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December 19, 2011

The Trick of Charge Capture: Inpatient vs. Observation

With medical facilities continually trying to increase revenue from all areas of the hospital, healthcare providers can still considerably increase net revenue through their charge capture process.  One of the heavy-hitting areas that providers need to pay close attention to is the charging for inpatient versus observation status.

In this offering of Off the Shelf we present you with distinctions between inpatient and observation status patients as well as basic guidelines for billing for observation services (e-mail us your tips if you'd like to share them with our other readers).

Inpatient vs. Observation

Due to recent Medicare changes regarding charging for patient status, observation versus inpatient, healthcare facilities are scrutinizing the basis for admitting patients.  For hospitals, Medicare will not pay for admission fees if the patient is admitted without cause.  From the patient side, remaining in observation or outpatient status for numerous days may cause Medicare to deny payment for follow-up care because the patient did not fulfill the mandatory three-day inpatient status.

The distinction concerning inpatient and observation status can be challenging to discern.  Those who endure what seems like a common inpatient hospital stay are sometimes surprised when they discover that even though they were assigned a nurse, a bed, an ID bracelet, routine tests, and treatments, they were never technically admitted but merely observed.  How does one discern between admitting a patient and not?  Healthcare facilities designate observation status patients as individuals who exhibit symptoms, like nausea, vomiting, and abdominal pain, but they are not sufficient enough to assert a diagnosis. 

To ensure that patients are being categorized correctly according to the CMS rules and standards, there are a number of things a hospital can do:

  • Document all medically necessary information to classify a patient as inpatient or observation.  Provide adequate records detailing the patient's symptoms, medical history, relevant test results, and routine physical that may require them to receive inpatient care.  Specify and describe all changes in the condition of the patient that could affect the status to ensure consistent medical records.
  • Follow admission procedures and look at length of stay.  Admission should be based on the acuity of the patient and the need and availability for diagnostic exams or tests.  Regarding length of stay, patients with less than 24 hours documented in the hospital can typically designate an outpatient status, but CMS does not determine Medicare coverage exclusively on the length of stay of the patient.  In many instances, a patient can be observed for 72 hours, and possibly even longer and never be actually admitted to the facility.
  • Ensure consistency with medical records.  Confirm all processes and entries are consistent with other parts of the medical record, including assessments, treatment plans, physician orders, nursing notes, medications, admission and discharge data, and pharmacy and treatment records.
Billing for Observation

After understanding how patients are categorized as inpatient or observation, the next area to review is the often difficult to tackle task of billing for observation patients.  Observation services are typically billed by the hour, with observation time beginning with the start time of observation care, which coincides with the time of a physician’s order.

Billing should also contain charges for all observation services, including injections, infusions, transfusions, and vaccines.  If active or direct monitoring of a patient is required during a procedure, such as with Therapeutic or Diagnostic services including a biopsy, chemotherapy, colonoscopy, or radiation therapy, then observation service charges should not be included.  A patient getting a laboratory blood draw or x-ray would still be included in the observation charges as this does not suspend observation service.

Basically, ensure your documentation process is consistent and thorough and review your system for billing observation patients.

Soyring's Solution

The Bottom Line: You might be missing out on charge capture with inpatients.  Contact Us for an overview of how to ensure maximum charge capture at your facility.

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