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

The classification and coding of procedures, services, and items constitute a newer development than the coding of conditions, which began in the 17th century. Procedure coding systems were developed in the 1960s to provide a standardized system for providers to report procedures to third-party payers for reimbursement. The system also allows for collection of data to be used for statistical purposes. Historically, physicians and other providers submitted a written description of procedures and services rendered on the claim form to explain charges. Payers experienced difficulty in processing claims submitted with the written descriptions. Additionally, tracking, monitoring, and statistical analysis using the written descriptions was a very complex process. The need for a standardized system of reporting procedures and services was first addressed when the American Medical Association (AMA) developed the Current Procedural Terminology (CPT) coding system. Other procedure coding systems were later introduced such as HCPCS Medicare National Codes and the International Classifications of Diseases (ICD) Procedure Coding System, as illustrated in Figure 8-1.

Prior to 1983, more than 120 different coding systems were used in the United States. The billing process was extremely complex because of the variations in payers’ guidelines, claim forms, and coding systems. This complex system of billing was costly for payers and providers. Since the government became a major payer of health care services, efforts to control costs have led to various levels of standardization in the administration of health care claims.

Legislative intervention, the Health Insurance Portability and Accountability Act (HIPAA) of 1996, laid the foundation for the standardization of transactions. HIPAA regulations highlighted standard procedure code sets required for submission of claims to payers effective October 2003 as the Healthcare Common Procedure Coding System (HCPCS) for reporting services, procedures, and items and the International Classifications of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) for coding patient conditions and significant procedures. In accordance with HIPAA provisions, effective October 1, 2014, the standard code set for reporting hospital diagnoses and procedure will be Heath Care Common Procedure Coding System (HCPCS), National Drug Codes (NDC), and the International Classifications of Diseases, 10th Revision (ICD-10), as illustrated in Figure 8-2.

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

A significant difference between ICD-9-CM Volume III and ICD-10-PCS is the manual content and the code format. The indexes contained in both systems outline procedures alphabetically by main term and subterms. Codes are listed in the index to provide direction to the appropriate code section. The tabular list in ICD-9-CM Volume III is a numeric list of codes. ICD-10-PCS provides alphanumeric tables that are used to construct a valid code. A valid code in ICD-9-CM Volume III is 2 to 4 digits. A valid code in ICD-10-PCS is 7 alphanumeric characters. Table 8-1 illustrates some of the differences between ICD-9-CM Volume III and 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
• Two to four digits	36.11	• Must be 7 characters	Ø21ØØZ3
• All numeric		• Alphanumeric
• Decimal point: yes, after the second digit		• Decimal point: no
• Maximum number of digits: 4		• Minimum number of characters: 7
• No embedded meaning of each digit		• Maximum number of characters: 7
		• Embedded meaning of characters: multiaxial structure, each character has the same meaning within the specific section and across procedure sections to the extent possible
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/.)

BOX 8-2 CONCEPT REVIEW
History of Procedure Coding

• Current Procedural Terminology (CPT), 1966

• International Classification of Diseases, 9th Revision, Clinical Modification, (ICD-9-CM), Volume III Procedures, 1979

• CMS adopted HCFA Common Procedure Coding System, Level I CPT and Level II Medicare National Codes, 1983

• Name changed to Healthcare Common Procedure Coding System (HCPCS), 2001

• HCPCS adopted as standard code set under HIPAA, 2003

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

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.

BOX 8-3 CONCEPT REVIEW
Procedure Coding – Hospital Coding and Billing Professionals

Hospital Coding Professionals

• Must master coding principals and applications to accurately describe services, procedures, and items

Hospital Billing Professionals

• Understand procedure coding to ensure compliance with coding guidelines

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.

FIGURE 8-3 Hospital billing process. (Revision of illustration courtesy Sandra Giangreco.)

BOX 8-4 CONCEPT REVIEW
Procedure Coding

Assignment of Numeric or Alphanumeric Codes to Health Care Data

• Outpatient

• Non-patient

• Inpatient

Abstracting and Assigning Codes to Written Descriptions

• Procedures

• Services

• Items

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.

Research

Data from procedure coding systems are used to research various patterns in the diagnosis and treatment of conditions. Researchers can monitor treatments provided for specific conditions to determine those that result in the best patient outcomes. Research data are also used to identify ways to improve or invent new procedures and technology. Through monitoring of these data, researchers can identify various risk factors related to specific procedures, services, or items.

Education

Data from procedure coding systems can be used to educate health care professionals and the public. The education of health care professionals can be enhanced through knowledge gained by analyzing data from these coding systems. New treatments, supplies, and medications can be monitored for the assessment of positive outcomes that show a decrease in mortality and morbidity. Educating the public on topics such as disease prevention is also enhanced through the use of procedure code data.

Administration

There are various administrative uses of data collected from procedure coding systems. Data can be used to evaluate, assess, monitor, and pay for health care services. Many payers use data collected through these systems to develop and implement policies and procedures related to the quality and utilization of health care services. Procedure coding data are also used by payers to develop reimbursement systems. Providers analyze procedure code data to assess and negotiate payer contracts. To code effectively, it is important to understand the relationship of procedure coding to documentation, medical necessity, claim forms, and reimbursement.

