TL;DR
Chapter 6 of the Medicare Benefit Policy Manual covers hospital services paid under Part B. It explains Part B payment for inpatients when Part A cannot pay, who counts as a hospital outpatient, the coverage rules for outpatient diagnostic and therapeutic services including the supervision they require, observation services, drugs, partial hospitalization and other psychiatric services.
Chapter 6 at a glance
- Current revision
- Rev. 12425
- Issued December 21, 2023
- Effective
- January 1, 2024
- Implemented January 2, 2024
- Sections
- 34
- 9 top-level sections
- Transmittals in history
- 23
- Listed at the end of the chapter
- Monthly searches
- 40
- Google Ads, US, October 2026
What chapter 6 governs for billing
Section 10 covers medical and other health services furnished to hospital inpatients that can be paid under Part B, most importantly when a Part A inpatient claim is denied as not reasonable and necessary or Part A cannot pay for another reason (10.1 and 10.2). Section 20 then defines outpatient hospital services: who is an outpatient (20.2), what an encounter is (20.3), and the coverage conditions for outpatient diagnostic services, including those furnished under arrangement (20.4).
Section 20.5 sets the supervision rules for outpatient therapeutic services, the services hospitals furnish incident to a physician's service. Since January 1, 2020 the minimum level is general supervision, meaning the service is furnished under the physician's or practitioner's overall direction and control without the need for presence during the procedure, while CMS may assign direct or personal supervision to particular services; 20.5.4 adds the 2024 rules for pulmonary, cardiac and intensive cardiac rehabilitation. Section 20.6 covers observation: an order is required, and observation is expected to support a decision to admit or discharge within 48 hours, usually less than 24.
The rest of the chapter covers outpatient drugs and biologicals (30), other covered items (40), sleep disorder clinics (50), intermittent peritoneal dialysis (60), outpatient psychiatric services including the coverage criteria for partial hospitalization (70), durable medical equipment furnished by hospitals (80) and the services of interns and residents (90).
Sections billing teams use most
Section numbers and headings are CMS's; the notes are ours. Each section number opens the official chapter 6 PDF at the page where that section starts.
| Section | CMS heading | Why it matters |
|---|---|---|
| 10.1 | Reasonable and Necessary Part A Hospital Inpatient Claim Denials | Part B payment after a Part A inpatient claim is denied as not reasonable and necessary. |
| 20.2 | Outpatient Defined | Who counts as a hospital outpatient. |
| 20.4.1 | Diagnostic Services Defined | Outpatient diagnostic services defined. |
| 20.5.3 | Coverage of Outpatient Therapeutic Services Incident to a | General supervision as the minimum for outpatient therapeutic services since 2020. |
| 20.6 | Outpatient Observation Services | Outpatient observation services: orders and expected duration. |
| 70.2 | Coverage Criteria for Outpatient Hospital Psychiatric Services | Coverage criteria for outpatient hospital psychiatric services. |
How chapter 6 shows up on claims and denials
Chapter 6 denials follow coverage conditions. Observation billed without an order, or extended far beyond what the record supports, is reduced or denied as not reasonable and necessary, reason code 50, and services that are packaged into another outpatient service are not separately paid. Outpatient therapeutic services billed without the supervision level CMS assigned to them can also fail review.
When an inpatient admission is denied, section 10 is the path to recover part of the cost: the hospital may bill payable services under Part B as described in the Claims Processing Manual chapter 4 section 240. Psychiatric and partial hospitalization claims are reviewed against the coverage criteria in section 70.
Codes you are likely to see on the remittance when a claim runs into this chapter's rules. The code pages explain each code's meaning, root causes and the usual fix.
| Code | Type | When it appears |
|---|---|---|
| 50 | Claim adjustment reason code | Outpatient or observation service not reasonable and necessary. |
| 97 | Claim adjustment reason code | Service included in the payment for another outpatient service. |
| 16 | Claim adjustment reason code | Missing order or other information needed to process the line. |
Current revision and recent transmittals
The chapter PDF posted on cms.gov is current through Rev. 12425, issued December 21, 2023, effective January 1, 2024, implemented January 2, 2024 (change request 13496). That revision changed sections 20 (Outpatient Hospital Services), 70.1 (General), 70.3 (Partial Hospitalization Services), 70.4 (Intensive Outpatient Services). Its subject line reads: “Enforcing Billing Requirements for Intensive Outpatient Program (IOP) Services with New Condition Code 92 - Additional Publication Update”.
