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Observation Services

  1. For use of observation service codes 99218, 99219, 99220, is there a requirement for a physician order for observation?

    Answer:
    In all circumstances, a written order for observation services must be entered into the medical record. As per CMS IOM Publication 100-04, Medicare Claims Processing Manual, Chapter 12, Section 30.6.8, “For a physician to bill observation care codes, there must be a medical observation record for the patient which contains dated and timed physician’s orders regarding the observation services the patient is to receive, nursing notes, and progress notes prepared by the physician while the patient received observation services. This record must be in addition to any record prepared as a result of an emergency department or outpatient clinic encounter.” Updated 9/12/2017
     
  2. Would Medicare cover an observation discharge (CPT code 99217) when a patient is placed in observation by an ED physician on day one and care is transferred on day two to a specialty provider, if the patient then remains in observation status under the care of the specialty provider?

    Answer:
    Observation services (initial, subsequent, discharge) are expected to be performed by the same provider or same-specialty members of the provider’s group. An exception to this rule exists when there is a written order for a transfer of care to another provider specialty. For example, a hospitalist may order and perform initial observation and then transfer the patient’s care to a cardiologist, who then performs the subsequent observation care and either discharge or hospital admission. However, this would occur in unusual situations since CMS guidelines indicate that, “In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours. In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours.” Updated 8/29/2017
     
  3. Would Medicare cover an observation discharge (CPT code 99217) for the ED physician when a patient is admitted to observation by an ED physician on day one and on day two the patient is admitted as an inpatient by another specialty (e.g., orthopedist)?

    Answer:
    The ED physician who admitted the patient to observation on day #1 may perform and bill an observation discharge service on day #2 (99217), with a medical record order indicating that the patient is being admitted as an inpatient by a provider of another specialty. The admitting provider, who will be responsible for the patient’s care during the inpatient stay, may perform and bill an initial hospital admission service (99221-99223) on that same date. Updated 9/12/2017
     
  4. A patient is admitted to observation from the ED by a resident at 4:00 p.m. on 6/1/2017. On the morning of 6/2, the patient is seen by the attending and is then discharged later in the day on 6/2. Please clarify correct billing for the attending physician’s service on 6/2.

    Answer:
    The service by the resident on 6/1/2017 is not billable to Medicare. The same-day observation admit and discharge codes (99234-99236) are only payable on the patient’s initial DOS, for which the hospital submits a Part A claim for observation services.

    The attending’s service on 6/2/2017 may be billed to Medicare as subsequent observation care (99224-99226) or as observation discharge service (99217), but both of these codes are not payable on the same DOS.

    Initial observation care coding is only payable on the DOS on which observation order is effectuated and the hospital submits a Part A bill for observation services. Updated 8/29/2017
     
  5. Please define correct coding for the following scenario: Dr. A and Dr. B are both members of a same-specialty hospitalist group. Dr. A places a patient in Observation on 7/1 and Dr. B admits the patient to inpatient status on 7/2.

    Answer:
    Dr. A’s service would be billed as an initial observation service (99218-99220). Dr. B’s service would be billed as an initial hospital service (99221-99223). Updated 8/29/2017
     
  6. Please clarify billing for initial and subsequent observation services within a same-specialty group hospitalist practice.

    Answer:
    Once a group-member hospitalist performs an initial observation service, the subsequent and discharge observation services may be performed by other same-specialty members of a group hospitalist practice, who are considered by CMS to be one billing entity.

    Both initial and subsequent services by other specialty providers, usually in a consultative capacity, are billed using the other appropriate E&M outpatient codes for initial and subsequent services. Updated 6/9/2017
     
  7. When one provider performs an initial outpatient observation service, and the patient is admitted to inpatient status the next day, what is the appropriate coding?

    Answer:
    Observation services are outpatient services. If a physician orders observation, the patient remains in outpatient status until that status changes to either inpatient (with an admission order) or discharge (with a discharge order. The facility cannot designate the patient into inpatient status until the admission order is entered. The Part B observation service (99219) can only be entered with an outpatient POS, while the inpatient admission service (99221-99223) can only be entered with an inpatient POS. Updated 6/9/2017
     
  8. What is the appropriate coding when a patient is seen in the ED and admitted for an inpatient-only procedure, and then discharged within 24 hours? Are observation services appropriate in this instance?

    Answer: When a patient is evaluated in the ED and a decision is made for a surgical procedure on the “inpatient only” list, the patient is admitted to inpatient status prior to the surgery, regardless of the planned length of stay. Observation services are outpatient codes and not appropriate for this scenario.

