The main objective of observation is to allow the physician to decide whether to admit the patient in the hospital or send the patient home. Even if the patient is made to lie in an inpatient bed, observation is an outpatient status.
Issues with regard to observation status are quite common as the Centers for Medicare and Medicaid as well as private insurers are assessing the medical necessity of a one-day long stay for inpatient admission vis-à-vis ‘observation’.
The physician who is responsible for placing the patient under observation has to use the appropriate observation codes. A physician order is necessary to place the patient in observation. The physician must note the exact date and time of patient admission as the minimum 8-hour required for admission and discharge on the same date needs to be met. The failure to maintain proper documentation and assign the right codes can result in erroneous billing and claim rejection.
The observation codes that physicians need to know about for proper coding and billing are:
99218 – 99220: Hospital Observation Services, where the patient is considered an outpatient. The facility does not need to have a selected observation area. Patients with medical conditions that do not meet the admission status can be admitted to observation. These codes must be used for patients in observation status over a calendar day.
99221 – 99223: If a patient is admitted as an inpatient on the same calendar date as the observation, hospital admit codes 99221 – 99223 codes have to be used.
99234 – 99236: These are observation care codes used for healthcare services provided to patients admitted and discharged on the same calendar date of service. If a patient is admitted to the hospital, the appropriate hospital admit codes are 99221- 99223.
For inpatient admissions on the day after the observation admission, observation codes 99218 – 99220 have to be used for the first day. On the second day, the initial hospital admit codes 99221 – 99223 should used.
To prevent RAC audits and minimize claim rejections or denials from Medicare or private insurers, get professional help for your medical coding tasks. With highly competent AAPC-certified coders and billing specialists, the right medical billing and coding company can provide accurate and timely services to maximize your reimbursements.
Meghann Drella possesses a profound understanding of ICD-10-CM and CPT requirements and procedures, actively participating in continuing education to stay abreast of any industry changes.