Local Coverage Determination (LCD)

Outpatient Observation Bed/Room Services

L34552

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Contractor Information

Contractor Name	Contract Type	Contract Number	Jurisdiction	States
Palmetto GBA	A and B MAC	10111 - MAC A	J - J	Alabama
Palmetto GBA	A and B MAC	10211 - MAC A	J - J	Georgia
Palmetto GBA	A and B MAC	10311 - MAC A	J - J	Tennessee
Palmetto GBA	A and B and HHH MAC	11201 - MAC A	J - M	South Carolina
Palmetto GBA	A and B and HHH MAC	11301 - MAC A	J - M	Virginia
Palmetto GBA	A and B and HHH MAC	11401 - MAC A	J - M	West Virginia
Palmetto GBA	A and B and HHH MAC	11501 - MAC A	J - M	North Carolina

LCD Information

Document Information

LCD ID
L34552

LCD Title
Outpatient Observation Bed/Room Services

Proposed LCD in Comment Period
N/A

Source Proposed LCD
N/A

Original Effective Date
For services performed on or after 10/01/2015

Revision Effective Date
For services performed on or after 10/31/2019

Revision Ending Date
N/A

Retirement Date
N/A

Notice Period Start Date
N/A

Notice Period End Date
N/A

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CMS National Coverage Policy

Title XVIII of the Social Security Act, §1862(a)(1)(A) allows coverage and payment for only those services that are considered to be reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.

Title XVIII of the Social Security Act, §1862 (a)(7) excludes routine physical examinations.

eCFR Title 42 Chapter IV Subchapter B Part 419

CMS Internet-Only Manual, Pub 100-02, Medicare Benefit Policy Manual, Chapter 6, §20.6

Coverage Guidance

Coverage Indications, Limitations, and/or Medical Necessity

Observation services are defined as the use of a bed and periodic monitoring by a hospital's nursing or other ancillary staff, which are reasonable and necessary to evaluate an outpatient's condition to determine the need for possible inpatient admission.

The services may be considered covered only when provided under a physician's order (or under the order of another person who is authorized by state statute and the hospital's bylaws to admit patients or order outpatient testing).

Outpatient observation services are not to be used as a substitute for medically necessary inpatient admissions. Outpatient observation services are not to be used for the convenience of the hospital, its physicians, patients, or patient's families, or while awaiting placement to another health care facility.

Outpatient observation services must be patient specific and not part of the facilities standard operating procedure or protocol for a given diagnosis or service. Observation services, generally, do not exceed 24 hours.

Documentation should include:

1. The attending physician's order including “clock time” for the observation service or “clock time” can be noted in the nursing admission notes/observation unit notes outlining the patient’s condition and treatment.

2. Observation time which begins at the "clock time" documented in the patient’s medical record, and which coincides with the time the patient is placed in a bed for the purpose of initiating observation care in accordance with a physician’s order.

3. The ending time for observation occurs either when the patient is discharged from the hospital or is admitted as an inpatient. The time when a patient is “discharged” from observation status is the "clock time" when all clinical or medical interventions have been completed, including any necessary follow-up care furnished by hospital staff and physicians that may take place after a physician has ordered that the patient be released or admitted as an inpatient. However, observation care does not include time spent by the patient in the hospital subsequent to the conclusion of therapeutic, clinical, or medical interventions, such as time spent waiting for transportation to go home.

4. The beneficiary is under the care of a physician during the period of observation as documented in the medical record by admission, discharge, and appropriate progress notes.

5. Risk stratification criteria (such as intensity of service and severity of illness) were used in considering potential benefits of observation care.

Observation claims exceeding 48 hours may be subject to medical review.

Outpatient observation services are categorized as follows:

Diagnostic Testing

For scheduled outpatient diagnostic tests which are invasive in nature, the routine preparation before the test and the immediate recovery period following the test is not considered to be an observation service. However, when a patient has a significant adverse reaction (beyond the usual and expected response) as a result of the test that requires further monitoring, outpatient observation services may be reasonable and necessary.

Observation services begin at that point in time when the reaction occurred and would end when it is determined whether or not the patient required inpatient admission. Medical review decisions will be based on the documentation in the patient's medical record.

