Understand Observation Status Coding Quickly

A Reader asked the question: After 10 frustrating years in the outpatient world, I have finally seen the light and joined a hospitalist group. I need some SERIOUS 411 on coding and appreciate your witty and informative blog. I have NO CLUE how to code obs patients. Please advise!!!

Emily,  I'm glad you asked.  Understanding observation status is VERY EASY.   First of all, it should not be up to you on whether a patient is a full admit or an observation status.  It takes experience to get a feeling on who is full admit and who is observation.  The utilization review people of the hospital carry around huge books with thousands of rules that Medicare and private insurance companies use to determine whether a patient meets inpatient criteria.  If they say they don't, the patient is observation status.  Do what they say so everyone gets paid.  You have to make sure your billing status as a physician matches the status of the patient by the hospital.  For example, if the patient is observation status by the hospital, and you are billing inpatient codes,  you will get denied.  Once your billing is in line with the hospital's status it is really quite easy.

You can see much more here in my coding lectures or earn CME at E&M University.

Read this very carefully, because understanding the following few paragraphs will show you the light on hospital billing.  It really is VERY EASY to understand.  You ONLY have three possible scenarios to worry about.

1. Inpatient status
2. Observation status that crosses over the magic midnight hour
3. Admit/Discharge Same Day (Does not cross over the magic midnight hour)

For #1  the patient is in patient status.  You admit the patient using codes 99221, 99222,99223.  You discharge using 99238 (less than 30 minutes) or 99239 (greater than 30 minutes).  The in between follow up visits are coded with 99231.99232, or 99233.

For #2.  Observation status that crosses over a midnight hour.  That means if you admit a patient observation at 11:59 PM and discharge them 8 hours later at 8:00 am, they qualify for the admit observation codes 99218, 99219, 99220.  For purposes of learning the requirements necessary to pass an audit by the coding police, this is the easy part.  The following rules in coding documentation apply:  99218 (low level obs)=99221 (low level admit), 99219 (mid level obs)=99222 (mid level admit), and  99220 (high level obs)=99223 (high level admit).   So if you learn how to code  the three full admit codes, you just pick the equivalent level in the observation codes.  And the easiest part of all is that there is only one possible discharge code you can use:  99217.  There is a slight trickiness to using observation stays that go past 2 midnight stays.  For example  lets say  you bring a patient into the hospital observation status on June 1st at 11:59 pm.  You can bill a (99218- 99220) for June 1st.  Lets say the following calendar day, June 2nd at 8 am, you are doing rounds and you determine the patient is not stable for discharge.  You can elect to keep them there under observation status (Medicare allows up to 48 hours of observation care).  Or you can admit them to full admission (if they meet criteria determined by your utilization folks).   If you elect to keep them observation, in this case, on June 2nd, you would bill them outpatient clinic codes (99212-99215).  Since the patient is not technically admitted, you cannot bill the inpatient subsequent care codes (99231-99233).  On the following day, June 3rd, the third calendar day you would bill the observation discharge code 99217 when they are discharged.  If you decide to make the patient a full admission on June 2nd, technically, you can do another complete H&P and bill a new full admit code (99221-99223) on June 2nd, in addition to the June 1st observation code (99218-99220).  However,  I rarely do this because I don't want to go through all that hassle.  I usually write an order to change the status to full admission from admission and then change my original June 1st observation code (99218-99220)  to a full admit code (99221-99223) and then bill an inpatient follow up visit on June 2nd (99231-99233).  Once a full admit, you use the inpatient follow up codes until discharge, at which point you pick either the less than 30 minutes (99238) or greater than 30 minutes (99239)

You can see much more here in my coding lectures or earn CME at E&M University.

#3  The admit/discharge same day (99234-99236).  This is even easier.  If the patient is admitted and discharged on the same calendar day (meaning they do not stay past a midnight) then these are the only possible codes you can use.  Nobody will pay you for the full admit codes (99221-99223) or the observation codes (99218-99220).  And just like the other observation codes,  you determine which level based on the requirements of coding documentation.  And, once again, here's the easy part,  99221=99218=99234, 99222=99219=99235, 99223=99220=99236.  That's why you only need to learn just the rules for the full admit codes 99221-99223 and you have all the others learned as well.  Remember the 99234-99236 are used when the patient is admitted and discharged on the same calendar day.  For example admitted June 1st at 8 am and discharged June 1st at 4 pm.  Medicare rules state that the patient must be in the hospital for at least 8 hours or nobody will get paid.  So you may want to round on them last  if they are going to go home the same day.    One rare scenario that I run into is the occasional drug overdose on a ventilator that I admit using the critical care codes 99291, 99292.  Sometimes the patient will improve very quickly, I can extubate and discharge on the same day.  In this case, I would keep my critical care code but I wouldn't bill a discharge code  because there is no discharge code that would suffice.  A critical care code will probably be audited on a patient that is discharged the same day, but I say, so what.  I did the work so well, they got well enough to leave the same day.  I'm not going to screw myself out of billing appropriately just because the patient got well quickly.

One other thing to look out for.  As a hospitalist, you will get consulted to see surgical patients that are ASC (ambulatory surgery center) status.  Basically the observation codes for surgeons.  These are usually overnight stays.  If you get consulted to see a patient in ASC or observation status,  make sure you bill outpatient consult codes 99241-99245.  And if you see the patient the next day, bill the outpatient clinic codes 99212-99215.  If you see a patient in the ER and decide they don't need to be admitted, bill the outpatient consult codes 99241-99245.

You can see much more here in my coding lectures or earn CME at E&M University.