Appealing Observation Level of Care Denials

Appealing Observation Level of Care Denials

Under constant pressure to avoid unnecessary inpatient admission, observational care is growing in many regions. Further, many organizations are seeking ways to expand their observation care units to include more specialized personnel and equipment and intensive patient education programs.

Much attention has been given to the clinical management of the observation unit. It is equally important to make sure the financial management is continually improved. Appeal Solutions conducted a round-up of online articles related to effective observational care reimbursement. As follows are our favorite tips and links to helpful online sources (note: some information may be carrier- or region-specific):

1. Contractors often evaluate medical records to determine the consistency between the physician order (physician intent), the services actually provided (inpatient or outpatient), and the medical necessity of the services, including the medical appropriateness of the inpatient or observation stay. Source: Carol Pohlig in The Observation Deck Smart steps to help you correctly document observation services, Sept 2008 edition of The Hospitalist (www.the-hospitalist.org). This article includes documentation tips and the most extensive list we located, 16 services and/or scenarios, which are most likely to lead to not medically necessary observational care denials.
2. Hospitals can use specialty inpatient areas (including CCU or ICE) to provide observation services (e.g., for telemetry). Level of care, not physical location of the bed, dictates admission status. Source: Oregon’s Medicare Quality Improvement Organization (www.ompro.org).
3. Organizations need to look at value broadly when assessing financial outcomes related to observation care. This can include measuring length of stay, readmission rates and ED diversion rates. The reduced staffing levels for observation services vs. inpatient services should also be considered. Lee Ann Runy in Hospital Medicine Advisors (www.hospitalconnect.com).
4. In a financial turn-around story on Hermann Hospital’s (Houston, TX) observation unit, the utilization management staff became more involved in observation management by conducting complete reviews of records of patient in the observation unit every day at 7 a.m. and 4 p.m. In addition, they began identifying and referring to appropriate services those patients needing discharge planning or follow-up care and training staff to perform this function. Angela Lenox and Helen New. Clinical observation units help manage costs and care Healthcare Financial Management April, 1997
5. Steven Feldman, MD, of Stony Brook University Medical Center, was recognized in the HFMA Managed Care Forum, Quarterly Insights, Winter 2007, for contracting with insurers for cardiology-related observation services. One contracting technique was to establish a pathway of services provided by the cardiology department during observations and negotiate a carve-out menu of cardiac services to be paid for separately without bundling. Specific codes for these carve-outs are stated in the contract. The charge for an observation is higher than an emergency department rate but contractually capped to be less that the regular contracted inpatient per diem rate (www.hfma.org/forums/managedcare/newsletter/MCQIWinter2007.htm).