Providers billing fiscal intermediaries (FIs) for hospital observation services provided to Medicare beneficiaries and paid under the OPPS

This article is based on Change Request (CR) 4259 which includes changes included in the January 2006 OPPS OCE and the January 2006 OPPS PRICER.

Change Request (CR) 4259 describes changes to coding and payment for hospital observation care paid under the OPPS to be implemented in the January 2006 OPPS update (including OPPS OCE and OPPS PRICER changes). In addition, CR4259 discusses changes to observation care under the OPPS.

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 whether they can be discharged from the hospital.

Observation status is commonly assigned to patients who present to the emergency department and who then require a significant period of treatment or monitoring before a decision is made concerning their admission or discharge.

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 tests. In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours. In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours.

For complete details and the specific new instructions regarding observation care, see the revised portions of the Medicare Claims Processing Manual attached to CR4259 at http://www.cms.hhs.gov/transmittals/downloads/R787CP.pdf and to the Medicare Benefit Policy Manual attached to CR4259 at http://www.cms.hhs.gov/transmittals/downloads/R42BP.pdf on the CMS web site.

Beginning January 1, 2006, the following two new G-codes should be reported by hospitals for observation services and direct admission for observation care:

The OPPS claims processing logic will determine the payment status of the observation and direct admission services, that is, whether they are packaged or separately payable. Thus, hospitals are able to provide consistent coding and billing under all circumstances in which they deliver observation care.

Beginning January 1, 2006, the following Current Procedural Terminology (CPT) codes should not be reported by hospitals for observation services:

G-Codes

Lastly, the following three G-Codes are discontinued as of January 1, 2006:

CR4047 (Transmittal 763, dated November 25, 2005) explains that some nonrepetitive OPPS services provided on the same day by a hospital may be billed on different claims, provided that all charges associated with each procedure or service being reported are billed on the same claim with the HCPCS code which describes that service.

The Medlearn Matters article that corresponds to CR4047 can be reviewed at: http://www.cms.hhs.gov/MLNMattersArticles/downloads/MM4047.pdf on the CMS web site.

Unless otherwise noted, the coding and payment policy addressed in CR4259 are effective for services furnished on or after January 1, 2006.

The implementation date for the instruction is January 3, 2006.

For complete details, please see the official instruction issued to your intermediary regarding this change. That instruction may be viewed at http://www.cms.hhs.gov/transmittals/downloads/R787CP.pdf on the CMS web site.

If you have any questions regarding this bulletin, please contact the appropriate Customer Contact Center at:

Maryland Providers: 1-866-488-0545
Pennsylvania Providers: 1-800-560-6170