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Hospital Observation Services and 2017 “MOON” Requirements

Hospital Observation services have received much attention in past years as a result of issues relating to patient confusion about co-pays and charges for Medicare outpatient vs. inpatient services.  In an effort to address these issues, CMS has developed the “Medicare Outpatient Observation Notice” (MOON) effective for dates of service beginning February 21, 2017 under CMS-10611 Transmittal 3695 dated January 20, 2017. The MOON is mandated by the Federal Notice of Observation Treatment and Implication for Care Eligibility Act, passed on August 6, 2015. MOON is the form and accompanying instructions required to inform all Medicare beneficiaries when they are considered outpatients and receiving observation services.  As observation patients, they would not be considered inpatients in a hospital or critical access hospital (CAH).

To better understand Observation, we thought it might be helpful to review the rules and payment for Hospital Observation. In 2017, payment for APC 8011 Comprehensive Observation Services under Status Indicator J2 is $2,221.70 for the 29.6223 Value Units. In addition, as discussed below, CMS added requirements for MOON notification to patients receiving Observation services for over 24 hours. For 2017, observation continues to be paid under a composite APC entitled “Comprehensive Observation Services (COS) APC” (APC 8011).

In order to qualify for COS payment, billing must include:

  • Any procedure that is assigned Status Indicator “T”;
  • Any claim containing 8 or more units of services described by HCPCS code G0378 (Observation services, per hour);
  • Claims that contain services provided on the same date of service or one (1) day before the date of service for HCPCS code G0378 and described by one of the following codes:
  • G0379 (direct referral of patient for hospital observation care) on the same date of service as HCPCS code G0378;
  • 99281(ED Level 1)
  • 99282 (ED Level 2)
  • 99283 (ED Level 3)
  • 99284 (ED Level 4)
  • 99285 (ED Level 5)
  • G0380 (Type B emergency department visit Level 1
  • G0381 (Type B emergency department visit Level 2)
  • G0382 (Type B emergency department visit Level 3)
  • G0383 (Type B emergency department visit Level 4)
  • G0384 (Type B emergency department visit Level 5)
  • 99291 (Critical Care)
  • G0463 (Hospital outpatient clinic visit for assessment and management of a patient)

Claims that do not contain a service that is described by a HCPCS code to which status indicator “J1” has been assigned

Requirements for Observation include:

  • A physician order to place the patient in observation
  • Placement notes (orders, on-going patient assessment, risk stratification, final discharge and diagnosis)
  • The time of placement into observation (the “clock” starts at the time that observation services are initiated in accordance with a practitioner’s order for placement of the patient into observation status)
  • The time the patient is either discharged, transferred or admitted to the hospital
  • Time in Observation must span a minimum of 8 hours
  • The patient must be under the care of a physician or non-physician practitioner during the time of observation care
  • All notes must be timed, written, and signed by the provider

A non-physician practitioner must be licensed by the state and approved by internal credentialing and bylaws to supervise patients in Observation

If the patient has been referred to Observation without first being seen in the ED or Clinic, the G0379 may be reported in lieu of an ED or clinic code. The E/M code associated with other services must be billed on the same claim form as the Observation service and the E/M must be billed with a modifier -25 assuming the same date of service as the observation code G0378.

Once the patient reaches the 24-hour observation mark, the MOON must be provided. As a precaution, patients may receive the MOON upon placement in observation as it must be delivered NO LATER THAN 36 hours after observation services begin. Providing the MOON at the time of transfer into Observation status removes the possibility of delay should the observation period exceed 24 hours.

The MOON must be delivered to beneficiaries or their representatives (Original Medicare fee-for-service AND Medicare Advantage enrollees) who receive observation services as outpatients for more than 24 hours. The MOON must be provided, however, no later than 36 hours after observation services begin. Also included are beneficiaries who:

  • Do not have Part B coverage;
  • Are subsequently admitted as an inpatient prior to the required delivery of the MOON, and/or,
  • Designate Medicare as either the primary or secondary payer

CMS has provided the appropriate MOON forms for use by institutions and allows some modification to include logos, contact information, etc. but within certain limits. The requirements for the type of information that must be provided on the form are:

  • Patient name;
  • Patient number, and
  • Reason the patient is considered Outpatient
  • Signature of the patient or representative indicating an understanding of the contents;
  • Presence of a staff person and, we recommend, signature of that individual, attesting that the patient and/or representative understands the document; and
  • Availability of institution staff to address any questions or concerns

Both the standardized written MOON form and oral notification must be provided and documented in each patient’s medical record.

