Observation care is a set of specific, clinically appropriate services, which include ongoing short term treatment, assessment, and reassessment. Observation services are commonly ordered for patients who present to the emergency department and who then require a significant period of treatment or monitoring in order to make a decision concerning their admission or discharge.

Medicare pays for initial observation care billed by the physician responsible for the patient during his/her observation care. To bill observation care codes, patient must be in the observation unit and there must be a medical observation record for the patient which contains dated and timed physician order's regarding the observation services the patient is to receive, nursing notes and any progress notes prepared by the physician while the patient is receiving observation services. This must be in addition to any record prepared as a result of an emergency department or outpatient clinic encounter.

In addition to meeting the documentation requirements for history, examination and medical decision making, documentation in the medical record shall include:

  • Time in Observation status, including beginning and end times and dates;
  • Documentation identifying the billing physician was present and personally performed the services;
  • A written order identifying the referral to Observation by MD/NP and timely signed;
  • Documentation progress notes and discharge notes were written by the billing physician.


Last Updated Nov 21 , 2022