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Observation stays

Observation services are defined as reasonable and necessary services provided on a hospital's premises for the purpose of evaluating the condition of a patient to determine whether they should be admitted for more intensive inpatient care, discharged or transferred to another facility. Observation services are commonly ordered for patients who present to the emergency department and who then require a significant period of treatment or monitoring in order to make a decision concerning their admission or discharge. 

Observation services are by definition outpatient services. 

Hospital billing for observation services should begin at the clock time documented in the patient's medical record, which coincides with the time observation services are initiated in accordance with a physician's order for observation services. 

The time receiving observation services (and hospital billing) ends when all clinical or medical interventions have been completed, including follow­up care furnished by hospital staff and physicians that may take place after a physician has ordered the patient be released or admitted as an inpatient. 

Below are the HealthChoice guidelines for observation stays. 

  1. Observation stays of 47:59 hours or less: 
    a. Certification is not required.
    b. Charges must be billed as outpatient services.
    c. Charges for a subsequent inpatient admission must be combined with charges for the observation stay and all charges must be billed as inpatient services.
  2. Observation stays of 48 hours or longer:
    a. Observation services that meet or extend beyond a 48-hour period are not covered. Providers must obtain certification approval for inpatient status for any services that extend beyond the initial 48-hour period.

If you have any questions regarding a HealthChoice certification, or to request certification, please call the certification administrator toll-free at 800-323-4314, Option 2. TTY 711. 

Last Modified on Mar 02, 2021
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