Basics about Initial observation Care E/M CPT codes

Significant changes were made to the Evaluation and Management (E/M) Hospital Inpatient and Observation Care Services subsection of the Current Procedural Terminology (CPT^®) 2023 code set. Other E/M subsection revisions were discussed in previous CPT Assistant issues. In this issue, the newly combined subsection of hospital inpatient and observation care services for both new and established patients will be discussed. Combining these services into one subsection has required the deletion of seven codes and revision of 11 existing codes.

While this new subsection uses “and” in the title (ie, Hospital Inpatient and Observation Care Services) to indicate the combination of both inpatient and observation care codes into one subsection, it is important to note the use of “or” in the code descriptors in all of the codes in this section to indicate that they may be reported for either type of patient care setting (ie, inpatient or observation).

Prior to the 2023 changes, there were three sections and additional subsections:

• Hospital Observation Services
  • Initial Observation Care
  • Subsequent Observation Care
  • Observation Discharge
• Hospital Inpatient Services
  • Initial Hospital Inpatient Care
  • Subsequent Inpatient Care
  • Hospital Inpatient Discharge Services
• Observation or Inpatient Care Services (including admission and discharge)

To decrease physician or other qualified health care professional (QHP) administrative burden and the unnecessary documentation of information not pertinent to patient care, a joint workgroup of members from the American Medical Association, CPT Panel, and Specialty Society RVS Update Committee (RUC) was convened to propose changes to the CPT 2023 code set. For reporting purposes, caring for patients admitted to observation status is the same as caring for patients that have facility inpatient status. Clinicians may not have always been certain of patient status, which was often determined by the hospital or facility, sometimes retrospectively. In addition, services for observation-status patients reported by a physician other than the attending physician of record were sometimes reported as office or other outpatient services, which could result in confusion and denial of coverage; for example, requiring an office visit copay when the patient felt they were admitted to the hospital simply by virtue of being physically present in a hospital.

The CPT/RUC/E/M Workgroup determined that the best way to resolve reporting confusion was to combine the two major subsections and establish one comprehensive new subsection. The new Hospital Inpatient and Observation Care Services subsection now includes the 11 revised codes discussed above, together with new instructional guidelines and parenthetical notes. The term “admitted” is often understood to represent inpatient status; therefore, combining the previous subsections into a single subsection addressing either patient care setting (ie, inpatient or observation) assists in the selection of the appropriate E/M services code(s) for these common visits. The revisions also align with the CPT 2021 office or other outpatient service E/M code and other CPT 2023 E/M code revisions that use medical decision making (MDM) or total time on the date of the encounter for appropriate code selection.

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Description of CPT code 99234, 99235 & 99236

99234–Hospital inpatient or observation care, for the evaluation and management of a patient including admission and discharge on the same date, which requires a medically appropriate history and/or examination and straightforward or low level of medical decision making.

99235– Hospital inpatient or observation care, for the evaluation and management of a patient including admission and discharge on the same date, which requires a medically appropriate history and/or examination and moderate level of medical decision making.

99236– Hospital inpatient or observation care, for the evaluation and management of a patient including admission and discharge on the same date, which requires a medically appropriate history and/or examination and high level of medical decision making.

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For CPT 2023, three subsections — Hospital Observation Services, Observation Care Discharge Services, and Hospital Inpatient Services — have been combined into one cohesive and comprehensive new subsection titled “Hospital Inpatient and Observation Care Services,” which includes 11 revised codes (99221-99223, 99231-99233, 99234-99236, 99238, and 99239). The instructional guidelines clarify that the services in this section are used to report initial and subsequent E/M services provided to hospital inpatients or to patients designated as hospital outpatient “observation status.” Table 1 is a summary of the deleted codes and what should be reported in 2023 as a result of the consolidation of the hospital inpatient and observation care services.

Code Changes for Hospital Inpatient and Observation Care Service

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Description of CPT code 99224, 99225 & 99226

The Initial Observation Care subsection codes (99218-99220) and Subsequent Observation Care subsection codes (99224-99226), which are used to report initial and subsequent hospital observation care, respectively, were deleted for 2023. To report observation care services, codes 99221-99223 and codes 99231-99233 were revised to add observation care services to the code descriptors. The goal of these revisions is to create a comprehensive subsection of codes reported for hospital inpatient or observation care, instead of fragmented subsections of codes that may be mistakenly reported based on varying patient status, which may be challenging for physicians and other QHPs to ascertain.

