Answer: Your practice cannot bill the initial observation care. The doctor who admitted the patient to observation would report a code from the 99218-99220 (initial observation care, new or established patient) series for the first calendar date of care.
Your practice would assign only 99217 (observation care discharge day management) for the services provided on the second day. According to CPT, this code is used to report all services provided to a patient on discharge if they occur on a date other than the initial date of observation status.
If the patient had remained under observation for the entire second day and was discharged on the morning of day three, your physician would be allowed to report an office or outpatient visit code, or 99499 (unlisted evaluation and management service) for any care provided during the second day. In the past, the AMA has advised that 99499 would be the best code to use for the second day of a three-day stay, but it also advises coders to check with the payer in question and follow its policy.