Policy language was clarified to confirm that observation services that take less than six hours are not eligible for reimbursement separate from the emergency room/emergency department (ER) visit, nor are they separate from other facility payments (e.g., Evaluation and Management Services). The reimbursement rate for the ER visit is inclusive of the first five hours of observation care regardless of the number of observation units billed (1 unit = 1 hour).
If the observation stay results in an inpatient admission, then the inpatient admission begins at the time of the admission for observation services. The inpatient claim should include all charges incurred during the stay. No separate observation claim is to be filed.
Observation services begin at the time the professional provider writes the order for the outpatient observation.
Example
A patient came to the ER at 1 p.m. and was admitted to observation care at 3 p.m. The patient was discharged from observation care at 11 p.m. The total time spent in observation was eight hours. Since the first five hours of observation services are included in the ER visit, three hours of observation services would be eligible for reimbursement.
For more information
For detailed information on how observation services are reimbursed, refer to the following Independence claim payment policies:
- Commercial: #00.01.19c: Facility Reporting of Observation Services
- Medicare Advantage: #MA00.040: Facility Reporting of Observation Services
To view these policies, visit our Medical Policy Portal. Select Accept and Go to Medical Policy Online, select the Commercial or Medicare Advantage tab, and then type the policy name or number in the Search field.