    When a patient is evaluated in the ED and a decision is made for a surgical procedure that is considered an outpatient procedure. The patient remains in outpatient status until discharge, unless a surgical complication or postoperative problem supports the need for a longer hospital stay and an order is entered for inpatient status.

    In the latter instance, initial care in the ED would be followed by postoperative care in the usual outpatient setting and billed as such. Observation services would be appropriate in this circumstance only preoperatively, if the ED physician had ordered observation services while completing initial workup and evaluating the patient’s need for surgery. Observation services might also be appropriate if the decision for outpatient surgery occurred on the day or night before the scheduled surgery, and the surgeon requested overnight monitoring prior to the surgery. Updated 6/9/2017
     
  9. If an attending physician of record bills initial observation service (99218‒99220), how do other consulting providers bill for services during the observation period?

    Answer:
    The provider who orders observation service is expected to serve in the capacity of attending physician for the patient during the period of observation, and is responsible for performance of the initial observation service. This function may be shared by group members of the same specialty. When the patient is receiving outpatient observation services, only the attending physician of record, who is primarily responsible for the patient, uses the observation codes (Initial care: 99218‒99220, Subsequent care: 99224‒99226), and appends the AI modifier to those services, indicating his/her role as the attending physician of record, primarily responsible for the patient’s care during the observation period. Services performed on a consultative basis by other providers are billed with the correlative outpatient visit codes (Initial care: 99201‒99205, Subsequent care: 99211‒99215) without the AI modifier. The use of a modifier “A1” is restricted to services performed by the provider serving as the attending physician. Updated 12/18/2018
     
  10. A provider orders observation services and performs the initial observation assessment. Can subsequent observation services (including discharge) be performed by another provider?

    Answer:
    The provider who assumes responsibility for the patient while in observation usually performs the initial observation assessment. Subsequent and discharge observation care may be rendered by this provider or any qualified member of his/her group. Consultative services by other providers are billed using appropriate outpatient codes (99201-99205 or 99211-99215). Updated 6/9/2017
     
  11. When a patient is admitted as an inpatient and discharged before the second midnight, what is the appropriate coding, inpatient hospital or observation?

    Answer:
    An inpatient order dictates billing with inpatient hospital codes. The inpatient order is not retroactive, and may only be changed to outpatient status when condition code 44 criteria are met. Observation services require an order for observation, and can only be billed for patients in an outpatient status. Updated 6/9/2017
     
  12. Is the initial observation service and the initial inpatient admission service payable to the same provider on subsequent days?

    Answer:
    Yes, the same provider may perform an initial observation service and then an initial hospital service, when performed on different days. Services do not necessarily need to be on contiguous days, e.g., and initial observation service may take place on Monday and an initial hospital service may not take place until Wednesday. Updated 6/9/2017
     
  13. What are the documentation requirements for observation services?

    Answer:
    Medicare has no defined documentation requirements for observation services. It is expected that the record reflect care relative to the condition for which the patient is being observed, and performed within the context of the physician’s orders and what would be medically reasonable and necessary for the patient. The notes written during the period of observation must support the medical necessity for ongoing care, provide the details of how that care is being rendered and, ultimately, provide a record of how a decision was reached to either discharge or admit the patient beyond the observation period. Updated 6/9/2017
     
  14. How is observation time counted?

    Answer:
    Observation time is counted from the time the doctor writes an order and care is being provided in that capacity, regardless of where the patient is located in the hospital. If the patient is in the ED awaiting a bed, but has an order for observation and is receiving care relative to that order (e.g., monitored vital signs), that time counts toward observation hours. Inpatient status begins with an inpatient order, which cannot be retroactive. Updated 6/9/2017
     
  15. A hospitalist refers a patient with chest pain to observation services. The hospitalist does not bill an initial observation service because the patient has a cardiac problem and is transferred to a cardiologist; the cardiologist becomes the attending of record. A cardiology resident sees the patient and within 24 hours the attending cardiologist evaluates the patient and documents and bills an initial observation service. Does this appear to be correct billing?

    Answer:
    This scenario appears to be appropriate for billing an initial observation service, and the claim should reflect the actual date on which the patient was seen by the cardiologist. If the cardiologist’s assessment is that care will be completed within a period that will not exceed two midnights from the point at which care was initiated, or if the cardiologist is not yet sure and is awaiting additional diagnostics, then observation services could be appropriate. If, however, the cardiologist anticipates hospital care over a longer timeframe, the decision for inpatient admission may be made at any point in the continuum. Updated 6/9/2017

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