Principal diagnosis for observation converted to inpatient status

Selection of the principal diagnosis is crucial for correct DRG assignment and reporting of the patient’s condition. When a patient is converted from a medical or surgical Observation status to an Inpatient, the principal diagnosis should be the condition that necessitated Inpatient admission. Per ICD-10-CM Official Guidelines for Coding and Reporting FY 2021, the principal diagnosis is defined as “the condition established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.” This diagnosis may be different from the reason for the initial Observation care.