Watchful Waiting: Collecting Newborn Information

Watchful Waiting: Collecting Newborn Information

Know when to code newborn conditions that only require a watchful eye.

During an initial newborn evaluation, watchful waiting conditions are findings that usually resolve without medical intervention in a few weeks to a few years. Some watchful waiting issues require continued outpatient evaluation until resolution. Let’s review which conditions should be reported and when.

Coding Watchful Waiting Conditions

Watchful waiting conditions usually are not coded by hospital inpatient coders because the conditions do not use significant hospital resources and do not affect newborn hospitalization. Per the ICD-10-PCS Official Guidelines for Coding and Reporting, only clinically significant conditions are reported.
For inpatient hospital coding, a condition is clinically significant if it requires:

  • Clinical evaluation (e.g., specialty consult during the hospitalization);
  • Therapeutic treatment (e.g., bili lights for clinically significant neonatal jaundice);
  • Diagnostic procedures (e.g., ultrasound due to sacral dimple);
  • Extended length of hospital stay (e.g., beyond the average for the MS-DRG);
  • Increased nursing care and/or monitoring (e.g., neonatal intensive care unit); or
  • There are implications for future healthcare needs (e.g., having a specialty consult ordered prior to discharge).

Note: These perinatal guidelines are the same as the general coding guidelines for “additional diagnoses,” except for the final point regarding implications for future healthcare needs. Assign codes for conditions that have been specified by the provider as having implications for future healthcare needs.
For instance, abnormal findings on screenings — for example, newborn hearing screening or lab screenings — are not coded in the inpatient record, unless:

  • There was diagnostic testing or a specialty inpatient consult; or
  • The pediatrician notes the abnormal results have implications for future healthcare.
  • This is not the same as for professional services coding, where the first-listed diagnosis is the reason for the encounter. In that case, other conditions can be coded if they were involved in medical decision-making, or otherwise affected the episode of care.

Here are several watchful waiting findings to consider.

Identify Watchful Waiting Conditions

Some watchful waiting conditions include:

  • Failing the newborn hearing screening
  • Eye issues due to immaturity or from the ointment applied to the newborn’s eyes
  • Congenital hydrocele
  • Cryptorchidism (undescended testicle(s))
  • Umbilical hernia
  • Clicking hip(s)
  • Fractured clavicle
  • Hematomas from the birth process
  • Neonatal jaundice

Some conditions happen more frequently in premature newborns such as cryptorchidism and umbilical hernias. Sometimes issues heal without interventions, such as minor hematomas from the birth process and laceration from the fetal monitoring electrode. And immature lacrimal glands mature, hydroceles close, and hip joint motion usually improves without need for intervention.

Inconclusive Newborn Hearing Screening

The longer the newborn has before an auditory function screening, the greater the chance of a successful screening. Screening is usually done as close as possible to inpatient discharge for this reason. Depending on the study, 2 to 10 percent of newborns have inconclusive results at discharge (e.g., there may be fluid in the middle ear; the newborn may be fussy; one ear might pass, but the other does not).
Report an inclusive screening finding (R94.120 Abnormal auditory function study) in the professional record so the newborn can be retested at the well-baby checks. There is no CPT® code because these hospital screenings are usually done by hospital staff who are trained by an audiologist. Because it is a screening (not diagnostic), the test does not meet the definition of a “diagnostic procedure or therapeutic treatment” for a clinically significant condition.
If the screening must be done during the well-baby check, possible CPT® codes to collect the screening are:
92586 Auditory evoked potentials for evoked response audiometry and/or testing of the central nervous system, limited
92558 Evoked otoacoustic emissions, screening (qualitative measurement of distortion product or transient evoked otoacoustic emissions), automated analysis

Immature Lacrimal Ducts 

Lacrimal ducts are the drainage system for fluid that lubricates the eye. With time, the lacrimal ducts mature and the membrane covering the nasolacrimal ducts open. Until the lacrimal ducts drain spontaneously, the pediatrician can show the parents a massage technique to use between the bridge of the nose and the inside corner of the affected eye.
Immaturity is not congenital absence, agenesis, stenosis, stricture, or malformation. Because this is a normal condition, there is no code for it. Do not report Q10.3 – Q10.6 or any of the H04 Disorders of lacrimal system for immaturity of the lacrimal ducts. Inpatient coders do not code immature lacrimal ducts because the condition does not use additional resources. Usually, the time spent teaching parents how to care for the newborn’s eyes until the lacrimal ducts mature is not significant. If time is not significant, and it does not impact medical decision-making, it does not meet the definition of an additional professional encounter diagnosis.

