Q&A: Billing for observation services when using condition code 44

Q: I manage a team of nurse auditors. HCPro's Medicare Compliance Essentials Training Compendium, page 54, suggests that in a condition code 44 scenario, the hospital may report and bill observation hours under revenue code 762 prior to the order for observation services. Currently, in a condition code 44 scenario, we charge observation hours beginning with the observation order for Medicare/Medicaid and Medicare Advantage plans. Commercial payers allow us to bill observation hours from the original inpatient order forward. My question is, in a condition code 44 scenario, may we report and bill for observation hours (revenue code 762) prior to the order for observation?

A: You may, but without HCPCS code G0378. Billable services with G0378 begin when there is a physician's order. However, CMS has recognized that when condition code 44 comes into play, there are hours prior to that time that involved resources and cost for the patient's care. Therefore, you can bill the hours but without the HCPCS code. This is supported in the Medicare Claims Processing Manual (Pub 100-04), Chapter 1, section 50.3.2, the last paragraph. CMS even provides an example: "For example, a beneficiary is admitted as an inpatient and receives 12 hours of monitoring and nursing care, at which point the hospital changes the status of the beneficiary from inpatient to outpatient and the physician orders observation services, with all criteria for billing under condition code 44 being met. On the outpatient claim on an uncoded line with revenue code 0762, the hospital could bill for the 12 hours of monitoring and nursing care that were provided prior to the change in status and the physician order for observation services, in addition to billing HCPCS code G0378 for the observation services that followed the change in status and physician order for observation services."

Note: This question was answered by Denise Williams, COC, senior vice president, revenue integrity services, REVANT Solutions, Trussville, Alabama. This question can be found in the billing and claims section on the NAHRI Forums where you can find answers to questions on a variety of topics from billing and claims to compliance to reimbursement.