequently, as CMS notifies us that reviewers willbe looking for this evidence, facilities must decidewhether to develop risk stratification guidelines, adoptthose that are commercially available, or simply to“wing it” and hope for the best.

What is risk stratification?Risk stratification is a set of criteria by which a phy-sician can calculate at how much risk a patient wouldbe if he or she was treated and released withoutfurther monitoring and treatment. These criteria aresimilar to the “severity of illness criteria” with whichmost health information professionals and cliniciansare familiar.

Risk stratification is widely used by managed care

organizations to estimate costs of future treatment forcertain subsets of patients. Managed care targets pre-ventive services to these patients, in the hope of off-setting future costly illnesses. Risk stratification alsodetermines best-practice models or protocols, in es-sence, those methods of treatment that are mosteffective in treating certain diseases.

Managed care has used risk stratification to developmeans of dealing with chronic illnesses. At the levelof primary care, the physician assesses factors suchas patient history, environmental and social situation,race and ethnicity, age, sex, and other factors to pro-ject how the course of a chronic illness will run. Thesecriteria take thousands of patients into account, anduse elaborate software modeling techniques to de-termine how likely a patient is to respond to cer-tain treatment modalities, and what life changes theprimary care physician can suggest/implement thatmay prevent the illness from worsening. For instance,a risk stratification model for prevention of acute ex-acerbation of a chronic CHF might include the fol-lowing factors:

• Over 65 years old• Obesity• Hypertension with diastolic dysfunction• Noncompliance with medications• Poor dietary habits

Similar factors can be used to determine risk stratifi-cation for patients for whom observation services are being considered, with the continued on p. 10


inclusion of the diagnostic factors indicating the sever-ity of the disease episode and patient’s response (orlack thereof) to current treatment modalities.

Developing risk stratification guidelinesCMS did not clearly define risk stratification as a requirement for OPPS observation services in 2002.Therefore, the use of risk stratification criteria is verymuch like the situation used to develop facility level-ing guidelines as defined by the April 7, 2000, FederalRegister, in which the onus for developing these guide-lines was left to the individual facility. This meansthere is going to be a wide variation in criteria usedto determine the need for observation services.

Facilities have been given two choices: They canadopt commercial risk stratification products (CMSpoints to those developed by QualCare) or theycan develop criteria independently. Commercialproducts come with a cost, and it may be equallyeffective for the facility to develop its own criteria,which can be ratified and adopted by medical staffand the APC committee, and filed for use in theemergency room, clinic, or with the hospitalist.

Although CMS states it does not require separatedocumentation of risk stratification, the facility maywish to develop a checklist that can be quickly filledin, signed and dated, and attached to the patient’schart (see the end of this section for an example).This document serves as proof-positive to the re-viewer that risk stratification criteria were used, anddefend the billing of the code when all other crite-ria are met.

A job for the APC task forceWho should be involved in this process? Certainly,this is a job for the ongoing APC task force, whichshould include clinicians and nurses as well ashealth information and financial personnel.

Clinical supportIt is likely that medical staff from your ED andother outpatient areas, as well as emergency andclinic nurses, are already represented on your APC

task force. For this project, it will also be necessaryto invite cardiology and pulmonary specialists, aswell as nurses from whatever units your observationpatients are likely to be transferred. You will needtheir expert advice on the criteria that you will choose.

The first determination will be to decide whether to adopt a commercial product or develop in-housestandards. (Your state peer review organization maybe able to provide some guidelines.) If you decideto develop your own guidelines, the clinicians mustdecide what types of criteria to measure and howthis will be done. You can use a point system, simi-lar to those that are sometimes used to determine fa-cility level of service, although the factors measuredwill be different to a large extent. In the case ofrisk stratification criteria, these factors will measurethe risk at which a patient is placed:

• Demographic factors, such as age, sex, ethnicity,life style, etc.

• Patient history• Presenting signs and symptoms• Diagnostic testing results• Response to treatment

Clinicians may wish to weight certain criteria at ahigher risk level than others.

Demographic factorsIn prevention or long-term treatment of a chronicdisease, demographic factors play a greater role thanthey do in the emergency situation. Some of thesefactors do, however, indicate the need for increasedconcern and may specify a need for further surveil-lance, especially when multiple factors exist.

