Q&A: Reporting Observation Time

Q: Can hospitals report more than 48 hours of observation services?

A: CMS states in the Medicare Benefit Policy Manual that only in rare and exceptional cases will reasonable and necessary outpatient observation services span more than 48 hours. It’s important to note that after 48 hours of medically necessary observation the patient will have reached the second midnight and is eligible for inpatient admission under the 2-midnight benchmark. By 48 hours, the decision to admit the patient should be clear or, if the decision has been made to discharge the patient, then the services no longer meet the definition of observation and should not continue to be billed as observation services.

Notwithstanding the foregoing, a hospital may report more than 48 hours of medically necessary observation in situations when the inpatient admission order was not issued or not signed before the patient’s discharge. In these cases, if the order had been written and signed, the care would qualify under the 2-midnight benchmark as inpatient care, but because there was no valid inpatient order, the hospital will have to bill the care as observation. A Medically Unlikely Edit prevents more than 72 hours of observation from being reported.

Care provided for the convenience of the patient, family, or physician or while the patient is awaiting a ride home is not considered covered observation and should not be reported as covered to Medicare.

For more information, refer to the Patient Status Training Toolkit for Utilization Review .

Need expert advice? Email your questions for consideration in the Revenue Cycle Daily Advisor. Note: We do not guarantee that all questions will be answered.