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Identify Emergency Department Observation Services and Achieve Reimbursement in 2015

By Ronald Stunz, MD, FACEP

Emergency department observation is defined as "use of a bed and periodic monitoring by the hospital's nursing or other ancillary staff, which are reasonable and necessary to evaluate an outpatient's condition or determine the need for possible inpatient admission" at least according to insurer Highmark. Observation represents a patient status, not a location, and the status provides a revenue opportunity for every emergency physician who is specifically determining if a patient needs to be admitted to the hospital. In essence, physicians are using time as a tool to assess results of treatment and evolution of clinical condition in order to determine the optimum final disposition for the patient.

Many emergency physicians are already providing observation services by using time as a tool to assess and determine results of treatment for the patient, but many are not billing for the service. The reason for the missed opportunity is simply due to the fact that many physicians misunderstand everyday cases that legitimately and compliantly qualify for observation status. In fact, it is a common source of confusion for physicians to hear "observation" and immediately think of an "observation unit" with all its implications for extra beds, extra nurses and even separate, additional provider staffing. It is important to emphasize, however, that observation is a correct coding initiative for work that the physician is already performing.

Proper identification of these cases can potentially significantly increase your annual practice revenue. Patient categories for observation include chest pain, abdominal pain, dehydration, asthma/COPD, syncope, renal colic, cellulitis, back pain, headache and other ailments including head injuries, poisonings, etc.

For instance, consider this case. A 35-year old presents with atypical chest pain with a non-diagnostic EKG and has a strong family history of coronary disease with no other risk factors. His internist thinks ischemia is unlikely but wants your help. He needs three sets of enzymes, two hours apart. Because the physician is performing this "observation" on the patient, it can be coded as such and will be reimbursed for more than standard ED evaluation and management services. The requirements for compliant coding are listed below:

  • Order to transfer to observation status
    • Provisional diagnosis
    • Orders for requisite testing/treatment
    • Progress note(s) — no frequency required
    • Discharge — either to home or inpatient
    • No need to rewrite the chart that got you a standard E/M service
    • Must document all three components of PMH/SH/FH (past medical history, social history, family history) for ED observation codes as listed below, as opposed to only two out of three needed to achieve the "comprehensive" level of service for ED evaluation and management (CPT code 99285).
  • With respect to observation time, Medicare requires at least eight hours to qualify for pro-fee billing, with a maximum of 48 hours in most circumstances. Private insurers have not set any minimum time, and according to Current Procedural Terminology: "Typical times have not yet been established for this category of services." Therefore it should be noted that a physician's observation time begins with the order to transfer to observation status, and it is obviously advantageous to initiate this status at the earliest identification of patients who might require extended ED workup to determine the potential need for hospital admission.

    There are certain parameters to billing for observation services, especially if it remains to be determined whether or not the patient will require hospital admission. "Waiting for a bed upstairs" does not equate to observation. If the decision to admit has already been made, then the physician is no longer observing, but instead simply "holding."

    Coding for observation status
    Emergency department physicians have traditionally limited themselves to coding services under CPT codes 99281-99285 for the evaluation and management of patients in the emergency department. However, when appropriate, observation codes (CPT codes 99217-99220) should be used to more accurately report the level of services provided.

    Observation codes in the ED are paid instead of (not in addition to) usual ED codes for E/M services. All other charge codes (procedures/facility coding) are unchanged. Below are listings of pro-fee CPT codes for ED observation services, for patients discharged on a different date and on different dates.

    Observation codes, for patients admitted and discharged on different dates (2012 updated codes noted below):

    99217 (discharge) RVU 2.04
    99218 RVU 2.81
    99219 RVU 3.81
    99220 RVU 5.22

    These codes apply to patients admitted on one date of service and discharged on a subsequent date. Both the service CPT codes (99218-99220) and the discharge CPT code (99217) are applied in these cases. Codes 99218 and 99219 apply to observation of patients with low- and moderately-severe problems and would generally not be applicable to the higher-complexity observation services taking place in the ED, for which 99220 would be the correct code choice.

    Observation codes for patients admitted and discharged on the same date

    99234 RVU 3.76
    99235 RVU 4.75
    99236 RVU 6.12

    Codes 99234 and 99235 refer to low-to-moderately complex cases, whereas 99236 is used for higher complexity cases. Here again, most patients requiring the extended evaluation implicit in ED observation services would, definitionally, be of the highest complexity, and assuming this is properly reflected in the documentation, the highest code (99236) would be the appropriate code choice for the encounter.


    E/M vs. observation coding
    The below example highlights the value of coding for true observation services of a high complexity case in the ED with observation codes, rather than with codes for general ED evaluation and management services.

    99285 (Complex E/M code) RVU 4.90
    99236 (Complex observation code) RVU 6.12


    Many physicians will ask the question: “Why go through the trouble for one extra RVU?" The answer is because you are doing it already and you are not getting paid for it. Further, general coding caveats require physicians to use the most appropriate code describing the services they are providing. The added revenue for a physician can add up over time as well. For example, If a physician sees 10 observation cases in a 24-hour period, that equals 3,650 cases per year, and 3,650 RVU x $35.8013 (2015 Conversion Factor) = $130,675.

    A final added bonus for physicians: gaining greater understanding and proper identification of observation cases within the ED practice will assist the hospital, particularly during a time of increased scrutiny and rejections of short-stay admissions. For example, hospitals now face potentially stiff financial penalties if their 30-day readmission rates for congestive heart failure, penmonia and acute myocardial infarction fall significantly outside established norms. Careful judgment on the part of emergency physicians regarding the need for a full service hospital admission will thus be mandatory, and the use of ED observation services will likely be viewed as a necessary component of many hospitals' action plan.

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    Ronald Stunz, MD, FACEP is the medical director for Zotec Partners.