Inflammation Due to Prophylactic Antibiotic Ointment 

Most newborns have ointment administered at birth, or soon after the initial bonding with the mother. Although inflammation occurs less frequently now than in the past because the medication used has changed, it may occur.
This is not a reportable inpatient condition. The ointment is administered by the hospital staff, so there is no professional component to the service. Even if it meets the technical meaning of conjunctivitis (inflammation of the conjunctiva), it isn’t contagious; it’s self-limiting and does not affect medical decision-making, so it cannot be coded on the pediatrician’s encounter.
To determine if the administration of the anti-infective (e.g., erythromycin) externally to the eye (3E0CX2 Introduction of oxazolidinones into eye, external approach) is coded, check if your hospital has a policy on inpatient procedure collection. Each payer can develop its own diagnosis-related group. Usually, procedures coded:

  • Involve significant costs (e.g., use of the operating room, more expensive diagnostic imaging types, such as computed tomography and magnetic resonance imaging);
  • Are risky (e.g., bedside spinal taps, epidural/regional/general anesthesia);
  • Are diagnostic or therapeutic; or
  • Increase the length of stay.

Low-cost, low-risk screening and prevention procedures usually are not coded. Hospitals typically decide the data provided by 3E0CX2 is not coded because it takes time to collect, clutters the rest of the data, and does not provide information to improve patient care or efficiency. For the same reason, subcutaneous vaccine administration (3E0134Z Introduction of serum, toxoid and vaccine into subcutaneous tissue, percutaneous approach) usually is not coded.
Sometimes, a parent declines prophylactic services such as the eye ointment and vaccinations. Although declining the inpatient prophylactic services is not reportable by inpatient hospital coders (because it does not affect the hospitalization), outpatient physician office coders can and should use Z28 Immunization not carried out and under immunization status codes when provider-recommended immunizations are not administered.

Congenital Hydrocele 

Testicles develop in the abdomen. Usually prior to birth, the testicles descend into the scrotum. The lining of the abdomen “pouches” into the scrotum to surround the testicle. Sometimes, fluid builds up inside the lining, causing a hydrocele. If the lining closes and the fluid has nowhere to go, it’s a noncommunicating hydrocele. Swelling in such a hydrocele is uniform, over time, until the fluid is absorbed by the body. If the lining still has an opening into the abdomen, the fluid can move in and out of the lining surrounding the testicle. For these hydroceles, the swelling will become greater and decrease.
Do not code the condition as part of the newborn hospitalization unless it requires a consult, diagnostic or therapeutic services, prolonged length of stay, increased nursing services, or there is documentation by the provider for future healthcare needs. In those (uncommon) circumstances, report P83.5 Congenital hydrocele. Unless there are issues, congenital hydroceles also are not coded on the well-baby checks.
This generally refers to an undescended or maldescended testis. The condition affects 3 percent of term male infants, and 1 percent of male infants at one year. Incidence is as high as 30 percent in premature male neonates. Spontaneous descent after one year is uncommon. Expect to see this monitored; usually there is a consult/referral around six months of age for newborns with undescended testicle(s). Typically, no extra resources are required during the newborn hospitalization, so do not code the condition. The pediatrician will spend time evaluating the condition, and at some point, a code in the Q53 Undescended and ectopic testicle range will be used. The provider should document whether the testis is ectopic (e.g., in the superficial inguinal pouch) or abdominal. Although an undescended testicle usually is described as palpable or impalpable, also get the location, if you can.

Umbilical Hernia 

Approximately 10 to 20 percent of newborn’s have an umbilical hernia. This is caused by a small opening in the abdominal muscles that abdominal contents (e.g., fluid, abdominal lining) spill through. These usually heal and resolve on their own. Otherwise, at 3 to 4 years of age, the hernia will be surgically repaired.
Do not code this condition for the newborn inpatient encounter, unless additional resources are used. At the well-baby check, report K42.9 Umbilical hernia without obstruction or gangrene if the condition is addressed (not merely noted in the documentation).

Clicking Hips without Diagnostic Imaging or Brace at Discharge 

The “ball” at the proximal end of the femur is supposed to fit snuggly into the acetabulum (the cup-shaped depression in the pelvis). When the depression is too shallow, the femoral head may move around in the depression and sometimes move out of the acetabulum. Usually, “clicking hips” lead to no findings but are noted so other providers know there is not issue. When the observation of “hip click” does not lead to diagnostic testing (e.g., ultrasound), therapeutic treatment (e.g., parental training in the use of, and discharged with, a Pavlik harness), an inpatient specialty consult, neonatal intensive care, or a scheduled outpatient specialty consult, it is not coded by inpatient coders. When there is a diagnostic study, such as an ultrasound with no diagnosis, the justification for the diagnostic study is coded with R29.4 Clicking hip.
When newborns are discharged with the Pavlik harness, code for the placement of an immobilization device, external, limiting the movement of the upper right leg with 2W3NXYZ Immobilization of right upper leg using other device and upper left leg with 2W3PXYZ Immobilization of left upper leg using other device. This is usually associated with one of the codes from Q65 Congenital deformities of the hip.
Clicking hips may develop into dysplasia of the hip. Approximately one in 1,000 children have congenital developmental dysplasia of the hip, which is coded Q65.89 Other specified congenital deformities of hip. Usually, hip clicks involve watchful waiting, with the tendons and muscles continuing to develop until the click is no longer felt.

