Coding for Observation Services

CPT® Codes for Observation Services

There are two sets of codes used for both inpatient status and observation level of care. Coding for observation services no longer has a distinct set of CPT® codes as those were deleted. The “observation care code” applies to Hospital Inpatient or Observation Care Services Codes: 99221–99223 for initial inpatient or observation care services and use 99231–99233 for inpatient or observation subsequent visits. 99238 and 99239 remain as the discharge codes.

For admission and discharge on the same calendar date, use codes 99234—99236. Note that these codes did not change but here are the definitions:

99234  Hospital inpatient or observation care, for the evaluation and management of a patient including admission and discharge on the same date, which requires a medically appropriate history and/or examination and straightforward or low level of medical decision making. When using total time on the date of the encounter for code selection, 45 minutes must be met or exceeded.

99235  Hospital inpatient or observation care, for the evaluation and management of a patient including admission and discharge on the same date, which requires a medically appropriate history and/or examination and moderate level of medical decision making. When using total time on the date of the encounter for code selection, 70 minutes must be met or exceeded.

99236  Hospital inpatient or observation care, for the evaluation and management of a patient including admission and discharge on the same date, which requires a medically appropriate history and/or examination and high level of medical decision making. When using total time on the date of the encounter for code selection, 85 minutes must be met or exceeded.

Medicare says, “Only the attending physician of record reports the discharge day management service.”

Place of Service

Continue to report the correct place of service on the claim form, place of service 21 for inpatient hospital and place of service 22 for on campus—outpatient hospital. Observation is an outpatient service.

Consulting Physicians

Following CPT® rules, a consulting physician would report inpatient consult codes 99252—99255 for the initial service. These are now defined as inpatient or observation services.  Use 99231—99233 for follow up visits. For patients with commercial insurance that still recognizes consultation codes, this is the correct coding for observation services.

Coding for observation services for Medicare patients seen in consultation

Medicare stopped recognizing consultation codes in 2010. Chapter 12 of Medicare’s Claims Processing Manual has not changed its instruction. Their manual says “Payment for an initial observation care code is for all the care rendered by the ordering physician on the date the patient’s observation services began. 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.”

• For all payers, the admitting physician uses 99221-99223 for patients in observation level of care. Add modifier AI for Medicare.
• For commercial payers that recognize consults, the consulting physician uses 99252—99255 for patients in observation level of care.
• For Medicare patients, the consulting physician uses office and/or other outpatient codes 99202—99215. Keep in mind the definition of new patient. A new patient is a patient who has never been seen by that physician or their same specialty partner (in their group) for the past three years. Use these codes for the initial visit and subsequent visits.

CMS citations: Medicare Claims Processing Manual, Ch. 12, Section 30.6. 9 and 30.6.10

Again, per CMS, the following information must be documented: (30.6.8(c):

In addition to meeting the documentation requirements for medically appropriate history and/or examination, and medical decision making, documentation in the medical record shall include:

• Documentation stating the stay for observation care or inpatient hospital care involves 8 hours, but less than 24 hours;
• Documentation identifying the billing physician was present and personally performed the services; and
• Documentation identifying the order for observation services, progress notes, and discharge notes were written by the billing physician.

There is a helpful chart in the CPT® book that shows “length of stay,” “discharge on,” and “report codes.” It’s located in the section on hospital inpatient or observation services.

Additional Resources

• Download the E/M guide for more detailed information about coding for observation (and other E/M services)