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How to bill for subsequent observation care
New codes reflect the real world of observation services

Keywords: New ICD-9 Codes: billing for subsequent observation care


by Kristy Welker, CPC, CAC



Published in the November 2011 issue of Today's Hospitalist

FINALLY, THE POWERS BEHIND CPT have created some codes that actually reflect the real world of observation services. You now have designated codes to use when billing services for patients who spend more than two calendar days in observation.

In January 2011, the AMA added three new subsequent observation care codes (99224-99226). Let's take a look at these codes and address some of your questions about them.

A new way to bill
The codes were designed to document three levels of subsequent observation care. Here they are, with a typical scenario for each:

  • 99224: patient is
    The new codes are designed for patients in observation for more than two calendar days.

    stable, recovering or improving and receives about 15 minutes of physician time;
  • 99225: patient is responding inadequately or having a minor complication and receives about 25 minutes of physician time; and
  • 99226: patient is unstable or having a significant new complication or problem and receives about 35 minutes of physician time.

    Choose the highest level among these based on at least two of three key components: history, exam and medical decision-making. Make sure your documentation elements mirror the code requirements.

    The Centers for Medicare and Medicaid Services still does not expect to routinely see patients in observation for more than 48 hours. And these new codes do not change the way you use already established observation codes.

    Here's a quick recap of those established codes: observation discharge (99217), initial observation care (99218-99220), and same day observation admit and discharge (99234-99236).

    What these new codes do replace (if you are the doctor or part of the same group of physicians that admits a patient to observation) are the office or other outpatient visit codes (99201-99215) that physicians have generally been billing for patients in observation status for more than two calendar days. Now, if you admit a patient to observation on a Monday but don't discharge him or her until Wednesday, here's how you'd bill:

  • 99218-99220: Monday, admit to observation
  • 99224-99226: Tuesday, subsequent observation
  • 99217: Wednesday, discharge

    Easy, right? Except that Medicare is reimbursing these new codes at 40% less than what it pays for outpatient visit codes. But there is an upside: Some carriers have been denying or delaying payments for observation services billed with outpatient codes. While the hope is that these new codes have solved that problem, the codes have generated some questions of their own. Here are some commonly asked questions and answers.

    Q: Our Medicare carrier does not want physicians to use subsequent observation care codes (9922499226) and a discharge code (99217) unless the physicians have admitted the patient into observation, done the history and physical, and charged the initial observation care code (99218-99220).

    Our hospitalist, however, covers patients Monday through Friday, picking up the care of patients admitted during the evening or weekend on his next working day. My understanding is that he has to bill his observation services for such patients using the outpatient visit codes (99201-99215).

    My concern is how to code his discharge visit. He does a comprehensive exam, summarizes the patient stay, and reviews all medications and other discharge instructions. In most cases, the patient is stable. Would it be appropriate to bill a higher-level established outpatient code, such as a 99213 or 99214, using medical-necessity criteria?

    A: According to Medicare guidelines, only the physician or group that admits a patient to observation can use observation codes. If this daytime hospitalist is not part of your group, he should not use these codes.
    Without reviewing the documentation, I can't recommend a level of service to bill. That said, the established outpatient visit codes (99211-99215) require only two of these three components: history, exam and medical decision-making. If the physician performs a comprehensive exam and meets the criteria for the appropriate level of history (along with medical necessity), it seems likely that he could bill a level 3 or 4 established outpatient visit.

    But keep this in mind: If this physician is using new outpatient visit codes (99201-99205) when first treating these observation patients, those codes require all three components to be met. For those codes, the level of medical decision-making becomes the key factor in determining what level of service to bill.

    Q: Is it true that subsequent observation care codes come with no reimbursement at all? I see physicians changing these subsequent observation codes to inpatient codes in an effort to get paid.

    A: In general, that's not true. Take a look at the table that shows the RVU weights associated with observation codes. (See "How much is that observation code worth?")

    Most private carriers are following Medicare's lead and paying for these codes. But some Medicaid programs don't recognize observation codes at all. If you have concerns about being reimbursed, review your payment history.

    But note that observation patients are not considered inpatients. Medicare has specifically stated, "The physician may not use the subsequent hospital care codes since the patient is not an inpatient of the hospital."

    So using inpatient codes for observation patients would be inappropriate, and such charges would likely be denied. As I mentioned in my August column, insurance companies now use edits to ensure that the CPT code you submit corresponds to what the hospital reports as the patient's place of service.

    Q: Say a patient is upgraded from observation status to inpatient. Should I bill my first visit with that inpatient using an inpatient admit code or an inpatient subsequent visit code?

    A: When you convert an observation patient to inpatient status, bill the appropriate initial inpatient care code (99221-99223) on that date. Don't bill any observation code for that calendar day.

    Medicare does allow you to bill subsequent visit codes (99231-99233) if you haven't performed the elements of the initial admission code history and physical that day. But if you do meet the requirements, remember that an admission code yields a higher rate of reimbursement, and most hospitals require a comprehensive history and physical on admission.

    Kristy Welker is an independent medical coding consultant based in San Diego. E-mail all your documentation and coding questions to her at kristywelker@hotmail.com. We'll try to answer your questions in a future issue of Today's Hospitalist.



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