Observation care provides a mechanism to evaluate and treat patients without the resource utilization and financial responsibility associated with an inpatient admission. Hospitalists may not understand the billing compliance risk and corresponding revenue implications when observation services (OBS) are not captured correctly.
Are OBS best reported with observation care codes (99218-99220, 99234-99236), office visit codes (99201-99215), or initial hospital care codes (99221-99223)? Code selection depends upon the patient’s registered status, the nature of the provided service, and the length of stay. Review the following information before reporting OBS to ensure an accurate claim submission.
Attending Physician Responsibilities
The physician-documented reason for observation substantiates the medical necessity for the OBS admission. Contractors often evaluate medical records to determine the consistency between the physician order (physician intent), the services actually provided (inpatient or outpatient), and the medical necessity of those services, including the medical appropriateness of the inpatient or observation stay.
Certain diagnoses and procedures generally do not support an inpatient admission and fall within the definitions of outpatient observation. Uncomplicated presentations of chest pain (rule out MI), mild asthma/COPD, mild CHF, syncope and decreased responsiveness, atrial arrhythmias, and renal colic all frequently are associated with the expectation of a brief (less than 24-hour) stay unless serious pathology is uncovered.2 Situations that do not meet the criteria for observation care are considered “not medically necessary” and separate payment is not permitted. Examples of circumstances that lack medical necessity include:
- Outpatient blood administration;
- Lack of/delay in patient transportation;
- Provision of a medical exam for patients who do not require skilled support;
- Routine preparation prior to and recovery after diagnostic testing;
- Routine recovery and post-operative care after ambulatory surgery;
- When used for the convenience of the physician, patient or patient’s family;
- While awaiting transfer to another facility;
- Duration of care exceeding 48 hours;
- When an overnight stay is planned prior to diagnostic testing;
- Standing orders following outpatient surgery;
- Services that would normally require inpatient stay;
- No physicians order to admit to observation;
- Observation following an uncomplicated treatment or procedure;
- Services that are not reasonable and necessary for care of the patient;
- Services provided concurrently with chemotherapy; and
- Inpatients discharged to outpatient observation status.3
The attending physician of record assumes responsibility for the patient’s admission to observation and is permitted to report observation care codes. In addition to the reason for admission, a medical record involving the observation stay must include dated and timed physician admitting orders outlining the care plan, physician progress notes, and discharge orders. This documentation must be added to any other record prepared as a result of an emergency department or outpatient clinic encounter. If physicians other than the admitting physician/group (i.e., physicians in different specialties) provide services to the patient during observation, they must use the appropriate outpatient visit (e.g., 99214) or consultation code (e.g., 99244).
Length of Stay4
In general, the duration of observation care services typically does not exceed 24 hours, although in some circumstances patients may require a second day. Observation care for greater than 48 hours without inpatient admission is not considered medically necessary but may be payable after medical review. When the stay spans two calendar days, physician billing is straightforward: Select an initial observation care code (99218-99220) for calendar day one and the observation discharge code (99217) for day two. Only the admitting physician/group may report the discharge service, when applicable. Documentation must demonstrate a face-to-face encounter by the physician for each date of service.
Should the stay only constitute one calendar day, the duration of care becomes a crucial factor in determining the code category. Standard OBS codes (99218-99220) are applicable if the patient stay is less than eight hours on any given date. The OBS discharge code (99217) is not reported in this instance, although the documentation should reflect the attending physician’s written order and appropriate discharge plan. Alternately, same day admit/discharge codes (99234-99236) apply to single-day stays lasting more than eight hours. The OBS discharge code (99217) also is not reported in this instance. Documentation must identify, at a minimum:
- Duration of the stay;
- Presence by the billing physician; and
- Physician performance of each service (i.e., both an admission and discharge note).
Sometimes the patient requires inpatient admission after initially being placed in observation. If the inpatient admission occurs on the same day as the OBS admission, only one service is reported (e.g., 99222). The physician need not redocument a complete history and physical (H&P) but merely write the new order for admission and update the OBS assessment with any relevant, new information.
Should the inpatient admission occur on the second calendar day of the OBS stay, the physician is able to report the initial observation care code (e.g., 99219) on day one, and the initial inpatient care code (e.g., 99223) on day two. However, the physician must meet the documentation guidelines for initial hospital care and redocument the H&P associated with the reported visit level. In the case of 99223, the physician must document a comprehensive history (only referring to the previous review of systems and histories, while rewriting the history of present illness) and high complexity decision making. If the physician chooses not to document to this extent, a subsequent hospital care code (99231-99233) is reasonable because the episode of care is a continuation from the observation phase.
Beware that some insurers may change the patient’s status for the entire episode of care. In other words, the conversion to inpatient status occurs on day two of the patient stay, but the insurer may convert the entire stay, including day one, to an inpatient status. Should this happen, the physician is responsible for reporting the visit category that corresponds with the patient’s status. Inpatient services codes are required for claim submission when the patient stay qualifies as an inpatient admission. Because these conversions occur with some frequency, it is advisable to hold claims intended for observation patients until the correct patient status can be confirmed by the utilization review team, and communicated to the physician. TH
Carol Pohlig is a billing and coding expert with the University of Pennsylvania Medical Center, Philadelphia. She also is on the faculty of SHM’s inpatient coding course.
- 1. American Medical Association. cpt 2008, Current Procedural Terminology Professional Edition. Chicago, IL: American Medical Association, 2007; 9-16 CPT codes, descriptions and other data only are copyright 2007 American Medical Association (AMA). All Rights Reserved (or such other date of publication of CPT). CPT is a trademark of the AMA.
- 2. Highmark Medicare Services. Local Coverage Determination L27548 Acute Care: Inpatient, Observation and Treatment Room Services. Available at www.highmarkmedicareservices.com/policy/mac-ab/127548.html. Accessed July 14, 2008.
- 3. Cigna. Healthcare Coverage Position: Observation Care. Available at www.cigna.com/customer_care/healthcare_ professional/coverage_positions/medical/mm_0411_coveragepositioncriteria_observation_care.pdf. Accessed July 12, 2008.
- 4. Centers for Medicare and Medicaid Services. Medicare Claims Processing Manual: Chapter 12, Section 30.6.8. Available at www.cms.hhs.gov/manuals/downloads/ clm104c12.pdf. Accessed July 13, 2008.
- 5. Pohlig C. Evaluation & Management Services: An Overview. Coding for Chest Medicine 2008. Northbrook, IL: American College of Chest Physicians, 2008; 57-69.
- 6. Centers for Medicare and Medicaid Services. Medicare Claims Processing Manual: Chapter 1, Section 50.3. Available at www.cms.hhs.gov/manuals/downloads/ clm104c01.pdf. Accessed July 13, 2008.