Published in the August 2007 issue of Today’s Hospitalist.
With hospital capacity on the rise, a growing number of hospitals are turning to observation services as a solution for a dwindling supply of beds. And as we pointed out in last month’s cover story, hospitalists are increasingly being tapped to head up those services.
As observation services become more popular, however, physicians need to nail down the intricacies of documenting and billing for these services. Because the Centers for Medicare and Medicaid Services (CMS) has strict criteria for coding observation services, physicians have little room for error.
Done right, observation services can greatly improve hospital capacity. Bill for these services incorrectly, however, and you might not get the reimbursement you deserve.
Unfortunately, observation services come with several misconceptions. A common one is that observation services can be performed only in an “observation unit,” which is entirely untrue. You can provide observation services in any designated unit or in common areas such as an emergency department or a standard hospital floor.
Second, many physicians don’t understand that once observation is initiated, they must perform a standard history and physical, as well as periodic assessments of the patient’s condition and a discharge summary.
Another area of confusion: how to code for observation status when the admission and discharge are on the same day vs. different calendar days. This is an important point because which code set you use depends upon those calendar-day criteria.
Same-day admission and discharge
For patients admitted to observation care (not to an inpatient service) and then discharged home on the same day, choose one of the following three CPT codes:
“¢ 99234: This code requires a detailed or comprehensive history, a detailed or comprehensive exam, and medical decision-making that is straightforward or of low-complexity.
“¢ 99235: Use this code when doing a comprehensive history, a comprehensive exam and moderate medical decision-making.
“¢ 99236: This code requires a comprehensive history, a comprehensive exam and a high level of medical decision-making.
In comparing these three codes, note the need for thorough documentation. When bringing at least a moderate level of decision-making to observation care, you need to provide four elements in the history of present illness; one of each from the past, family and social histories; a complete (10-plus) review of systems; and a physical exam of eight-plus organ systems, not body areas.
Unlike subsequent visits where you need to elaborate on only two out of three in terms of history, exam and medical decision-making, you must meet or exceed these criteria in all three areas to bill these codes. That leaves little room for error.
Because documentation requirements are so strict, it’s been my experience that physicians fare much better dictating their history and physical instead of just handing them in as progress notes. Forgetting just one element could prove to be a costly mistake that could result in your being reimbursed for a 99234 instead of the 99236 you performed but didn’t document. (See “A look at RVU values for observation codes,” below.)
Note too that with this code set, the discharge component is built into the RVU work factor. Even though you need to have either a handwritten or dictated discharge summary on file for these patients, you do not code or bill separately for discharge services.
And for Medicare patients, the CMS has spelled out an additional guideline for using this code set: Patients must be in observation status for eight hours or more to report 99234-99236.
For patients observed for less than eight hours, you can code only 99218’99220 (see below) for the initial admit to observation service. Again, the CMS does not allow the discharge service to be separately reported for a short encounter.
Different-day admission and discharge
Observation services can be maintained for up to 48 hours. At that point, patients need to be either admitted to inpatient services or discharged.
For patients admitted and discharged from observation care on different calendar dates, you again have three CPT codes to choose from to initiate the service. However, you also have a code for the discharge portion.
Here’s a look at this code set:
“¢ 99218: This code requires a detailed or comprehensive history, a detailed or comprehensive exam, and medical decision-making that is straightforward or of low complexity.
“¢ 99219: You can report this code after a comprehensive history, a comprehensive exam and moderate medical decision-making.
“¢ 99220: Use this code when doing a comprehensive history, a comprehensive exam and a high level of medical decision-making.
“¢ 99217: Use this code when documenting all services necessary for discharge.
When documenting these codes, include the same number of elements as for the same-day code set. Here’s an example of how to code observation services that span several calendar days, within the 48-hour timeframe:
“¢ Day 1: Admit to observation with standard history and physical at 3 p.m.: 99219.
“¢ Day 2: Rounds: 99214. (Remember, the patient is still considered to be an “outpatient,” so refer to codes 99212-99215.)
“¢ Day 3: Discharge from observation with standard discharge summary at 12 p.m.: 99217.
Admitting to the hospital
For patients admitted to the hospital after observation status, use 99221-99223 to code that admission. In this situation, you must again perform a standard history and physical, exam and a level of medical decision-making.
Many physicians ask if they still need to do a separate history and physical if they performed those on admitting to observation status. The answer is yes: You need another history and physical because you are coding and billing an entirely separate admission.
I do believe, however, that an “interval history” would be sufficient, along with a new exam and updated medical decision-making. You would need to document a current history of present illness, then state that “complete review of systems and past, family and social history remain unchanged from my H&P from date of service,” with the date of the observation admission. Check guidelines from your local payer to make sure this meets its requirements.
Unlike most of the other evaluation/management services that hospitalists bill, observation services are not tied to any time factor in the CPT manual. You cannot use time to drive your choice of codes if you spend more than 50% of your service in counseling or coordinating care.
Tamra McLain is an independent coding consultant in Southern California. E-mail her your documentation and coding questions, or send a fax to 888-202-1601. We’ll answer your questions in a future issue of Today’s Hospitalist.