A hospitalist group we talked to last week had a stack of remittances with CO-181 on them: procedure code invalid on the date of service. Every one was an observation code, 99218 through 99220 or 99224 through 99226, on a date of service in January. The codes had been deleted on January 1, 2023, the charge master had not been updated, and nobody noticed until the money did not come in.
This is the first big test of the 2023 CPT evaluation and management revisions, which took effect January 1, 2023. The AMA extended the framework it introduced for office visits in 2021 (code selection by medical decision making or by total time on the date of the encounter) to hospital inpatient and observation care, consultations, emergency department visits, nursing facility visits and home or residence visits. Most of the attention in the fall was on the concepts. Five weeks in, the problems are practical: deleted codes still loaded in systems, two different prolonged service code sets, and notes that support a level in the physician's head but not on paper.
Key takeaways
- Observation codes 99217 to 99220 and 99224 to 99226 were deleted on January 1, 2023. Observation is now reported with the inpatient codes 99221 to 99223, 99231 to 99233 and 99238 or 99239.
- Level selection for hospital, consultation, nursing facility and home visits is now by medical decision making or total time. Emergency department visits are by MDM only.
- Prolonged services have two code sets: CPT 99417 and 99418, and Medicare G2212, G0316, G0317 and G0318, and Medicare's time threshold starts 15 minutes later.
- January claims denied CO-181 for deleted codes are corrected claims, not appeals, and most payers accept them within normal timely filing.
- The documentation failure we see most is implied MDM: the note lists the problems but never states their status, the data reviewed or the risk of the management chosen.
What was deleted and where it went
The observation care codes are gone. Initial observation care (99218 to 99220), subsequent observation care (99224 to 99226) and observation discharge (99217) were deleted. Observation is now reported with the hospital inpatient codes: 99221 to 99223 for initial care, 99231 to 99233 for subsequent care, and 99238 or 99239 for discharge. Same-day admission and discharge stays with 99234 to 99236. The distinction between inpatient and observation status still matters to the hospital and to the patient's Part A or Part B coverage, but it no longer changes the professional code.
The lowest consultation codes, 99241 (office) and 99251 (inpatient), were deleted because they duplicated the low levels above them. The remaining consultation codes, 99242 to 99245 and 99252 to 99255, now use MDM or time. Medicare still doesn't recognize consultation codes at all, so for Medicare patients you continue to report the appropriate office or hospital visit code.
Domiciliary and rest home codes (99324 to 99328 and 99334 to 99337) were deleted and folded into the home or residence codes 99341 to 99350, with 99343 also deleted. The old prolonged service codes 99354 to 99357 were deleted. If any of these codes is still selectable on an encounter form, a superbill or a charge master, it will be selected, and the claim will deny.
The time thresholds you need on the wall
When you code by time, the total time on the date of the encounter includes non face-to-face work: reviewing the record, documenting, ordering, and coordinating with other clinicians. It excludes separately reported services and time spent by clinical staff. The 2023 thresholds are minimums, not ranges. A 74-minute admission is a 99222, not a 99223.
| Code | Service | Total time on the date of encounter |
|---|---|---|
| 99221 / 99222 / 99223 | Initial hospital inpatient or observation care | 40 / 55 / 75 minutes |
| 99231 / 99232 / 99233 | Subsequent hospital inpatient or observation care | 25 / 35 / 50 minutes |
| 99234 / 99235 / 99236 | Admission and discharge on the same date | 45 / 70 / 85 minutes |
| 99238 / 99239 | Hospital discharge day management | 30 minutes or less / more than 30 minutes |
| 99252 / 99253 / 99254 / 99255 | Inpatient or observation consultation | 35 / 45 / 60 / 80 minutes |
Emergency department codes 99281 to 99285 are the exception: they are selected by MDM only, because ED time is too fragmented to count. Code 99281 was also revised so that it no longer requires the physician or qualified health professional to be present, which makes it the ED equivalent of 99211.
Prolonged services: two code sets, two clocks
This is the part everyone gets wrong. CPT created 99418 for prolonged inpatient or observation care, reported with the highest level code (99223, 99233 or 99236) for each additional 15 minutes. CMS did not adopt it. For Medicare you report G0316 instead, and Medicare's clock starts later than CPT's. With 99223, CPT allows 99418 once total time reaches 90 minutes. Medicare allows G0316 only once total time reaches 105 minutes. The same pattern applies in the office: CPT uses 99417 with 99205 or 99215, Medicare uses G2212, and Medicare's threshold is 15 minutes later (89 minutes for a new patient, 69 for an established one). CMS also created G0317 for nursing facility and G0318 for home or residence prolonged services.
