Experts agree: You should always report place-of-service code 22 (Outpatient hospital) when you bill observation service codes (99217-99220, 99234-99236). In our March 2004 Reader Question "Report Place-of-Service Code 21 or 23 for Observation Services," we advised billers to use place-of-service codes 21 (Inpatient hospital) or 23 (Emergency room - hospital) for observation services, but further investigation revealed this is incorrect.
Always 22: "If you're going to bill an observation code, then the place of service is 22," says Catherine A. Brink, CMM, CPC, president of Healthcare Resource Management Inc., in Spring Lake, N.J. Just be careful not to be misled by the word "observation" in a patient's chart. Unless the physician clearly states that he has placed the patient under "observation status," the service does not warrant an observation service code, and place-of-service code 22 may not be appropriate, Brink says.
For example: The physician's documentation may state that the physician "observed" a patient while treating him in the emergency room. You would report this service with the appropriate emergency-department procedure code with place-of-service code 23 because the physician did not clearly document that the patient was under actual "observation status."