For example, in the case of asthma, African Amer-icans have an 11% prevalence of acute asthma, andHispanic/Puerto Ricans have a 6% prevalence. Thesefactors, coupled with smoking history, age, and sex,might indicate a higher-risk patient than a Cauca-sian (3% prevalence) with no smoking history, whois male, and between the ages of 18–54, during whichfewer males are afflicted with acute episodes of

Risk stratification continued from p. 9


asthma than females. Other social factors, such as socio-economic information, or whether a patient lives alone,may be important in this area of risk definition.

Patient historyA thorough patient history is needed to completethe picture of the risk. The number of hospital visitsa year for the same symptoms may indicate a re-fractory condition. Factors, such as the duration oftime between hospitalizations and whether a patienthas ever been intubated, contribute information nec-essary in the assessment of risk. Additionally, the pres-ence or absence of other chronic diseases may indicatea higher or lower risk factor for a particular patient.Chronic obstructive pulmonary disease, sarcoidosis,HIV, cystic fibrosis, or a history of heart disease canbe used to justify increased risk in our asthma exam-ple. Medication compliance, animal exposure, weath-er extremes, recent asthma medication use, steroiduse, and current symptom duration all factor intothe risk assessment picture.

Presentation of symptomsThe initial clinical assessment provides immediateindication of risk, in that it will qualify and quantifyobservable symptoms. The degree of dyspnea andthe ability of the patient to speak are clear indicatorsof disease severity. Other symptoms that may bepresent, such as chest pain, are notably important.These factors are likely to be noted in the physicalexamination portion of the patient’s record, but if aseparate document is used for risk stratification, anynumber of symptom combinations substantiate theneed for further treatment. Clinicians may choose toweight the presenting signs and symptoms higherthan demographic or historical data.

Diagnostic testing resultsAgain, using asthma as an example, testing reinforc-es the diagnostic picture, and the results of thosetests should be noted for reference. They may beweighted, as above, to reflect a higher level of riskthan social and environmental factors. Pulse oximetrytests should show whether the patient is hypoxic, andalso the level of hypoxia can be weighted for risk,with more severe states weighted higher. Arterialblood gas may indicate hypoxemia or hypercarbia,

and these should be documented. Peak expiratoryflow is one of the tests that CMS has deemed defin-itive, and should be repeated during the observa-tion period, but in the ED, or upon admission toobservation, an initial reading should be taken.

Remember, peak flow is effort-dependent, so the re-sults are somewhat suspect. To be completely accurate,a baseline reading should be available. The riskstratification criteria should note whether baselinereadings are available, and also that efforts havebeen made to locate previous medical records forcomparison when this is appropriate. Chest x-raysmay provide further data, and an EKG can indicatetachycardia or other evidence of strain on the car-diovascular system.

Response to treatmentAlthough this is probably going to be documented inthe ED record or by the hospitalist or clinic physician,a narrative section on the risk stratification checklistmay be a helpful reminder to physicians and a gooddefense in an audit. The patient’s response to med-ications and treatments should be noted in detail,and a brief summary of current status leading to thedecision to admit to observation is the facility’s bestproof of the effective use of the criteria. The docu-mentation checklist on p. 12 is a sample of what arisk stratification checklist might look like. The weight-ing values and numerical assignment of points arepurely arbitrary, and the clinicians on your taskforce should be the final arbiters of how the check-list should be applied.

Risk stratification and chest painRisk stratification in the patient with chest pain differsfrom that of a patient with asthma because no truediagnosis may have been defined when the patientis admitted for observation services. Chest pain is asymptom rather than a diagnosis and may indicateany number of different conditions with varyingdegrees of severity and threat to life. In general, riskstratification for chest pain endeavors to determinethe probability of cardiac involvement as a cause forthe pain. The social/historical factors weigh higherthan in the case of the asthma patient in determiningthe need for further observation for continued on p. 12


some type of cardiac event. When the EKG andlaboratory results can confirm a diagnosis, thepatient is admitted or transferred for further care.

In many cases, facilities have chest pain protocolsin place based on best practice models that haveproven effective in the diagnostic process as well asearly management of the cardiovascular event. Incases where certain risk factors are present, however,and there is no definitive information provided by

EKG and laboratory data, the following risk stratifi-cation can be used to indicate the need for furtherobservation services.

