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Billing observation services? Not so fast
Factors to consider to bill appropriately

Keywords: When should physicians bill the right ICD-9 codes for observation services?


by Kristy Welker, CPC



Published in the September 2012 issue of Today's Hospitalist

I RECENTLY RECEIVED A QUESTION from a reader that targets an area where many hospitalists spend a lot of time and effort: in the emergency department, deciding whether patients should be admitted to observation or to the hospital, or sent home. As the question illustrates, hospitalists aren't sure how to bill for some of these patients—and they receive a lot of conflicting advice.

Here's the question: "We have a new charge capture company. Our rep has described this scenario: Our hospitalists are called for a consult to the ED for a possible
A company rep for a charge-capture company may have it all wrong.

admission and they do a history and physical. The patient, however, is feeling better and goes home from the ED, rather than being admitted.

The rep claims that our doctors should charge an observation same-day admission and discharge code (99234-99236), and that hospitalists should not be billing ED consult codes, as those are only for the ED doctors. I am not comfortable passing this information on to our group unless I get verification."

Who can use ED visit codes
First, a clarification: There are no consult codes specific to the ED.

According to Medicare guidelines, emergency department visit codes (99281-99285) are not reserved solely for ED physicians. The "Medicare Claims Processing Manual" states: "Any physician seeing a patient registered in the emergency department may use emergency department visit codes (for services matching the code description). It is not required that the physician be assigned to the emergency department."

Next, while observation codes could in theory be used in this scenario, there's a lot that goes into using observation codes appropriately. Let's first review the guidelines for billing observation codes before we consider the right answer.

Who can bill observation
The Centers for Medicare and Medicaid Services states that observation care is "a well-defined set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment, that are furnished while a decision is being made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital."

Now let's look at the observation guidelines. To be able to bill observation codes, physicians must document a dated, timed order for observation status. Only the doctor who ordered observation status and is responsible for the patient during his or her observation care can bill for those services.

Choosing which observation code to use depends on the usual suspects: history, exam and medical decision-making. But how long the patient stays in observation also comes into play when choosing which service level to bill. Here are the various observation codes:

  • 99218-99220 Initial observation, per day
  • 99217 Observation care discharge
  • 99224-99226 Subsequent observation care, per day
  • 99234-99236 Observation or inpatient hospital care, admission and discharge same date

    Same or multiple days?
    When observation services span two calendar days, a physician should bill an initial observation code (9921899220) for the first day and the discharge code (99217) for the second. Documentation must establish a face-to-face encounter by the physician for each service date.

    For patients admitted to observation and discharged on the same calendar day, doctors should bill an observation or inpatient hospital care, admission and discharge same date code (99234-99236). Because the discharge service is included in this code, you should never also use the separate discharge code (99217).

    CPT guidelines do not set a minimum time requirement to use the same-date codes, but Medicare states that these codes should be used only for observation services greater than eight hours and less than 24 hours. According to Medicare guidelines, when doctors have patients in observation for less than eight hours on the same calendar date, they should bill an initial observation care code (99218–99220) but no discharge code (99217).

    Subsequent care and admissions
    Subsequent observation care codes (99224-99226) were implemented in 2010. These should be used for services on each observation day between the initial observation and the discharge. Keep in mind that, as far as Medicare is concerned, observation services spanning more than 48 hours should be rare—although recent data indicate that the use of longer observation stays is on the rise.

    If you admit a patient from observation to inpatient status, the only service you should bill for the day of that admission is the initial hospital care code (99221-99223). Make sure you meet documentation guidelines for billing an initial hospital care code and include a detailed or comprehensive history and exam.

    In the case of a patient being admitted from observation to inpatient, you are not allowed to bill an observation discharge code. Im often asked if it is appropriate to bill an observation code for a patient who has observation status on day 1 and an initial inpatient code for a patient admitted on day 2. The answer is yes, as long as you meet all documentation guidelines. Remember, too, that all observation services are considered outpatient.

    An ED visit or outpatient consult
    Let's get back to the reader's question. What code should a hospitalist bill after being called to the ED for a possible admission when the patient is ultimately discharged and not admitted?

    As the scenario is outlined, it appears that observation guidelines are not being met, at least in terms of having a physician order observation status for the patient described. So the blanket course being recommended by the company rep—charging an observation same-day admission and discharge—doesn't sound correct to me.

    What code set should be used depends on whether Medicare guidelines, which no longer recognize consult codes, are being applied or not. Under Medicare guidelines (and many private payers follow those guidelines), physicians should bill these services using emergency department visit codes (99281-99825).

    But if you're billing a payer that still pays consult codes, I would say that the hospitalist has been asked for an opinion on whether the patient needs to be admitted. In that case, I'd recommend using the office or other outpatient consultation codes (99241-99245).

    Kristy Welker is an independent medical coding consultant based in San Diego. Email 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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