REIMBURSEMENT GUIDELINES

Initial Observation Care 

The physician supervising the care of the patient designated as "observation status" is the only physician who can report an initial Observation Care CPT code (99218-99220). It is not necessary that the patient be located in an observation area designated by the hospital, although in order to report the Observation Care codes the physician must: 

 Indicate in the patient's medical record that the patient is designated or admitted as observation status; 

 Clearly document the reason for the patient to be admitted to observation status; and 

 Initiate the observations status, assess, establish and supervise the care plan for observation and perform periodic reassessments

The CPT codebook states that "When "observation status" is initiated in the course of an encounter in another site of service (e.g., hospital emergency department, office, nursing facility) all evaluation and management services provided by the supervising physician or other qualified health care professional in conjunction with initiating "observation status" are considered part of the initial observation care when performed on the same date. The observation care level of service reported by the supervising physician should include the services related to initiating "observation status" provided in the other sites of services as well as in the observation setting."

Oxford follows the Centers for Medicare and Medicaid Services' (CMS) Claims Processing Manual which provides the instructions, "for a physician to bill the initial observation care codes [99218-99220], there must be 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. This record must be in addition to any record prepared as a result of an emergency department or outpatient clinic encounter." 

Consistent with CMS guidelines, Oxford requires that an Initial Observation Care CPT code (99218-99220) should be reported for a patient admitted to observation care for less than 8 hours on the same calendar date.