Coding for Observation Services

CPT codes for observation services

Beginning January 1, 2023 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, those were deleted. Use 99221–99223 for initial inpatient or observation care services and use 99231–99233 for inpatient or observation subsequent visits. 99238 and 99239 are the discharge codes.

For admission and discharge on the same calendar date, use codes 99234—99236.

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 with the deletion of observation codes 99218—99220, 99224-99226, and 99217.  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

Additional Resources

• Download the E/M guide for more detailed information about coding for observation (and other E/M services)
• Or, take the E/M Expertise Course

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