This workshop is devoted to the observation services with an emphasis on coding, billing and financial impacts with the development of the observation C‐APC (Comprehensive APC) under the Medicare Outpatient Prospective Payment System (OPPS). Observation continues as a problem area relative to proper coding, billing and documentation particularly in relationship with the propriety of inpatient admissions. CMS through the OPPS has developed a packaged payment process using a C‐APC that makes a blanket payment of observation services. Whether hospitals even recover their costs under this packaged approach is problematic given the extreme variability of services and the host of challenges with determining proper inpatient admissions. The reimbursement differences between a short inpatient stay versus observation will also be discussed.