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Network Matters
News and Information for the
Harvard Pilgrim Health Care Network

November 2018

Update to Reimbursement Process for Observation to Inpatient Transition


Harvard Pilgrim has updated the commercial reimbursement process for observation stay and inpatient admissions for facilities reimbursed via the percent-of-charge methodology, in an effort to improve efficiency and simplify the administrative experience for these providers.

Facilities reimbursed on a percent-of-charge basis no longer need to appeal the denial of observation services provided prior to midnight in order to receive payment for observation stays that transition to inpatient admissions. Instead, Harvard Pilgrim will determine the hours that count as observation and those considered inpatient and provide the appropriate separate reimbursement up front.

Harvard Pilgrim’s Observation Stay Payment Policy states that for an observation stay that converts to an inpatient stay after midnight, percent-of-charge-based reimbursement for the observation stay is not considered to be included in the inpatient reimbursement, and the observation bed charge for the time prior to the date of the inpatient admission is separately reimbursed.

How is the process changing?

Harvard Pilgrim’s definition of observation stay versus inpatient care is not changing, and the reimbursement amount these facilities ultimately receive will be the same. However, in the past, payment for the observation stay portion of this care would have initially denied and the facility would have had to submit an appeal to receive the correct payment.

Going forward, Harvard Pilgrim is eliminating the administrative burden of this extra step to ensure more timely payment. We will determine the observation hours prior to the day of admission by subtracting the admission hour submitted from the total submitted observation hours, and calculate the proper reimbursement based on the provider’s contractual agreement.

More information

Keep in mind that separate reimbursement for observation stay applies only to the hours prior to midnight. For example, if a patient is in observation status starting at 7 p.m. on Dec. 1 and admitted to inpatient care at 10 a.m. on Dec. 2, the observation care ceases to be counted as observation time at 11:59 p.m. on Dec. 1. The care delivered between 7 p.m. and 11:59 p.m. are separately reimbursed as observation care, but the hours spent between midnight and 9:59 a.m. on Dec. 2 are included in the inpatient reimbursement and not separately reimbursed as observation time.

For more information, please refer to Harvard Pilgrim’s updated Observation Stay Payment Policy.

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