Understanding Observation Medical Billing

A common problem many medical billing professionals face is how to handle observation related medical billing claims. The basic rule is that the patient must be in observation for a minimum of 8-hours to qualify for medical billing for observation stays. In the situation where you have a patient that was admitted and stayed less than eight hours and was released and then re-admitted less than eight hours later, is to use the observation as one day but not the same day as the discharge. CPT codes 99218-99220 and 99217.

For handling an observation stay that includes an admission and discharge on the same date, you would not use 99218-99220 ranges of codings; instead you will use CPT codes 99234-99236. This is another instance in which you would not report a separate discharge code. This is because those particular codes include the evaluation and management plus the admission and discharge and adding any additional coding isn’t necessary.

Another good rule to apply when billing for observation is regarding discharge services. If the patient is put into observation on a different day than they were discharged from the hospital, then the CPT codes of 99218-99220 should be billed, but without the discharge codes.
Make sure that you get your medical billing for observation right and use the correct code sets for categorizing your medical billing claim the correct way to ensure you get the maximum returns on your medical billing claims.

View all Articles by: Kathryn E, CCS-P - Retired