From Observation to Inpatient Status: Code the Transition

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  • March 1, 2012
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Be sure to include the required documentation to support the new level of service.

By Jules Enatsky, RT, BSN, CPC-H
edicare observation services have been around since ambulatory payment classifications (APCs) came into existence. They provide a means to compensate hospitals and professional fee providers for outpatient services when there is uncertainty whether a patient should be admitted or sent home.
In the “olden days” (prior to the existence of Medicare observation services), the emergency department (ED) and ED physicians were able to bill only the initial day of service. A patient’s family physician (if he or she cared for the patient) could bill only one service per day for outpatient care.
Observation care allows the provider to assess a patient’s illness without the implications associated with inpatient admission. Hospitals are paid on APCs 609 and 613-616, while the professional provider who places a patient in observation status is paid on CPT® codes 99217, 99218-99220, 99224-99226, and/or 99234-99236. Providers who consult with a Medicare patient in observation may bill using office or outpatient codes 99201-99205 (new patient) or 99212-99215 (established patient).

Review Updated Guidance

Transmittal 1875CP, effective Jan. 1, 2010 revised the Medicare Physician Fee Schedule (MPFS) such that when a patient is in observation status for greater than one calendar day, or receives subsequent day observation services, and is then admitted or changed to inpatient status, the physician must bill an initial hospital visit for the services provided on that date. The physician may not bill the observation discharge management care code 99217 Observation care discharge day management (or any other outpatient code) for this day of service.

Documentation Must Justify the New Status

It makes sense that when a patient goes from hospital observation status (place of service (POS) 22) to hospital inpatient status (POS 21), there needs to be additional documentation. Yet, in my work as a consultant, I have reviewed many professional provider services for both office-based providers and hospital-based providers and rarely, if ever, have I seen an initial hospital inpatient service billed following initial observation care for greater than one day.
The amount of work or documentation required by the professional provider to bill for these services depends on the level of service (e.g., 99221, 99222, or 99223) surrounding the inpatient admission. Some data from the initial observation service (such as review of symptoms (ROS) and past, family, and social history (PFSH)) may be used for the new initial hospital service; but the chief complaint, history of present illness (HPI), physician exam (PE), and medical decision making (MDM) must be newly documented by the professional provider performing the service.
The professional provider must document the circumstances surrounding the change from observation to inpatient status. The chief complaint might be the same or similar, but the HPI will clearly document what circumstances occurred during the workup that caused the patient’s status to change (i.e., location, quality, severity, duration, timing, content, moderating factors, associated signs and symptoms). A new PE must be performed that is detailed or comprehensive, and straightforward, moderate, or high complexity MDM also must be documented.
Hospitals should develop an admission “short-form” for the professional provider to use for this purpose. Whether it is paper or EHR format, it should contain the ROS and PFSH from the initial observation service so the provider can simply add the required documentation to support the new level of service.
The new Centers for Medicare & Medicaid Services’ (CMS’) “three-day rule,” effective Jan. 1, 2012, which bundles hospital owned/employed physicians diagnostic and non-diagnostic services into an admission occurring within three days of the service, will not have any effect on the observation to inpatient transition service. As an evaluation and management (E/M) service, the admission is not considered a diagnostic service, and always is paid under fee schedule rules as a facility service. For more information on the three-day rule, read Barbara J. Cobuzzi’s, MBA, CPC, CPC-H, CPC-P, CPC-I, CHCC, CENTC, article “‘Three-day Window’ Extends to Non-diagnostic Services” in this issue of Coding Edge.

Jules Enatsky, RT, BSN, CPC-H, is senior consultant with JA Thomas & Associates. He has more than 30 years of combined radiology technology, acute care nursing, and consulting experience for Part B hospitals and physicians.


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