STATEMENTS OF POLICY
Title 55—HUMAN SERVICES
DEPARTMENT OF HUMAN SERVICES
[ 55 PA. CODE CH. 1150 ]
Payment Policy for Observation Services
[46 Pa.B. 3262]
[Saturday, June 25, 2016]This statement of policy applies to physicians, dentists and podiatrists (practitioners), and acute care general hospitals (hospitals) enrolled in the Medical Assistance (MA) Program who provide observation services to MA beneficiaries under the Fee-for-Service (FFS) delivery system. Hospitals and practitioners that provide observation services to MA beneficiaries in the managed care delivery system should address any payment related questions to the appropriate managed care organization.
Purpose
The purpose of this statement of policy is to specify the conditions for payment of observation services pending adoption of regulations.
Background
The act of December 28, 2015 (P.L. 500, No. 92) (Act 92) amended the Human Services Code (code) (62 P.S. §§ 101—1503). Act 92 added several new provisions, including section 443.3(a)(1.1) of the code (62 P.S. § 443.3(a)(1.1)). Section 443.3(a)(1.1) of the code authorizes the Department to establish rates for observation services and to issue an MA Bulletin specifying the conditions for payment of observation services for dates of service on or after July 1, 2016, pending adoption of regulations.
The Department announced its intent to pay hospitals for observation services and provided the rates the Department will pay for these services. Additionally, the Department announced the addition of observation services to the MA Fee Schedule. See 46 Pa.B. 2475 (May 14, 2016).
Discussion
Clinically-appropriate and medically necessary observation services include short-term treatment, assessment and reassessment, which are furnished in the hospital outpatient setting while a decision is made as to whether to admit an MA beneficiary to the hospital inpatient setting for further treatment or to discharge the MA beneficiary from the hospital outpatient setting.
Currently, the Department does not pay hospitals or practitioners for the provision of observation services rendered in the hospital outpatient setting under the FFS delivery system. Effective with dates of service on and after July 1, 2016, the Department will pay for medically necessary observation services provided in the hospital outpatient setting when prescribed or ordered by a practitioner and provided for a minimum of 8 hours.
Consistent with Act 92, this statement of policy establishes the conditions for the payment of observation services provided by a hospital and practitioner for the care of eligible MA beneficiaries as described in Annex A.
Effective Date
This statement of policy is effective July 1, 2016.
Contact Person
Comments and questions regarding this statement of policy should be directed to the Department of Human Services, Office of Medical Assistance Programs, c/o Regulations Coordinator, Room 515, Health and Welfare Building, Harrisburg, PA 17120.
THEODORE DALLAS,
Secretary(Editor's Note: Title 55 of the Pennsylvania Code is amended by adding a statement of policy in § 1150.56b to read as set forth in Annex A.)
Fiscal Note: 14-BUL-105. (1) General Fund;
(7) MA—Capitation; (2) Implementing Year 2015-16 is $0; (3) 1st Succeeding Year 2016-17 is $4,111,000; 2nd Succeeding Year 2017-18 through 5th Succeeding Year 2020-21 are $0; (4) 2014-15 Program—$3,823,000,000; 2013-14 Program—$3,995,000,000; 2012-13 Program—$3,631,000,000;
(7) MA—FFS; (2) Implementing Year 2015-16 is $0; (3) 1st Succeeding Year 2016-17 is $6,118,000; 2nd Succeeding Year 2017-18 through 5th Succeeding Year 2020-21 are $0; (4) 2014-15 Program—$564,772,000; 2013-14 Program—$428,041,000; 2012-13 Program—$718,947,000;
(8) recommends adoption. Funds have been included in the budget to cover this increase.
Annex A
TITLE 55. HUMAN SERVICES
PART III. MEDICAL ASSISTANCE MANUAL
CHAPTER 1150. MA PROGRAM PAYMENT POLICIES
PAYMENT FOR SERVICES § 1150.56b. Payment policy for observation services—statement of policy.
(a) The Department will pay for clinically-appropriate and medically necessary observation services while a decision is made as to whether an MA beneficiary requires admission for inpatient acute care services or may be discharged to a nonhospital setting.
(b) Clinically-appropriate and medically necessary observation services include short-term treatment, assessment and reassessment that are furnished in the acute care general hospital outpatient setting.
(c) Observation services shall be prescribed or ordered prior to the acute care general hospital or practitioner rendering the service.
(d) The Department will pay acute care hospitals a one-time support component fee for observation services for a period of observation. The support component fee includes payment for all ancillary and diagnostic services provided during the period of observation.
(e) An acute care general hospital shall provide a minimum of 8 hours of observation services to be paid the support component fee.
(f) The Department will pay physicians, dentists and podiatrists a visit fee for observation services. The Department will pay physicians, dentists and podiatrists a separate professional component fee for ancillary and diagnostic services provided during the period of observation.
(g) Payments to physicians, dentists and podiatrists are subject to the conditions and limitations established in Chapters 1141, 1143, 1149 and 1150.
(h) The Department will not make payment for observation services in conjunction with the following:
(1) Short procedure unit surgical procedures, including surgical recovery time.
(2) Inpatient acute care general hospital services.
(3) Emergency room services.
(4) Hospital clinic services.
(5) Hospital physical therapy, occupational therapy and speech therapy services provided on any day other than the first calendar day of the period of observation.
(6) Special treatment room services.
(i) Physicians, dentists, podiatrists and acute care general hospitals shall comply with the recordkeeping and general standards for medical records requirements in § 1101.51(e) (relating to ongoing responsibilities of providers). In addition, physicians, dentists, podiatrists and acute care general hospitals shall include the medical record entries that are dated, with hour of entry noted, and signed.
[Pa.B. Doc. No. 16-1070. Filed for public inspection June 24, 2016, 9:00 a.m.] 
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