Observation Status And The Importance Of The Midnight Hour

I received a couple of questions regarding observation status. For those non medical people here is a brief explanation. When a patient is brought into the hospital, there are several statuses they can achieve. What status they qualify for is entirely based on huge books of criteria. Medicare uses these criteria as do all third party insurance companies. Our utilization review folks tell me what status the patient qualifies for.  They have admission criteria so that homeless people don't simply come into the hospital for a week of free meals (although there is almost always a way to qualify someone). The three major statuses that you as a patient can be in a hospital are

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1. Inpatient.  That means most hospitals will get paid on a diagnosis related group (DRG).  If you come into the hospital for two days or two weeks, your hospital will get the same amount of money, plus or minus extra for complicating or major complicating conditions.  
2. Observation status.  When the patient doesn't meet any of the qualifications in the giant book of hospital admission criteria, you are placed in observation status.  As the words indicate, this is  where you may not be sick enough to be admitted, but your docs are concerned enough to watch you in the hospital.  Observation status is considered outpatient.  The hospital charges room rent, literally by blocks of hours.  For every 4-8 hour blocks you are in the hospital, your insurance gets charged room rent.  All the xrays, and labs and even medications are paid for separately under your out patient insurance.  One thing that really ticks me off is that when a patient is in under observation status,  Medicare Part A (the hospital insurance) does not pay for any of the medications administered in the hospital.  If the patient does not have Medicare Part D (the drug benefit plan), then the hospital bills the patient for all their medications at 5-10x the normal price.  And hospitals will not allow the patients to use their own home medications because of safety issues (we don't know what comes out of the patients pill bottle).  That means the patient, unless they have Medicare Part D, is screwed.  They pay 10 times the cost for their meds.  It is unfair by all means.  But safety trumps convenience and cost and so we all lose.  
3. ASC (Ambulatory Surgical Center).  This is the outpatient version of a surgical admission.   I don't know enough about how hospitals are paid for ASC to comment much.  But I do know when I see a patient in consultation for a surgeon who's patient is in under ASC, I bill an outpatient consultation code.  

So, if you, Joe Plumber, ever gets admitted to the hospital, you will be in under one of these three criteria.

And now it gets really complicated.  A reader asked me to comment on the following scenario:

Dear Happy Hospitalist,

 I have a question that has been puzzling me and fellow coders for a long time. I have read your articles and thought maybe you could help me. I will give you an example of what is going on here:

 November 1:

I have a patient come in the ER at 11:00pm at night , the ER calls DR "T" at 11:59pm and explains to him that he has a patient of his in the ER, explains what the patient is in for, wants to know if he wants to admit them. Dr "T" says by phone only, " Put them in Outpatient Observation. "

 November 2:

The following morning Dr "T" comes to see the patient and does the patient's " Intial Evaluation or H/P"

 November 3:

 Dr "T" discharges patient out of OPO to go home

 Now here is my question: For November 2 can the Dr bill 99218-99220 because this is actually when he comes and sees the patient. This is his intial H/P (YES YES YES.  YES they can because the doc is billing for services provided.)

 and then bill the Discharge on November 3 (YES YES YES, because the doc is billing for services provided).

OR

 Since he gave the "phone orders" on November 1, is that when he was supposed to bill the 99218-99220?

 I am confused on this... because the way it makes it sound.... the Dr would have to be setting in the ER with that patient at 11:59pm at night to bill the 99218-99220... and then on November 2nd all he could bill was the E/M of 99211-99215....  (NO! NO! NO!  The doctor bills for services provided.  If he does a complete H&P on November 2nd, he bills for a complete H&P on November 2nd.  It doesn't matter what calendarday the patient was admitted.  The doctor bills nothing on November 1st because phone orders do not qualify for any E&M code)

 I thought it was always based on when the Dr done the Initial H/P.  Please help :) Thank you so much

Before I respond, I need y'all to know I am not a licensed coding compliance officer.  The following is my interpretation of the rules and regulations of the Medicare National Bank(MNB).  With that said, here goes.

The status of the patient in the hospital MUST match the appropriate codes of the billing physician.  If a hospital lists a patient as inpatient status, then I, Dr Happy, can not be billing under observation codes 99218-99220 or 99234-99236.  If the hospital lists the patient as observation status then I, Dr Happy, can not be billing under admission codes 99221-99223.  If you do, all third parties will deny your claim.  You will not get paid unless your codes are appropriate for the status of the patient.

You see, physician billing is entirely separate from hospital billing.  Using Medicare as an example, hospitals bill inpatient admissions under Medicare part A.  All physicians bill Medicare under Part B benefits.  So the billing systems are completely separate and independent of each other.  BUT the status of the patient in the hospital must match the set of codes that the physician bills for that patient.  Inpatient hospital status=Inpatient admission codes.  Outpatient hospital status=Outpatient admission codes.

