Does the hospital get reimbursed for
Yes, Medicare continues to pay for
observation, though it does not make a
separate payment for these services. The
outpatient prospective payment system
pays for observation by “packaging” these
services with other services, such as
surgery, that may lead to a period of
Must there be designated “observation
beds” in the hospital that are used only
An observation bed can be anywhere in
the hospital where observation services
can be performed.
What can I do to ensure compliance
with Medicare? A Physician’s Guide to
*Date and time your admission order.
*Specify the level of care – “Place in Your Hospital Name Observation
observation” or “Admit as inpatient.”
*Patient evaluation in observation is Hospital Address
recommended within 24 hours to
establish the patient’s continued level of Hospital phone number/fax
care. Hospital website
*For outpatient surgery patients who may
need further monitoring post-surgery,
document – after the surgery and
recovery period – the reason Your Hospital
the patient is being placed in observation.
*Be aware of how the hospital is billing
to make sure your claim matches This material was prepared by FMQAI, the
(Your hospital may
the hospital’s claim. Medicare Quality Improvement Organization for customize this brochure
Florida, under contract with the Centers for
Medicare & Medicaid Services (CMS), an for your own use)
agency of the U.S. Department of Health and
Human Services. The contents presented do not
necessarily reflect CMS policy.
What is observation? What does not qualify for If the hospital determines after an
It is the use of a bed and periodic observation or inpatient inpatient admission that the patient
monitoring by hospital staff to admission? did not meet an inpatient level of
evaluate a patient’s condition to *Routine stays following late surgery care, can the stay be billed as
determine the need for possible *Diagnostic testing observation?
inpatient admission. *Normal postop recovery time Yes, this is where Condition Code 44
following surgery is used. The physician’s written order
Does observation require a *Stays for the convenience of to convert back to observation must
doctor’s order? patient/family/doctor be made prior to the patient’s
Yes. The order must be written prior *Placement into observation before discharge and must be agreed upon
to the initiation of observation the outpatient surgery procedure by the attending physician and the
services and may not be backdated. utilization review committee.
The order should be dated and If an observation patient is acute
timed. and is not responding to treatment, What are some examples of
can the patient be admitted as an observation status/services?
How should the physician write inpatient? *Abdominal pain not requiring
the order for observation versus Yes, the observation stay can be surgery
inpatient admission? converted to inpatient; the physician *Allergic reaction, generalized
State the level of care that is being must then write an order to “Admit as *Back pain
ordered, e.g., “Place in inpatient” at that time. The *Chest pain
observation,” or “Admit as documentation in the chart must *Headache
inpatient.” support medical necessity of the *Kidney stones, renal colic
inpatient admission. *Nausea/vomiting/dehydration
When is observation appropriate? *Ruling out any condition
*The physician needs additional How many hours of observation *T.I.A.
time to evaluate the patient to will Medicare cover? *Weakness/dizziness/syncope
determine his need for an acute Observation is typically *Urinary retention requiring a
inpatient admission. recommended for 24 to 48 hours. catheter
*The physician thinks that the Payment is based upon services *Vaginal bleeding
patient will respond rapidly to received during that period of time. It *Some postoperative complications
treatment. is recommended that physicians make
*An outpatient surgery patient a decision about the patient’s
develops a complication and continued status after 24 hours.
requires monitoring or To convert the patient to an inpatient
intervention. status at this time, the documentation
in the medical record must support
the acute medical necessity for that
higher level of care.