Healthcare Common Procedure Coding System (HCPCS)

In 1983, the Health Care Financing Administration (HCFA), now known as the Centers for Medicare and Medicaid Services (CMS), adopted the HCFA Common Procedure Coding System (HCPCS) for use when submitting claims to Medicare carriers. Other payers such as Blue Cross/Blue Shield followed suit and adopted HCPCS for claim submission. In 1983, HCPCS consisted of three levels of codes: Level I CPT codes; Level II Medicare National Codes; and Level III Local Regional codes. In June 2001, the procedure coding system name was changed to the Healthcare Common Procedure Coding System (HCPCS). Healthcare Common Procedure Coding System (HCPCS) is the standard coding system adopted under HIPAA for use in coding services, procedures, and items. The HCPCS coding system consists of two levels of codes—Level I CPT and Level II Medicare National Codes.

International Classification of Diseases (ICD) Procedure Codes

The International Classification of Disease, 9th Revision, Clinical Modification (ICD-9-CM) Volume III procedure coding system has been the primary coding system for reporting significant procedures performed during a hospital inpatient stay since 1979. The International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) is scheduled to replace ICD-9-CM Volume III procedure codes. The standard code set under HIPAA for coding procedures, services, and items effective October 1, 2014 will be HCPCS, NDC, and ICD-10-PCS.

Development of ICD-10

The World Health Organization (WHO) published the newest version of the ICD with a new name, the International Classification of Diseases, 10th Revision (ICD-10), in 1993. ICD-10 has been implemented in many countries including the United Kingdom, France, Australia, Germany, and Canada. WHO granted permission to the National Center for Health Statistics (NCHS), an agency under the Centers for Disease Control and Prevention (CDC), to clinically modify the ICD-10 diagnosis coding system and to create a procedure coding system to replace ICD-9-CM Volume III. The ICD-10 consists of two coding systems, each presented in a separate manual.

The system was designed to provide the level of detail required to assess and track the quality of medical processes and outcomes and compile statistics that are valuable tools for research. The development of ICD-10-PCS was performed with the goal of incorporating the following attributes:

Purpose of Procedure Coding

Procedure coding systems are designed to provide a standardized system for describing and classifying data regarding services rendered. The use of coding classification systems provides an efficient method to collect, track, research, and analyze specified data. Coded health care data constitute the primary key to reimbursement and statistical analysis by hospitals, insurance companies, health care facilities, and other relevant organizations. Quality coding is necessary to ensure accurate and reliable data is gathered for budgeting, clinical research, credentialing, peer review, education, financial analysis, marketing, patient care, quality assurance, risk management statistics, strategic planning, utilization management, and other internal or external facility purposes. Procedure codes are used to communicate with various payers regarding procedures, services, or items provided during a hospital visit. Payers determine reimbursement using the procedures codes submitted.

Hospital coding professionals should master an understanding of coding guidelines and principals to ensure that an accurate description of procedure(s) is given, compliance with coding guidelines is achieved, and proper reimbursement is obtained.

Procedure Coding Defined

The definition of coding is the assignment of numeric or alphanumeric codes to all health care data elements of outpatient and inpatient care. Procedure coding is the process of translating written descriptions of procedures, services, and items documented in the patient’s medical record into numeric or alphanumeric codes. Procedure coding is an essential component of the billing process (Figure 8-3). The description of procedures, services, and items provided during a hospital visit is communicated to payers using procedure coding systems. The process begins when the patient presents at the hospital with a health care issue that requires attention, or for a service that involves health care status. The physician or other provider reviews the history, performs an examination, and prepares a plan of care. Patient care services are rendered in accordance with physician’s orders and the plan of care. Written descriptions of health care services, procedures, and items are documented in the patient’s medical record. Charges are posted by various departments through the Charge Description Master (CDM), also called the chargemaster. All procedures, services, and items listed in the chargemaster are associated with a code from the appropriate procedure coding system (Figure 8-4). Heath Information Management (HIM) personnel are responsible for coding patient conditions and significant procedures documented in the patient medical record that are not posted through the chargemaster.

Procedure Code Data Usage

Procedure coding systems allow for the collection of data regarding procedures and services performed and the various items used to diagnose and treat patient conditions. The data gathered through the use of these coding systems can be monitored, tracked, and retrieved for various purposes such as research, education, and administration, as illustrated in Figure 8-5.

