Observation Coding in Brief
When a provider admits a patient to observation, he or she is evaluating a patient’s condition to see if it resolves (in which case the patient can go home) or worsens (in which case the patient may be admitted). To qualify for observation, the service must be medically necessary. The physician must date and time the admission orders to observation. There must be periodic assessments on the patient’s condition, including nurse’s notes and provider progress notes. Observation usually lasts 24 hours and rarely exceeds 48 hours.
Multiple scenarios may occur when the patient is admitted to observation. Different code categories report the various types of observation encounters.
- Initial Observation Care (99218-99220): Used only by the physician ordering the observation care
- Discharge from Observation (99217): Used when the discharge from observation occurs on a different DOS than the admission
- Admission and Discharge on the Same Date of Service (99234-99236): If the patient is admitted and discharged on the same DOS.
Usually, the patient is admitted to observation during an emergency department encounter or clinic/office visit. In this case, report only the observation code when the same provider (or same group) provides the care in both sites on the same date of service. Do not report an ED and observation visit if the same physician or same group physician admits the patient to observation care on the same DOS.
If an observation encounter spans three days, report an initial observation code for the first day, subsequent observation care (99224-99226) for the second day, and 99217 for the discharge on the third day.
When the patient’s condition requires an inpatient admission on the same date that observation was initiated, report an initial hospital care code (99221-99223) only. Do not report an observation code and initial inpatient code for the same date of service. If the services occur on different dates of service, report both services.
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