Inpatient Facility Coding & Compliance Alert

Question: A pediatrician admitted and discharged a patient to observation status for 12 hours in the emergency department. We reported the service as 99235 with a place-of-service (POS) code 23. The carrier told us to use 22 instead. Why?

Montana Subscriber

Answer: You should assign observation codes with a place of service of 22 (Outpatient Hospital), not 23 (Emergency Room - Hospital).

Reason: The patient’s status - not his physical location - determines the POS. Even though the patient is physically in an emergency department, when the pediatrician registers him to observation status the patient is considered a hospital outpatient. The physician can perform observation anywhere: in a room, a clinic, or a hallway.

Watch out: Double-check your observation code. You should use 99235 (Observation or inpatient hospital care, for the evaluation and management of a patient including admission and discharge on the same date ...) if the pediatrician admits and discharges the patient on the same date. But if the 12-hour observation occurs on different dates, you should instead report the admission with the most appropriate choice from 99218-99220 (Initial observation care, per day, for the evaluation and management of a patient ...) and the discharge with 99217 (Observation care discharge day management ...).

Variation: Some insurers may want you to use 99218-99220 for same-day observation admits and discharges. These payers follow Medicare’s interpretation that the initial observation care code represents a full day of care. See also the Medicare rule that same day admits and discharge codes can be used only when there are at least 8 hours of care, otherwise, simply use the regular observation codes.