ED Coding and Reimbursement Alert

Question: Our ED physician performed an observation on a patient who was not in the observation area. Notes also seem to indicate a separate evaluation and management (E/M) service, too. Can we still report an observation code, and can we code separately for the E/M service?

Texas Subscriber Answer: Location is not the most important factor when deciding whether to use an observation code or not. The patient does not have to be in a designated observation unit to use the codes.

Remember it this way: Observation is a status, not a location where the service occurs.

Example: So if your physician provided a level 2 observation with same-day discharge service outside the observation unit, you would report 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 three components: a comprehensive history; a comprehensive examination; and medical decision making of moderate complexity) for the encounter.

As for the E/M, you are not allowed to report an E/M with observation care for the same  encounter on the same date of service. CPT instructs coders to roll the work of the earlier E/M service into the observation code.