Outpatient Therapeutic Services

Observation status does not apply when a beneficiary is treated as an outpatient for the administration of blood only and receives no other medical treatment. The use of the hospital facilities is inherent in the administration of the blood and is included in the payment for administration.

When the patient has been scheduled for ongoing therapeutic services as a result of a known medical condition, a period of time is often required to evaluate the response to that service. This period of evaluation is an appropriate component of the therapeutic service and is not considered an observation service.

The observation service begins at that point in time when a significant adverse reaction occurred that is above and beyond the usual and expected response to the service.

Patient Evaluation

When a patient arrives at the facility with an unstable medical condition (generally via the Emergency Department), observation services may be reasonable and necessary to evaluate the medical condition to determine the need for a possible admission to the hospital as an inpatient.

An unstable medical condition can be defined as:

Variance from generally accepted normal laboratory values; and
Clinical signs and symptoms present that are above or below those of normal range (for the patient) and are such that further monitoring and evaluation is needed. Changes in the patient's status or condition are anticipated and immediate medical intervention may be required.

Documentation in the patient's medical record must support the medical necessity of the observation service.

Upon internal review performed before the claim was initially submitted and upon the hospital determining that the services did not meet its inpatient criteria, an inpatient status may not be automatically changed to observation status. An observation stay must adhere to the criteria as described in the “Coverage Indications, Limitations and/or Medical Necessity” section of this LCD.

Summary of Evidence

N/A

Analysis of Evidence (Rationale for Determination)

N/A

Proposed Process Information

Synopsis of Changes

Changes	Fields Changed
	N/A

Associated Information

Sources of Information

Bibliography

Open Meetings

Contractor Advisory Committee (CAC) Meetings

MAC Meeting Information URLs

Proposed LCD Posting Date

Comment Period Start Date

Comment Period End Date

Reason for Proposed LCD

Requestor Name	Requestor Letter
	View Letter

Requestor Information

Contact for Comments on Proposed LCD

Coding Information

ICD-10-CM Codes that Support Medical Necessity

ICD-10-CM Codes that DO NOT Support Medical Necessity

Additional ICD-10 Information

General Information

Associated Information

Documentation Requirements

Documentation must be legible, relevant and sufficient to justify the services billed. The documentation for outpatient observation must include:

1. The attending physician's order including “clock time” for the observation service or “clock time” can be noted in the nursing admission notes/observation unit notes outlining the patient’s condition and treatment.

2. The physician's admission/progress note which clearly indicates the patient's condition, signs and symptoms that necessitate the observation stay.

3. Supporting ancillary reports such as laboratory and diagnostic test reports.

Legible documentation in the medical record must clearly support the medical necessity and reasonableness of the observation services. The documentation should clearly state the method of assessment during observation and, if necessary, treatment in order to determine if the patient should be admitted or may be safely discharged.

