Chapter 8
Procedure Coding (HCPCS and ICD-10-PCS)
1. Define terms, phrases, abbreviations, and acronyms.
2. Demonstrate an understanding of the history and purpose of procedure coding systems.
3. Discuss how procedure coding data are used for research, education, and administrative purposes.
4. Provide an explanation of the relationship between procedure coding and documentation, medical necessity, claim forms, and reimbursement.
5. Discuss the relationship between procedure coding and diagnosis coding.
6. Identify variations in the use of coding systems for outpatient, non-patient, and inpatient services.
7. Outline the standard code set requirements for reporting procedures under HIPAA.
8. List the two levels of HCPCS and discuss the content of each system.
9. Explain the reasons why ICD-10 was implemented and discuss the transition to ICD-10.
10. Outline the content of the ICD-10-PCS coding system.
11. Demonstrate an understanding of the steps to coding using the HCPCS and ICD-10-PCS procedure coding systems and basic coding principles.
Current Procedural Terminology (CPT)
Healthcare Common Procedure Coding System (HCPCS)
International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS)
Local Coverage Determinations (LCD)
Local Medical Review Policy (LMRP)
National Coverage Determinations (NCD)
American Academy of Professional Coders
American Health Information Management Association
Ambulatory Payment Classifications
Center for Disease Control and Prevention
Centers for Medicare and Medicaid Services
Current Procedural Terminology
Health Care Financing Administration
Healthcare Common Procedure Coding System
Health Insurance Portability and Accountability Act
International Classification of Diseases, 9th Revision, Clinical Modification
International Classification of Diseases, 10th Revision, Clinical Modification
International Classification of Diseases, 10th Revision, Procedure Coding System
Medicare Administrative Contractor
Medicare Severity-Diagnosis Related Groups
National Coverage Determinations
National Center for Health Statistics
National Uniform Billing Committee
Hospital coding and billing professionals are required to have an understanding of the ICD-9-CM coding system and will need to transition to ICD-10. In an effort provide current and future knowledge required for hospital professionals, this text presents concepts on coding using ICD-9-CM and ICD-10. The prior chapters presented concepts regarding coding medical conditions and significant procedures using ICD-9-CM. This chapter will focus on coding procedures, services, and items using HCPCS and the ICD-10-PCS coding system. A discussion of the history and purpose of procedure coding will highlight the importance of procedure coding in the health care industry. A brief review of how procedure coding relates to documentation, medical necessity, claim forms, reimbursement, and diagnosis coding will further demonstrate the importance of procedure coding. Variations in coding system utilization are outlined to illustrate appropriate code usage for outpatient, non-patient, and inpatient services. The content, format, and conventions of the Healthcare Common Procedure Coding System (HCPCS) and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) is reviewed to provide an overview of coding using these systems. The chapter will close with a discussion of the basic steps to coding using HCPCS and ICD-10-PCS codes.
History of Procedure Coding
Development of ICD-10
• The International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) diagnosis coding system is the system scheduled to replace ICD-9-CM Volumes I-II for coding patient conditions (reasons for health services) in all health care settings. ICD-10-CM is the clinical modification of the World Health Organization’s ICD-10.
• The International Classification of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS) is the procedure coding system scheduled to replace ICD-9-CM Volume III in accordance with HIPAA provisions. The ICD-10-PCS was developed by 3M Health Information System under contract with CMS.
• Completeness – a unique code should be created for all procedures that are substantially different.
• Expansion – the system should allow codes to be added as new procedures are developed.
• Multiaxial – codes contain characters that are independent with each individual component axis retaining its meaning across broad ranges of codes.
• Standardized terminology – the system should not include multiple meanings for terms. Each term should have a specific meaning.
Other principals followed in the development of ICD-10-PCS:
• Diagnostic information is not included in procedure descriptions.
• Not otherwise specified (NOS) options are restricted.
• Limited use of not elsewhere classified (NEC) option.
• Level of specificity for procedures performed today is included.
Differences ICD-9-CM Volume III versus ICD-10-PCS
TABLE 8-1
Differences in ICD-9-CM Volume III versus ICD-10-PCS
ICD-9-CM Volume III | Bypass, Coronary Artery-1 artery | ICD-10-PCS Separate manual divided into three sections: | Bypass, Coronary Artery-1 artery |
Alphabetic index—main terms bold | Bypass | Alphabetic index—main terms | Bypass |
Tabular list—numeric listing of codes | 36.1 | Table Ø21 Medical and surgical section, Central Nervous System, Bypass | Ø21 |
Code structure and reporting | Code structure and reporting | ||
36.11 | Ø21ØØZ3 | ||
Conventions | NEC, NOS, EXCLUDES | Conventions NEC, NOS-limited | A1-A11 Axis |
Conventions and format | Main term, subterm | Conventions and format | Main term, subterm, and tables |
(Data from Centers for Medicare and Medicaid Services Web site, ICD-10 Development, www.cms.gov/ICD10/.)
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 Coding Relationships

Medical Necessity
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 www.cms.gov/medicare-coverage-database.

Procedure Coding System Variations
TABLE 8-2
CMS-1450 (UB-04) Claim Form Reporting of Coding Systems Based on the Level of Service
CLAIM FORM REPORTING AND CODING SYSTEM VARIATIONS | ||||
Hospital Service Categories “Facility Charges” | DIAGNOSIS ICD-9-CM | PROCEDURES HCPCS | PROCEDURES ICD-9-CM Volume III | |
Effective 10/1/14 ICD-10-CM | Level I CPT | Level II Medicare National | Effective 10/1/14 ICD-10-PCS | |
OUTPATIENT—Outpatient services are provided and patient is discharged within 24 hours. | ||||
Ambulatory Surgery | FL 67A-Q, 70, 72 | FL 44 | ![]() | ∗ Varies by payer Used to report significant procedures on the CMS-1450 (UB-04) in FL 74a-e. |
Emergency Department Observation | FL 67A-Q, 70, 72 | FL 44 | ![]() | ![]() |
Ancillary Departments Radiology, Laboratory, Physical Therapy | FL 67A-Q, 70, 72 | FL 44 | ![]() | ![]() |
Other Outpatient Services Infusion Therapy and Observation | FL 67A-Q, 70, 72 | FL 44 | ![]() | ![]() |
Durable Medical Equipment Provided on an outpatient or inpatient basis | FL 67A-Q, 70, 72 | FL 44 | ![]() | Required on inpatient claims. |
Hospital Based Primary Care Office or Hospital-Based Clinic | FL 67A-Q, 70, 72 | FL 44 | ![]() | ![]() |
NON-PATIENT—Specimen is received and processed; the patient is not present. | ||||
Non-patient services: Pathology, Laboratory | FL 67A-Q, 70, 72 | FL 44 | ![]() | ![]() |
INPATIENT—The patient is admitted with the expectation that he or she will be in the hospital for more than 24 hours. | ||||
Inpatient services | FL, 67A-Q, 69, 72 | FL 44 | ![]() | ![]() |
∗Some payers may require on ambulatory surgery claims.
Not required on outpatient and non-patient claims.
Used to report significant procedures on the CMS-1450 (UB-04) in FL 74 a-e.