Gotcha. The guidelines state that a provider can only bill for the initial obs care if they saw the patient face-to-face in the hospital. So in order for your provider to bill this service, he/she would have had to also see the patient in the hospital as well as in the office. Because the provider only saw the patient in the office, he/she can only bill for the office visit. The provider who sees the patient in the hospital would bill the initial obs code. It would be different if your provider saw the patient in the ED at the hospital for example and then admitted; then he/she could bill the initial obs code.
Here's how I look at your situation. The patient comes in for the office visit complaining of a "foot problem" which the provider believes is due to a bug bite. An I&D was done to treat the problem, however after the procedure was completed, it proved ineffective in resolving the problem and subsequently the provider in your office decided the issue may be more than a mere bug bite. The provider may have decided an admit to observation was necessary to further evaluate for possible cellulitis, but because the provider did not see the patient face-to-face in the hospital, I would classify the decision made by the provider at your office as a "referral" rather than an actual "admit." The receiving provider at the hospital that did the initial eval would be the one who technically did the admission. And although the problems seem as though they may be related, no definitive decision was made that they actually were - based on the cellulitis being "possible." Because you can't code for "possible" or "suspected" diagnoses in an office setting, you'd end up coding the office visit encounter with the symptoms as the diagnoses. The cellulitis wouldn't be included as a diagnosis until it was confirmed by the provider overseeing the patient's care during observation. There's really no way to tell if the swelling and tenderness was due to a bug bite or possibly cellulitis. It could be due to both or just one or neither for that matter.
I would bill the office visit (plus the mod) and I&D for your provider and use the signs and symptoms as the diagnoses; and also possibly the bug bite if the provider documented it as certain versus "suspected". The admitting provider at the hospital would then bill for the initial obs care and use whatever diagnoses he/she makes and documents. Even though your provider believed it to be cellulitis, ultimately it's up to the admitting provider to decide if that's the route to pursue or not. Although the office visit and the I&D were done on the same date as the admit, the purpose or reason for the I&D was not due to anything cellulitis-related. The encounter with your provider, including the procedure, were done for reasons other than the what was addressed regarding the admit.