Documentation

Documentation is the term used to describe information recorded in the medical record regarding patient conditions, procedures, services, supplies, equipment, and medications provided as part of the patient’s care. The patient’s medical record is the foundation for coding. When coding procedures, services, and items it is necessary to read the record to identify the service or item that must be coded for billing purposes. A code from HCPCS or ICD-10-PCS is assigned to accurately describe the service or item documented in the medical record. Figure 8-7 illustrates an example showing the assignment of HCPCS Level I and ICD-10-PCS procedure codes to describe a coronary bypass procedure performed during the hospital inpatient stay.

The challenge for coders is to be absolutely certain the code assignment represents what is in the record. Remember, the golden rule in coding is “IF IT IS NOT DOCUMENTED, DO NOT CODE IT.” It is important that the coder does not read into the scenario and code a condition that is not supported by the documentation. If the record lacks specific information required to select a code, the coder should pursue more specific information from the physician or other provider. Most hospitals have a physician query process for coders to clarify information. Coders should always follow good coding habits such as WHEN IN DOUBT, QUERY THE PHYSICIAN.

Medical Necessity

Medical necessity is the term used to describe procedures and services that are considered reasonable and medically necessary to address the patient’s condition based on standards of medical care. Medical necessity is determined by payers based on a review of procedure and diagnosis codes submitted. The diagnosis code must describe a medical reason for the service that meets medical necessity criteria. Medical necessity guidelines are generally determined based on standards of medical care; however, they do vary by payer.

Medicare publishes National Coverage Determinations (NCD) that set forth the extent to which Medicare will cover specific services, procedures, or technologies on a national basis. Local Medical Review Policies (LMRP) are published by Medicare Administrative Contractors (MAC) to provide information regarding diagnosis codes that support medical necessity along with other statutory provisions. A final rule was published indicating Local Coverage Determinations (LCD) would replace Local Medical Review Policies (LMRP) effective 2005. Local Coverage Determinations (LCD) are published by Medicare Administrative Contractors (MAC) to provide information regarding medical necessity criteria. The difference between the LCD and the LMRP is that Local Coverage Determinations (LCD) does not contain information regarding statutory provisions.

It is critical for coders to review LCD policies to understand medical necessity requirements for services, procedures, and items. Payers will not provide reimbursement for services that are not medically necessary. It is also critical for coders to understand coding and payer specific guidelines. Figure 8-8 illustrates the Local Coverage Determination (LCD) for mammography. NCD policies can be found on the CMS Web site at https://www.cms.gov/medicare-coverage-database.

Claim Forms

Claim forms are used to submit charges for services rendered to payers for reimbursement. The CMS-1450 (UB-04) is the claim form primarily used to submit hospital services. There may be a situation where a payer requires the CMS-1500 for specified services. Codes that describe services and diagnoses are listed on the claim form. Procedures, services, and items are reported on the claim form using the HCPCS and/or ICD-10-PCS procedure coding systems.

CMS-1450 (UB-04)

The fields used to record diagnosis and procedure codes on the CMS-1450 (UB-04) are highlighted in Figure 8-9. Procedure codes are reported on the claim form in FL 44 and FL 74a-e. Diagnosis codes that describe the medical reason for services are reported in FL 67A-Q, 69, 70, and 72. HCPCS Level I and II codes are reported in FL 44 in accordance with payer guidelines. ICD-10-PCS codes are recorded in FL 74a-e to describe significant procedures performed during an inpatient stay.

Reimbursement

Medicare and other third-party payers will provide reimbursement for medical services that are covered in accordance with the patient’s health care plan or policy; however, they must be medically necessary. For example, a payer will not pay for a lung biopsy if the diagnosis codes do not represent a medical condition that would indicate the need for a biopsy, such as a lung mass and family history of lung cancer.

Outpatient Services

Outpatient services are procedures or services performed and the patient is released from the hospital within 24 hours. Outpatient services include ambulatory surgery and ancillary department services such as radiology, emergency room, and observation. HCPCS Level I and/or HCPCS II codes are used for reporting procedures, services, and items provided on an outpatient basis. Some payers may require ICD-10-PCS procedure codes in addition to HCPCS codes on ambulatory surgery claims. Most hospital outpatient services are reported on CMS-1450 (UB-04) including ambulatory surgery. Professional services provided by a physician in a hospital-based primary care clinic or other clinic are reported by the hospital if the physician is employed by or under contract with the hospital.

