Place of Service for “Observation” Status Patients

December 5, 2022
Outpatient CPT Codes

When it comes to coding are “Observation” patients inpatients?

Medicare considers observation services to be outpatient services. Even though this may be counterintuitive, providers cannot assume that a patient who is in a hospital bed has been “admitted” to the hospital. A patient who is physically staying in the hospital building is not necessarily a hospital inpatient. It is important to know if the patient is in the hospital under “observation” status or “inpatient” status because this affects CPT® code selection.

Because observation services are considered outpatient services, when performing a consult for a hospital Observation patient, the “Office or Other Outpatient Consultations” codes should be used, CPT® 99241 – 99245. The exception to this is for payers who do not recognize consultation CPT codes, such as Part B Medicare and UnitedHealthcare. For these payers, the initial visit for a hospital Observation patient should be coded using an “Initial Observation Care” code, CPT® 99218 – 99220 and subsequent visits should be coded with “Subsequent Observation Care” codes, CPT® 99224-99226. As always, the thresholds of performance, documentation, and medical necessity must be met for whatever code level is selected. When providing observation services, the Place of Service should be “22: On Campus – Outpatient Hospital.”

Observation status is not limited to stays of 24 hours or less. It can even last multiple days, so providers and coders cannot rely on length of stay alone in determining observation status. Some facilities have “Observation” units, but this also may not be a determining factor as patients sometimes are placed in different beds or units based on hospital volume or other criteria. It is important to confirm patient status with an administrator or staff person in the hospital who understands the difference and has access to the patient’s official status.

2022 CPT Professional. Current Procedural Terminology (CPT®) is copyright 1966, 1970, 1973, 1977, 1981, 1983-2021 by the American Medical Association. All rights reserved. CPT is a registered trademark of the American Medical Association (AMA).

Jeffrey D. Lehrman, DPM, FASPS, MAPWCA, CPC, CPMA

Dr. Lehrman is a Board Certified Podiatrist, Certified Professional Coder, and Certified Professional Medical Auditor. He is in private practice in Colorado and operates Lehrman Consulting, LLC which provides consultation services regarding coding, compliance and documentation.

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