Carve Outs during Observation Services

How are you carving out other services from observation?  Are you using a standard time or calculating based on the time off the nursing unit?  What services are you carving out?  Are you carving out services for other non-Medicare payors?


  • I love the internet! here is a link to Tenet's policy- see page 22 for their carve out times. Don't use actual time- too labor intensive. Remember that most Obs patients will get way past the 8 hours needed to get the payment. So whether you bill 22 hours using standard carve outs or 23 hours by actually looking at the nursing notes and documentation, you get the same payment. All that work for no extra money? no thanks
  • So the part in the CMS Manual about Part B services doesn't apply to services off the unit in CT, MRI or Nuc Med?   

    Hospitals should not report as observation care, services that are part of another Part B service, such as postoperative monitoring during a standard recovery period (e.g., 4-6 hours), which should be billed as recovery room services. Similarly, in the case of patients who undergo diagnostic testing in a hospital outpatient department, routine preparation services furnished prior to the testing and recovery afterwards are included in the payments for those diagnostic services.
  • Typically, what I see is hospitals carving out the specific time when it is a procedure like surgery or cath lab, when there is a specific place in the record where the time is documented.  Many surgery departments bill by time, so this is an "easy" way to capture that time.  However, I agree with Dr. Hirsch - you will run yourself (and your clinical areas) crazy trying to figure out how long the patient was in nuclear med or how long the echocardiogram took.  Ask the departments for a average time for the procedures and then through whatever process/team is responsible, once it is agreed upon, make a list of what the carve out time is going to be for each procedure/type of procedure and publish it internally for consistency in application.  Using average times for procedures is allowed under the CMS guidance. You may want to consider making the list an addendum to your overall observation policy; then when updates are indicated, the list can be updated (date is recommended) without having to go through a full policy review process.  
  • Thanks for your help. I use average times but our system calculates observation hours based on start and end observation time entered in boxes.  In a separate program, carve out time must also be entered based on a start and stop time.  If we just manually adjust the observation hours, the system will reverse the manual charges and post back charges based on the original start and end times.  Like you've said, it's a lot of work for little return.

  • This process is one that always has me scratching my head.... and asking, why do we have to do this.... since as many have mentioned, it rarely impacts our MCR payment.  With that said, we have tried to simplify this as much as possible in our Epic workflows.  We have OP charge capture staff that will carve out time in the ADT event manager depending on ordered and documented services.  Average times for some services and actual times for others.  For surgeries and Cath Lab/EP procedures it is as easy as changing the ADT event to OP so that OBS charges don't calculate for that time period.  We have also considered automating this within Epic, but have not taken that step yet.

  • Which group of individuals do the carve outs at your organization? Is this process done by staff in the Revenue Cycle or do you have Utilization/Case Management doing this work? Do any organizations automatically carve out the time using Epic functionality/build? Thank you!

  • We have a small team of revenue capture analysts that manage the OBS carve out as part of their review and charge capture for nursing ancillary services. They capture charges for all OP/OBS and ED patients. We have chosen not to automate the carve out in Epic, but if others have had success with it, we would possibly reconsider.

  • Thank you for your response - do you mind sharing what organization you are from?

  • Community Health Network, Indianapolis, IN

  • Thank you!!

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