Medicare Compliance & Reimbursement

Study Medicare minutiae on 8-hour stays.

Medicare providers have had a lot to unpack over the last year with COVID-19 and the regulatory reform to address the pandemic, so it’s no surprise that observation reporting isn’t at the top of the compliance to-do list.

Understanding how to code and report observation E/M services can be tricky, particularly since the rules may change depending on how long the patient is there. Get a handle on how to report these services with a quick review of observation reporting to keep you on the straight and narrow.

Don’t Forget These 3 Critical Requirements

Before delving into observation specifics, here are some words of wisdom from Mary I. Falbo, MBA, CPC, CEO of Millennium Healthcare Consulting Inc. in Lansdale, Pennsylvania.

“First and foremost, only the practitioner who orders, and is responsible for, the patient’s care while receiving observation services can bill for observation services. The order for observation must be in writing and clearly specify outpatient observation. It should also include the reason for observation and be signed, dated, and timed by the ordering physician,” explains Falbo.

What about verbal orders? Verbal orders aren’t forbidden; they’re just governed by some extra guidance. “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,” Falbo clarifies. However, “verbal orders should be the exception; not the rule,” she cautions.

Also, 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. April 10 and discharged at 9 p.m. April 10, it is a single-day observation. Conversely, if a patient is admitted at 11 p.m. on April 10 and released at 4 a.m. on April 11, it would be a two-day observation stay.

Multi-Day Stays Marked by 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 …)

You should also roll other work related to the observation admission into the observation code, Falbo relays. “Any evaluation and management services by the same provider or someone in the same group practice of the same specialty in another setting, such as the office or an emergency department, that are related to the admission to observation status cannot be billed separately, as they are considered part of the initial observation care service.”

Know the Medicare Rule on Shorter 1-Day Stays

The Centers for Medicare & Medicaid Services (CMS) also wants you to use 99218-99220 for certain single-day observation services. When reporting to CMS (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, reminds Falbo.

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

Warning: This is only for Medicare and its adherents. There are payers who 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.

Use 99217 for Discharge Date

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.

So, let’s say a patient is admitted on April 10 and receives level-three observation services. The patient is discharged on April 11. For this patient, you’d report:

• 99220 for the April 10 services (admit day)
• 99217 for the April 11 services (discharge day)

Remember 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 ...)

Reminder: 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. If notes indicated that the subsequent observation day involved a detailed interval history and exam with moderate-complexity MDM, you could still report 99226.

Let’s say that a patient receives level-three observation care on April 10, level-two care on April 11, and is discharged on April 12. For this claim, you’d report:

• 99220 for the April 10 service (admit day)
• 99225 for the April 11 service (subsequent day)
• 99217 for the April 12 service (discharge day)

Single-Day Observations Call for These Codes

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.

Documentation alert: Falbo stresses the importance of specific documentation on 99234-99236 claims. “In addition to meeting the documentation requirements for history, examination, and medical decision making [MDM], documentation in the medical record shall include:

• “Documentation stating the stay for observation care or inpatient hospital care involves eight hours, but less than 24 hours
• “Documentation identifying the billing physician was present and personally performed the services and
• “Documentation identifying the admission and discharge notes were written by the billing physician.”