Practice Management Alert

Question: Our office gets lots of denials on charges for E/M observation services, and I think it has something to do with the place-of-service code. What is the appropriate place-of-service code to use for patients placed on "observation status"?

Montana Subscriber Answer: This is a tricky question. First, you have to examine the definition of "observation status." A patient may end up spending 12 hours or more in the ER just waiting to receive full treatment, but that doesn't mean he is being observed, says Kathy Philp, billing manager for Oklahoma Cardiovascular Associates in Oklahoma City. Check all the documentation to be sure a physician did in fact place the patient in observation.

Once you've determined that you should bill an observation code (99217-99220, 99234-99236), the place-of- service codes work out like this:

-- 21 (Inpatient hospital) is appropriate when a patient comes in through the ER, the physician places the patient on observation status, and subsequently the physician decides to move the patient to a separate observation area or admit the patient to the hospital.

For example, if a patient has chest pains, comes to the ER, and the physician decides to keep the patient at the hospital under observation status to have an EKG and make sure everything's OK, the patient is admitted under "observation status." Therefore, you bill for an E/M observation service with the inpatient place-of-service code (21). The key is in the documentation: The patient must be documented as on "observation status."

-- 22 (Outpatient hospital) is never used for observation services.

-- 23 (Emergency room -- hospital) is appropriate when the patient comes in through the ER, the physician keeps the patient in the ER for observation without formerly admitting him on "observation status," and the physician keeps the patient on-site in the ER for the duration of the observation and until released.

Always be sure your E/M codes match up with your place-of-service codes, says Margaret Zalenski, president of Emerald Billing Inc. in Cleveland. For E/M observation services, you need to decide on a place-of- service code based on the specific conditions of each patient's observation service.