Appropriate Use and Billing of Observation Services

Hospitals large and small, rural and urban face a common struggle to assure that their patients are admitted to the most appropriate level of care.  While the care provided to outpatients receiving observation services and inpatients may be the same, the payments are very different.  The determination of an inpatient (Medicare Part A) or outpatient with observation services  (Medicare Part B) for any given patient is specifically reserved to the attending physician, although the physician has Medicare or other payer guidelines he or she is expected to follow. To be in compliance, hospitals must educate physicians and gain their cooperation even though the care provided and professional fees received may be essentially the same for either level of care.   But what have physician’s been told about observation services?  Has their education been based on the facts as published in the Federal regulations or is it based on confusion between different payer requirements, rumor or over-reaction?  Have healthcare professionals gone from the extreme use of observation to minimal or no use of observation, and back again?

Administrative Consultant Service, LLC auditing and educational assistance is designed to help providers distinguish between fact and fiction.  We can then help hospitals develop the appropriate strategies for managing short stay patients whether they are inpatient or outpatient receiving observation services.  Consultation services include:

  • Data analysis to identify level of care risk areas
  • Medical record review of short stay discharges (observation, inpatient and outpatient surgery)  to determine appropriate level of care and accuracy of billing for both inpatient and outpatient services.
  • Evaluation of hospital Utilization Review policies and procedures including:

Denial Management
Condition Code 44
Provider Liable Claims

  • Observation of the Utilization Review process
  • Interview key personnel responsible for the Utilization Review process
  • Present educational programs for hospital and members of the medical staff including physician to physician education.
  • Provide recommendations for improvement in hospital Utilization Review program.
  • Preparation of appeals for medical necessity denial by MAC, RAC, CERT or other payors.