Initial Observation Care – E&M codes (99218, 99219, 99220) used to report the first hospital observation encounter between the patient and admitting physician.

Subsequent Observation Care – E&M codes (99224, 99225, 99226) used to report subsequent observation visits.

Observation Care Discharge Day Management – E&M code (99217) used to report the work performed to discharge a patient from an observation stay.

Admission and Discharge to Observation, Same Day – E&M codes (99234 – 99236) used to report services for a patient who is admitted and discharged from an observation or inpatient stay on the same calendar date.  Patient’s stay must be a minimum of eight hours in order to bill these codes.

STANDARD

Initial Observation Care

Initial Observation Care codes (99218 – 99220) are used to report E&M services provided to patients designated/admitted as “observation status” in a hospital to determine whether they warrant admission, transfer, or discharge.

Only the physician initiating observation status may report these codes. These codes include initiation of observation status, supervision of the care plan for observation, and performance of periodic reassessments.

All three (3) “key” components, history, examination and medical decision-making, must be included in the medical record documentation. Below is a table showing the elements required for each of the different levels of service.

Code	History	Examination	Decision Making
99218	Detailed or Comprehensive	Detailed or comprehensive	Straightforward or Low complexity
99219	Comprehensive	Comprehensive	Moderate complexity
99220	Comprehensive	Comprehensive	High complexity

Physicians other than the physician initiating observation status may bill, as appropriate, office and other outpatient service codes.

This code includes all services performed at all sites by the admitting physician that relate to the observation admission. E&M services provided on the same date in a site other than the hospital that are related to the admission should not be reported separately but documentation by the admitting provider from other E&M services may be combined with the admission documentation to determine the appropriate level of initial observation hospital care. This code may not be billed if the patient is admitted as an inpatient later that day; in such case the observation supervision is bundled into payment for the initial hospital care services.

Subsequent Observation Care

Subsequent observation care services (99224 – 99226) are used to report subsequent hospital observation care services provided to patients by the admitting provider or another provider in the same specialty and group.

All levels of subsequent observation care include reviewing the medical record and reviewing the results of diagnostic studies and changes in the patient status (i.e., changes in history, physical condition and response to management) since the last assessment by the physician.

Two of the three (3) “key” elements, history, examination and medical decision-making, must be included in the medical record documentation.  Below is a table showing the elements required for each of the different levels of service.

Code	History	Examination	Decision Making
99224	Problem Focused	Problem Focused	Straightforward or Low complexity
99225	Expanded Problem Focused	Expanded Problem Focused	Moderate complexity
99226	Detailed	Detailed	High complexity

Subsequent observation care codes are for all the care rendered by the treating physician on the day(s) other than the initial or discharge date. All other physicians who furnish consultations or additional evaluations or services while the patient is receiving hospital outpatient observation services must bill the appropriate outpatient service codes.

Observation Care Discharge Day Management

Observation care discharge day management services are a face-to-face evaluation and management (E/M) service between the attending physician and the patient used to report the total amount of time spent by the physician for final discharge of a patient from observation status. These codes include, as appropriate:

• final examination of the patient;
• discussion of the hospital stay even if the time spent is not continuous;
• instructions for continuing care to all relevant caregivers; and
• preparation of discharge records, prescriptions and referral forms.

This code may be used if the dates of admission to and discharge from the observation are different.

Code	Description
99217	Observation care discharge day management

Admission and Discharge to Observation, Same Day

When a patient receives observation care for a minimum of 8 hours, but less than 24 hours, and is discharged on the same calendar date, Observation or Inpatient Care Services (Including Admission and Discharge Services) (99234 – 99236) is reported. The observation discharge, CPT code 99217, cannot also be reported.

All three (3) “key” elements, history, examination and medical decision-making, must be included in the medical record documentation. Below is a table showing the elements required for each of the different levels of service.

Code	History	Examination	Decision Making
99234	Detailed or Comprehensive	Detailed or Comprehensive	Straightforward or Low complexity
99235	Comprehensive	Comprehensive	Moderate complexity
99236	Comprehensive	Comprehensive	High complexity

When a patient receives observation care for less than 8 hours on the same calendar date, the Initial Observation Care (99218 – 99220) should be reported by the physician. The Observation Care Discharge Service, CPT code 99217, should not be reported.

Documentation must support an admission and a discharge in order to bill for this code.

REGULATORY REFERENCES

Medicare Claims Processing Manual, Ch. 12, 30.6.8 – Payment for Hospital Observation Services and Observation or Inpatient Care Services (Including Admission and Discharge Services) http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c12.pdf

Centers for Medicare and Medicaid (CMS)

QUESTIONS

Questions regarding policies, procedures or interpretations should be directed to the USC Office of Culture, Ethics and Compliance at (323) 442-8588 or USC Report & Response at (213) 740-2500.