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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 : 4.2.4.8 Inpatient Admission to Outpatient Observation

4.2.4.8
When a client is admitted to the hospital as an inpatient and a subsequent internal utilization review (UR) determines that the services did not meet inpatient criteria, the hospital may change the client’s status from inpatient to outpatient observation. The order to change from an inpatient to outpatient observation admission is effective for the same date and time as the inpatient order. This practice is acceptable under Texas Medicaid if all of the following conditions are met:
Note:
When the hospital has determined that it may submit an outpatient claim according to the conditions described above, the entire episode of care should be billed as an outpatient episode of care.
Reimbursement for emergency room (ER) and observation services are considered part of the inpatient DRG payment and must be submitted as separate details on the inpatient claim when the client is admitted as an inpatient under one or both of the following circumstances:
The date of admission on the inpatient claim must reflect the date the client presents at the hospital.
If the client is admitted as an inpatient more than 24 hours after presenting in the ER without being placed in observation status or more than 48 hours after being placed in observation status, the ER and observation services may be reimbursed separately as outpatient services.
Examples
The following examples indicate the appropriate dates of admission and claim submissions for different scenarios:
Scenario 1
In scenario 1, the ER and outpatient observation services must be submitted on the inpatient hospital claim, because the ER services are within 24 hours of the observation services, and the observation services are within 48 hours of the inpatient admission, and the client was not discharged and sent home before being admitted as an inpatient.
The inpatient admission date reflects the date the patient presented at the ER.
 
Claims submissions are as follows:
ER visit: Submitted on the inpatient claim as a separate detail (part of the DRG payment)
Observation services: Submitted on the inpatient claim as a separate detail (part of the DRG payment)
Scenario 2
In scenario 2, the ER service was more than 24 hours before the observation period began and must be submitted on an outpatient hospital claim. The observation service must be billed on the inpatient hospital claim because the service was within 48 hours of the inpatient admission, and the client was not discharged and sent home before being admitted as an inpatient.
The inpatient admission date reflects the date the patient was placed in observation status.
 
Claims submissions are as follows:
ER visit: Submitted on an outpatient claim and reimbursed separately from the observation and inpatient services
Observation services: Submitted on the inpatient claim as a separate detail (part of the DRG payment)
Scenario 3
In scenario 3, the ER service must be submitted on an outpatient claim as part of the observation service because the ER service was within 24 hours of the observation service. The observation service may be reimbursed separately from the inpatient admission because the observation service was more than 48 hours before the inpatient admission, and the client was not discharged and sent home before being admitted as an inpatient.
The inpatient admission date reflects the date the patient was admitted as an inpatient.
 
Claims submissions are as follows:
ER visit: Submitted on an outpatient claim and reimbursed as part of the outpatient observation services
Observation services: Submitted on the outpatient claim and reimbursed separately from the inpatient services
Scenario 4
In scenario 4, the ER service may be reimbursed separately because it was more than 24 hours before the client was placed in observation status. The observation service may be reimbursed separately because it was more than 48 hours before the client was admitted as an inpatient.
The inpatient admission date reflects the date the patient was admitted as an inpatient.
 
Claims submissions are as follows:
ER visit: Submitted on an outpatient claim and reimbursed separately from the observation and inpatient services.
Observation services: Submitted on an outpatient claim and reimbursed separately from the inpatient services.
Scenario 5
In scenario 5, the ER service must be submitted on an outpatient claim as part of the observation service because the ER service was within 24 hours of the observation service. The observation service may be reimbursed separately from the inpatient admission because the client was discharged and sent home without being admitted as an inpatient.
The inpatient admission date reflects the date the patient presented at the ER after being discharged and sent home 14 hours earlier.
 
Claims submissions are as follows:
ER visit: Submitted on an outpatient claim and reimbursed as part of the observation services
Observation services: Submitted on the outpatient claim and reimbursed separately from the inpatient services
When the hospital has determined that it may submit an outpatient claim according to the conditions described above, the entire episode of care should be submitted as an outpatient episode of care.

Texas Medicaid & Healthcare Partnership
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