3-day payment window vs. observation

A patient was in the ER on 8/31, diagnostic lab, imaging and IV drug administration were performed and then observation was ordered at 6:00 pm. The patient received observation for 20 hours and was discharged on 9/1. The patient was admitted as an inpatient 9/4 for a diagnosis related to the observation stay. If we apply the 3-day payment window, the ER, lab, imaging and part of the IV drug administration fall outside of the window and would not be rolled into the inpatient claim. If we apply the billing rules for observation, all hours of observation would usually be reported on the day they began (8/31), which again would be outside of the window. The ER visit and 20 hours of observation would trigger C-APC 8011 with a payment of about $2,200. Which rule will take precedence – the 3-day payment window which would split the hours of observation and 6 hours of observation would be packaged into the ER visit which would prevent the C-APC payment or report all 20 hours of observation on the date they were ordered which would trigger the C-APC payment? 


  • If outpatient services fall outside of the 3-day payment window “line in the sand” then you bill those services separately and do not roll them to the inpatient claim. I like to count backwards to draw the line in the sand so in your example, if the patient is admitted on 9/4, then the dates to consider for application of the 3-day window would include 9/4, 9/3, 9/2, and 9/1. The outpatient services provided on 8/31 would usually be billed on a separate outpatient claim since they are outside of the 3-day window. Technically, the Medicare Claims Processing Manual, Chapter 4 § 290.2.2 directs providers to bill observation services with the line item date of service (LIDOS) that they began with the order, rather than the date they are rendered.  However, since 14 hours of observation were provided within the 3-day payment window on 9/1 and they were related to the inpatient admission, those observation hours should be rolled to the inpatient claim which would prevent the C-APC for the outpatient services provided on 8/31 - technically only 6 hours of observation were provided on that date of service.

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