Physician Billing for Observation: If You Don’t Order it, You Can’t Bill for it

Will CMS address the “absurdity” embedded in the rules of outpatient coding?

Every once in a while, something comes to my attention that I choose not to discuss in public. Over a year ago, I was asked about physician billing for observation services. When a patient is hospitalized, the physician who does the initial history and physical has to choose the proper evaluation and management (E&M) code to use.

The code is based on the type and place of service. If the patient is admitted as an inpatient, the physician uses the initial inpatient visit codes, 99221-99223, with the place of service designated as inpatient hospital. If the patient is placed as an outpatient with observation services, then the physician uses the initial observation visit codes, 99218-99220, with place of service of outpatient hospital.

This person told me that they read that the only physician who could bill for the initial observation visit codes was the physician who actually gave the order for observation. That did not make sense. The doctor who takes the call from the emergency department physician and actually gives the order is often not the same doctor who then comes and sees the patient and provides the face-to-face visit.

But then I read the pertinent regulation and was shocked that the person was correct. Sure enough, Chapter 12, Section 30.6.8.A of the Medicare Claims Processing Manual indicates that the Centers for Medicare & Medicaid Services (CMS) will “pay for initial observation care billed by only the physician who ordered hospital outpatient observation services and was responsible for the patient during his/her observation care.”

And for the past year I have been avoiding reporting about this or writing a RACmonitor article because first, I have never seen a denial for this, and there is no logical reason to have such a policy. If one doctor can give the order for inpatient admission and another one can perform and bill for the initial inpatient visit, why would the same not apply to observation services? But then in October, WPS Medicare, one of the Medicare Administrative Contractors (MACs), released a notice indicating that they had met with CMS about this and confirmed that it is indeed CMS policy.

But now that WPS has published this notice, providers need to decide what to do with this information. If WPS wanted to audit this, they could compare the attending physician entered by the hospital in field 76 on the UB-04 to the physician who bills for the initial observation visit code.

So the first thing to do is ensure that your billing staff is entering the name of the physician who performs the visit and not the physician who gave the order.

But is this legal? Well, the Uniform Billing Rules instruct the hospital to choose as attending provider the individual who has overall responsibility for the patient’s medical care and treatment on the claim, so it seems that choosing the doctor who saw the patient and not the one who ordered the service would be compliant.

If we get those names to match, then WPS would have to actually request the chart to perform a complex review, and that’s a lot of work for a relatively small payment. Plus, there are certainly bigger issues to audit than this.

Of course, the other thing I plan to do is talk to CMS about this. Seema Verma, the administrator of CMS, has started the “Patients over Paperwork Initiative” and has tweeted about the absurdity of Medicare regulations, and this clearly is an example of a regulation that is absurd.

Will I get anywhere? Does CMS read RACmonitor e-News? Who knows? But I’ll keep you up to date if I get any answers.