Fractured Clavicle 

Sometimes, a newborn’s clavicle is fractured during a vaginal delivery. Fractured clavicles are usually noted by the pediatrician on the newborn evaluation, but do not meet the definition of clinical significance. Usually, the nurses pin the sleeve of the affected arm to the body of the newborn’s t-shirt. With the sleeve pinned to the t-shirt, the newborn has restricted arm movement, and the clavicle heals without intervention.
If the fractured clavicle does not use additional resources during the hospitalization (a safety pin is not additional resources), do not code the condition on the hospital encounter. If the condition involves a diagnostic study, however, it is coded. The pediatrician will wait watchfully and check the clavicle until it’s healed. On the pediatrician’s encounter, code P13.4 Fracture of clavicle due to birth injury because it involved medical decision-making. Do not use S42.0- Fracture of clavicle for the initial encounter or subsequent professional encounters.

Hematoma from the Birth Process 

For most newborns, hematomas from the birth process resolve spontaneously. All that is needed is watchful waiting. When no additional resources are used, this is not coded on the inpatient record, and is part of the pediatrician’s well-baby check. When the hematoma is extensive or combined with other issues that cause excessive hemolysis, involving additional resources, look to P58 Neonatal jaundice due to other excessive hemolysis.

Newborn Jaundice 

A fetus’ blood is different than an adult’s. The fetal blood is designed to attract oxygen from the mother’s blood. After the newborn begins to breath on his own, the fetal blood is destroyed and replaced with blood that works with lungs. Newborn jaundice happens when the newborn’s liver and sunshine on the newborn’s skin don’t remove the fetal blood components in an efficient manner. Two hundred years ago, newborns would have been placed on blankets in the sun for newborn jaundice. Now, newborns are checked with a transcutaneous bilirubinometer, and the pediatrician reviews standard laboratory blood screenings. These are not “additional resources.” Blood testing done as a diagnostic test, however, meets the requirements for coding the jaundice. If the newborn jaundice is excessive, hospitals use “bili” lights.
The ICD-10-PCS code for light treatment of the skin is 6A600ZZ Phototherapy of skin, single for a single treatment. Multiple treatments is coded 6A601ZZ Phototherapy of skin, multiple. Do not confuse light treatment with ultraviolet light therapy, which is usually used for skin conditions such as psoriasis.
When the newborn jaundice requires additional resources, the correct diagnosis is usually found under P58 Neonatal jaundice due to other excessive hemolysis or P59 Neonatal jaundice from other and unspecified causes codes. Mothers typically are counseled on newborn jaundice signs and when to bring the newborn in. For most newborns, the transition from fetal to newborn blood simply involves watchful waiting.


Stigma (plural stigmata) is a finding that may indicate an abnormal condition, such as a sacral dimple without a visible floor being stigma for occult spina bifida. Sacral dimples without diagnostic services, such as diagnostic imaging, are not coded on inpatient records. There is a new code for sacral dimples, Q82.6 Congenital sacral dimple, which can be coded in the professional encounter if they affect care, such as when an ultrasound is ordered and there is no finding of occult spina bifida.
Malpresentations are almost always noted on the inpatient record. But unless the breech presentation or other malpresentation caused a significant finding for the newborn, do not code it on the inpatient hospital record.
Numerous skin findings may be noted, but are not coded in the inpatient record unless they are clinically significant. When the pediatrician spends additional time explaining the skin condition, and the findings affect the episode of care, it should be coded on professional encounters.
An example is hemangiomas (e.g., strawberry hemangiomas), which do not impinge on vital structures and are not located in the periorbital area, lip, neck, or sacral region. More commonly seen in the documentation are:

  • Infantile acne
  • Melanin hyperpigmentation
  • Disorders of pigmentation
  • Vitiligo
  • Other hypertropic disorders of skin
  • Café au lait spots
  • Diaper dermatitis
  • Neonatal erytherma toxicum
  • Seborrhea capitis
  • Local infection of skin
  • Milia (including Bohn nodules on the gum and Epstein pearls on the palate)

Abnormal Results of Routine Screenings 

Without a diagnosis, abnormal results of routine screenings should not be coded unless the pediatrician states the abnormal results have implications for future healthcare. If the abnormal results lead to diagnostic testing, they should be coded on an inpatient record.
Inpatient coders don’t collect watchful waiting conditions. A condition does not need to be coded on the inpatient hospital encounter to be coded on the pediatrician’s hospital encounter. Understanding why a pediatrician documents a finding enables you to determine if it should be coded.

For more information about blocked lacrimal ducts, visit:
For more information about cryptorchidism, visit:
For more information about congenital hydrocele, visit: sacral dimple hip dysplasia
Cincinnati Children’s, umbilical hernia:

Evaluation and Management – CEMC

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