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Provider Manual

Hospital Observation Admission

Last Updated on November 24, 2020

Effective January 1, 2016

Facility must send request for observation admission to Security Health Plan via fax within 48 hours of member being admitted to Observation status in the facility. Only applies if the member has been in this observation status greater or equal to 48 hours .

If Security Health Plan’s review indicates that the member meets medical necessity for observation, the facility will receive approval for two observation days.

If additional observation days are required, facility must submit daily clinical documentation which Security Health Plan will review and render a daily determination within 24 hours or next business day after receipt of clinical information.  

Claims submitted need to match the appropriate dates and level of care indicated for the authorization number(s) granted.  Example: On day one you receive authorization for observation. On day two the patient’s level of care meets inpatient status.  You must submit a claim for observation status for day one, and a claim for inpatient status on day two.

As a reminder, there are unforeseen circumstances set forth by CMS relating to inpatient-only admissions. These unforeseen circumstances may result in a shorter stay than the physician’s expectation:

  • Death
  • Transfer
  • Departure against medical advice (AMA)
  • Unforeseen recovery
  • Election of Hospice

Such claims may be considered appropriate for hospital inpatient payment/billing.  Please fax clinical information to support claims. The physician’s expectations and any unforeseen interruptions in care must be documented in the medical record.

Once approval for inpatient status has been received:

DRG Facilities: No further reviews required.

Critical Access/Non DRG facilities: Follow your current process and provide Security Health Plan updates if the member requires additional days past the certified days approved.    

  • If the provider fails to provide the needed clinical information within 24 hours of the admission (Observation and/or Inpatient), Security Health Plan will deny for provider contract requirement. Each day will be denied to the provider until Security Health Plan receives required clinical information.  Provider cannot bill the member for these denied charges.
  • If ultimately it is determined that the patient did not meet medical necessity for the admission, payment for services will be denied to the Provider.  Provider cannot bill the member for these denied charges.  Provider may appeal through Security Health Plan’s Appeal Process.

Answers to additional questions

When hospitals do not use Interqual criteria, how do they send the bullet points/criteria of Interqual for patients receiving observation services? What criteria will Security Health Plan use to determine observation appropriateness?

Security Health Plan uses Interqual for all reviews. Being that all review-based software is evidence-based, if you use a different criteria set you must submit the criteria you used with that review and Security Health Plan staff will compare it to Interqual.  Medical necessity will still have to be met in order for it to be approved.

CMS requires the physician to sign the inpatient order and certification prior to discharge. Will Security Health Plan require the actual physician signature or will a telephone/verbal order from the physician meet your requirements?

Security Health Plan does need to see a copy of the order.  However, if your organization allows nurses to obtain telephone orders and sign on behalf of the physician, then we would accept that order.   

Should all patients who stay 2 midnights be inpatient? The only exception to this is for a stay that is clearly custodial (i.e. awaiting guardianship, awaiting SNF placement).
No. The only patients that should be placed in inpatient after 2 midnights are your Medicare Advantage members.  Commercial members need to continue to follow your current process.  The Two Midnight Rule is only for Medicare Advantage members.
If a patient is admitted as observation and after the first midnight the physician plans to do an EGD, heart cath, etc., and the patient remains hospitalized the second night, would this case be converted to inpatient?
For Medicare Advantage the person would meet the Two Midnight Rule.  All other products would not be converted to inpatient but rather remain in observation.
For observation services, do the UR reviewers have to bullet point the Interqual observation criteria? If the patient does not meet all bullet points, will the case be denied for observation services?
Yes, if the criteria are not met the observation stay will be denied. Security Health Plan utilizes the Interqual observation criteria to determine if observation status meets medical necessity. 

Last updated: 7/1/2017