New billing codes for ‘subsequent observation care’ services

Internists can use new procedure codes to be paid for the increasingly common service of evaluation and managing a patient after their admission to observation status in a hospital.

The new year brought numerous changes that have a significant impact on internists' practices. Internists can use new procedure codes to be paid for the increasingly common service of evaluating and managing a patient after the date of their admission to “observation status” in a hospital but prior to the date of observation status discharge.

There are three new codes in the evaluation and management (E/M) section of the Current Procedural Terminology (CPT) 2011 code book that describe a physician's “subsequent observation care” service to a patient. These codes were developed, with significant input from ACP, to enable physicians to more accurately report the work that is specific to these increasingly common services.


Before Jan. 1, the CPT book contained coding options for reporting observation services provided to a patient admitted on one date and discharged on a different date, and for a patient admitted and discharged on the same date. Without a specific mechanism to report a subsequent observation care service, coding guidelines dictated that a physician report the service using CPT 99499, the code for an unlisted E/M service, which requires the physician to submit documentation and gives Medicare discretion as to how much to pay.

The Centers for Medicare and Medicaid Services (CMS) has assigned a value to each subsequent observation care service that determines a national Medicare payment amount in 2011.

The accompanying table provides the “relative value” for each service, instead of listing the payment amount, because the conversion factor that Medicare uses to convert the relative value assigned to each service to a dollar payment amount for 2011 was unknown at the time this article went to press.

While ACP continues to press Congress and fully expects it to avert a devastating cut, perhaps replacing it with a continuation of the 2010 conversion factor, we are unable to predict the exact payment amount of the subsequent observation care and other services with confidence.

The CMS Physician Fee Schedule Search will let readers find the specific payment amount for these services that result from the 2011 conversion factor.

ACP has undertaken significant effort to realize a CMS relative value assignment that adequately captures the physician work and other resource inputs for these services relative to others. The College was a driving force behind the Relative Value Update Committee (RUC) recommending that CMS establish relative values higher than those listed here for each service. The RUC is the entity convened primarily by the American Medical Association that is composed of physicians appointed by major specialty organizations, including ACP.

ACP disputes the relative value CMS assigned to these codes, believing that the assignments do not fully account for the physician work involved in providing the services. The College will continue to urge CMS to use the RUC-recommended relative values.