Many common laboratory indicators for myocardialinfarction do not show definitive changes until theevent has evolved over a period of several hours.Levels for creatinine phosphokinase farction and forTroponin 1 requires three to four hours to rise to lev-els that can be considered definitive. Since any singleassay is only sensitive to about 34%, observation maybe indicated on symptomatic and historical data alone.

CHF and risk stratificationAssessment of risk in patients with CHF presents adifferent challenge from either asthma or chest pain.Observation for asthma is targeted toward monitoringthe patient’s progress during the attack and improv-ing the outcome without the necessity of furtherhospitalization. In chest pain, the clinician seeks todetermine whether the pain is a symptom of anevolving cardiac event or is due to some other non-life threatening cause. CHF is a symptom of manydifferent disease processes, however the episode ofheart failure is life-threatening in itself. Physicianswill be monitoring care and working to improvethe outcome of the attack and, at the same time, todefine the cause of the failure and identify thosefactors that are exacerbating the condition.

The morbidity and mortality associated with CHF ishigh. It is listed as a cause of death (primary or sec-ondary) in approximately 250,000 patients per year.The incidence of heart failure increases dramaticallywith age. It is the most common diagnosis amonghospitalized patients over the age of 65. Some of thecauses of CHF are reversible or treatable, and a basichistory and physical examination will reveal risk fac-tors or precipitants. One of the indicators that willprobably be the most widely used to determine theneed for further observation among patients with CHF(as opposed to direct admission) will be the patient’sresponse to diuretic medications. Document these fac-tors to define the level of risk and the need forobservation.

Risk stratification checklist/Asthma

Risk factorRace/ethnicity

African AmericanPuerto Rican/HispanicCaucasianAsian

Sex/AgeMale <10 yearsFemale < 10 yearsMale/female 10–17Male 18–54Female 18–54Male/Female >55

Social factorsEconomic constraintsLives aloneSmokerHistory of smokingSecond-hand smoke exposureExposure to precipitating factors

Medical historyDuration of symptoms

<12 hours<13 to 24 hours> 24 hours

Frequency of attack1 ED visit per year2–4 ED visits per year> 4 Ed visits per year

Severity of attackHospitalized within the yearICU within the yearHas been intubated

Treatment issuesDaily asthma medicationDaily inhaler useSteroid useNoncompliance with medication

Presence Weight

3211

211122

112112

123

123

123

1122

Risk stratification continued from p. 11


Billing for observationservicesBilling for G0244Reconciling the method for coding and billing obser-vation services in a way that is consistent with codingand billing for other payers presents a challenge forfacilities working to comply with the OPPS rule. Ingeneral, facilities must develop this method to ac-curately reflect observation utilization.

Billing by the hour may be the optimal method forfacilities with a special observation unit handling avariety of medical conditions besides those approvedby OPPS.

This will permit a consistency of charges that canbe billed to any payer as needed. For those facilitiesthat use observation services on an as-needed basis,and that may observe patients in a variety of de-partments within the facility, billing in a lump sumby cost center may be more efficient.

Hourly billing requires an update of chargemastercodes with charges attached by the hour. Most charg-es are incurred during the first hour the patient isobserved. This hour is billed at the highest level,with an hourly monitoring charge for each hourafterward at a lower level.

The amount billed in an eight-hour observation per-iod, for example, may be equal to or greater thanthe total amount that OPPS will pay. As we are allaware, the amount billed is often greater than theamount that is eventually paid. However, unless wefurnish CMS with current data that accurately assessthe resources used, we may expect little to no ad-justment of fees in the future.