Sources of Information

N/A

Bibliography

N/A

Revision History Information

Revision History Date	Revision History Number	Revision History Explanation	Reasons for Change
10/31/2019	R11	This LCD is being revised in order to adhere to CMS requirements per Chapter 13, Section 13.5.1 of the Program Integrity Manual, to remove all coding from LCDs. There has been no change in coverage with this LCD revision. Title XVIII of the Social Security Act, §1833(e) was removed from the *CMS National Coverage Policy* section of this LCD and placed in the related Billing and Coding: Outpatient Observation Bed/Room Services A56673 article.	Provider Education/Guidance
07/11/2019	R10	All coding located in the *Coding Information* section has been moved into the related Billing and Coding: Outpatient Observation Bed/Room Services A56673 article and removed from the LCD. At this time 21^stCentury Cures Act will apply to new and revised LCDs that restrict coverage which requires comment and notice. This revision is not a restriction to the coverage determination; and, therefore not all the fields included on the LCD are applicable as noted in this policy.	Provider Education/Guidance
04/11/2019	R9	Under *CMS National Coverage Policy,* Federal Register, Final Rule was deleted and replaced with eCFR Title 42 Chapter IV Subchapter B Part 419. Formatting, punctuation and typographical errors were corrected throughout the LCD. At this time 21st Century Cures Act will apply to new and revised LCDs that restrict coverage which requires comment and notice. This revision is not a restriction to the coverage determination; and, therefore not all the fields included on the LCD are applicable as noted in this policy.	Provider Education/Guidance
06/28/2018	R8	Under *CMS National Coverage Policy* deleted CMS Internet-Only Manual, Pub 100-04, section 290.5 from the last regulation, and formatting was corrected throughout the policy. At this time 21^stCentury Cures Act will apply to new and revised LCDs that restrict coverage which requires comment and notice. This revision is not a restriction to the coverage determination; and, therefore not all the fields included on the LCD are applicable as noted in this policy.	Provider Education/Guidance
01/29/2018	R7	The Jurisdiction "J" Part A Contracts for Alabama (10111), Georgia (10211) and Tennessee (10311) are now being serviced by Palmetto GBA. The notice period for this LCD begins on 12/14/17 and ends on 01/28/18. Effective 01/29/18, these three contract numbers are being added to this LCD. No coverage, coding or other substantive changes (beyond the addition of the 3 Part A contract numbers) have been completed in this revision.	Change in Affiliated Contract Numbers
01/01/2018	R6	Under *CPT/HCPCS Codes* *Group 2* Descriptions were revised for CPT codes 99217, 99218, 99219 and 99220. This revision is due to the Annual CPT/HCPCS Code Update. At this time 21st Century Cures Act will apply to new and revised LCDs that restrict coverage which requires comment and notice. This revision is not a restriction to the coverage determination; and, therefore not all the fields included on the LCD are applicable as noted in this policy.	Revisions Due To CPT/HCPCS Code Changes
08/18/2016	R5	Under *CMS National Coverage Policy* sections 290.5.1, 291.5.2 and 290.5.3 were added to the CMS Internet-Only Manual, Pub 100-04, Medicare Claims Processing Manual, Chapter 4.	Provider Education/Guidance Other (Updated source information)
01/14/2016	R4	Under *CMS National Coverage Policy* revised CMS Internet-Only Manual, Pub 100-04, Medicare Claims Processing Manual, Chapter 4, §§250-250.1, §§290.1-290.5.2 and §290.6 to CMS Internet-Only Manual, Pub 100-04, Medicare Claims Processing Manual, Chapter 4, §§250-250.1, §§290.1-290.5 and §290.6. CR 9486, Transmittal 3425 became effective January 1, 2016.	Other
10/01/2015	R3	This LCD is being reactivated due to Change Request 9252, Transmittal 1537, One-Time Notification related to NCD 20.20. Under *Coverage Indications, Limitations and/or Medical Necessity* under paragraph 5, statement #1 the sentence was reworded. Under *Patient Evaluation* deleted “s” from “conditions” in the first paragraph. Under *CPT/HCPCS Codes-Group 1* revised” 13X bill type” to now read “hospital outpatient billing”. Under *CPT/HCPCS Codes-Group 2* revised “85X bill type” to now read “Critical Access Hospital billing”.	Provider Education/Guidance Other
04/17/2015	R2		LCD Being Retired
10/01/2015	R1	Under *CMS National Coverage Policy* corrected manual sections cited for CMS Manual System, Pub 100-04, Medicare Claims Processing Manual, Chapter 4 to now read §§290.1-290.5.2 and added §290.6. Under *Coverage Indications, Limitations and/or Medical Necessity 1.* deleted “must have” and added “including”. Under *Coverage Indications, Limitations and/or Medical Necessity 2.* added “which” and “and” to the first sentence. Under *Coverage Indications, Limitations and/or Medical Necessity-Patient Evaluation* corrected the LCD section cited in the last paragraph to now read “Under *Coverage Indications, Limitations and/or Medical Necessity* .”	Other

Associated Documents

Attachments
N/A

Related Local Coverage Documents
Articles
A56673 - Billing and Coding: Outpatient Observation Bed/Room Services

Updated On	Effective Dates	Status
10/25/2019	10/31/2019 - N/A	Currently in Effect	You are here
Some older versions have been archived. Please visit the MCD Archive Site to retrieve them.

Keywords

Outpatient Observation
Observation

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Outpatient Observation Bed/Room Services

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Group 1

ICD-10-CM Codes that Support Medical Necessity

Group 1

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Group 1

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