Are observation codes submitted by the hour or by the calendar date?

Answer
Payment for an initial observation care code is for all the care rendered by the ordering physician on the date the patient’s observation services began.

Payment for a subsequent observation care code is for all the care rendered by the treating physician on the day(s) other than the initial or discharge date.

Observation Codes Scenarios
Reporting Requirements
Observation Care for less than eight hours on the same calendar date
  • Report an initial observation, CPT code from code range 99218–99220
  • Observation care discharge service, CPT code 99217 cannot be reported
Admission for observation care followed by discharge on a different calendar date
  • Report an initial observation, CPT code from code range 99218–99220 along with
  • Observation care discharge service, CPT code 99217
Observation care continues for three days
  • Report an initial observation care CPT code from code range 99218-99220 for the first day of observation care;
  • Report a subsequent observation care CPT code from code range 99224–99226 for the second day of observation care; and
  • Report observation care discharge CPT code 99217 for observation care on the discharge date
Observation care continues beyond three days
  • Report a subsequent observation care CPT code (992249–9226) for each day between the first day of observation care and the discharge date
Observation care is received for a minimum eight hours, but less than 24 hours, and discharge occurs on the same calendar date
  • Report an observation or inpatient care services (including admission and discharge services) from CPT code range 99234–99236
  • Observation care discharge service, CPT code 99217 cannot be reported

Resource: CMS IOM 100-04, Medicare Claims Processing Manual, Chapter 12, Section 30.6.8 (PDF, 1.05 MB).

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