1. How did the OPPS rules for Observation change in 2024?
The comprehensive Observation services APC (C-8011) remained the same in 2024.
Starting in 2021, Payment for 8011 Comprehensive Observation Services under Status Indicator J2 is made for the Relative Weight of 27.5754 Value Units at a payment rate of $2283.16. In addition, as discussed below, CMS added requirements for notification to patients receiving Observation services for over 24 hours. From CY 2008 through CY 2013, in the circumstances when observation care was provided in conjunction with a high level visit, critical care, or direct referral; and is an integral part of a patient’s extended encounter of care, payment was made for the entire care encounter through one of the two composite APCs as appropriate. For 2023, observation continues to be paid under a composite APC entitled “Comprehensive Observation Services (COS) APC” (APC 8011). To qualify for COS payment, billing must include the following:
- A minimum of eight units of G0378
- No procedure with a T status indicator
- A qualifying E/M visit is on the claim on the same date of service or one day before the date of service:
- Type A visit (99281-99285)
- Type B visit (G0380-G0384)
- Critical care (99291)
- An outpatient clinic visit (G0463)
- A direct referral (G0379)
Services that would otherwise qualify for Facility Observation payment are not considered to be observation services when they are associated with a surgical procedure (assigned to status indicator "T''). Instead, they are considered perioperative recovery, which is always packaged in with the surgical procedure.
If the supervising physician or appropriate non-physician practitioner determined and documented in the medical record that the beneficiary is stable and may be transitioned to general supervision, general supervision may be furnished for the reminder of the service. Medicare does not require an additional initiation period(s) of direct supervision during the service. CMS expanded this in the final 2013 OPPS rule by creating a new classification of "nonsurgical extended duration therapeutic services.” These services include 16 observation, injection and infusion services. CMS selected these specific 16 services because they can last a significant period of time, require substantial monitoring, are low risk, and are not surgical. Because of these characteristics, CMS believed that a relaxed level of supervision would be safe and appropriate after the patient was deemed stable. Direct supervision, which was the prior standard for observation care, is required during the initiation of observation, and then general supervision is allowed once the patient is deemed stable. CMS further stated that the provider could be an MD or NPP if the service was within the scope of licensure, credentialing and bylaws.
Importantly, in 2014 OPPS, and still in effect in 2024, there is an increase in the packaging of interrelated services into a primary service. Per CMS, “Our overarching goal is to make OPPS payments for all services paid under the OPPS more consistent with those of a prospective payment system and less like those of a per-service fee schedule, which pays separately for each coded item.” See FAQ 12 for details.
The Medicare Outpatient Observation Notice (MOON), effective for dates of service beginning February 21, 2017, under CMS-10611 Transmittal 3695, dated January 20, 2017, remains in effect in 2024. MOON is the form and accompanying instructions required to inform all Medicare beneficiaries when they are considered outpatients and receiving observation services. They would not be considered inpatient status in a hospital or critical access hospital (CAH). The MOON is mandated by the Federal Notice of Observation Treatment and Implication for Care Eligibility Act, passed on August 6, 2015.
The MOON must be delivered to beneficiaries or their representatives (Original Medicare fee-for-service AND Medicare Advantage enrollees) who receive observation services as outpatients for more than 24 hours. Additionally, the MOON must be provided no later than 36 hours after observation services begin. Also included are beneficiaries who:
- Do not have Part B coverage.
- Are subsequently admitted as an inpatient before the required delivery of the MOON and/or,
- Designate Medicare as either the primary or secondary payer.
Observation start time is defined as the clock time observation services are initiated as documented in the patient’s medical record following the physician's order. During the observation period, documentation must identify the date and time of placement into observation and the date and time the patient is either discharged, transferred or admitted to the hospital. Once the patient reaches the 24-hour observation mark, the MOON applies. Importantly, it must be delivered no later than 36 hours after observation services begin. As it must be delivered within 36 hours after observation begins, providing it at the time of transfer into Observation status removes the possibility of delay should the observation period exceed 24 hours.
