No, Medicare will not pay for routine observation
following a surgical procedure. This service is usually
packaged with the procedure payment. If a patient
requires additional postoperative monitoring once the
patient is discharged from the recovery room, the hospital
should bill the services as a second stage recovery
and assign the charges to 710, the recovery room revenue
code.
The second stage charges will be packaged except for
services such as postoperative injections (intramuscular,
subcutaneous, intravenous, etc.), which will generate a
separate payment when they are billed.
To charge and code for observation, the patient must
meet strict diagnosis, documentation, time, and service
criteria. Refer to Program Memorandum (PM) A-02-026
and PM A-02-129 for these guidelines. For criteria for
observation that does not meet separate ambulatory
payment classification (APC) guidelines—but still is
allowable under Medicare guidelines to be billed as
packaged services—refer to PM A-01-9.
