Covered and Noncovered Services : Covered Services and Requirements

Observation Policy

Observation care is defined as a set of specific, clinically appropriate services, including ongoing short-term treatment, assessment, and reassessment, that are performed before determining whether a patient will require inpatient treatment or can be dismissed from the hospital. Observation services are commonly ordered for patients who present to the emergency department and require a significant period of treatment or monitoring, typically a minimum of eight hours, to determine whether to admit or dismiss them.

Observation services are covered only when provided by the order of a physician or another individual authorized by Wisconsin Medicaid to admit patients to the hospital or to order outpatient tests. Following resolution of the reason for the observation care, the decision of whether to dismiss a patient from the hospital or to admit the patient can typically be made in less than 48 hours and is usually made in less than 24 hours.

In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours, as referenced in the Claims Denials and Resubmissions section below.

ForwardHealth allows up to 48 hours of hospital observation, regardless of whether a member is released without being admitted to the hospital or is subsequently admitted as an inpatient and counted in the midnight census.

If, after observation, a member is released without being admitted to the hospital, the outpatient hospital services provided during observation must be indicated as outpatient hospital services on an institutional claim. If, after observation, a member is subsequently admitted to the hospital and is counted in the midnight census, the outpatient hospital services provided during observation as well as the subsequent inpatient hospital services must be billed together on one institutional claim. In this case, the outpatient hospital services are not separately reimbursable.

Claim Denials and Resubmissions

In limited extenuating circumstances, ForwardHealth will allow up to 72 hours of observation-level services. These circumstances are confined to:

• Chapter holds, otherwise known as emergency detention
• Diseases related to public health emergencies, including suspected cases

For claims that meet the extenuating circumstance criteria listed above and are submitted for 49–72 hours, providers may submit the claim via paper to ForwardHealth with the Written Correspondence Inquiry form, F-01170 (07/2012), and documentation that identifies the circumstance as a chapter hold and/or a disease related to a public health emergency. Claims submitted without proper documentation for observation lasting more than 48 hours will be automatically denied by ForwardHealth.

On the Written Correspondence Inquiry form, providers should check the Other box in the Reason for Inquiry field and indicate "Request for review of medical necessity for extended observation period" in the space provided. Providers should follow the instructions on the form for submitting the claim, medical documentation, and form to ForwardHealth. A copy of the claim, medical documentation, and form should be retained by providers for their records.

All claims submitted for over 72 hours of observation will be denied.