Medicare's reasoning is that the CPT thresholds begin counting at the minimum time for the top code, while Medicare wants the full range of the top code used up first. Whether you agree with that or not, it means your practice management system needs payer-specific rules, not a single prolonged service code. In practices where the same physician sees Medicare and commercial patients in the same hospital, we have seen both codes billed to the wrong payer in the same week. The Medicare code sent to a commercial plan denies as invalid; the CPT code sent to Medicare denies as not covered. Both are avoidable with one edit in the scrubber.
Where the documentation fails
Under the old rules a level 3 admission needed a comprehensive history and exam. Under the 2023 rules the history and exam should be medically appropriate and are no longer scored. Code level comes from MDM (two of three elements: problems addressed, data reviewed and analyzed, risk of complications or management) or from time.
The failure we see most is a note that supports a high level of MDM in the clinician's head but not on paper. The problem list says "sepsis" but the assessment does not state that the condition poses a threat to life or bodily function. Labs were reviewed but the note does not say which, or that an independent historian was needed. Total time is documented as "greater than 75 minutes" with no number. Auditors will not give credit for what is implied.
The second failure is double counting. If a physician bills a hospital visit and a separately reported procedure on the same day, the time for the procedure comes out of the E/M time. If two clinicians in the same group and specialty both see the patient on the same date, their time is combined into one visit, not two. And a test that is ordered and later reviewed counts once, at the order, not twice.
A worked admission, leveled two ways
A fictional 78-year-old patient is admitted from the emergency department with community-acquired pneumonia, a new oxygen requirement, and chronic kidney disease stage 3 that is worse than baseline. The hospitalist reviews the ED notes, the chest film and six lab results, speaks with the daughter because the patient is confused, starts intravenous antibiotics and decides against ICU transfer for now.
By MDM: problems addressed are an acute illness with systemic symptoms that poses a threat to bodily function, which is high. Data is extensive: review of external notes, review of more than three tests, an independent historian, and the ED radiograph. Risk is high because of the decision about escalation of hospital-level care, which the 2023 MDM table lists as a high-risk example, on top of the prescription drug management. Two of three elements are high, so the visit is a 99223, provided the note actually says these things. If the assessment reads "pneumonia, CKD, start antibiotics" with no status words and no listing of what was reviewed, an auditor scores it moderate and the claim drops to 99222.
By time: the hospitalist documents 35 minutes in the ED reviewing and examining, 20 minutes on the call with the daughter and the pharmacist, and 25 minutes documenting and ordering, for a total of 80 minutes on the date of service. That is also a 99223 (75 minutes or more). At 95 minutes CPT would allow 99418 for a commercial patient; Medicare would need 105 minutes before G0316 applies. The same encounter, coded correctly, produces different claim lines depending on the payer, and that is exactly why the billing rule cannot be a single code.
Questions we hear
Can we still bill observation with the old codes for dates before January 1?
Yes. Code sets apply by date of service. A December 2022 observation stay is still reported with 99218 to 99220, and a stay that crossed midnight into January uses the 2022 codes for December dates and the 2023 codes for January dates. Payers processing 2022 claims in 2023 should still accept the 2022 codes for 2022 dates; if one does not, it is the payer's edit that is wrong, and a call to provider relations usually fixes it.
Does the patient's observation status still matter to us?
For the professional claim, no. For the patient, yes: observation is outpatient, so Part B cost sharing and the three-day inpatient rule for skilled nursing facility coverage still apply. The hospital's notice requirements did not change. Your coders should stop asking "was this observation or inpatient" for code selection and start asking "how much time, and what was the MDM".
Should we code everything by time now?
No. Time works well for long, complex admissions and for discharge day management, where the work is real but the MDM may be modest. For routine subsequent visits MDM usually supports the level with less documentation burden, and a physician who writes a time statement on every note invites an audit of the day's total minutes. Pick the method that the note supports and be consistent within the encounter. Our live RCM training courses cover the MDM table with worked hospital examples, and the Revelrex coding service reviews hospital-based physician notes against the 2023 rules before the claim goes out.
What to do this month
- Update the charge master and encounter forms to remove 99217 to 99220, 99224 to 99226, 99241, 99251, 99343, 99324 to 99328, 99334 to 99337, and 99354 to 99357. Search the favorites lists too; that is where deleted codes hide.
- Split the prolonged service rules in the practice management system into a CPT set (99417, 99418) and a Medicare set (G2212, G0316, G0317, G0318), with the Medicare thresholds loaded, and add a scrubber edit that blocks the wrong set for the payer.
- Correct and resubmit January claims denied CO-181 with the crosswalked inpatient code. These are corrections, not appeals; note the original claim number on the corrected claim where the payer requires it.
- Edit the hospital note templates to include a total time field that takes a number, a problem list with status wording (stable, worsening, threat to life), and a data section that lists what was reviewed and who was spoken to.
- Run a 20-chart audit per hospital-based physician for January, comparing the billed level to MDM and to documented time, and share the results by name before the pattern hardens.