The newest rows of the transmittal history printed at the end of the chapter (23 revisions in all). Rows whose subject could not be read reliably from the PDF table are left out; the PDF has the complete list.
| Revision | Issued | Subject | CR |
|---|---|---|---|
| R12425BP | December 21, 2023 | Enforcing Billing Requirements for Intensive Outpatient Program (IOP) Services with New Condition Code 92 - Additional Publication Update | 13496 |
| R12421BP | December 21, 2023 | January 2024 Update of the Hospital Outpatient Prospective Payment System (OPPS) | 13488 |
| R10541BP | December 31, 2020 | January 2021 Update of the Hospital Outpatient Prospective Payment System (OPPS | 12020 |
| R267BP | February 4, 2020 | January 2020 Update of the Hospital Outpatient Prospective Payment System (OPPS) | 11605 |
| R215BP | December 18, 2015 | January 2016 Update of the Hospital Outpatient Prospective Payment System (OPPS) | 9486 |
| R194BP | September 3, 2014 | Pub. 100-02 Language-Only Update for Upon ICD-10 Implementation of ICD-10 | 8605 |
Sections ordered by the date in the revision note printed under each heading.
| Section | Heading | Revision |
|---|---|---|
| 20 | Outpatient Hospital Services | Rev. 12425, December 21, 2023; effective January 1, 2024 |
| 70.1 | General | Rev. 12425, December 21, 2023; effective January 1, 2024 |
| 70.3 | Partial Hospitalization Services | Rev. 12425, December 21, 2023; effective January 1, 2024 |
| 70.4 | Intensive Outpatient Services | Rev. 12425, December 21, 2023; effective January 1, 2024 |
| 20.5.4 | Coverage of Outpatient Therapeutic Services Incident to a Physician's Service Furnished on or After January 1, 2024 – Changes to Direct Supervision Requirements for Pulmonary, Cardiac and Intensitv Cardiac Rehabilitation | Rev. 12421, December 21, 2023; effective January 1, 2024 |
| 20.5.3 | Coverage of Outpatient Therapeutic Services Incident to a | Rev. 10541, December 31, 2020; effective January 1, 2021 |
| 20.5.2 | Coverage of Outpatient Therapeutic Services Incident to a Physician's Services Furnished on January 1, 2010 through December 31, 2019 | Rev. 267, February 4, 2020; effective January 1, 2020 |
| 20.6 | Outpatient Observation Services | Rev. 215, December 18, 2015; effective January 1, 2016 |
Section index
Every section in the chapter's table of contents, grouped under its top-level heading, with the PDF page where it starts. Open a heading to see its subsections.
10 Medical and Other Health Services Furnished to Inpatients of Participating Hospitals · p. 3 · 3 subsections
- Open section 10 in the PDF
- 10.1 Reasonable and Necessary Part A Hospital Inpatient Claim Denials · p. 3
- 10.2 Other Circumstances in Which Payment Cannot Be Made Under Part A · p. 4
- 10.3 Hospital Inpatient Services Paid Only Under Part B · p. 7
20 Outpatient Hospital Services · p. 7 · 17 subsections
- Open section 20 in the PDF
- 20.1 Limitation on Coverage of Certain Services Furnished to Hospital Outpatients · p. 8
- 20.1.1 General Rule · p. 8
- 20.1.2 Exception to Limitation · p. 8
- 20.2 Outpatient Defined · p. 9
- 20.3 Encounter Defined · p. 10
- 20.4 Outpatient Diagnostic Services · p. 10
- 20.4.1 Diagnostic Services Defined · p. 10
- 20.4.2 Reserved
- 20.4.3 Coverage of Outpatient Diagnostic Services Furnished on or Before December 31, 2009
- 20.4.4 Coverage of Outpatient Diagnostic Services Furnished on or After January 1, 2010 · p. 12
- 20.4.5 Outpatient Diagnostic Services Under Arrangements · p. 15
- 20.5 Outpatient Therapeutic Services · p. 15
- 20.5.1 Coverage of Outpatient Therapeutic Services Incident to a Physician's Services Furnished on or After August 1, 2000 and Before January 1, 2010 · p. 15
- 20.5.2 Coverage of Outpatient Therapeutic Services Incident to a Physician's Services Furnished on January 1, 2010 through December 31, 2019 · p. 17
- 20.5.3 Coverage of Outpatient Therapeutic Services Incident to a · p. 20
- 20.5.4 Coverage of Outpatient Therapeutic Services Incident to a Physician's Service Furnished on or After January 1, 2024 – Changes to Direct Supervision Requirements for Pulmonary, Cardiac and Intensitv Cardiac Rehabilitation · p. 20
- 20.6 Outpatient Observation Services · p. 21
30 Drugs and Biologicals · p. 23
40 Other Covered Services and Items · p. 24
50 Sleep Disorder Clinics · p. 24
60 Intermittent Peritoneal Dialysis Services · p. 24
