Humana Releases Update to Facility Observation Services Payment Policy

October 2019 ~

Humana has issued a new claims payment policy for appropriate billing and documentation of facility observation services -specific, clinically appropriate outpatient services provided to help a healthcare professional decide whether a patient needs to be admitted as an inpatient or can be discharged.

The policy update outlines the criteria that Humana plans use to determine appropriate billing and documentation of facility observation services. The following policy applies to facility services only. For Humana Medicaid plans, this policy applies except when not permissible by state Medicaid guidelines.

Billing of Observation Services

The billing of facility observation services is appropriate only when the observation services were medically necessary, the observation services were ordered by a qualified health care professional, the patient was under the care of a physician or qualified nonphysician practitioner during observation services, and one or more of the following is true of the encounter:

• Treatment and monitoring were provided to determine if inpatient admission was needed
• The observation services were provided for patient monitoring, after outpatient surgery or diagnostic testing that was beyond the standard recovery period for the service
• A qualified health care professional directly referred the patient to the facility for observation services
• The patient was a child who was observed because of an uncertain clinical response to outpatient therapy
• The patient was a child whose parent or caregiver was unavailable or unknown

If none of those events occurred, a Humana plan does not reimburse for a facility observation charge.

The billing of and reimbursement for observation services are limited to rendered observation services that were specifically medically necessary and typically do not exceed 48 hours. Any time for any of the following scenarios is excluded from the calculation of billable observation hours:

• Patient monitoring during diagnostic or therapeutic services, including observation care interrupted by such services
• Routine preparation for outpatient surgery and diagnostic testing
• Services provided during the standard recovery period for outpatient surgery, which is four to six hours, or diagnostic testing
• Services provided for the convenience of the patient, physician or qualified nonphysician practitioner
• Observation services provided according to a standing order
• Observation services provided for less than eight hours
• The time period between the qualified health care professional’s order for observation services and when observation services began
• The time period between observation services ending and the patient’s discharge
• The time period between observation services ending and the arrival of the patient’s transportation

Documentation of Observation Services

Humana reserves the right to request medical records, at any time, to confirm accurate billing of observation services. Medical record documentation for observation services must include:

• The physician’s or qualified nonphysician practitioner’s assessment that determined the patient would benefit from observation services
• The qualified health care professional’s order for observation services
• The start and stop times of observation services
• Time for non-observation services that interrupted observation care, if any
• Nurses’ notes
• Progress notes on the patient’s condition and treatment to confirm the continuing need for observation services
• Supporting diagnostic and ancillary test reports, if any
• Discharge notes including the discharge order

Source(s): Humana’s Your Practice; Humana;