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December 2016 Texas Medicaid Provider Procedures Manual

Inpatient and Outpatient Hospital Services Handbook : 4 Outpatient Hospital (Medical and Surgical Acute Care Outpatient Facility) : 4.2 Services, Benefits, Limitations, and Prior Authorization : 4.2.4 Outpatient Observation Room Services : 4.2.4.5 Documentation Requirements for Outpatient Observation

4.2.4.5
Documentation that supports the medical necessity of the outpatient observation services must be maintained by the facility in the client’s medical record. Documentation must include:
The practitioner’s admission and progress notes, which must be dated and timed, confirm the need for observation care, and outline the client’s condition, treatment, and response to treatment.
Anesthesia and recovery room/post anesthesia care unit notes from the practitioner and the nurse, which must be dated and timed and detail orders and any complications that require admission to observation status.
Documentation related to an outpatient clinic visit or critical care service that was provided on the same date of service as the observation service. The documentation must address any need for observation services and be dated and timed.
The client must be in the care of a practitioner during the period of observation, as documented in the medical record by admission, discharge, and other appropriate progress notes that are dated, timed, written, and signed by the practitioner.
Claims submitted for outpatient procedures in which the original intention was to keep the client for an extended period of time, such as overnight or for a 48-hour period, will be denied unless significant medical necessity is documented.
Retrospective review may be performed to ensure that the documentation supports the medical necessity of the outpatient observation services. Medical records will be evaluated to determine whether the practitioner’s order (practitioner intent) and the services that were actually provided were consistent.
The medical records must clearly support the medical necessity of the outpatient observation services and must include a timed order for observation services that will support the number of hours that the client was under observation care and the hours that were submitted for payment.

Texas Medicaid & Healthcare Partnership
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