What you need to know about the GZ modifier; How to determine inpatient versus outpatient status

May 25, 2011

Understand whether claims will be denied if you use the GZ modifier.

Key Points

Q: We heard that our claims may be denied if we use the GZ modifier. Is this true, and, if so, when does this policy go into effect?

The GZ modifier indicates that an advanced beneficiary notice of noncoverage, or ABN, was not obtained for the services rendered. CMS interprets the GZ modifier to indicate lack of medical necessity; therefore, when it is appended to a code, the result will be a denial reason code of 50 ("These services are non-covered services because this is not deemed a 'medical necessity' by the payer"), and a group code of CO (contractual obligation) to show provider/supplier liability. Additionally, contractors should not perform complex medical review on claim line item(s) submitted with a GZ modifier.


Q: If I saw a patient in the recovery room of a hospital but the patient never was admitted, what place of service code should I use?

A: You are not alone in your confusion of whether to bill inpatient or outpatient observation. This is an area that continues to cause coding errors because of several factors: confusion as to what the term "admit" means, lack of clear documentation and communication between the admitting or principal physician and the other physicians involved in the patient's care, and a difference of opinion between the physicians and the hospital utilization review committee.

With the information you provided in your question, I assume that the patient was at the hospital for an outpatient surgery. Because the patient was not admitted, the place of service code to be billed would be 22, hospital outpatient. Remember, where the patient is in the hospital does not determine whether he or she is in inpatient or outpatient status. The determining factor is whether the patient has been admitted. If the patient has not been admitted, then he or she would be considered in outpatient (observation) status.

As I mentioned earlier, however, understanding whether a patient is admitted to the hospital (and thus, services are billed as inpatient) or is in observation status requires clear definition by the physician involved in the care, the admitting physician, and the hospital utilization review committee.

First, the term "admission" typically is used to denote an inpatient admission and inpatient hospital services. CMS also has removed references to "admission" and "observation status" in relation to outpatient observation services and direct referrals for observation services, to avoid confusion. Therefore, read the patient's record very closely and talk with the principal physician to determine the patient's status.

According to the Medicare Claims Processing Manual, Chapter 12, Section 30.6.8, only the ordering physician can bill the initial observation codes (99218–99220, 99234–99236). Physicians other than the ordering physician should bill subsequent observation or outpatient consultation codes (99224–99226, 99241–99245).

Another factor in the hospital environment is the hospital's utilization review committee. Based on the clear criteria for hospital admissions, the patient's status can change once the committee has reviewed the chart. Before submitting a charge, double-check that the patient's status has not changed.

If the patient underwent surgery in the hospital, it also is important to note that subsequent visits related to the surgery by the surgeon would be included in the global surgery reimbursement. If the visit is unrelated to the surgery, then the 24 modifier (unrelated evaluation and management service by the same physician during postoperative period) should be appended to the appropriate CPT code.

The author is a medical consultant based in Indianapolis, Indiana. Do you have a primary care-related coding question you would like to have our experts answer in this column? Send it to medec@advanstar.com