Medical Code Sets

The Current Procedural Terminology^® (CPT^®) code set is maintained by the American Medical Association through the CPT Editorial Panel. The CPT code set accurately describes medical, surgical, and diagnostic services and is designed to communicate uniform information about medical services and procedures among physicians, coders, patients, accreditation organizations, and payers for administrative, financial, and analytical purposes.

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Each year, in the United States, health care insurers process over 5 billion claims for payment. For Medicare and other health insurance programs to ensure that these claims are processed in an orderly and consistent manner, standardized coding systems are essential. The HCPCS Level II Code Set is one of the standard code sets used for this purpose. The HCPCS is divided into two principal subsystems, referred to as level I and level II of the HCPCS. Level I of the HCPCS is comprised of CPT (Current Procedural Terminology), a numeric coding system maintained by the American Medical Association (AMA). The CPT is a uniform coding system consisting of descriptive terms and identifying codes that are used primarily to identify medical services and procedures furnished by physicians and other health care professionals. These health care professionals use the CPT to identify services and procedures for which they bill public or private health insurance programs. Decisions regarding the addition, deletion, or revision of CPT codes are made by the AMA. The CPT codes are republished and updated annually by the AMA. Level I of the HCPCS, the CPT codes, does not include codes needed to separately report medical items or services that are regularly billed by suppliers other than physicians.

Level II of the HCPCS is a standardized coding system that is used primarily to identify products, supplies, and services not included in the CPT codes, such as ambulance services and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) when used outside a physician's office. Because Medicare and other insurers cover a variety of services, supplies, and equipment that are not identified by CPT codes, the level II HCPCS codes were established for submitting claims for these items. The development and use of level II of the HCPCS began in the 1980's. Level II codes are also referred to as alpha-numeric codes because they consist of a single alphabetical letter followed by 4 numeric digits, while CPT codes are identified using 5 numeric digits

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The International Statistical Classification of Diseases and Related Health Problems (commonly known as the ICD) provides alpha-numeric codes to classify diseases and a wide variety of signs, symptoms, abnormal findings, complaints, social circumstances and external causes of injury or disease. Nearly every health condition can be assigned to a unique category and given a code, up to six characters long. Such categories usually include a set of similar diseases.

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ABC codes were originally developed to process claims addressing conventional, complimentary, and alternative health care services not routinely included in traditional medical billing codes (ABC Coding Systems). These codes provide a more detailed description of health care services to assure appropriate reimbursement (Giannini, 2005). ABC codes fill in the missing gaps found in the older medical coding systems making the new billing system more reliable and cost effective. Not only are these codes used to improve billing systems but they are also used in practice management, medical record keeping, insurance claims, benefits, and administrative activities.

The mission of this specific vocabulary is empowering greater access to quality care at less cost. The vision of this vocabulary is improving the health and welfare of our nation and our world. The ABC coding system incorporates their mission and vision into practice by getting the right care to the right people, in the right time and place, at a rationale cost (ABC Coding Systems).

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Medicare is the nation’s health insurance program for the aged and disabled. Part A of the program, the Hospital Insurance program, covers hospital services, post-hospital services provided in skilled nursing facilities and by home health care agencies, and hospice services. Part B, the Supplementary Medical Insurance program, covers a broad range of complementary medical services including physician, laboratory, and outpatient hospital services, and durable medical equipment. Part C provides managed care options for beneficiaries who are enrolled in both Parts A and B. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) added Part D to Medicare, which is a new prescription drug benefit that begins January 1, 2006.

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The 2006 Tax Relief and Health Care Act (TRHCA) (P.L. 109-432) required the establishment of a physician quality reporting system, including an incentive payment for eligible professionals (EPs) who satisfactorily report data on quality measures for covered services furnished to Medicare beneficiaries during the second half of 2007 (the 2007 reporting period). CMS named this program the Physician Quality Reporting Initiative (PQRI).