Hourly billing for observation under OPPS producesthe following CDM entries:

Cost center HCPCS Description of services Charges

762 G0244 Observation 1st hour $150

762 G0244 Observation 2nd hour 90

762 G0244 Observation 3rd hour 90

Risk stratification checklist

Congestive heart failureRisk factor

Gender/AgeAged 70 or olderAged 60–69 yearAges 40–59 years

Medical historyPrevious cardiovascular diseasePrevious episode of CHF documentedRecorded left ventricular dysfunctionHypertensionRenal insufficiencyDiabetes mellitus

Social factorsSmokerHistory of smokingObesitySedentary lifestyleInadequate social support for

outpatient treatmentNon-compliance with medical

treatmentPresenting symptoms

DyspneaOrthopneaReduced exercise toleranceLethargy/fatigueNocturnal coughWheezingAnkle swellingAnorexia

Physical examinationTachycardiaElevated jugular venous pressureCrepitations or wheezeThird heart soundArrhythmiasHypotension

Objective testingEKG, evidence of arrhythmia/damageChest x-ray, infiltrate

Results of diuretic treatment (notedrug and dosage)

Presence Weight

321

233111

21212

2

32111121

122232

23

Comments:

Admit to observation

Date: _________ Time: ______ Signature:________________


762 G0244 Observation 4th hour 90





762 G0244 Observation $780

APC 0339 G0244 Medicare assignment: $348.69

Other charges, including an ED or clinic E/M level,and required observation testing, would be billedalong with the observation charges.

Non-Medicare observation

A second set of observation codes can be enteredinto the chargemaster and keyed to the non-Medicarepayer:


762 99217 Observation 1st hour $90

762 99217 Observation 2nd hour 90

762 99217 Observation 3rd hour 90

762 99217 Observation 4th hour 90





762 99217 Observation $630

762 99218 Observation discharge $150

Total charge $780

Billing for Medicare patients who do not meet theeight-hour criteria or for those with diagnoses otherthan the three approved by CMS for separate pay-ment, can and should appear on the patient’s UB-92,even though they will elicit a line-item denial.

This data will give CMS additional information neededto either approve additional diagnoses for coverageunder APC 0339, adjust the fee schedule, or evaluatethe effectiveness of the time period requirements.

For these cases, follow the directions given in calen-dar year 2001 when CMS was collecting informationabout observation charges. The HCPCS code wasnot required:

Cost center Description of services Charges

762 Observation 5 hours $510

Naturally, your organization will not be paid sepa-rately for this; payment will be included in the clinicED visit.

Billing by cost centerFacilities with special observation units have anaccurate assessment of the total charges for a patientwith a particular diagnosis who is observed for aspecified period of time. They may choose to bill thecharges in a lump sum, which may or may not beadjusted for varying time periods, but may also bebilled consistently to all payers. A second set ofchargemaster entries must be made to define Medi-care observation services, keyed to the approved di-agnosis codes, and billed only when the criteria forlength of time is met.


762 G0244 Observation 10 hours $840

Again, those charges for the ED or clinic E/M, as wellas the required tests, must also appear on the samebill along with the observation. The same theory ap-plies for those observation cases that don’t meet theMedicare separate payment criteria. And again, theHCPCS code need not be recorded:

Cost center Description of services Charges

762 Observation 5 hours $420

This is a great deal of programming for those whoadd and delete charges and codes from the CDM. Afacility may not wish to do this much reprogramming.The solution may be to “soft code” observation serv-ices in the HIM department instead of hard-codingthe charges in duplicate. They can be passed to thebilling system through coding data entry.

Soft coding observation also ensures that the docu-mentation requirements for observation are met,and that all the necessary testing and time require-ments have been met before observation is billed.Be sure to involve the health information managerin your APC task force meetings on observationservices.


Final thoughtsIt is incumbent on us, as facilities offering observa-tion services, to provide the CMS committee on ob-servation services with the data necessary to improveand fine-tune the observation process. Even in itsthird calendar year, OPPS is still a work in progress.It will not evolve into a completely fair and cost-effective system without the input of those on thefrontline of patient care.

Will separate observation reimbursement for thesethree diagnoses net hospitals the kind of reimburse-ment that accurately reflects the time spent and theresources used for the service? The question remainsto be answered through the data collected duringthe first year of the implementation of this APC. Itshould be noted, once again, that the OPPS programis still a work in progress.

Will maintaining a separate observation unit benefitfacilities? It is much less likely that the reimbursementfrom the three diagnoses allowed will be enough tooffset the overhead of keeping a separate observationunit open and staffed.

Private payers may make up some of the deficit, but it seems unrealistic to believe that monies fromMedicare will make this type of unit a worthwhileuse of the facility’s health care dollars. Since CMSassures us it doesn’t matter where in the hospital thepatient receives observation care, it seems that CMSthinks the specialized unit is irrelevant.

