Observation Care

Observation care is a well-defined set of specific, clinically appropriate services that are described as follows:

• The services include ongoing short-term treatment, assessment and reassessment. 
• The services are furnished while a decision is being made regarding whether a member requires further treatment as a hospital inpatient or is able to be discharged from the observation bed.  

Observation stays of up to 48 hours for Medicare Advantage members may be eligible for reimbursement when providers need more time to evaluate and assess a member’s needs in order to determine the appropriate level of care. Examples (not all-inclusive) of diagnoses that may be treated in an observation setting include: 

• Chest pain 
• Syncope  
• Cellulitis  
• Pneumonia  
• Bronchitis  
• Pain or back pain  
• Abdominal pain  
• Pyelonephritis  
• Dehydration (gastroenteritis)  
• Overdose or alcohol intoxication  
• Close head injury without loss of consciousness  

Requirements for Observation Stays  
Observation stays do not require any pre-authorization or pre-notification requirements for Medicare Advantage Members.  

Providing Medicare Outpatient Observation Notice (MOON)  
Blue Cross and Blue Shield of Nebraska (BCBSNE) follows CMS guidance for the Medicare Outpatient Observation Notice (MOON). Hospitals and Critical Access Hospitals (CAHs) are required to furnish the MOON to any Medicare beneficiary who has been receiving observation services as an outpatient for more than 24 hours. The MOON is a standardized notice developed to inform beneficiaries (including Medicare health plan enrollees) that they are an outpatient receiving observation services and are not an inpatient of the hospital or critical access hospital (CAH). The notice must be provided no later than 36 hours after observation services are initiated or, if sooner, upon release.  

The MOON notice informs beneficiaries of the reason(s) they are an outpatient receiving observation services and the implications of such status with regard to Medicare cost-sharing and coverage for post-hospitalization skilled nursing facility (SNF) services. Provider compliance with this notification requirement is mandatory.  

The standard language for the MOON notice and instructions can be accessed at the following link: cms.gov/medicare/forms-notices/beneficiary-notices-initiative*.  

Options Available Beyond the Observation Period  
For members who require care beyond the observation period, the following options are available: 

• Contact BCBSNE clinical staff to discuss alternate treatment options such as home care or home infusion therapy
• Request an inpatient admission  

Note: If the member is not discharged within the 48-hour observation stay limit covered by the plan, the provider should re-evaluate the member’s need for an inpatient admission. Approval of an inpatient admission is dependent upon criteria review and plan determination. 

Medical Necessity Considerations: Inpatient vs. Observation Stays  
When Medicare Advantage members are admitted for inpatient care, the process that is used to determine whether their stay is medically necessary is different than the process Original Medicare uses.  

Here are some guidelines that clarify how BCBSNE determines medical necessity:  

• BCBSNE uses InterQual criteria to make determinations of medical necessity for all Medicare Advantage members.  
• BCBSNE does not require physician certification of inpatient status to ensure that a member’s inpatient admission is reasonable and necessary. For Original Medicare patients, however, this certification is mandated in the Original Medicare rule found in the Code of Federal Regulations, under 42 CFR Part 424 subpart B and 42 CFR 412.3.  
• When the application of InterQual criteria results in a Medicare Advantage member’s inpatient admission being changed to observation status, all services should be billed as observation, including all charges. No services should be billed as ancillary only (TOB0121).  
• BCBSNE clinical review process takes precedence over the Original Medicare coverage determination process. This applies to requests related to any inpatient vs. observation stay, including a denied inpatient stay billed as observation, inpatient-only procedures.  

Review of Readmissions that Occur Within 30 Days of Discharge  
BCBSNE reviews inpatient readmissions that occur within 30 days of discharge from a facility reimbursed by diagnosis-related groups (DRGs)when the member has the same or a similar diagnosis. BCBSNE reviews each readmission to determine whether it resulted from one or more of the following:  

• A premature discharge or a continuity of care issue
• A lack of, or inadequate, discharge planning  
• A planned readmission  
• Surgical complications  

In some instances, BCBSNE combines the two admissions into one for purposes of the DRG reimbursement. Medical Advantage guidelines for bundling a readmission with the initial admission are available: NebraskaBlue.com/Providers/ BCBSNE-Provider-Procedures /Medicare-Advantage-Policies.