Medical Inpatient, Outpatient and Observation Billing Codes

The medical coder has to define the patient’s relationship to the hospital, (inpatient, outpatient or under observation), while receiving treatment in the hospital to properly code a claim.

Inpatient and outpatient codes

A consideration that defines the correct code choice is whether the patient is an inpatient or outpatient. Curiously, being in the hospital overnight does not necessarily mean that the patient is an inpatient. Here’s the distinction:

  • Inpatient: An inpatient is a person who has been officially admitted to the hospital under a physician’s order. The patient remains an inpatient until the day before the day of discharge.

  • Outpatient: A patient who comes through the emergency room and is being treated or who is undergoing tests but has not been admitted to the hospital is an outpatient, even if she spends the night.

Misrepresenting a patient’s inpatient or outpatient status may lead to accusations of fraud, although sometimes the misrepresentation is unintentional. Documentation can be difficult to interpret when the patient status changes.

Observation codes

You use observation service codes to bill for the physician’s time when the patient is being seen at the hospital but the decision whether to admit has not been made. For example, a patient may come to the emergency room with chest pain, breathing difficulties, dangerously elevated blood pressure, or any number of symptoms, and that patient may spend one or two nights in the hospital.

But if the physician has not written an order to admit the patient as an inpatient, it is an outpatient visit, and observation codes are the appropriate choice.

Always verify that a written order is part of the patient record, regardless of how often the physician sees the patient in the hospital setting. Without the written order, the visits are observations, or they may be consultation visits if the billing physician is seeing the patient at the request of another physician.

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