70 Outpatient Hospital Psychiatric Services · p. 24 · 5 subsections
- Open section 70 in the PDF
- 70.1 General · p. 25
- 70.2 Coverage Criteria for Outpatient Hospital Psychiatric Services · p. 28
- 70.3 Partial Hospitalization Services · p. 29
- 70.4 Intensive Outpatient Services · p. 35
- 70.5 Laboratory Services Furnished to Nonhospital Patients by Hospital Laboratory · p. 41
80 Rental and Purchase of Durable Medical Equipment · p. 42
90 Services of Interns And Residents · p. 42
Using this chapter in a denial or appeal
Start with the remittance. The claim adjustment reason code says what happened to the line, the remark code narrows it, and the group code says who is liable. Match that to the section of the chapter that sets the rule, then read the section in the official PDF rather than a summary: the wording that matters, such as a time limit, a modifier requirement or a documentation element, is usually a single sentence. Check the revision note under the section heading, because a rule that changed after the date of service may not apply to the claim, and an effective date earlier than the issue date can make a new rule reach back.
When the chapter supports the claim, cite it precisely in the redetermination request: the publication number, chapter, section and revision. When it does not, the fix is usually a corrected claim or better documentation rather than an appeal, and a coding or format rejection is corrected and resubmitted because it carries no appeal rights. Manual instructions bind the Medicare Administrative Contractor, so they settle most first-level disputes; at the hearing level, administrative law judges give them substantial deference without being bound by them. If the issue turns on whether a service is covered at all, read the matching Benefit Policy Manual chapter and any national coverage determination or local coverage determination as well, because coverage and billing rules are written in different places.
How QuickIntell works with Benefit Policy Manual chapter 6
QuickAuth coordinates requirement checks, documentation, submission and status tracking with human review, so the coverage conditions in this chapter are looked at before the service. QuickRCM handles claim readiness and the coverage denials that follow.
Frequently asked questions: chapter 6
What supervision do hospital outpatient therapeutic services require?
Since January 1, 2020, chapter 6 section 20.5.3 sets general supervision as the minimum, so the physician or practitioner need not be present, while CMS can assign direct or personal supervision to specific services.
How long should observation last?
Section 20.6 says that in most cases the decision to admit or discharge can be made in less than 48 hours, usually in less than 24, and only rarely do reasonable and necessary observation services span more than 48 hours.
Can a hospital bill Part B after an inpatient denial?
Yes. Section 10 of chapter 6 describes Part B payment for services to inpatients when Part A cannot pay, including after a denial of the admission as not reasonable and necessary.
Sources
Every figure on this page is taken from the CMS publications below, as released by the Centers for Medicare & Medicaid Services. Projection built 2026-10-10. Verify against the primary file before billing or contracting decisions. The reference methodology explains how each figure is computed from these files.
- Medicare Benefit Policy Manual, Chapter 6: Hospital Services Covered Under Part BVersion Rev. 12425, issued 2023-12-21 · effective 2024-01-01 · file bp102c06.pdfSHA-256 32501cdb7c6ed39a…
- Medicare Benefit Policy Manual (Pub. 100-02)Version 17 chapter PDFs; newest revision Rev. 13889 (chapter 15), issued 2026-07-30 · effective 2026-09-27 · file 100-02-benefit-policy-manual/*.pdf (17 chapters; SHA-256 of their sha256sum listing)SHA-256 be35772e4f9f80b4…
Disclaimer
This guide summarizes a CMS manual chapter in our own words for billing teams; section headings and transmittal subjects are quoted from the chapter PDF. The chapter itself is the authority, and it changes by transmittal. Not legal, clinical or billing advice.
Found a figure that does not match the CMS file? Report a data correction with the CMS file and the value you expected; the request reaches the editorial team through the contact form.