Q&A: Billing observation patients for inpatient-only

Q: My facility had a neurosurgery case ordered as day surgery and that later became observation. The patient spent the night on our normal inpatient floor. We found out the next day, after the patient was discharged, that one of the procedures performed was an inpatient-only procedure. Can we bill this to Medicare without an official inpatient order on the medical record?

A: Yes, you can bill the claim to your Medicare Administrative Contractor as an outpatient claim only. Without an appropriate inpatient order (documented and authenticated) prior to discharge, you cannot bill it as an inpatient claim. The patient is considered an inpatient upon issuance of the physician order for inpatient status and inpatient orders cannot be backdated or timed (see Medicare Claims Processing Manual, Chapter 3 § 40.2.2 (K), 42 C.F.R. 412.3(d)). However, if this incident was discovered prior to discharging the patient and with the application of the three-day payment window, all outpatient charges could have been rolled into the inpatient claim and paid under the MS-DRG (see Medicare Claims Processing Manual, Chapter 4 § 180.7, Medicare Claims Processing Manual Transmittal 3238). Since the patient was discharged and although it seems counterintuitive, it is a good idea to bill the outpatient claim to Medicare. First, Medicare uses claims data to identify certain procedures that may be considered for removal from the IPO list (see 69 Fed. Reg. 65834). Second, the inadvertent inpatient-only procedure should be reviewed against the CMS separate procedure list. If the inpatient-only procedure is on separate procedure list, it is “bypassed when performed incidental to a surgical procedure with Status Indicator T.” Essentially, Medicare will consider for payment the other services on the claim and ignore the inpatient-only procedure, so in this instance you may want to let the claims processing system do the editing work for you. This allows the facility to be reimbursed for most of its services while also providing CMS with relevant claims data for future removal from the IPO list or possible addition to the separate procedures list. The list is available in the IOCE Quarterly Data Files (“Q_CD_HcpcsMap”, “SeparateProcedure” column) which is posted on the IOCE homepage (see IOCE Specifications, Special Processing Conditions).

This question was answered by Debbie Mackaman, RHIA, CPCO, CCDS, regulatory specialist for HCPro, an H3.Group brand, in Middleton, Massachusetts.

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