2023 Observation Coding and Reimbursement Update - Part One

Michael Granovsky, MD, CPC, FACEP 

2023 has brought with it a myriad of documentation, coding, and reimbursement changes impacting Observation services including:

1. Brand new 2023 Evaluation and Management Documentation Guidelines 
2. Changes to both the definitions and numeric codes used to report Observation services
3. 2023 new RVU valuations
4. Updated Medicare time requirements
5. Changes to the elements used to score medical decision making

This component of the Observation Medicine Section newsletter will focus on an overview of the 2023 Documentation Guidelines, changes to the numeric coding definitions, 2023 RVU valuations, and the 2023 Medicare time requirements.  In a subsequent article, we will drill down on the specific Medical Decision Making elements that determine Observation code assignment and documentation best practices.

2023 Observation Documentation Changes

The observation documentation and coding guidelines are significantly changed for 2023. The 2023 guidelines now have less burdensome documentation requirements. There are no longer specific documentation elements required for the history and physical examination. For example, the 2023 observation guidelines no longer mandate that a family history be documented for the highest level cases. Instead, only a "medically appropriate history and/or exam" is required. Beginning with 2023, medical decision making (MDM) OR time determines the level for observation visits.

Importantly, for 2023, the same day Observation services require that the patient be seen twice and have two distinct “encounters,” typically at the time of admission and again near the time of discharge. 

Changes to the Observation Numeric Codes and Definitions

• How is a single day Observation stay reported in 2023?

2023 Same day admit and discharge CPT Codes:

• • 99234 – Low-complexity MDM
  • 99235 – Moderate-complexity MDM
  • 99236 – High-complexity MDM

• How is a 2 day Observation Stay reported in 2023?

2023 Day 1 of a 2 day stay CPT Codes:

• • 99221 Initial hospital inpatient or observation care, per day, straight forward or low-level medical decision making
  • 99222 Initial hospital inpatient or observation care, per day, moderate medical decision making
  • 99223 Initial hospital inpatient or observation care, per day, high-level medical decision making

Note: Observation services have now been blended into the initial inpatient codes.

2023 The Discharge Day CPT Codes

• • 99238 Hospital inpatient or observation discharge day management; 30 minutes or less on the date of the encounter
  • 99238 Hospital inpatient or observation discharge day management; more than 30 minutes on the date of the encounter

Note: the Observation discharge codes are now time based with a threshold of 30 minutes. On the Discharge Day, physicians should document the amount of time spent caring for the patient and arranging for discharge.

• What if the Observation stay spans more than 2 days?

In 2023, the “middle days” of an Observation service are reported with CPT codes:

• • 99231 Subsequent hospital inpatient or observation care, per day, straightforward or low medical decision making
  • 99232 Subsequent hospital inpatient or observation care, per day, moderate medical decision making
  • 99233 Subsequent hospital inpatient or observation care, per day, high-level medical decision making

Note: Observation services have now been blended into the subsequent inpatient codes.

What are the Time Requirements for 2023 Observation Services? 

What are the Medical Decision Making Requirements for 2023 Observation Services?

There have been a lot of numeric coding changes for Observation for 2023. Is there some kind of cheat sheet to track the evolution of the codes? 

2023 Observation RVUs

Have the RVUs for Observation codes changed for 2023?

The RVUs for Observation are stable and nicely value the cognitive work required for these longer stays: 

Same Day Obs 2022 vs 2023

Multi Day Obs 2022 vs 2023

2023 Medicare Time Requirements

The Medicare timing requirements seem complex. Is there a summary table available that details the various time requirements and codes?

CMS provided the table below in the 2023 Medicare Physician Fee Schedule Final Rule. The actual CPT codes have been added for additional clarity.

Summary of Final Policy for the “8 to 24 Hour” Rule

The other general rules surrounding Observation have not changed drastically including:

• Medicare requirement of 8 hours to use the same day Observation codes 99234-99236
• Observation is a status, not a location, and the patient may be in a hallway, ED bed, separate formal CDU, or an “upstairs ward” that could also house inpatients
• Observation is generally not appropriate for routine recovery following procedures
• Despite the significant professional side changes to Observation for 2023 the facility reporting of Observation generally remains the same.

Readers are encouraged to access the ACEP FAQs which are maintained by the Coding and Nomenclature Committee. 

• ACEP // Observation Physician Coding FAQ
• ACEP // Observation Care Payments to Hospitals FAQ

Dr. Granovsky is the President of LogixHealth, a national ED coding and billing company processing over 13 million annual encounters. He has served as the chair of both the ACEP Coding and Nomenclature Committee and ACEP Reimbursement Committee and is the current course director of the ACEP National Coding and Reimbursement Conference. Questions? Contact Dr. Granovsky.