Revisions were made to the descriptors for codes 99221-99223 and 99231-99233 to be consistent with revisions to other sections of E/M services, in which selecting the appropriate level of service will no longer require documentation of the three key components (history, physical examination, and MDM), but instead MDM or total time on the date of the encounter may be used to select the appropriate level of code. 

The time element for selecting the appropriate code when using total time rather than MDM was revised for this set of codes. For example, prior to 2023, code 99223 could have been reported using time if 70 minutes were spent at the bedside and on the patient’s hospital floor or unit; whereas, starting January 1, 2023, code 99223 may be reported for 75 minutes of total time, including all time spent for care of the patient on the date of the encounter. For time spent beyond 90 minutes on the date of encounter, users are instructed via a parenthetical note to report the newly established prolonged services add-on code 99418.

Similarly, prior to 2023, code 99233 could have been reported using time if 35 minutes were spent at the bedside and on the patient’s hospital floor or unit; whereas, starting on January 1, 2023, code 99231 may be reported for 50 minutes of total time when time is used for reporting the level of code. For time spent beyond 65 minutes, report new prolonged services add-on code 99418. For complete information regarding the total time revisions that were made to codes 99221-99233, see Table 1. Note that when using MDM to determine code selection, no minimum times are required.

Initial and Subsequent Hospital Inpatient/Observation Care Services: Total Time Revisions in 2023

*Time spent at the bedside and on the patient’s hospital floor or unit

** Total time related to patient care on the date of the encounter

Note that total time on the date of the encounter is by calendar date. When using MDM or total time for code selection, a continuous service that spans the transition of two calendar dates is considered as a single service and is reported on one calendar date. If the service is continuous before and through midnight, all of the time spent may be applied to the reported date of the service.    

Same-day admit and discharge services codes 99234-99236 were revised by replacing the three key-component requirements with MDM or total time on the date of the encounter. In addition, the total time required when time is the element used for reporting was adjusted for all three codes. For example, code 99234 requires 45 minutes of total time instead of 40 minutes spent with the patient, and code 99235 requires 70 minutes of total time spent instead of 50 minutes of time with the patient previously, while code 99236 requires a total time of 85 minutes instead of 55 minutes. It is important to note that the reporting of these three codes requires at least two encounters on the same date, one of which is the initial admission and another is the discharge. For time spent beyond 100 minutes, users are instructed to report new prolonged services add-on code 99418. For complete information regarding the total time revisions that were made to codes 99234-99236, see Table 2.  

Hospital Inpatient or Observation Care Services (Including Admission and Discharge Services): Total Time Revisions in 2023

* Time spent at the bedside and on the patient’s hospital floor or unit

** Total time related to patient care on the date of the encounter

Observation Care Discharge Services subsection and observation care discharge code 99217 were deleted. For 2023, the time-based discharge services codes 99238 and 99239 were revised to report either hospital inpatient discharge or observation discharge management services. The codes are now located in the revised Hospital Inpatient or Observation Discharge Services subsection. These codes should be used to report total time for all discharge-day management services provided to a patient on the date of discharge, if performed on other than the initial date of inpatient or observation care services. The physician or other QHP who is responsible for discharge services may report codes 99238 or 99239.

Discharge-day management services for a patient in observation or inpatient status that require 30 minutes or less on the date of the encounter are reported with code 99238. For services of more than 30 minutes, report code 99239. If a patient in observation status is admitted as an inpatient to another service, use codes 99231-99233 to report observation services provided to the patient prior to the admission to another service. Note that services by additional physicians or other QHPs that may include providing instructions to the patient and/or the patient’s family or caregiver and coordination of post-discharge services may be reported with codes 99231-99233.

Codes 99238 and 99239 may only be reported if the initial services for admission to the hospital as an inpatient or under observation care are performed on a different calendar date. If a patient is admitted and discharged during the same encounter, report codes 99221-99223, as appropriate. If a patient is admitted and discharged on the same calendar date with two encounters, codes 99234-99236 may be reported, as appropriate. It is important to note that codes 99238 and 99239 may not be reported with codes 99221-99223 for admission and discharge services on the same calendar date. In addition, if a neonate or newborn is admitted and discharged on the same date, code 99463, Initial hospital or birthing center care, per day, for evaluation and management of normal newborn infant admitted and discharged on the same date, should be reported.

In the E/M guidelines subsection, a new heading titled “Initial and Subsequent Services” was created, which details the rules applicable to the code families that use initial and subsequent services as compared to new or established patients.