Facilities must develop strategies to use, document,and bill observation services correctly under thefinal rule. Facilities must also collect the data neces-sary to provide CMS with an evaluation of the ruleand its recommendations for revision or expansion.

Even when the time constraints haven’t been metfor the three diagnoses allowed, or when anotherclinical scenario warrants the use of observationservices, those services should appear on the UB-92along with the charges accrued under the properrevenue code. There might even be a chance of get-ting paid for some of these services.

According to Program Memorandum A-01-133, datedNovember 20, 2001,“If a claim contains services that result in an APCpayment but also contains packaged services, sepa-rate payment for the packaged services is not madesince payment is included in the APC. However, charg-es related to the packaged services are used for out-lier and Transitional Corridor Payments (TOPS) aswell as for future rate setting.”

Since observation that does not fall under APC 0339 isconsidered packaged into the ED or outpatient depart-ment visit, the costs reported on the claim may be eligi-ble for some reimbursement. At the very least, the datacan be used to research the need for the expansion ofthe observation diagnosis list, the time requirements, oradjustments in the reimbursement rate. Facilities shouldbe prepared to submit documentation of the reasons forobservation, the services rendered, and the outcome,upon request by CMS.

The APC concept is based on resources and personneland on strategies for the correct utilization of facilityresources. We stand in a unique position to determinewhere the real needs lie, and to assist with the devel-opment of a comprehensive plan to meet those needs.The data collected during the next year about the ef-fectiveness of this new APC are crucial to the devel-opment of future policies regarding observation services.Facilities that take an active role in this process willhave a better chance of helping to determine the fu-ture of this vital service.

Illustration by Dave Harbaugh

“The final rule from the Federal Register is number oneon the best-seller list. If you order a copy they’ll throw in

a tape of the Survivor series.”


Jugna Shah, MPH, is president of Nimitt Consult-ing, St. Paul, MN (www.nimitt.com), and contribut-ing editor to HCPro’s family of APC publications.She recommends that you have the following inyour APC tool kit.

• Relevant Federal Registers: - March 1, 2002, Federal Register and

Addenda: www.access.gpo.gov/su_docs/fedreg/a020301c.htmlwww.hcfa.gov/regs/hopps/changef4cy2002.htm

- November 30, 2001, Federal Register: www.access.gpo.gov/su_docs/fedreg/a011130c.html

- November 13, 2000, Federal Register: www.access.gpo.gov/su_docs/fedreg/a001113c.html

- April 7, 2000, Federal Register: www.access.gpo.gov/su_docs/fedreg/a000407c.html

• Official program memos, manuals, and documents from CMS- For the Hospital Manual (#10): www.hcfa.

gov/pubforms/progman.htm

- For Program Memos (PM) list: www.hcfa.gov/pubforms/transmit/memos/comm_date_dsc.htm

- Pull down all PMs for 2002 (A-02-025 and A-02-026 are critical), plus all relevant onesfor 2001 and 2000 listed: www.hcfa.gov/medlearn/refopps.htm

- For Blue Cross/Blue Shield initial trainingmanual on OPPS: www.hcfa.gov/medlearn/oppstraining.htm

- APC Advisory panel meeting minutes andagenda: www.hcfa.gov/medicare/apcover.htm

• Important Web sites- www.hcfa.gov/medlearn/refopps.htm (one-

stop reference for all information related to OPPS since the beginning)

- www.hcfa.gov or www.cms.gov

- Federal Register: www.gpo.gov/su_docs/aces/aces140.html (scroll down to browsethe whole list of Federal Registers by year)

- CMS Medlearn Frequently Asked Questions:www.hcfa.gov/medlearn/faqclaim.htm

- Local Medical Review Policies (LMRP): www.lmrp.net

- Society of Nuclear Medicine (list of radio-pharmeceuticals): www.snm.org

- Food and Drug Administration: www.fda.gov

• Coding resources (CDM, HIM/MR, ClinicalDepartments)- CPT-4 Professional and CPT Assistant

- HCPCS coding manual

- ICD-9 coding manual and Coding Clinic

- Hospital Manual #10 (link listed above)