BOX 8-5 CONCEPT REVIEW
Procedure Code Data Usage

• Research

• Education

• Administration

Procedure Coding Relationships

Procedure coding relates to all aspects of the billing process. The process of procedure coding is dependent on information documented in the medical record. Charges for services are described on the claim form using procedure codes. Payers conduct medical necessity reviews and payment determination based on the procedure and diagnosis codes submitted. In essence, procedure coding is the key to obtaining reimbursement for services rendered. It is important for hospital coding and billing professionals to understand how procedure coding relates to documentation, medical necessity, claim forms, and reimbursement, as illustrated in Figure 8-6.

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.

BOX 8-6 CONCEPT REVIEW

Procedure Coding Defined

• Translating written descriptions of services, procedures, and items documented in the patient’s medical record into alphanumeric codes

Documentation

• Information documented in the medical record regarding the patient’s condition, treatment, and response to treatment

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

FIGURE 8-8 Example of a Local Coverage Determination (LCD) for mammography. (Information from CMS MAC BC/BS LCD #L29048, www.cms.gov/medicare-coverage-database/)

BOX 8-7 CONCEPT REVIEW

Medical Necessity

• Services that are considered reasonable and medically necessary

• Determined based on standards of medical care

• Diagnosis code establishes medical necessary

Medicare – Payer Policies

• National Coverage Determinations (NCD)

• Local Medical Review Policies (LMRP) – replaced with LCD in 2005

• Local Coverage Determinations (LCD)

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.

BOX 8-8 CONCEPT REVIEW
Procedure Coding Relationships

Procedure coding systems relate to all aspects of the billing process

BOX 8-1 Test Your Knowledge
HISTORY OF PROCEDURE CODING; PURPOSE OF PROCEDURE CODING; PROCEDURE CODING RELATIONSHIPS

True/False

1. Procedure coding systems were developed in the 1960s to provide a standardized system for providers to report procedures to third-party payers for reimbursement.	T	F
2. Physicians and other providers still submit written descriptions of procedures and services rendered on the claim form to explain charges.	T	F
3. 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). Other payers such as Blue Cross/Blue Shield did not follow suit in adopting HCPCS for claim submission.	T	F
4. Procedure codes are used on claim forms to describe services and procedures billed to third-party payers.	T	F
5. Data collected using procedure coding systems can only be used to evaluate, assess, monitor, and pay for health care services.	T	F

Fill-in-the-blank

6. ____________ ____________ systems are used to describe services, procedures, and items provided during a patient hospital visit. They are also used for statistical purposes.

7. The data gathered through the use of these coding systems can be monitored, tracked, and retrieved for various purposes such as____________, ______________, and _______________ purposes.

8. The process of translating written descriptions of procedures, services, and items documented in the patient’s record into numeric or alphanumeric codes is _________ __________.

9. The ___________ ____________ _________ is the foundation for coding, as it contains written descriptions of services, procedures, and items to be coded.

10. The _______________ coding system will be used for reporting significant procedures and services performed during an inpatient hospital visit, effective October 1, 2014.

Matching

Select the answer option that matches the descriptions below.

A Reimbursement

B Documentation

C Current Procedural Terminology (CPT)

D Health Insurance Portability and Accountability Act (HIPAA)

E Local Coverage Determinations (LCD)

F ICD-9-CM Volume III

G CMS-1500

H FL 74a-e

I Healthcare Common Procedure Coding System (HCPCS)

J Medical necessity

K CMS-1450 (UB-04)

L FL 44

11. ____ What coding system was published by the AMA in 1966?

12. ____ What coding system contains two levels: Level I CPT codes and Level II Medicare National Codes?

13. ____ The coding system currently used to describe significant procedures performed during an inpatient stay.

14. ____ The legislation passed in 1996 that laid the foundation for the standardization of transactions.

15. ____ The term used to describe payment for service provided by Medicare and other payers.

16. ____ The claim form primarily used for hospital services.

17. ____ What term is used to describe services provided that are considered reasonable and necessary to address the patient’s medical condition?

18. ____ Name the fields on CMS-1450 (UB-04) used to report principal and other procedures.

19. ____ The policies currently published by Medicare Administrative Contractors (MAC) to provide information regarding medical necessity.

20. ____ The term used to describe information recorded regarding patient conditions and procedures, services, supplies, equipment, and medications provided as part of the patient’s care.

Procedure Coding System Variations

Procedure coding systems are used to communicate with payers regarding services, procedures, and items provided for the purpose of obtaining reimbursement. As discussed in previous chapters, the ICD-9-CM diagnosis coding system is currently used to report the medical reason why services, procedures, and items are provided. The ICD-10-CM diagnosis coding system will replace ICD-9-CM effective October 1, 2014. The chapters also highlighted coding system variations based on service category, which illustrates diagnosis coding systems used for all service categories as illustrated in Table 8-2. Unlike diagnosis code usage, procedure code utilization varies by service category. Service categories include outpatient, non-patient, and inpatient. The following section presents procedure coding system variations using HCPCS and ICD-10-PCS based on services provided on an outpatient, non-patient, or inpatient basis.

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
Hospital Service Categories “Facility Charges”	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	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	FL 44
Ancillary Departments Radiology, Laboratory, Physical Therapy	FL 67A-Q, 70, 72	FL 44	FL 44
Other Outpatient Services Infusion Therapy and Observation	FL 67A-Q, 70, 72	FL 44	FL 44
Durable Medical Equipment Provided on an outpatient or inpatient basis	FL 67A-Q, 70, 72	FL 44	FL 44	Required on inpatient claims.
Hospital Based Primary Care Office or Hospital-Based Clinic	FL 67A-Q, 70, 72	FL 44	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	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	FL 44	FL 74 a-e