Q&A: Inpatient-Only Procedure Orders
Q. Obtaining appropriate inpatient status orders for inpatient-only procedures can be difficult due to the EMR and written orders that are still in existence. Is it true that if the surgeon or attending physician orders observation/outpatient status after an inpatient-only procedure that we must bill as outpatient? Can we use our utilization review (UR) committee to overturn the observation/outpatient order in this scenario? Please advise.
A. I am assuming that you have an inpatient order prior to the inpatient-only procedure and then an observation order is written post-procedure. Observation orders after a valid inpatient order really have no effect, unless condition code 44 processes are followed. The Medicare Claims Processing Manual, Chapter 1, Section 50.3.1, “When an Inpatient Admission may be Changed to Outpatient Status,” it states:
“‘Outpatient’ means a person who has not been admitted as an inpatient but who is registered on the hospital or critical access hospital (CAH) records as an outpatient and receives services (rather than supplies alone) directly from the hospital or CAH.”
In the case you describe, the patient has been admitted pursuant to a valid inpatient order. The patient is therefore no longer an outpatient. Observation is an outpatient service, not a status, and ordering a particular outpatient service does nothing to negate the inpatient order or inpatient status of the patient. Additionally, observation services are not billable on an inpatient claim because those services are already included in the room rate, so the order really has no effect.
If the concern is that the case should be billed as outpatient using Type of Bill (TOB) 131 because of the observation order, with the idea that somehow the patient was changed to outpatient by the order for observation, then we have to remember what would be occurring. We would have a patient being retroactively changed from inpatient to outpatient with observation. Medicare has provided only one way for that to be accomplished: Through UR following the condition code 44 process, which includes a determination by the UR committee and notice to the patient, not just an order by the provider. Further, due to the inpatient-only nature of the procedure, a UR determination would not find the care inappropriate for Part A payment nor seek to change the patient’s status. For more information on CC44 see the Medicare Claims Processing Manual, Chapter 1, Section 50.3, and MLN Matters SE0622.
But let’s suppose we consider this observation order to be valid and we effectively change the patient to outpatient at the time it’s written. According to information in the Medical Claims Processing Manual on condition code 44, the change can’t be retroactive unless we follow condition code 44 procedures, which wouldn’t be inappropriate here due to the inpatient-only nature of the procedure. Therefore, we have a period of inpatient admission, followed by a period of outpatient status with observation starting when the observation order was written, albeit without a discharge order from the inpatient status—again, we are assuming the order can actually change the patient’s status to outpatient. Now we have a real mess from a billing perspective.
The portion that is inpatient would still have to be billed correctly as inpatient, in this case for Part A payment (TOB 111) because the procedure was an inpatient-only procedure. You would also have to bill the services from after the change to outpatient on an appropriate outpatient claim (TOB 131) because there is no post0discharge global period for hospital services. This causes concern for an overpayment issue. You would be paid for outpatient services that could have been provided as a part of the inpatient stay, which seems particularly inappropriate in light of the lack of a discharge order from inpatient status. The whole thing just doesn’t make sense and is predicated on the idea the order for observation can serve to change the patient from inpatient to outpatient without a discharge order from inpatient, and it’s not entirely clear the observation order can even do that.
The simplest way to put it is that the patient is an inpatient once there is a valid inpatient order and the patient generally remains an inpatient until discharge. CMS adopted a method to change a patient from inpatient to outpatient and treat the entire episode as outpatient for billing purposes, but it requires certain steps are taken, including UR and notice to the patient, not just an order by the attending practitioner. If that UR process wasn’t followed, the fact that a typically outpatient service like observation was ordered for an otherwise appropriate inpatient case, doesn’t change the patient to outpatient. I hope this helps in understanding the situation of an observation order after an inpatient order.
Editor’s note: This question was answered by Kimberly Anderwood Hoy Baker, JD, CPC, is the director of Medicare and compliance for HCPro, a division of BLR, in Middleton, Massachusetts.
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