Three Rules for Observation Medical Billing Coding

There are three rules that govern observation coding. Let’s use for example a case in which a surgeon admits a patient for observation at 9 p.m. and releases the patient the next day, at 1 a.m. Follow these three rules, and you will be all set.

1. If a physician admits a patient for observation and releases the patient on a different date of service, if the total duration of the observation stay is more than eight hours, you should report 99218-99220 with 99217. If a stay lasts multiple days, you may report one unit of 99218-99220 for each date of service, except the date when they physician discharges the patient.

2. If a stay for observation lasts for less than eight hours, if the admission and discharge occur on different dates of service, report 99218-99220 (which is initial observation care, per day, for the evaluation and management of a patient) only. You would not report a discharge service.

3. If a stay for observation takes place within a single date of service, you would report the observation/inpatient hospital care E/M codes 99234-99236 (which is observation or inpatient hospital care for the evaluation and management of patient including admission and discharge on the same date). You should not report a separate discharge code with 99234-99236.

In the example above, the stay for observation of the patient spans two dates of service, but lasts only for four hours. In this case, you should choose just the appropriate observation care code (99218-99220).

View all Articles by: Melissa Clark, CCS-P