In instances where the patient or patient designee refuses or is unable to sign the MOON and there is no patient representative to sign on the patient’s behalf, the notice must be signed by the staff member of the hospital or CAH who presents the written notification. This attestation must include staff members signature, name and title as well as the date and time the notification was presented to the patient. The date and time of the staff members signature/attestation becomes the official date of notice of receipt. 

In some cases, patients will require signature of their “authorized representative” who may make health care decisions on the patient’s behalf. In cases where a beneficiary is temporarily incapacitated, a family member or close friend who has been determined by the institution to be the representative of the patient although not legally named as a representative, may be a representative for purposes of receiving the MOON. Note this may be obtained in person or over the phone with a hospital/CAH representative documenting the required information.

The MOON also provides an opportunity for the institution to document additional information to the patient. This might include:

  • Contact information for specific hospital departments or staff members;
  • Additional content relating to the notice of observation services that may be required by the State;
  • Any Part-A cost sharing responsibilities of the patient following admission as an inpatient before the 36 hours following initiation of observation services has occurred;
  • Date and time of inpatient admission of the patient is admitted as an inpatient prior to delivery of the MOON;
  • Medicare Accountable Care Organization information;
  • Hospital waivers of beneficiary responsibility for cost of self-administered drugs; and/or
  • Unique information pertaining to unique patient circumstances

All information associated with the MOON must be maintained in the patient’s medical record as well as:

  • Signature of the patient or representative indicating an understanding of the contents;
  • Presence of a staff person and, we recommend, signature of that individual, attesting that the patient and/or representative understands the document; and
  • Availability of institution staff to address any questions or concerns

Both the standardized written MOON form and oral notification must be provided and documented in each patient’s medical record.

To review the policies for Observation, care must be provided hourly for a minimum of 8 hours. In billing for observation service, the units of service represent the countable number of observation hours that the patient spends in observation. This countable observation time is exclusive of any time the patient was out of the observation area without an RN and exclusive of any time that a separately billable procedure was performed that required active monitoring. Medicare will not pay separately for any hours a beneficiary spends in observation over 24-hours, but all costs beyond 24-hours will be included in the composite APC payment for observation services.

Observation services with less than 8 hours of observation are not eligible for Medicare reimbursement and would be billed with the appropriate E/M level (99281-99285 or Critical Care 99291). If a period of observation spans more than one calendar day, all of the hours for the entire period of observation must be included on a single line and the date of service for that line is the date the patient is admitted to observation.

Observation time starts at the clock time documented in the patient’s medical record, which “coincides with the time that observation services are initiated in accordance with a physician’s order for observation.” Observation ends at the time when all medically necessary services related to observation care are completed — including follow-up after discharge orders are written. This observation end time is the time when all clinical or medical interventions have been completed, including the nursing follow-up care performed after the physician’s observation discharge orders were written.

Intravenous infusions and injections are reportable in addition to observation service for all payers including Medicare. Most infusion and injection procedures are status indicator “S” procedures and are paid separately. If an infusion is started in the ED or clinic visit preceding observation, subsequent or concurrent hours of infusion may be coded in observation but the initial service codes would not be coded a second time, unless a second IV infusion site was initiated. Facilities are instructed to follow CPT rules for coding of injections and infusions. Separate payment is allowed for services with status indicators “S” (significant procedure not subject to discounting) and “X” (ancillary service) when billed with G0378. The payment policy is the same for many non-Medicare payers. As in years before, no payment will be made in 2017 if a surgical procedure or any service that has a status indicator of “T” occurs on the day before or the day that the patient is placed in observation. However, all services related to the observation services should be coded. The OCE logic will determine payment.

Infusion add-on codes 96368 (concurrent infusion) and 96376 (IV push same drug) are packaged under Status Indicator “N”.

Observation – Direct Admit Patients

CMS will pay for a direct referral to observation under HCPCS code G0379 (now recognized under APC 5013). CMS expects that hospitals will bill this service in addition to G0378 when a patient is referred directly to observation care after being seen by a physician in the community. HCPCS code G0379 (APC 5013) is NOT billed for a direct referral to observation care on the same day as a hospital clinic visit, emergency room visit, critical care, or after a “T” status procedure that is related to the subsequent admission to observation care. If observation criteria are met, the composite APC 8011 will be paid if observation time related to direct referral does not meet observation guidelines. The payment for G0379 in 2017 is $492.72.

For additional information regarding the coding and billing of the 2017 MOON notice, contact E+A to set up your consultation with our CMS experts.


For a copy of the official MOON form,  Instructions may be found at: (Reimbursement FAQs; Hospital Observation)