Both national evidence-based guidelines and insurance company guidelines factor into level of care determination.
When it comes to determining a patient’s level of care for a short hospital stay, observation services are generally used for short-term monitoring, testing and evaluation to establish a treatment plan, and to give the treatment team time to see if immediate intervention is needed or to determine whether an inpatient admission is necessary.
Large healthcare insurance companies generally use national externally created evidence-based guidelines, such as MCG (Milliman Care Guidelines) or InterQual, to help determine a patient’s appropriate level of hospital care. However, some insurers have their own set of observation guidelines created in-house which should be reviewed prior to/or in combination with those that are external when deciding level-of-care for a stay. While there is considerable overlap between the national guidelines, including those for Centers for Medicare and Medicaid Services and commercial insurance plan policies, utilization review teams should be familiar with both internal and external sets, particularly being aware of their differences when it comes to observation services level of care.
A review of major healthcare insurers’ observation guidelines, including UHC, Aetna, Cigna, and BCBS, show most contain three main elements:
- Intention/guidance/disclaimer information which explains what coverage is based on.
- Language regarding coverage based on the definition of medical necessity* for observation services, which is defined as short-term monitoring, reassessment, and treatment planning from 24 hours to less than 48 hours.
- Exclusions: situations where observation services are not medically necessary, such as for convenience, placement, and certain conditions as referenced by plan policies.
Although there are many similarities between insurance company observation guidelines as well as some differences, they don’t differ significantly from a hospital’s perspective. Primarily, the health plan policies vary in the manner in which they are framed by the different insurance companies, how they are accessed, and the degree of details they contain.
Similarities found in insurance company guidelines include:
- The use of a combination of plan documents, nationally recognized guidelines, state and federal requirements, medical judgment as determine by evidence-based medicine, and a qualified provider’s order to determine level of care.
- Plan documents, in most cases, take precedence for coverage determinations over all other items as long as they are within applicable state and federal law. For example, UnitedHealthcare’s observation guidelines specifically state, “In the event of a conflict (when deciding coverage), the member specific benefit plan document governs.”1
- Coverage is strongly based on the medical necessity of services, including observation required for monitoring, stabilization, and determination of whether hospital inpatient admission is needed. Plans note that observation services are not preplanned.
- Services usually range from 24 hours to less than 48 hours, as stated specifically in several plan guidelines. Observations greater than 48 hours are usually considered medically unnecessary.
- Plan guidelines include exclusions, what is not considered medically necessary for observation services.
- The way in which companies publish the guidelines, many being difficult to find on-line. For example, Aetna’s policies cannot be found and the version of Cigna’s policy that appears in a search, are already retired. Guidelines and policies used for this review are located in a variety of different areas such as utilization management, coding, and billing, coverage, and appeal policies.
- The level of detail contained in each plan’s guidance varies.
The payers gave no explicit (or implicit) workflows to follow during day-to-day operations when utilizing these posted observation services guidelines. Instead, they focused heavily on plan coverage, which often does not become clear until after the services are rendered and denied. For hospitals and utilization review teams to use this information in their day-to-day reviews or denial management, it may be necessary to review each insurance company’s screening questions for observation services as well as those items that apply to an individual member’s specific plan and/or coverage.
In addition, it is important for hospitals to acquaint themselves with the common principles that cross all plans as identified above and the commonalities in observation services and coverage. Utilization review teams should learn major insurance company’s individual authorization processes (or at least the process of the top payers in their market) and become proficient in how to reference individual plan details.
With this information at hand, a final question arises. What should a hospital do if it believes that a healthcare insurance company is not following its own rules around observation and inpatient? This issue is likely to be identified when there is a payment denial. The way to address such situations is to utilize the appeals process clearly referencing plan documents, guidelines, and policies to highlight and refute these types of gaps. That process begins with payer Peer-to-Peer discussions with insurance company medical directors. If a resolution has not been reached, appeals can go as far as adjudication before an administrative law judge.
DEFINING OBSERVATION SERVICES
The differences in the definition of “observation services” can be seen in the language below from each payer’s guidelines:
United Healthcare: “Observation services are considered medically necessary for an individual who requires the following in any location within a hospital: Short-term monitoring that is not expected to exceed 24 hours but would generally be no longer than 48 hours; and Acute treatment and reassessment are required; or Monitoring of an event (e.g., cardiac dysrhythmia) or response to therapy (e.g., from drug ingestion) that may require immediate intervention; or Diagnostic evaluation to establish a treatment plan.”1
Blue Cross Blue Shield of Illinois: “Observation services may also be considered when the member does not meet in patient level of care and meets observation level of care. … For an observation stay to be medically necessary, the following must be met: The member is clinically unstable for discharge; and clinical monitoring, and/or laboratory, radiologic, or other testing is necessary to assess the member’s need for continued hospital stay; or a treatment plan has not been established and based on the member’s condition will be completed within 48 hours; or changes in status or condition are anticipated that may require immediate medical intervention.”2
Humana: “Observation services are specific, clinically appropriate, outpatient services provided to help a health care professional decide whether a patient needs to be admitted as an inpatient or can be discharged. This policy outlines the criteria that Humana plans use to determine appropriate billing and documentation of facility observation services.”3
1. United Health Care, Utilization Management Guidelines for community plans concerning “Observation Services” https://www.uhcprovider.com/en/policies-protocols/commercial-policies.html
2. Blue Cross Blue Shield of Illinois, Observation Services are addressed in a Clinical Payment and Coding Policy https://www.bcbsil.com/pdf/standards/observation_services_cpcp.pdf
3. Humana, Claims Payment Policy Subject: Observation Services https://www.humana.com/provider/medical-resources/claims-payments/claims-payment-policies
*Medical Necessity standardly defined as: Health care services or supplies needed to diagnose or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.