There are 3 Observation Z code categories.

  • Z03: Encounter for Medical Observation for Suspected Diseases and Conditions Ruled Out
  • Z04: Encounter for Examination and Observation for Other Reasons
  • Z05: Encounter for Observation and Evaluation of Newborn for Suspected Diseases and Conditions Ruled Out

Official Coding Guideline I.A.21.c.6 states that these codes are used in very limited circumstances when a person is being observed for a suspected condition that is ruled out. Ruled Out are the key words here! The observation codes are not for use if an injury or illness or any signs or symptoms related to the suspected condition are present. In those cases, the diagnosis/symptom code is used with the corresponding external cause code.

The observation codes are primarily to be used as a principal/first-listed diagnosis. An observation code may be assigned as a secondary diagnosis code when the patient is being observed for a condition that is ruled out and is unrelated to the principal/first-listed diagnosis. Also, when the principal diagnosis is required to be a code from category Z38, Liveborn infants according to place of birth and type of delivery, then a code from category Z05, Encounter for observation and evaluation of newborn for suspected diseases and conditions ruled out, is sequenced after the Z38 code. Additional codes may be used in addition to the observation code, but only if they are unrelated to the suspected condition being observed.

Codes from subcategory Z03.7, Encounter for suspected maternal and fetal conditions ruled out, may either be used as a first-listed or as an additional code assignment depending on the case. They are for use in very limited circumstances on a maternal record when an encounter is for a suspected maternal or fetal condition that is ruled out during that encounter (for example, a maternal or fetal condition may be suspected due to an abnormal test result). These codes should not be used when the condition is confirmed. In those cases, the confirmed condition should be coded. In addition, these codes are not for use if an illness or any signs or symptoms related to the suspected condition or problem are present. In such cases the diagnosis/symptom code is used.

Additional codes may be used in addition to the code from subcategory Z03.7, but only if they are unrelated to the suspected condition being evaluated.

Codes from subcategory Z03.7 may not be used for encounters for antenatal screening of mother. See Section I.C.21. Screening.

For encounters for suspected fetal condition that are inconclusive following testing and evaluation, assign the appropriate code from category O35, O36, O40 or O41.