Observation services are being increasingly provided by emergency physicians, whether within the ED proper or at a different site within the hospital. Observation services may be provided in any bed in any part of the hospital, including the ED.  Observation is not a location, but a status. 

If an ED bed is to be utilized for provision of observation services, the physician providing observation services must:

• write initial “Admission to Observation” orders,
• must periodically enter Progress Notes on the patient
• must document
  (a) a physical exam of the patient just prior to discharge from observation status,
  (b) a discussion of the patient’s observation stay and
  (c) must write (or otherwise document) all discharge instructions, including prescriptions, referrals, follow-up with the patient’s primary care physician, activity and return to work or school instructions (if applicable), etc.

If the observed patient is a Medicare beneficiary, if the physician bills the initial observation care codes, there must be a medical observation record which contains dated and timed physician admitting orders.  The observation record should reflect all the care the patient receives while in observation status, the nursing notes, and the physician’s dated and timed progress notes.  The observation services medical record must be in addition to the ED medical record or outpatient clinic record.  

Medicare requires, for “same day” observation services, i.e. the patient is both admitted and discharged from observation status on the same calendar day—that the patient spend at least 8 hours in observation status.  If the patient is admitted to observation on one calendar day and discharged on a different calendar day, then Medicare does not require a minimum length of stay in observation status.     

Patients may receive a procedure in the ED and then receive observation services from the same physician.  Both services will be paid.  Of course, the ED Visit codes may not be coded in this instance.  The observation services code would be assigned (with a –25 modifier for “significant, separately identifiable evaluation and management services provided on the same day of the procedure or other service”) and the correct CPT code for the procedure would also be coded.     

Likewise, if a patient receives observation services as well as procedural services (while in observation status) from the same physician (or another physician), then both the observation services and procedural services are coded and reimbursed.  For example, an intoxicated patient with a head injury is placed into observation by Dr. A.  While in observation , the patient has another seizure and sustains a laceration of his leg, which is repaired by Dr. A.  The coder assigns the appropriate observation services code as well as the laceration repair code to Dr. A’s claim and both services will be paid—unless you are contractually prohibited from doing so. 

The following are the appropriate CPT codes and descriptions for observation services:

For same day observation admit and discharge: 

99234  Observation care for problems of low severity with documentation requiring a detailed or comprehensive History, a detailed or comprehensive PE, and straightforward or low complexity MDM (Medical Decision Making). 

99235  Observation care for problems of moderate severity.  Documentation requires a comprehensive History, a Comprehensive PE, and moderate complexity MDM. 

99236 Observation care for problems of high severity.  Documentation requires a comprehensive History, a comprehensive PE, and high complexity MDM.  

For observation services which span more than one calendar day: 

99218  Initial observation care for problems of low severity.  Documentation requires a detailed or comprehensive History, a detailed or comprehensive PE and straightforward or low complexity MDM. 

99219  Initial observation care for problems of moderate severity.  Documentation requires a comprehensive History, and comprehensive PE, and moderate complexity MDM. 

99220  Initial observation care for problems of high severity.  Documentation requires a comprehensive History, a comprehensive PE, and a high complexity MDM. 

99217  Observation care discharge includes services on the date of observation discharge (only to be used on a calendar day other than the initial day of observation).  These services include a “final exam”, discussion of the observation stay, all follow-up instructions, and documentation of the patient’s discharge. 

RVUs (relative value units) comparing ED E&M Codes Vs. Observation Codes 

Of note is that the same physician cannot charge for both the ED care and the observation care if he or she provided both services.   In this instance, the physician would charge for observation services and forego charging for the ED visit services, since the RVUs are higher for the observation services.  If two different physicians in the same specialty or in the same group and one physician provides the ED service and the other provides the observation service, the two physicians are considered to be the same physician for coding and billing purposes—thus either the ED visit services or the observation services may be billed, but not both.  If a mid-level practitioner provides the ED care and the ED physician provides the observation care—if both individuals are part of the same group, then either the ED service or the observation service may be coded and billed—but not both.  If the ED physician provides ED visit services and the patient subsequently receives observation services from a physician in a different specialty and a different group, then both physicians may bill and receive reimbursement for their services. 

There are No Procedures that are “Bundled” into Observation Services.  Any procedure you provide to a patient in observation status may be separately (and additionally) billed. 

All payers except Medicare do not place any restrictions on the kinds of problems for which observation patients may receive care and subsequent reimbursement.  Medicare continues to reimburse physicians for observation services provided to Medicare beneficiaries regardless of the patient’s diagnosis or medical problem, as long as the services are reasonable and medically necessary.  Medicare will only reimburse the hospital for observation services provided to patients with congestive heart failure, asthma or acute chest pain, however.  Before providing observation services to a Medicare beneficiary who suffers from a problem “not approved for payment to the hospital by Medicare”, the physician would be well advised to contact the hospital administrative staff for “guidance”—as provision of care in this instance may create a source of friction between the hospital and the physician.