- Fiscal Intermediary Manual

- LMRPs

- All relevant PMs since the beginning ofOPPS (link listed above)

- Addenda from latest OPPS rules (listedabove)

- National Correct Coding

Resources and Web links for your APC/OPPS tool kit

continued on p. 4


Initiative Edits (order from NTIS)

- OCE editor in the APC Grouper (order fromNTIS)

• Billing resources- Hospital Manual #10 (link listed above)

- All relevant PMs (link listed above)

- PC Print Software

- Other OPPS software (either CMS publicdomain or commercial)

- LMRPs

- National Correct Coding Initiative Edits (orderfrom NTIS)

- OCE editor in the APC Grouper (order fromNTIS)

6. E-mail listserves- APC Monitor: www.himinfo.com/apcezine/

index_new.cfm

- OPPS list serve from CMS: [email protected]

• Publications/Newsletters from HCPro (findonline at www.himinfo.com)- Briefings on APCs

- APC Answer Letter

- APCs Weekly Monitor

• APC audioconferences - HCPro’s audioconferences keep your whole

task force up to date. Go to www.hcpro.com/audio.cfm for upcoming audioconferences orto purchase tapes of past programs.

- CMS audioconferences—straight from the source

Resources continued from p. 16


Diagnosis codes by conditionrequired to bill the observation APC

Asthma diagnosis codes• 493.01 Extrinsic asthma with status

asthmaticus• 493.02 Extrinsic asthma with acute

exacerbation• 493.11 Intrinsic asthma with status asthmaticus• 493.12 Intrinsic asthma with acute

exacerbation• 493.21 Chronic obstructive asthma with status

asthmaticus• 493.22 Chronic obstructive asthma with acute

exacerbation• 493.91 Asthma, unspecified with status

asthmaticus• 493.92 Asthma, unspecified with acute

exacerbation

Chest pain diagnosis codes• 411.1 Intermediate coronary syndrome• 411.81 Coronary occlusion w/o myocardial

infarct• 411.0 Postmyocardial infarction syndrome• 411.89 Other acute ischemic heart disease• 413.0 Angina decubitus• 413.1 Prinzmetal angina• 413.9 Other/unspecified angina pectoris• 786.05 Shortness of breath• 786.50 Chest pain, unspecified

• 786.51 Precordial pain• 786.52 Painful respiration• 786.59 Other chest pain

CHF diagnosis codes• 391.8 Other acute rheumatic heart disease• 398.91 Rheumatic heart failure (congestive)• 402.01 Malignant hypertensive heart disease

with congestive heart failure• 402.11 Benign hypertensive heart disease with

congestive heart failure• 402.91 Unspecified hypertensive heart disease

with congestive heart failure• 404.01 Malignant hypertensive heart and renal

disease w/CHF• 404.03 Malignant hypertensive heart disease

and renal disease w/CHF and renal failure• 404.11 Benign hypertensive heart and renal

disease w/CHF• 404.13 Benign hypertensive heart and renal

disease w/CHF and renal failure• 404.91 Unspecified hypertensive heart and

renal disease w/CHF• 404.93 Unspecified hypertensive heart and

renal disease w/CHF and renal failure• 428.0 Congestive heart failure• 428.1 Left heart failure• 428.9 Heart failure, unspecified


This special report is published by Opus Communications, Inc., 200 Hoods Lane, Marblehead, MA 01945. • Copyright 2002 OpusCommunications, Inc. All rights reserved. Printed in the USA. Except where specifically encouraged, no part of this publication maybe reproduced, in any form or by any means, without prior written consent of Opus Communications or the Copyright ClearanceCenter at 978/750-8400. Please notify us immediately if you have received an unauthorized copy. • For editorial comments or ques-tions, call 781/639-1872 or fax 781/639-2982. For renewal or subscription information, call customer service at 800/650-6787, fax800/639-8511, or e-mail: [email protected] • Opinions expressed are not necessarily those of the editors. Mention ofproducts and services does not constitute endorsement. Advice given is general, and readers should consult professional counselfor specific legal, ethical, or clinical questions. Opus Communications is not affiliated in any way with the Joint Commission onAccreditation of Healthcare Organizations.

07/02 SR2302

the observation report - hcpro · the observation report guidelines and tips for coding the new...

Documents