ED Coding and Reimbursement Alert

Review these code descriptors to avoid compliance problems under close scrutiny

When is the last time you carefully read the CPT^® preamble language and the code descriptors for observation services? Observation services continue to be closely watched as Congress considers a bill for greater transparency regarding when and why observation services are reported rather than an inpatient admission.

Several factors are involved in the controversy, which is mostly driven by changes in out of pocket payments by Medicare beneficiaries when they are observation patients. This is predominately seen when beneficiaries end up with huge bills when they go to a skilled nursing facility after leaving the hospital, advises Todd Thomas, CPC, CCS-P, President of ERcoder, Inc in Edmond, OK.

They find that Medicare won’t cover the cost because the patient failed to qualify for skilled nursing facility coverage by first spending three consecutive midnights as an admitted inpatient in a hospital, Thomas notes. Currently, observation days don’t count towards those three midnights. Even if a skilled nursing stay is not needed, beneficiaries are responsible for unexpected Medicare Part B co-pays for self-administered drugs received during the outpatient hospital stay; since they were never actually admitted into the hospital and the drugs therefore are not covered under Part A, he says. 

Be aware:   At press time Congress had passed The Notice of Observation Treatment and Implication for Care Eligibility Act that would require hospitals to notify beneficiaries receiving observation services for more than 24 hours of their status as an outpatient under observation. However, it had not yet been signed into law.

Stay tuned: The next issue of ED Coding and Reimbursement Alert will cover news and analysis to explain what this will mean for your practice if it becomes law.

Be Sure You Know How to Handle These Codes

There are multiple sets of codes to report observation services, depending on whether all of the care is provided on a single calendar date or spans more than one calendar dates. Add in the discharge from observation code, and you have a total of ten possible choices per given day of observation services, says Thomas.

Medical Decision Making Is A Key Driver Of Observation Code Assigned

Let’s start with the codes to use when total observation services span more than one calendar day. 

These include the initial and subsequent observation care codes and the observation discharge services code. 

As you can see from the individual code descriptors below all but the lowest level in each observation code family requires a comprehensive history and physial exam, so the actual driver of the code choice is frequently the medical decision making level documented, says Thomas.

Even so, be sure to remember that unlike ED E/M codes, observation services require three of three documented items from the past medical, family and social history for a comprehensive history in the Medicare documentation guidelines.

Also unlike the ED E/M codes, there are typical times listed in the code descriptors; however, in the ED observations setting those times are rarely concurrent and rather take place over repeat visits during the time the patient is in observation status, Thomas explains.

Initial Observation Care Codes

According to CPT^®, these codes apply to all evaluation and management services that a practitioner provides on the same date of initiating “observation status”.

• 99218 (Initial observation care, per day, for the evaluation and management of a patient which requires these 3 key components: A detailed or comprehensive history; A detailed or comprehensive examination; and Medical decision making that is straightforward or of low complexity… Typically 30 minutes are spent at the bedside and on the patient’s hospital floor or unit)

• 99219 (… moderate complexity… Typically, 50 minutes are spent at the bedside and on the patient’s hospital floor or unit)

• 99220 (… high complexity… Typically 70 minutes are spent at the bedside and on the patient’s hospital floor or unit)

Check Timeframes for Subsequent Observation Care Codes

If the observations services transcend midnight onto a second calendar full day, report that second day using the subsequent observation codes.

This is typically the middle day of observation services between the initial admission to observation status and the discharge for observation on the third day.  These codes include reviewing the medical record and reviewing the results of diagnostic studies and changes in the patient’s status since the last assessment by the physician. 

Be sure to note that only 2 of the 3 key components are required for this code set, says Thomas.

• 99224 (Subsequent observation care, per day, for the evaluation and management of a patient… Usually, the patient is stable, recovering, or improving. Typically, 15 minutes are spent at the bedside and on the patient’s hospital floor or unit)

• 99225 (…Typically 25 minutes are spent at the bedside and on the patient’s hospital floor or unit)

• 99226 (…Typically 35 minutes are spent at the bedside and on the patient’s hospital floor or unit)

CMS is of the opinion that in the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours, says Thomas.

In only rare and exceptional cases do reasonable and necessary outpatient observation services span more than 48 hours. This is the rationale behind the “two midnight rule” that suggests a patient that spends more than two nights in observation status, should probably have been admitted as inpatient status, however in the ED setting those three calendar days can over far less than 48 hours of actual observation time, Thomas explains.

Observation Discharge Code

99217 (Observation care discharge day management. [This code is to be utilized to report all services provided to a patient on discharge from “observation status” if the discharge is on other than the initial date of “observation status.” To report services to a patient designated as “observation status” or “inpatient status” and discharged on the same date, use the codes for Observation or Inpatient Care Services (including Admission and Discharge Services, 99234-99236 as appropriate.)]) These services include a final exam, discussion of the observation stay, follow-up instructions, and documentation. Do not report 99217 if the patient was placed in observation and discharged on the same day.

If the admission to and discharge from observation status all occur on the same day, report  the appropriate  code from the Observation or inpatient hospital care  family. Remember that Medicare requires a minimum of eight hours in observation care on that day to qualify for reporting these codes, warns Thomas. If you don’t reach that threshold, report using the initial observation care code instated, he adds.