Ace the Ins and Outs of Observation Coding

Ace the Ins and Outs of Observation Coding

When a patient is placed in observation status, know the documentation guidelines for time.

Occasionally, a physician will need to observe a patient in the hospital for a time beyond that of a single-visit encounter. In these instances, instead of admitting the patient as inpatient status, the physician may admit the patient as observation status (OBS).

When coding observation services, there is a distinction between services lasting beyond 24 hours, and those lasting at least eight hours, but less than 24 hours.

8-24 Hour Observation Codes

If the patient remains in observation for at least eight hours and discharges on the same date of service, select from Observation or Inpatient Care Services codes 99234-99236. Combine all evaluation and management (E/M) documentation by the same provider on the same day to select the appropriate service level.

Example 1: At 5:30 a.m. the patient presents to the emergency department complaining of “the worst headache she has ever had.” The emergency department doctor calls the neurology department’s Dr. B for a consult of this patient after elevated troponin levels are revealed in lab testing. Dr. B, after examination, feels the patient should be admitted under observation status at 8 a.m., while he schedules stress testing with cardiology. The patient has a family history of early cardiac death. He wants to ensure the p.o. medications will help relieve symptoms, or he will proceed with IV meds, instead. No abnormal findings are noted from stress testing, and the patient’s symptoms subside after 12 hours under observation status. Dr. B discharges the patient on the same day with instructions to follow up with her primary care physician in 3-5 days. Dr. B submits proper documentation to support 99235 Observation or inpatient hospital care, for the evaluation and management of a patient including admission and discharge on the same date, which requires these 3 key components: A comprehensive history; A comprehensive examination; and Medical decision making of moderate complexity.

Using Example 1: Suppose abnormal and concerning findings are noted from stress testing, and the patient’s symptoms continue to progress after six hours under observation status. This leads Dr. B to admit the patient to inpatient status due to an imminent, dangerous health condition.

In this case, select an inpatient admission code from 99221-99223. Do not report the observation service, but you may consider the documentation collected during the observation period when assigning the service level for the inpatient admission.

More than 24 Hours:
99218-99220 for Initial Observation Care

For observation services that span more than a single date of service, report the initial day of service using 99218-99220. Initiation of the observation status begins when the supervising physician or other qualified healthcare provider has developed a care plan. That provider must perform periodic reassessments.

When reporting 99218-99220, consider all E/M services provided and documented for the initial day of admission — regardless of location (hospital emergency department, office, or nursing facility) — to select an appropriate code. For example, you may combine the documentation by the same provider on the same day in the emergency department with the history and physical documentation upon admission to observation status to determine the overall level of service.

Subsequent Observation Care Codes for Over 24 Hours

If the patient’s condition warrants observation beyond 24 hours, the physician must provide adequate documentation (meeting the required two of the three key elements) to report a charge. The patient is considered “established” at this point. The physician should review the medical record, diagnostic results, and status changes of the patient since the last assessment.

Report observation care services for each subsequent day beyond the first using subsequent observation care codes 99224-99226.

Example 2: A 68-year-old, insulin-dependent diabetic is admitted to observation status 10/12/16 by Dr. Q, endocrinologist. Projectile vomiting, elevated blood sugar levels, and elevated blood pressure readings continue overnight, after several medication administrations. At 24 hours, after an expanded problem-focused exam, Dr. Q decides the patient will remain in observation status as he attempts other IV hypertensive, nausea meds, and frequent urine and A1C checks.

Report the first day of observation using 99220 Initial observation care, per day, for the evaluation and management of a patient, which requires these 3 key components: A comprehensive history;
A comprehensive examination; and Medical decision making of high complexity
. Report the subsequent day’s service using 99225 Subsequent observation care, per day, for the evaluation and management of a patient, which requires at least 2 of these 3 key components: An expanded problem focused interval history; An expanded
problem focused examination; Medical decision making of moderate complexity
.

Day 3 and Beyond: Status Changes to Inpatient

Observation services may last three or more days, but this would be rare. If after day 3 the patient’s condition deteriorates and requires further monitoring, the physician could write orders admitting the patient to inpatient status. As stated above, when the patient is admitted as an inpatient, observation services are not reported for that day. Instead, report inpatient subsequent care codes 99231-99233. The physician must review the medical record, diagnostic results, and any status changes since the last assessment.

Discharge (Sometimes) Calls for 99217

When a patient remains in observation beyond an initial date of service, separately report a discharge service on the day of discharge using 99217 Observation care discharge day management. CPT® clarifies that 99217 includes, “all services provided to a patient on discharge from ‘observation status’ if the discharge is on other than the initial date of ‘observation status.’”

Continuing with Example 2: If on day 2 Dr. Q deems the 68-year-old, insulin-dependent diabetic (admitted to observation status 10/12/16) ready for discharge, report 99220 for the first day and 99217 for discharge on day 2. If the patient remains in observation throughout day 2 and is released on day 3, however, report 99220 (day 1), 99225 (day 2), and 99217 (day 3 discharge).

No documentation of time is warranted for 99217; however, final exam, discussion of stay, and preparation of discharge record are required.

Less Than 8 Hours Observation:
Don’t Report Discharge Separately

If the duration of observation care is less than eight hours on the same date of service, codes 99218-99220 are appropriate, but do not report the discharge (99217) separately.

Continuing with Example 2: If after administration of Zofran intravenous meds and insulin regulation, the patient is deemed stable and ready for release after 6 hours (1 p.m.), select the appropriate service level from 99218-99220 because the patient was under observation status less than eight hours. Remember: Do not separately report the discharge.


Betty Prescott-Paschal, CPC, CPMA, CEMC, has 20+ years in healthcare. She is employed with AU Medical Associates as a compliance specialist in the Compliance, Audit and Education department. Prescott-Paschal performs internal and external audits and is a Medicare PQRS submitter and department SME for the Revenue Cycle Transformation Project. She is a member of the Augusta, Ga., local chapter.

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