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The answer to your question, as I see it, is quite simple.  The physician bills for the work he/she provides.  Observation status really is quite simple.  For Medicare, they will pay the hospital  for observation status for up to 48 hours (remember, it's room rent).  But Medicare will only pay the physician for work they document.  Billing of services by the hospital is completely independent of billing by the physician.  So in answer to your question.  The physician bills their admission on the calendar day  when they have their face to face encounter.  In this case, November 2nd.  Even though the hospital lists November 1st as the admission calendar day.

In your example, if a patient is admitted observations status at 11:59 pm on November 1st with phone orders by the physician, the hospital should list November 1st as the admission calendar day.  Even though the physician phone in orders on November 1st,  they cannot bill anything on November 1st.  When the  doc comes in at 8 am on November second, evaluates the patient and does a history and physical, they CAN bill the observation admission 99218-99220 on November 2nd because that's the calendar day they saw the patient.

It should not matter that the patient was admitted on calendar day November 1st.  All that matters is the hospital status matches the status of billing codes for the physician.  Let me give you another common example.  If a patient is admitted observation status with phone orders at 9 pm on November 1st.  Then comes around and sees the patient for the first time at 9 am November second and decides that the patient can go home, that doc can only bill one of two E&M codes (because you can only bill one E&M code per day).  The doc can chose between billing the H&P (99218-99220) or the discharge summary (99217).  Me personally, I would bill Medicare for the admission code only because it pays more than double the discharge code.  The doc may have to do both an H&P and and a discharge summary at the same encounter, but that has more to do with the hospital bylaws and requirements to maintain privileges.  It has nothing to do with getting paid, because you can only collect one E&M code a day.

Notice also, in this example that you CANNOT use the admit/discharge same day codes (99234-99236) because the patient crossed over into a new calendar day for their admission.  Now.  If the hospital lists the observation admission as 1 am on November 2nd and you come around at 9 am on November 2nd and decide the patient can be discharged, then the physician CAN bill the same day admit/discharge codes 99234-99236.  These codes can ONLY be used if the patient was admitted and discharged on the same  calendar day.

In your specific example, even though the hospital lists November 1st as the admission day and the patient doesn't leave until November 3rd, if the doctor phones in orders on November 1st, the doc can't bill for November 1st.  When they see the patient on November 2nd, they should bill the observation admission codes 99218-99220.  When they discharge the patient on November 3rd, they should bill the obs discharge code 99217.

Now, IF the doc was in the ED and evaluating the patient at 11:59 for an observation admission, then the doc CAN bill 99218-99220 on November 1st.  If they wanted to wait two minutes, they could technically see the patient again, at 12:01 am on November 2nd and bill an outpatient clinic code (I think its' 99211-299215).  But normally, the doc would come around at 8 or 9 am  and bill the 99211-99215 on November 2nd.  When the patient is discharged on November 3rd, the doc bills a an observation discharge code 99217.

On problem I often run into is I am down in the ED at 11:30 pm November 1st.  I am evaluating my patient, writing admission orders for the observation stay and tell the ED at 12:15 am on November 2nd  to send the patient upstairs to an observation bed.  Now, I tell the ED that they MUST list November 1st as the calendar day of admission.  Since I saw the patient on November 1st, I'm billing Medicare Part B for November 1st.  If the hospital lists November 2nd as the calendar day of admission, my claim will be rejected.  And that's not gonna happen.  So I physically TELL the admissions people (who don't know anything about any of this) that they MUST list November 1st as the calendar day of admission for everything to go smoothly.

And that's how I make sure I get paid for work provided, in spite of the archaic rules of the MNB

So, as a winded response to your question, if the hospital lists November 1st as the calendar day of admission for observation, it makes no difference to the physician what he/she bills, except that the physician is billing observation codes of some sort.  Hell, the patient could sit in the hospital without seeing any doc until November 3rd.  The doc could role in on November 3rd, say "I'm sorry Mrs Smith, I was at Disney World and my flight was late."  He could see the patient for the first time 48 hours after admission and decide to discharge her, and he could still bill an observation admission code (99218-99220) on November 3rd, the day of discharge.  Of course, he can't also bill the discharge code (99217) because you can only bill one E&M code on any single day. (It's like a lawyer only getting paid if you show up in the office face to face.  And then spending 1/2 hour later in the day doing research on his own, but not billing for it because you aren't there.  That's the racket that the MNB has built.)

I hope that helps.  Another reader asked me the following question:

I am having trouble finding the documentation requirements for discharge from observation to home. Everything has documentation needs from OBS to inpatient. I am looking at the documentation requirements for CPT 99217. Can you help?

A 99217 is the only code you can bill for an observation discharge.  As far as I know, the discharge codes don't have any specific criteria to be met.  If you discharge an observation patient after a face to face encounter you bill this code.  I have no idea what the specific criteria are. I wish I could pin it down, but I've never heard of anything more specific.  As far as I know, you can wave at the patient, ask them how they are doing, look at their vital signs and write the discharge orders and that constitutes a 99217.  Maybe some other readers could help qualify.

You can see much more here in my coding lectures or earn CME at E&M University.