CMS FAQ plus Outpatient Observation Services and Place of Service Defined
Which Emergency Department patients should be included in the denominators of meaningful use measures?
Published 09/15/2010 11:48 AM   |    Updated 12/01/2010 10:54 AM   |    Answer ID 10126
Excerpted from FAQs on CMS site on 12/5/2010.A number of measures for Meaningful Use objectives for eligible hospitals and critical access hospitals (CAHs) include patients admitted to the Emergency Department (ED). Which ED patients should be included in the denominators of these measures for the Medicare and Medicaid Electronic Health Record (EHR) Incentive Programs? 

On September 17, 2010, we issued an FAQ that explained that our intent to include in the denominator visits to the emergency department (ED) of sufficient duration and complexity that all of the Meaningful Use objectives for which the ED is included would be relevant.  Therefore we explained that eligible hospitals and CAHs should count in the denominator patients admitted to the inpatient part of the hospital through the ED, as well as patients who initially present to the ED and who are treated in the ED’s observation unit or who otherwise receive observation services.  

Since that response was issued, we have received questions regarding which observation services should be included.  We have also received responses noting that the plain language of the regulation would allow for a reading that counts all emergency department visits, and not just those identified in our September 17th FAQ.  

Therefore, we are revising our FAQ to allow eligible hospitals and CAHs, as an alternative, for Stage 1 of Meaningful Use, to use a method that is consistent with the plain language of the regulation.  There are two methods for calculating ED admissions for the denominators for measures associated with Stage 1 of Meaningful Use objectives. Eligible hospitals and CAHs must select one of the methods below for calculating ED admissions to be applied consistently to all denominators for the measures. That is, eligible hospitals and CAHs must choose either the “Observation Services method” or the “All ED Visits method” to be used with all measures. Providers cannot calculate the denominator of some measures using the “Observation Services method,” while using the “All ED Visits method” for the denominator of other measures. Before attesting, eligible hospitals and CAHs will have to indicate which method they used in the calculation of denominators.  

Observation Services method.
The denominator should include the following visits to the ED: 
          –The patient is admitted to the inpatient setting (place of service (POS) 21) through the ED.  In this situation, the orders entered in the ED using certified EHR technology would count for purposes of determining the computerized provider order entry (CPOE) Meaningful Use measure.  Similarly, other actions taken within the ED would count for purposes of determining Meaningful Use.

          –The patient initially presented to the ED and is treated in the ED’s observation unit or otherwise receives observation services. Details on observation services can be found in the Medicare Benefit Policy Manual, Chapter 6, Section 20.6. Patients who receive observation services under both POS 22 and POS 23 should be included in the denominator.

All ED Visits method. An alternate method for computing admissions to the ED is to include all ED visits (POS 23 only) in the denominator for all measures requiring inclusion of ED admissions. All actions taken in the inpatient or emergency departments (POS 21 and 23) of the hospital would count for purposes of determining meaningful use.

For more information about the Medicare and Medicaid EHR Incentive Program, please visit http://www.cms.gov/EHRIncentivePrograms.
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Related Excerpts  from Medicare Benefit Policy Manual 

1.  Outpatient Observation Services Defined

Chapter 6 – Hospital Services Covered Under Part B
(Rev. 128, 05-28-10)
[PDF VERSION]

20.6 – Outpatient Observation Services
(Rev. 107, Issued: 05-22-09, Effective: 07-01-09, Implementation: 07-06-09)
A. Outpatient Observation Services Defined 
Observation care is a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. 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 covered only when provided by the order of a physician or another individual authorized by State licensure law and hospital staff bylaws to admit patients to the hospital or to order outpatient tests. In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours. In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours. Hospitals may bill for patients who are directly referred to the hospital for outpatient observation services. A direct referral occurs when a physician in the community refers a patient to the hospital for outpatient observation, bypassing the clinic or emergency department (ED) visit. Effective for services furnished on or after January 1, 2003, hospitals may bill for patients directly referred for observation services.  

See, Pub. 100-04, Medicare Claims Processing Manual, chapter 4, section 290, at http://www.cms.hhs.gov/manuals/downloads/clm104c04.pdf  for billing and payment instructions for outpatient observation services.

Future updates will be issued in a Recurring Update Notification.

B. Coverage of Outpatient Observation Services
When a physician orders that a patient receive observation care, the patient’s status is that of an outpatient. The purpose of observation is to determine the need for further treatment or for inpatient admission. Thus, a patient receiving observation services may improve and be released, or be admitted as an inpatient (see Pub. 100-02, Medicare Benefit Policy Manual, Chapter 1, Section 10 “Covered Inpatient Hospital Services Covered Under Part A” at http://www.cms.hhs.gov/manuals/Downloads/bp102c01.pdf ). For more information on correct reporting of observation services, see Pub. 100-04, Medicare Claims Processing Manual, chapter 4, section 290.2.2.)  All hospital observation services, regardless of the duration of the observation care, that are medically reasonable and necessary are covered by Medicare. Observation services are reported using HCPCS code G0378 (Hospital observation service, per hour). Beginning January 1, 2008, HCPCS code G0378 for hourly observation services is assigned status indicator N, signifying that its payment is always packaged. No separate payment is made for observation services reported with HCPCS code G0378. In most circumstances, observation services are supportive and ancillary to the other separately payable services provided to a patient. In certain circumstances when observation care is billed in conjunction with a high level clinic visit (Level 5), high level Type A emergency department visit (Level 4 or 5), high level Type B emergency department visit (Level 5), critical care services, or direct referral for observation services as an integral part of a patient’s extended encounter of care, payment may be made for the entire extended care encounter through one of two composite APCs when certain criteria are met. For information about billing and payment methodology for observation services in years prior to CY 2008, see Pub. 100-04, Medicare Claims Processing Manual, Chapter 4, §§290.3-290.4. For information about payment for extended assessment and management under composite APCs, see §290.5.Payment for all reasonable and necessary observation services is packaged into the payments for other separately payable services provided to the patient in the same encounter. Observation services packaged through assignment of status indicator N are covered OPPS services. Since the payment for these services is included in the APC payment for other separately payable services on the claim, hospitals must not bill Medicare beneficiaries directly for the packaged services.