Home Coding The new year brings a shakeup in inpatient E/M codes

The new year brings a shakeup in inpatient E/M codes

Observation codes are gone, and medical decision-making plays a major role

January 2023

FOR MORE THAN 20 years, hospitalists have gotten very comfortable with a core set of inpatient and observation evaluation and management (E/M) codes. But as of Jan. 1, physician billing for E/M services in the hospital has undergone some major changes.

As expert panelists explained during a Society of Hospital Medicine (SHM) Webinar in late December, the CMS has now eliminated observation codes. Going forward, physicians should bill observation services with the same codes they use for initial and subsequent inpatient care and discharge.

Also gone: the use of history and physical exam as a way of determining the level of physician services to bill. Now, clinicians must use either time or medical decision-making to select that service level (low, moderate or high)—and provide documentation to justify the level they choose.

“Familiarizing yourself with the medical decision-making table is going to be so helpful.” 


Heather Miles, CPC
St. Dominic Hospital

The CMS also adopted recommendations made by the AMA to revise valuations for work RVUs (decreasing valuations for some codes, increasing others) and for the times associated with inpatient CPT codes. Here’s a look at those changes.

No more observation codes
As Joshua Lapps, SHM’s director of policy and practice management, explained during the Webinar, the goal of the CMS in making these changes was to reduce the administrative and documentation burden associated with physician billing and to hopefully do away with note bloat.

Mr. Lapps described the coding revisions this way: Where hospitalists have long made use of what he called 18 “bread and butter” codes, now there are 11. That’s because the codes used for initial (99218-99220) and subsequent (99224-99226) observation care have been deleted, as has 99217 for observation discharge services.

Going forward, hospitalists providing initial, subsequent and discharge services to observation patients need to bill those services with the same codes used for inpatient services (99221-99223, 99231-99233, and 99238-99239). The three codes for same date hospital inpatient or observation care (99234-99236) were retained.

“Collapsing the observation codes into inpatient codes,” said Mr. Lapps, “was really a recognition of how similar the clinical work is in both observation and inpatient care.” He was quick to point out that the changes pertain only to professional billing for observation services, not to observation status. That status remains firmly in effect, as does the two-midnight rule.

Time billing
The CMS has also done away with the use of history and physical exam as a mechanism for choosing which service level to bill. Clinicians no longer need to document a prescribed number of systems or past medical or family history, although they are expected to continue to document medically appropriate history and physical exam elements.

Instead, hospitalists must base the level of service they bill on either time or medical-decision making—and all the times associated with each level of inpatient or observation care have been revised upwards. Where previously, for instance, the time associated with billing a 99221, a level 1 initial inpatient visit, was 30 minutes, that time as of Jan. 1 is 40 minutes.

Moreover, said Mr. Lapps, the revised times for each code level are now thresholds. That means that the time associated with a specific code must be met or exceeded and then documented to be able to bill that code by time.

If billing by time, pointed out panel member Dan Duzan, MD, medical director coding policy, hospitalist services, for TeamHealth in Knoxville, Tenn., hospitalists aren’t expected to document the percentage of their time spent in different professional activities related to time billing.

“Start thinking of all the professional time activities as defined in the CPT manual,” said Dr. Duzan, who’s also a member of SHM’s public policy committee. “It’s not just the time you spend face to face with the patient.”

The time spent preparing to see a patient, for instance, counts toward billed time, as does coordinating that patient’s care, documentation and discussing the care plan with another physician.

What doesn’t count toward billed time, he added, is time spent teaching residents or students.

Another panel member—Robert Zipper, MD, MMM, an SHM board member and chief medical officer, physician advisory and health policy, for Sound Physicians—said he believes that medical-decision making, not time, will be the basis for selecting most codes going forward.

“If you look at the threshold times for these codes, they’re pretty high,” Dr. Zipper said. Most physicians working a full census won’t be able to spend the 25 minutes or more that’s now required to bill a level 1 subsequent visit by time.

“It’s probably going to take less time to meet the documentation requirements for a higher level of code through medical decision-making.

Medical decision-making and documentation
Panel member Heather Miles, CPC, agreed, noting that the medical decision-making grid has been around a long time.

“We’ve never really focused as hard on it as we are going to now,” said Ms. Miles, who is practice administrator for the hospital medicine department at St. Dominic Hospital in Jackson, Miss. “Familiarizing yourself with the medical decision-making table is going to be so helpful for providers.”

As Mr. Lapps laid out, code level selection by medical decision-making is based on the highest two out of three of the following elements:

  • number and complexity of problems addressed;
  • amount and/or complexity of data to be reviewed and analyzed; and
  • risk of complications and of morbidity and mortality of patient management.

As he pointed out, social determinants of health and how they affect patient care can be documented and counted toward that third element of risk.

As for documentation to support billing different levels of medical decision-making, panel members said that clinicians need to paint the picture of what they did for the patient that day.

“What exactly happened medical decision-wise that day?” Ms. Miles said. “What test results came in, is the treatment plan working, what might be happening that day that we didn’t see yesterday? Put those things in bold, and I think that adding status and complexity to every daily note is not a bad idea.”

As Mr. Lapps pointed out, “be sure to document how you’re thinking about a patient’s treatment and care.” Get used to making “I” statements, he added, such as “I reviewed” or “I discussed.” And “include in your documentation each unique test, order or document that you reviewed and how each of those could affect the care plan.”

“Focus on telling the story of the patient’s care,” said Mr. Lapps said, “and what you did that day.” As for getting up to speed on using medical decision-making to select code levels, he suggested working with your billing and coding teams on education and using educational audits of existing charts to target areas for improvement.

Phyllis Maguire is Executive Editor of Today’s Hospitalist.


Click here for the AMA CPT Evaluation and Management (E/M) home page. Or here for the 2023 Medicare Physician Fee Schedule Final Rule. The AMA’s CPT® Evaluation and Management (E/M) Code and Guideline Changes is here, and this discussion of the changes here.

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January 2023 12:57 pm

Given billing mainly by MDM are the requirements for having family history and social history in admission notes gone?

Today's Hospitalist
January 2023 10:27 am
Reply to  Tex

The Webinar didn’t spend a lot of time on that, saying only–as we point out in the article–“Clinicians no longer need to document a prescribed number of systems or past medical or family history, although they are expected to continue to document medically appropriate history and physical exam elements.” From page 6 of the AMA’s CPT® Evaluation and Management (E/M) Code and Guideline Changes, which you can find here: History and/or Examination ►E/M codes that have levels of services include a medically appropriate history and/or physical examination, when performed. The nature and extent of the history and/or physical examination are… Read more »