It is my understanding the observation codes are hospital observation. The patient is typically admitted to observation status, but not admitted to the hospital. This would make the appropriate place of service as 22.
CPT describes them as Hospital Observation Services. Also indicating that even if the patient who is admitted to observation status is not in a designated observation area, bill the hospital observation services E/M codes.
Examples could be:
1) Mrs. Jones is admitted into observation status at yoohoo hospital. Yoohoo hospital has an observation unit and has an open bed. Dr. A is the one who admits Mrs. Jones into observation status and, based on his documentation, bills 99219 as the intial observation care code. The following day, Dr. A visits Mrs. Jones and she is doing so much better, Dr. A decides to discharge Mrs. Jones from observation status and send her home. Dr. A bills 99217 for the observation care discharge.
2) Mrs. Jones is admitted into observation status at yoohoo hospital. Yoohoo hospital has an observation unit but does not have an open bed. Dr. A is the one who admits Mrs. Jones into observation status. Dr. A admits Mrs. Jones into observation status but keeps Mrs. Jones in the emergency room, hoping a bed in the observation unit will become available. Based on his documentation, bills 99219 as the intial observation care code. The following day, Dr. A visits Mrs. Jones, she is still in the emergeny department as no bed became available through the night or morning. Mrs. Jones is doing so much better, Dr. A decides to discharge Mrs. Jones from observation status and send her home. Dr. A bills 99217 for the observation care discharge.
The only difference between example 1 and 2 is the actual physical location of where the patient was in the facility. The patient was admitted into observation status. Observation status is just that, a status of being partially admitted for observation only. It does not matter where the patient is physically at within the facility. It's the status of whether they were admitted into observation, admitted as an inpatient, or an emergency room patient, etc., that will guide the selection of E/M codes for observation, inpatient, ER, etc., the place of service will follow the patient's status.
Hope this helps.
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