Physicians are often confused about whether to bill for observation status or inpatient status for patients admitted to the hospital.  There are specific rules in the Medicare Claims Processing Manual, but sometimes the question is: what is the status of the patient?

Commercial carriers have long rejected claims when the bill submitted by the hospital used one status and the bill submitted by the physician had the other status.  Now that Medicare is using MACs to process both Part A and Part B claims, we can expect denials from them, as well, in this situation.

According to Medicare rules, "observation begins and ends with the physician."  That is, the physician determines the the status of the patient. In fact, often, it is the Case Managers who are familiar with the requirements for observation versus inpatient status on the facility side, who talk to the doctor about what the status should be.  Why does it matter?  From the physician perspective, it matters very little.  The physician is paid about the same amount for an inpatient or observation service.  For the hospital, it matters a lot.

What should the practice do?  Check with the hospital accounting office if there is any question as to the status of the patient.

See the other articles in Codapedia about "what if" and "how to" related to observation services.