When may a physician bill for initial observation care?

When a physician decides to place a patient in “hospital observation” status, that patient has not formally been admitted to that hospital. The physician who placed the patient in “hospital observation,” is the only one who may care for the patient during his/her stay in observation, and the only one that may bill the hospital observation codes.

In order to bill the initial observation care codes, 99218 through 99220, the following must be created and maintained:

  • A medical observation record for the patient which contains dated and timed physician’s admitting orders regarding the care the patient is to receive while in observation;
  • Nursing notes; and
  • Progress notes prepared by the physician while the patient was in observation status.

If applicable, this record is in addition to any record prepared as a result of an emergency department or outpatient clinic encounter.

When payment is made for an initial observation care code, it is for all the care rendered by the physician on the date the patient was placed in observation. All other physicians who see the patient in observation must bill the outpatient/office visit codes, or outpatient consultation codes, for the services they provide to that patient.

For example, if an internist admits a patient to observation and asks an allergist for a consultation on the patient’s condition, only the internist may bill the initial observation care code. The allergist must bill using the outpatient consultation code that best represents the services provided. The allergist cannot bill an inpatient consultation because the patient was not admitted as a hospital inpatient.