General Surgery Coding Alert

E/M:

Avoid Observation Coding Pitfalls or Risk Denials

Published on Fri Feb 18, 2022

Remember Medicare vs. private-payer rules.

Somewhere between inpatient and outpatient services lurks the mysterious observation evaluation and management (E/M) procedure codes.

If you’ve ever felt confused by the observation coding rules and coverage ambiguities, we have some insights for you. Check out this quick review to make sure you file clean claims for your surgeons’ observation services.

Meet the 3 Observation Requirements

Before you turn to the observation E/M codes 99217-99226 (… observation care …), make sure you have documented these three components:

The provider should clearly communicate in the chart that they are placing the patient in observation status;
To support the facility, the record should also include the reason for observation and clinically appropriate reassessment; and
Performing providers should also sign, date, and time the record.

Coder tip: Remember that “day” is defined by the date on the calendar, not each 24-hour block. For example, if a patient is admitted at 3 a.m. October 10 and discharged at 9 p.m. October 10, this would be classified as a single-day observation. Conversely, if a patient is admitted at 11 p.m. on October 10 and released at 4 a.m. on October 11, this would be regarded as a two-day observation stay.

What about verbal orders? “Verbal orders are permitted but must be documented by the individual receiving the order. The ordering practitioner must review and confirm the verbal order when they see the patient,” says Mary I. Falbo, MBA, CPC, CEO of Millennium Healthcare Consulting Inc. in Lansdale, Pennsylvania. However, “verbal orders should be the exception; not the rule,” she cautions.

Document Multi-Day Stays With 99218-99220

If the patient is in observation for multiple calendar days, you’ll choose from these codes for the first date of service:

99218 (Initial observation care, per day, for the evaluation and management of a patient which requires these 3 key components: A detailed or comprehensive history; A detailed or comprehensive examination; and Medical decision making that is straightforward or of low complexity …)
99219 (… A comprehensive history; a comprehensive examination; and Medical decision making of moderate complexity …)
99220 (… A comprehensive history; A comprehensive examination; and Medical decision making of high complexity …)

All inclusive: You should roll other work related to the observation admission into the observation code and not bill them separately. Include any E/M services related to the observation status provided by the same provider or another provider in the same group practice of the same specialty.

Setting: Remember that observation is a “virtual” status that is not dependent on a specific physical location. “The patient doesn’t have to go to ‘the floor’ or a specific bed to be in observation,” says Terri Brame Joy, MBA, CPC, COC, CGSC, CPC-I, billing specialty subject matter expert at Kareo in Irvine, California. “The patient could stay in the emergency department or even be in a well-supplied office setting,” she continues.

Note How Medicare Differs on Shorter 1-Day Stays

Medicare also wants you to use 99218-99220 for certain single-day observation services. When reporting to Medicare (and other payers that follow Medicare guidelines), you should also use 99218-99220 for patients admitted and discharged from observation status for less than eight hours on a calendar date, says Falbo.

Example: A Medicare patient is admitted to observation at 7 a.m. on October 10 and discharged at 1 p.m. on October 10. Notes indicate comprehensive history and exam, along with moderate medical decision making (MDM). For this patient, you’d report 99219.

Warning: This example is true only for Medicare and its adherents. Some payers don’t want you to report 99218-99220 for any single-date observation services. You’ll have to check with each non-Medicare payer to get a bead on where they stand concerning this issue.

Do This for Different Calendar Date Discharges

When a patient is discharged on a different calendar date, you’ll need to change coding gears; ditch 99218-99220 for the final day of observation service and report 99217 (Observation care discharge day management…) instead.

For instance: A patient is admitted on October 10 and receives level-three observation services. The patient is discharged on October 11. For this patient, you’d report:

99220 for the October 10 services (admit day); and
99217 for the October 11 services (discharge day).

Recall These Codes for Subsequent Observation Days

What about coding for a patient that is in observation for more than two calendar days? It doesn’t happen often, but CPT^®has you covered in case it does.

Solution: In this situation, you’ll need to rely on another code set. You’ll report the “middle” day with these subsequent observation codes:

99224 (Subsequent observation care, per day, for the evaluation and management of a patient, which requires at least 2 of these 3 key components: problem focused interval history; problem focused examination; medical decision making that is straightforward or of low complexity …)
99225 (... an expanded problem focused interval history; an expanded problem focused examination; medical decision making of moderate complexity ...)
99226 (... a detailed interval history; a detailed examination; medical decision making of high complexity ...).

Remember: Unlike the other observation care codes, you can report the subsequent observation codes based on two of the three key components for each code level. For instance, if notes indicate that the subsequent observation day involved a detailed interval history and exam with moderate-complexity MDM, you could still report 99226.

Another example: A patient receives level-three observation care on Oct. 10, level-two care on Oct. 11, and is discharged on Oct. 12. For this claim, you’d report:

99220 for the October 10 service (admit day);
99225 for the October 11 service (subsequent day); and
99217 for the October 12 service (discharge day).

Use These Codes for Single-Day Observations

Finally, there’s the matter of coding observations that occur entirely on a single calendar date. For these services, you’ll choose from the following codes:

99234 (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 detailed or comprehensive history; A detailed or comprehensive examination; and Medical decision making that is straightforward or of low complexity …)
99235 (… A comprehensive history; A comprehensive examination; and Medical decision making of moderate complexity …)
99236 (… A comprehensive history; A comprehensive examination; and Medical decision making of high complexity …)

For Medicare and those that follow its payment rules, the visit must exceed eight hours in order to report 99234-99236. Query payers that don’t follow Medicare rules if you need clarity on their single-day observation coding requirements. CPT^®is silent on this issue.

Look for Future Observation Changes

E/M service code revisions will go big in 2023 with a host of changes. The American Medical Association (AMA) proposal for CPT^® 2023, outlines changes that will include deletion of observation codes 99217-99226, according to Lynn M. Anderanin, CPC, CPMA, CPPM, CPC-I, COSC, during her presentation at HEALTHCON Regional 2021 in Charleston, South Carolina.

Stay tuned to General Surgery Coding Alert for updates on how you’ll bill observation services once the proposed changes go into effect.