Will 2019 Proposed Physician Rule be a Boon to Observation Medicine?

Multiple visits to observation patients may soon be payable but… 

When one looks at the current payment structure for observation medicine from the physician viewpoint, it makes no sense. Although observation patients are not as sick as inpatients, the amount of time and number of daily visits needed to care for them often exceeds that needed for the critically ill patient in the intensive care unit.

One of the first issues is determining where to care for the observation patient. Because payment to the hospital is limited to a single comprehensive ambulatory payment classification (C-APC) amount, currently paid as C-APC 8011 with a base amount of $2,350, regardless of the length of stay, the hospital is motivated to have the patient receive the necessary care and then be promptly discharged. To that end, many hospitals have opened observation units which do not provide the patient the level of comfort and amenities available to them in an inpatient unit, such as private rooms or private bathrooms.

The observation unit is also located near the emergency department, so the patients do not consider themselves “admitted.” It is hoped that if the patient never has the opportunity to “get comfortable,” they will be less likely to protest being discharged when the care is done and are less likely to ask to stay until the next day.

If the observation unit is located near the emergency department (ED), it seems natural for an emergency medicine physician to care for the patient during their observation care. Those physicians are used to seeing patients multiple times during their ED visit and don’t have the “once a day rounding” schedule of many of the community physicians who still care for patients at the hospital. They also routinely discharge patients from the ED at all hours of the day and night and don’t have the mentality that a patient who is finished with their care could not possibly be sent home if it is dark outside.

The other common structure is to have hospitalists assigned to the observation unit, asking them to care for such patients, often with the support of a hospital-employed non-physician practitioner. Hospitalists are experts in hospital medicine and can focus the care of the patient to the presenting problem. They are also present in the hospital all day, so they can assess the patient at frequent intervals.

But be it an emergency medicine physician or a hospitalist, the current physician professional fee structure and regulations are a hindrance to efficient observation care. As it stands, if physicians of the same specialty from the same group see a patient multiple times in a single day, only one service may be billed. That can be a logistical nightmare; the doctors have to coordinate who will submit the bill, what code should be assigned to the service, taking into account the multiple visits, and who gets “credit” for the care if their salary structure involves a component of production, often measured by relative value units, also called RVUs.

This complexity leads many emergency physicians to shy away from observation patient care since the emergency medicine physician who saw the patient in the ED will be billing an ED visit, precluding the second physician for billing for an observation visit on the same day. Some emergency medicine groups have gone as far as forming separate corporations that employ all the same doctors so the ED visit can be billed by group A and the observation visit on the same day by another emergency physician billed by group B.

Likewise, hospitalists want credit for the work they perform. If one of their group members places a patient on observation in the overnight hours after midnight and hands the patient over to an associate for care during waking hours, the second physician will be unable to bill for their care.

But all that may change on Jan. 1, 2019 if the Centers for Medicare and Medicaid Services (CMS) adopts its proposal in the 2019 Physician Fee Schedule Rule. In the proposed rule, CMS references current manual provision from chapter 12 of the Medicare Claims Processing Manual, which states, “As for all other E&M services except where specifically noted, the Medicare Administrative Contractors (MACs) may not pay two E&M visits billed by a physician (or physician of the same specialty from the same group practice) for the same beneficiary on the same day unless the physician documents that the visits were for unrelated problems in the office, off campus-outpatient hospital, or on campus outpatient hospital setting which could not be provided during the same encounter.”

They go on to note that this regulation may not make sense with the way medicine is currently practiced with some physicians may have a clinical specialization that is not reflected in their official specialty designation. As an example, although I am listed with Medicare as an internist, I also had a special interest and extensive training in HIV medicine. If one of my internal medicine partners wanted to refer a patient with HIV to me, that patient would not be able to be seen the same day because of the prohibition on visits with physicians in the same group with the same specialty.

How could this affect observation medicine? If CMS rescinds this manual provision, there would be no prohibition of an emergency physician seeing and billing the ED visit, and then another member of the group who is also an emergency physician could initiate observation services and bill for the service on the same calendar day. Likewise, if a hospitalist-initiated observation care on a patient early in the day, another member of the same group could see the patient later in the day and bill for that service.

Although we always expect physicians to do the right thing for the patient at the right time, the lack of reimbursement for that second visit may lead the physician to defer a discharge until the next day when the service would be billable. This could also allow a hospitalist to initiate care on an observation patient and a non-physician practitioner could see the patient later in the day and both would be providing billable services. This could improve the efficiency of the care provided to these patients whose hospital stay is counted in hours and not days.

But before anyone goes out and starts redesigning their observation medicine program, CMS does note that they are seeking comments on whether to totally eliminate this manual provision, modify it in some way, or simply provide exceptions.

Whether visits to observation patients makes the cut when CMS publishes the final rule is far from certain. If you agree that allowing multiple billable visits in one day on hospital patients will improve patient care, you have until Sept. 10, 2018 to submit a comment to CMS at https://www.regulations.gov/document?D=CMS-2018-0076-0001.

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