Answer: It would not be appropriate to use the UB code as a guide for Part B physician or nonphysician practitioner billing for observation services. Part A and Part B billing instructions may be different. The Internet Only Manual Publication 100-4, Chapter 12, Section 30.6.8 specifically states observation services, "… include ongoing short term treatment, assessment, and reassessment, that are furnished while a decision is being made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital." While it is true that medical documentation should clearly indicate the official "status" of the patient at the facility (i.e., inpatient, observation, or emergency department) billing guidelines for Part B also relate to the length of time the patient is in observation status as well as whether they are discharged or admitted as an inpatient when selecting the CPT code billed by the Part B provider.

When a patient is admitted as an inpatient from observation status, CMS has clear guidelines regarding how the Part B provider should bill. In Internet Only Manual Publication 100-4, Chapter 12, Section 30.6.8, CMS makes no reference to the UB bill code but places an emphasis on the patient’s length of time in observation and whether the patient was admitted as an inpatient or discharged. Below is a portion of the CMS Internet Only Manual that provides further guidance on Part B billing for observation services. Providers may find additional valuable information in the other sections if this manual.

Resource: Internet Only Manual Publication 100-4, Chapter 12, Section 30.6.8 (PDF, 1.4 MB).

Section D: Admission to Inpatient Status Following Observation Care
If the same physician who ordered hospital outpatient observation services also admits the patient to inpatient status before the end of the date on which the patient began receiving hospital outpatient observation services, pay only an initial hospital visit for the evaluation and management services provided on that date. Medicare payment for the initial hospital visit includes all services provided to the patient on the date of admission by that physician, regardless of the site of service. The physician may not bill an initial observation care code for services on the date that he or she admits the patient to inpatient status. If the patient is admitted to inpatient status from hospital outpatient observation care subsequent to the date of initiation of observation services, the physician must bill an initial hospital visit for the services provided on that date. The physician may not bill the hospital observation.

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