CMS has provided the appropriate MOON forms for use by institutions and allows some modifications to include logos, contact information, etc., but within certain limits. The most important considerations are the requirements for the type of information that must be provided on the form are as follows:
- Patient name;
- Patient number, and
- Reason the patient is an outpatient.
In addition, the following must be assured:
- Signature of the patient or representative indicating an understanding of the contents.
- Presence of a staff person and, we recommend, the signature of that individual, attesting that the patient and/or representative understands the document; and
- Availability of institution staff to address any questions or concerns.
Both the standardized written MOON form and oral notification must be provided and documented in each patient’s medical record.
2. What are the two APCs Medicare uses to reimburse hospitals for observation care in 2024?
3. What are the criteria that hospitals must meet in order to receive Medicare payment for observation care?
4. How do CPT and Medicare payment policies for observation care differ between physician and hospital payments?
5. Does Medicare have any specific time requirements for hospitals to be paid for observation care?
6. When does observation care time begin and end for facility coding?
7. What if the patient bypasses the clinic or ED and is a direct referral to the observation area?
8. How does the facility report intravenous infusions performed during observation?
9. Are additional procedures payable to a facility when reported in addition to observation?
10. What outpatient services are now “packaged” into the payment of the ED, clinic, or observation facility?
11. How does the facility report observation services for patients who are not on Medicare?
12. How does the "Two-Midnight Rule" instituted in 2013 affect billing for Hospital Observation Services to Medicare?
CMS implemented a “Two-Midnight Rule” in 2013 that directs Medicare contractors to assume hospital admissions are reasonable and necessary for patients who stay in a hospital through two midnights. Hospital stays that are shorter are presumed legitimate if coded as outpatient observation. Medicare does not expect anything to change with the Two-Midnight rule in 2024.
The Two-Midnight rule requires that patients admitted to the hospital are expected to be hospitalized over two midnights. When this does not occur, Medicare will consider the outpatient services provided immediately in advance of the admission as evidence of the need for hospital admission. The physician’s expectation should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. All of these factors should be documented in the ED record to avoid any denials of the admission, which is arranged by the admitting physician. Although the time a patient spends in the ED or observation prior to admission will not be considered as part of the Two-Midnight inpatient stay, it will be considered during the medical review process for purposes of determining whether the Two-Midnight benchmark was met and, therefore, whether payment for the admission is generally appropriate under Medicare Part A.
Admitted patients not meeting the Two-Midnight rule may be reclassified as observation. However, condition 44, used when utilization review reclassifies admitted patients as observation patients, will not apply.
In 2024, CMS continues to believe an inpatient admission is generally appropriate for payment under Medicare Part A when the admitting physician expects the patient to require hospital care that crosses two midnights. The factors that lead to a particular clinical expectation must be documented in the medical record in order to be granted consideration. If an unforeseen circumstance, such as a beneficiary’s death or transfer, results in a shorter beneficiary stay than the physician’s expectation of at least two midnights, the patient may be considered to be appropriately treated on an inpatient basis, and payment for the inpatient hospital stay may be made under Medicare Part A. An inpatient admission for a surgical procedure specified by Medicare as inpatient is generally appropriate for payment under Medicare Part A, regardless of the expected duration of care.
Where the admitting physician expects a patient to require hospital care for only a limited period of time that does not cross two midnights, an inpatient admission may be appropriate for payment under Medicare Part A based on the clinical judgment of the admitting physician and medical record support for that determination. The physician’s decision should be based on such complex medical factors as patient history and comorbidities, the severity of signs and symptoms, current medical needs, and the risk of an adverse event. In these cases, the factors that lead to the decision to admit the patient as an inpatient must be supported by the medical record in order to be granted consideration. Although emergency physicians generally do not admit patients, the documentation provided during the ED stay can support the need for admission when the patient is discharged prior to the two-midnight required stay.
For additional information, see CMS Medicare FFS Payment.