Outpatient procedures, services, or items are recorded in the patient’s medical record. Charges are posted through the chargemaster by the departments involved in the patient’s care. The Health Information Management Department (HIM) receives the medical record after the patient is discharged. HIM personnel assign codes for patient diagnoses and procedures that are not posted through the chargemaster. The procedure and diagnosis codes are used for the appropriate Ambulatory Payment Classification (APC) assignment. It is important to remember hospital services that are considered outpatient services, which include emergency room, observation, ambulatory surgery, and a hospital-based primary care clinic visit. The reporting of diagnosis and procedure codes for an ambulatory surgery case on CMS-1450 (UB-04) is illustrated in Figure 8-10.

Non-Patient Services

Non-patient services are those involving tests or procedures performed on a specimen when the patient is not present. Laboratory testing on a specimen sent to the hospital from the physician’s office is an example of a non-patient service. Department personnel post non-patient services through the chargemaster. Non-patient services are coded using HCPCS Level I and Level II codes (Table 8-2). Most hospital non-patient services are submitted on the CMS-1450 (UB-04).

Inpatient Services

Inpatient services are provided to patients who are admitted to the hospital for more than 24 hours. The patient is assigned a room/bed required for overnight accommodations. Procedures, services, and items provided during the inpatient stay are recorded in the patient’s medical record. Inpatient services are reported on the CMS-1450 (UB-04) using HCPCS and ICD-10-PCS procedure codes. Claims for inpatient cases require ICD-10-PCS codes for significant and other procedures and they are recorded in form locator (FL) 74a-e. It is important to note that when a patient is admitted from the emergency room or observation, all services are reported on the inpatient claim.

Principal Procedure

The principal procedure is the procedure performed for definitive treatment of the principal diagnosis or the procedure that most closely relates to the principal diagnosis (Figure 8-11).

BOX 8-10   CONCEPT REVIEW

Significant Procedures – Defined by the Uniform Hospital Discharge Data Set (UHDDS) are:

• Surgical in nature, or

• Carry a procedural risk, or

• Carry an anesthetic risk, or

• Require specialized training

Principal Procedure

• The procedure performed for definitive treatment of the principal diagnosis

Other Procedures

Other significant procedures performed during the stay are recorded in FL 74a-e as illustrated in Figure 8-11. It is important to remember that payers will compare the principal and other procedures codes with the principal and other diagnosis codes to determine medical necessity.

Charges for services provided on an inpatient basis are posted through the chargemaster by the departments involved in the patient’s care. Each service and item listed in the chargemaster is associated with an HCPCS code. The inpatient claim is a summary claim that categorizes all charges in revenue code categories, and therefore HCPCS codes may not be required on the claim form in accordance with payer specifications. A revenue code is a four-digit numeric code developed and maintained by the National Uniform Billing Committee (NUBC) to categorize like services and items. Revenue codes are reported on the CMS-1450 (UB-04) claim form.

After the patient is discharged, the medical record is forwarded to HIM for coding of patient conditions and procedures not posted through the chargemaster. The principal diagnosis and procedure codes are used to determine the Medicare Severity-Diagnosis Related Groups (MS-DRG) assignment. Figure 8-12 illustrates an example of coding an inpatient case for reporting on the CMS-1450 (UB-04).

It is important for hospital billing and coding personnel to have an understanding of the coding process in a hospital and how coding relates to documentation, medical necessity, claim forms, and reimbursement. It is also important to understand coding system variations to ensure services are coded and reported in accordance with guidelines. This section will provide a review of the content, format, and conventions of the procedure coding systems, which is essential to understanding the basic steps to coding.

A brief review of HCPCS Level I CPT and Level II Medicare National Codes is provided since it is the coding system used for all physician and outpatient services. It is important to remember, the intent of this text is to transition that knowledge into the hospital environment. The review of the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) will be more in-depth because it is the new coding system that will be used to describe significant procedures performed during a hospital impatient stay.

BOX 8-11   CONCEPT REVIEW
Inpatient Procedure Code Requirements

• HCPCS Level I CPT Codes

• HCPCS Level II Medicare National Codes

• International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) Volume III until October 1, 2014

• International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) effective October 1, 2014

Note: Services, procedures, and items provided during an inpatient stay are posted through the chargemaster using HCPCS codes.

BOX 8-12   CONCEPT REVIEW
Current Procedural Terminology (CPT)

• CPT codes have 5 numeric or alphanumeric digits.

Examples: 99204, 0037T, or 4009F

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