Notification of Observation/Treatment Room and E&M Services Reimbursement Policy

Date: February 29, 2024

Attention: Hospital facilities

Effective Date: May 27, 2024

Call to action: The purpose of this communication is to make hospital facilities aware of a new reimbursement policy for Texas Children’s Health Plan (TCHP), which outlines the billing restrictions for observation and treatment room revenue codes billed with evaluation and management (E&M) services.  This policy applies to hospitals billing outpatient services, and applies to CHIP and Medicaid lines of business.

How this impacts providers: Policy guidelines are as follows:
Observation and treatment room services (revenue codes 760, 761, 762, 769) must be billed with the appropriate observation related procedure code when billed on an outpatient hospital claim.

• Procedure code G0378 should be used for observations services when admitted to observation level of are after an ER, clinic, or critical care visit.
• Procedure code G0379 should be used when a patient is directly admitted to observation level of care without an associated ER, clinic, or critical care visit. 
• Observation care should not be reported if monitoring/reimbursement is included in the diagnostic, therapeutic, or surgical procedure.

Outpatient hospital claims billed with an outpatient type of bill (13X) that include revenue code 760, 761, 762, or 769, will deny with the denial codes (CARC and RARC) when billed with one of the Texas Medicaid payable evaluation and management (E&M) CPT codes shown in the table below.

• CARC: 199 - Revenue code and Procedure code do not match
• RARC: N431 - Not covered with this procedure

Next step for Providers: Hospitals should follow the guidance as outlined in the policy and share this communication with their staff.

Resources:

Texas Medicaid Provider Procedure Manual: Inpatient and Outpatient Hospital Services Handbook
https://www.tmhp.com/sites/default/files/file-library/resources/provider-manuals/tmppm/pdf-chapters/2024/2024-02-february/2_11_inpatient_outpatient_hosp_srvs.pdf

Texas Medicaid Provider Procedure Manual: Medical and Nursing Specialists, Physicians, and Physician Assistants Handbook
https://www.tmhp.com/sites/default/files/file-library/resources/provider-manuals/tmppm/pdf-chapters/2024/2024-02-february/2_13_med_specs_and_phys_srvs.pdf

Texas Medicaid Provider Procedure Manual: Children's Services Handbook
https://www.tmhp.com/sites/default/files/file-library/resources/provider-manuals/tmppm/pdf-chapters/2024/2024-02-february/2_04_childrens_services.pdf

If you have any questions, please email Provider Relations at: providerrelations@texaschildrens.org.

For access to all provider alerts,log into:
www.thecheckup.org or www.texaschildrenshealthplan.org/for-providers.