Hospital Medical Services (Inpatient and Observation) and Consultation - CAM 250HB

Inpatient medical care is treatment or services, other than surgical or obstetrical, being rendered to a patient who has been admitted to a hospital or other health care facility for at least a 24-hour period. These services include a first-day history and physical, along with an initial examination at the time of the admission or readmission.

An inpatient consultation service is a process in which the help of a specialist is sought to identify a way to handle a specific problem in patient management or in the planning and implementation of health care programs.

Benefits are provided for inpatient medical care under the following circumstances:

  • Only one level of medical visit is allowed per day. This would include a daily visit, examination and/or treatment of the hospitalized patient.
  • Benefits will be provided for daily visits by only one physician. Exceptions to this rule are outlined in the "Concurrent Care" (CAM 071) policy.
  • Skilled nursing facility visits are limited to one time per week, UNLESS documentation is submitted by the physician to support the medical justification of additional visits. Please see specific contract verbiage for limitations/maximums.
  • Benefits are provided for one inpatient visit per day for treatment of behavioral health, which includes functional mental health conditions, alcoholism and substance abuse. Please see specific contract verbiage for coverage, limitations and maximums.

Benefits are provided for inpatient consultations under the following circumstances:

  • There must be a consultation request by the attending physician for the patient who is confined to an inpatient hospital/inpatient rehabilitation facility or to a skilled nursing facility.
  • Benefits are provided for only one consultation service per consultant for each inpatient admission. Please see specific contract verbiage for limitations or exclusions.
  • If a consultant assumes the primary responsibility for the care of an inpatient patient, he assumes the role as the attending physician. He/she will no longer be considered a consultant, and subsequent hospital care and visits then become medical care and are reimbursed accordingly.
  • Consultation benefits will not be reimbursed to partners of the same group UNLESS one partner's knowledge is unique to a particular situation or condition (e.g., endocrinologist and cardiologist in the same group).

Observation Room Services:
Observation services are an outpatient care status defined as the use of a bed and periodic monitoring and/or short term treatment by a hospital's nursing or other staff. These services are considered reasonable and necessary when an individual is not medically stable to safely permit discharge and the necessity for inpatient hospital admission is yet to be determined. Observation care provides a method of short-term evaluation and treatment as an alternative to inpatient hospitalization and is most commonly ordered for patients who present to the emergency department.

Observation services are provided by an acute care hospital and are defined as a set of clinically appropriate services that include ongoing short-term treatment and assessment and reassessment, while a decision is being made whether a patient will require further treatment as a hospital inpatient or can be discharged for further follow-up and care in a less comprehensive setting. Services may be considered eligible for coverage only when provided under direct physician order or under the order of another person who is authorized by state statute and the hospital's bylaws to admit patients and order outpatient testing.

The observation services must be patient-specific and not part of a standard operating procedure or facility protocol for a given diagnosis or service. The duration of observation care services does not exceed 48 hours. Observation care for greater than 48 hours is considered not medically appropriate and is not covered.

For an observation stay (a period not to exceed 48 hours) to be considered medically appropriate, the following conditions must be met:

  • The patient is clinically unstable for discharge.
  • Clinical monitoring, and/or laboratory, radiologic or other testing is necessary in order to assess the patient's need for hospitalization.
  • The treatment plan is not yet established or, based on the patient's condition, is anticipated to be completed within a period not to exceed 48 hours.
  • Changes in status or condition are anticipated and immediate medical intervention may be required.

Documentation in the medical record must clearly support the medical need for observation care services and must include the following information:

  • The treating physician's order for observation care
  • The treating physician's admitting note detailing the patient's condition, the need for observation care services and the treatment goal of the interventions
  • Progress notes detailing the initiation of observation care, required testing and results, intervention and treatments and record of the periodic assessments of response to care
  • The treating physician's discharge order, discharge time, discharge notes and disposition of the patient post observation care

Observation services are not allowed for coverage when the following occur (but not limited to these factors):

  • Services that are provided are not reasonable or necessary for the diagnosis or treatment of the patient
  • Outpatient blood, chemotherapy or other infusion administration
  • Lack of and/or delay of patient transportation
  • Provision of medical examination and evaluation of patients who do not require skilled support
  • Routine preparation to and recovery following diagnostic testing
  • Routine recovery and post-operative care exceeding 48 hours, after ambulatory procedures or surgery
  • When used as a substitute for inpatient admission
  • When used for more than one consecutive 48-hour period
  • When used for the convenience of the patient, the patient's caregivers or the physician
  • When used while awaiting transfer to another facility
  • When an overnight stay is planned prior to diagnostic testing, ambulatory surgery or an ambulatory procedure


  1. Centers for Medicare & Medicaid Services. Medicare Benefit Policy Manual. 20.5 Outpatient Observation Services.
  2. Centers for Medicare & Medicaid Services. LCD for Outpatient Observation Bed/Room Services (L1158).
  3. American College of Emergency Physicians (ACEP). Emergency department observation services. Policy # 400206. Approved October 1998, Revised and approved January 2008, Copyright 2010 American College of Emergency Physicians.
  4. American College of Emergency Physicians (ACEP). Management of observation units. July 1994. Copyright 2010 American College of Emergency Physicians.

This medical policy was developed through consideration of peer-reviewed medical literature generally recognized by the relevant medical community, U.S. FDA approval status, nationally accepted standards of medical practice and accepted standards of medical practice in this community, Blue Cross Blue Shield Association technology assessment program (TEC) and other nonaffiliated technology evaluation centers, reference to federal regulations, other plan medical policies and accredited national guidelines.

"Current Procedural Terminology © American Medical Association. All Rights Reserved" 

History From 2024 Forward     

01/01/2024 NEW POLICY

05/15/2024 Annual review, no change to policy intent. 


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