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An LMRP is a Local Medical Review Policy. LMRPs are the coverage policies that are developed by the Medicare Insurance Carriers and apply directly to claims made to the Insurance Carrier for Coverage under Medicare. LMRPs outline how local carriers will review claims to ensure that they meet Medicare coverage and coding requirements. They specify under what clinical circumstances a service is covered and correctly coded. An LMRP includes a description of the service, specific procedure codes, and for each of these procedures, a list of covered and non-covered diagnostic codes.

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An NCD sets forth the extent to which Medicare will cover specific services, procedures, or technologies on a national basis. Medicare contractors are required to follow NCDs. If an NCD does not specifically exclude/limit an indication or circumstance, or if the item or service is not mentioned at all in an NCD or in a Medicare manual, it is up to the Medicare contractor to make the coverage decision (see LMRP). Prior to an NCD taking effect, CMS must first issue a Manual Transmittal, CMS ruling, or Federal Register Notice giving specific directions to our claims-processing contractors. That issuance, which includes an effective date and implementation date, is the NCD. If appropriate, the Agency must also change billing and claims processing systems and issue related instructions to allow for payment. The NCD will be published in the Medicare National Coverage Determinations Manual. An NCD becomes effective as of the date listed in the transmittal that announces the manual revision.

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An LCD, as established by Section 522 of the Benefits Improvement and Protection Act, is a decision by a fiscal intermediary or carrier whether to cover a particular service on an intermediary-wide or carrier-wide basis in accordance with Section 1862(a)(1)(A) of the Social Security Act (i.e., a determination as to whether the service is reasonable and necessary). The difference between LMRPs and LCDs is that LCDs consist only of "reasonable and necessary" information, while LMRPs may also contain category or statutory provisions.

The final rule establishing LCDs was published November 11, 2003. Effective December 7, 2003, CMS's contractors will begin issuing LCDs instead of LMRPs. Over the next 2 years (until December 31, 2005) contractors will convert all existing LMRPs into LCDs and articles. Until the conversion is complete, for purposes of a 522 challenge, the term LCD will refer to both 1.) Reasonable and necessary provisions of an LMRP and, 2.) an LCD that contains only reasonable and necessary language. Any non-reasonable and necessary language a contractor wishes to communicate to providers must be done through an article.

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The Centers for Medicare and Medicaid Services developed the National Correct Coding Initiative (NCCI) as a proposal and effort to promote correct coding methodologies at a national level in the US and to control improper coding in Part B claims.

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A fee schedule is a complete listing of fees used by Medicare to pay doctors or other providers/suppliers. This comprehensive listing of fee maximums is used to reimburse a physician and/or other providers on a fee-for-service basis. CMS develops fee schedules for physicians, ambulance services, clinical laboratory services, and durable medical equipment, prosthetics, orthotics, and supplies.

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An RVU (Relative Value Unit) is a comparable service measure used by hospitals to permit comparison of the amounts of resources required to perform various services within a single department or between departments. It is determined by assigning weight to such factors as personnel time, level of skill, and sophistication of equipment required to render patient services. RVUs are a common method of physician bonus plans based partially on productivity.

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The Department of Health and Human Services (HHS) has mandated industry-wide adoption of ICD-10-CM and ICD-10-PCS code sets by Oct. 1, 2011. ICD-10-CMS will affect all components of the healthcare industry. Ambulatory surgery centers (ASCs) will not be affected by ICD-10-PCS unless they are utilizing ICD-9-CM volume 3 for inpatient procedures.

The two major changes in the ICD-9-CM to ICD-10-CM code sets are structure and detail. The codes will move from a numeric five-character size to an alphanumeric seven-character size. At current count, there are approximately 17,000 ICD-9-CM codes and the possibility of 155,000 ICD-10-CM codes. The codes are far more specific which will allow for greater accuracy.

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The ICD-10 Procedure Coding System (ICD-10-PCS) is a system of medical classification used for procedural codes. The National Center for Health Statistics (NCHS) received permission from the World Health Organization (WHO), the body responsible for publishing the International Classification of Diseases to create the ICD-10-PCS as a successor to Volume 3 of ICD-9-CM and a clinical modification of the original ICD-10. The final draft was completed in 2000, but the system still has not been implemented, as the WHO has not yet set any anticipated implementation date at which to phase out ICD-9-CM.

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