Physician Documentation Requirements for Observation

Laws require physicians and other medical caregivers to provide documentation for all patient encounters both in hospital and medical office settings. Outpatient observation rooms in hospitals allow physicians to monitor and evaluate a patient's condition and to determine the necessity for hospital admission. Observation must be ordered by a physician or other authorized party.

Indications

• A patient is an inpatient when the hospital stay is expected to last through at least one night. Since an observation is generally shorter than 24 hours, an observation is treated as an outpatient visit. Although these services typically last no longer than 24 hours, some patients require an additional day of observation. It is rare for patient observation to last more than two days. Patient insurance or Medicare covers observation only when it is reasonable and necessary for evaluation and treatment, or to determine the need for inpatient admission. Any observation that lasts more than 48 hours will generally not be reimbursed.

General Guidelines

• When a patient is admitted for observation, insurance companies and Medicare typically require documentation consisting of an order of hospital admission that defines the level of care the doctor recommends. This information can be documented with a telephone call to the payer. Documentation must also include hospital admission and discharge reports. A discharge order must also be documented and can be provided by phone. It is also useful to provide hospital treatment orders and progress notes for other reasons, though this is not required for reimbursement. Services not considered reasonable or necessary for diagnosis and treatment are not covered.

Specific Conditions

• Specific conditions require standard services to be performed in conjunction with the observation admission. Necessary services can be performed in a clinic or private office before hospital observation. Before approving reimbursement of charges related to observation for chest pain, a payer typically expects two or more sets of cardiac enzyme tests and two electrocardiograms. If a patient is being observed for an asthma attack, the physician must submit a peak expiratory flow rate or a pulse oximetry. For an exacerbation of congestive heart failure, the physician must document a chest x-ray, electrocardiogram, and pulse oximetry.

Required Documentation

• When submitting an insurance claim, the ICD-9 diagnosis code and all pertinent information must be put in the documentation. If the claim is not complete, the insurer can deny coverage. The insurance company or Medicare might request additional documentation, including history and physical, physician orders, progress notes and additional information.