The landscape of hospital inpatient and observation Evaluation and Management (E/M) codes (99221-99239) underwent significant changes in CPT® 2023. If you’re navigating the complexities of these updated codes, especially distinguishing between initial and subsequent care, you’re not alone. This guide, drawing on expert insights, clarifies the critical aspects of these revisions to ensure accurate coding and billing practices.
Key Shift: MDM or Time as the Determining Factor
A fundamental change in the 2023 CPT® update for hospital inpatient or observation care (codes 99221 through 99239) is the removal of the mandatory three key components – history, examination, and Medical Decision Making (MDM). The revised guidelines now allow coders to select the appropriate E/M code based on either MDM level or total time spent on the date of the encounter.
Previously: Code 99221 was defined by requiring “A detailed or comprehensive history; A detailed or comprehensive examination; and Medical decision making that is straightforward or of low complexity…”
Currently: Code 99221 is defined as: “Initial hospital inpatient or observation care, per day, for the evaluation and management of a patient, which requires a medically appropriate history and/or examination and straightforward or low level medical decision making. When using total time on the date of the encounter for code selection, 40 minutes must be met or exceeded.”
While the shift to MDM or time mirrors changes in office E/M coding from 2021, coders are encountering new challenges, particularly in understanding Place of Service (POS) updates for observation codes and the nuances of initial versus subsequent care.
Challenge 1: Place of Service (POS) Confusion for Observation Codes
One of the most significant points of confusion arises from the expanded application of codes 99221-99239 to include both hospital inpatient and observation services. Jill Young, CPC, CEDC, CIMC, owner of Young Medical Consulting, highlights the challenge, noting, “This has been a challenge for coders and payers.”
Historically, codes 99221-99239 were exclusively for hospital inpatient services. The 2023 revision explicitly broadens their scope to “hospital inpatient or observation,” accompanied by the elimination of initial inpatient observation codes 99218-99226. Now, codes 99221-99233 are used for initial observation care.
POS Clarification: Despite the term “observation,” patients do not need to be physically located in a designated observation unit within the hospital for these codes to apply. CPT® 2023 guidelines clarify that “observation status” within the hospital, regardless of location, qualifies for the revised codes.
Potential Issues: Misidentification of POS by physicians or staff for observation patients can lead to coding errors. Furthermore, some payers may not have updated their systems to recognize “observation” as a valid POS for these codes, potentially causing claim denials.
Best Practice: Ensure providers accurately identify POS for patients in observation status. Monitor for POS-related denials, as payer system updates may be lagging.
Challenge 2: Navigating Initial Care Rules with Multiple Providers
Another area requiring adjustment is reporting initial hospital care when multiple providers from the same specialty are involved in a patient’s admission.
Mary I. Falbo, MBA, CPC, CEO of Millennium Healthcare Consulting Inc., explains that traditionally, only the admitting physician could report initial hospital care codes (99221-99223).
The updated CPT® 2023 E/M guidelines state: “An initial service may be reported when the patient has not received any professional services from the physician or other qualified health care professional (QHP) or another physician or QHP of the exact same specialty and subspecialty who belongs to the same group practice during the stay.”
This means that only one initial hospital observation code can be billed per patient admission by providers of the same specialty and group practice. Falbo emphasizes, “CPT® clarifies in the 2023 E/M guidelines that a hospital admission is from when the patient is admitted until when the patient is discharged. That’s one course of admission, so [payers] would expect to see only one initial code for that course of stay from practitioners of the same specialty and subspecialty who belong to the same group practice. This is an adjustment.” This also extends to advanced practice providers. CPT® considers NPs and PAs assisting a physician to be of the same specialty and subspecialty as the physician and therefore cannot bill separately for initial care services.
Best Practice: Avoid duplicate claims for initial observation care. Verify payer adherence to the 2023 inpatient/hospital E/M rules, particularly regarding initial service limitations within the same specialty and group practice.
Challenge 3: Applying Subsequent Care Codes Appropriately
Understanding when to use subsequent care codes is crucial, especially when a patient’s care continuum begins prior to hospital admission.
Young explains a scenario: “where their physician or NP or PA have seen the patient for the problem or a related one the day before or the day of the patient’s admission to either observation or hospitalization status. Per CPT® guidelines, their visit to the patient who is now in the hospital can only be billed with a subsequent care code, not an initial. This is for non-admitting providers.”
In essence, if a provider within the same group has already seen the patient for the same or related issue in an office or other outpatient setting shortly before the inpatient or observation admission, subsequent care codes (99231-99233, 99238-99239) are appropriate for the hospital encounter. This applies to non-admitting providers who are continuing care initiated in another setting.
Best Practice: Review the patient’s encounter history to determine where the care episode originated. Prior outpatient visits for the same condition by a provider in the same group may necessitate coding for subsequent hospital care rather than initial care.
Final Expert Insights on Inpatient/Observation E/M Coding
Our experts offer these concluding recommendations for navigating the revised hospital/inpatient E/M codes:
Young advises, “Remember that if a patient is in observation status and transitions to hospital status, it is still one continuous episode of care. The physician can only bill one Initial care code for this patient, even though their status changed. Also remember, per CPT® guidelines NP’s and PA’s that work with a specialty or subspecialty physician are considered as being a provider of that same specialty as their physician.”
Falbo adds, “During an inpatient or observation stay, the group may bill only one initial service, and follow-up services are billed with subsequent visits. This is not a change in how groups are reporting inpatient or observation services. When partners are covering for one another, the practitioner who does the initial service bills for the initial service and on subsequent days covering physicians report a subsequent visit. It is aligned with the Medicare rule that physicians in the same group of the same specialty should bill and be paid as if they were one physician.”
By understanding these key distinctions between initial and subsequent inpatient/observation care, and by staying informed about POS guidelines and provider rules, healthcare professionals can confidently navigate the 2023 E/M coding updates and ensure accurate reimbursement.
