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HCPCS Level II: The Stone Soup of Coding

Avoid confusion by knowing where HCPCS comes from.

By Brad Ericson, MPC, CPC, COSC
There are few measures of the coding community’s breadth as wide as the Healthcare Common Procedure Coding System (HCPCS) Level II codes, one of the official HIPAA code sets. Publicly compiled from a number of different sources and used in a number of venues, the HCPCS Level II codes grow in importance and usefulness.
While the changes in HCPCS Level II alphanumeric codes for 2008 aren’t as voluminous as in past years, they are extensive and purposeful. More than 200 codes were deleted and nearly 250 codes added since the 2007 set was introduced. Several new modifiers are added to the system this year with some going into effect later this year, and many can be used with CPT® (HCPCS Level I) codes.

The Stone Soup of Coding

The average apprentice coder finds the jumbled pantry of procedures, services and supplies in HCPCS Level II confusing and bothersome. But understanding where they come from and why they exist will help you use them properly.
HCPCS Level II codes are compiled by the CMS HCPCS Level II Workgroup through what is largely a public process. Unlike data-gathering ICD-9-CM codes, which are developed by the National Center for Health Statistics (NCHS), a division of the Centers for Disease Control (CDC), and CPT® codes, which are developed, owned and copyrighted by the American Medical Association (AMA), the HCPCS Level II code set is meant to be a public repository for codes not appropriate for the other two core code sets. It incorporates codes and nomenclature for everything from payment systems like Medicaid, Outpatient Prospective Payment System (OPPS), ambulance, durable medical equipment, day-to-day supplies, drugs, prosthetics, glasses, orthotics, hearing aids, hospital outpatient services, dental check-ups, daycare, and surgery. Toss into this boiling pot HCPCS’ additional roles as a testing ground for possible CPT® codes, as a federal means for tracking demonstration projects, and as a platform for the new Physician Quality Reporting Initiative (PQRI), and it becomes the Stone Soup of the core code sets.
And like the Stone Soup of folklore, HCPCS Level II proves one of the most useful of the coding sets for most specialties, bringing several members and services of the health care community together. Nearly every specialty draws a bowl of soup from HCPCS Level II.

Making the Soup

Some HCPCS codes are provided by organized outside entities developing them for specific audiences. The American Dental Association (ADA) adapts their copyrighted Current Dental Terminology (CDT) codes for the D dental codes. Blue Cross and Blue Shield develop and provide the S services and procedure codes of which mirror CPT® codes.
Since the demise of the state-specific and contradictory HCPCS Level III local codes in 2003, state Medicaid agencies apply for national HCPCS codes representing the services they provide. This assures a national coding standard for services usually found in the H and T sections, which include Medicaid, substance abuse, and counseling codes.
Other codes must travel a longer and more hazardous path to creation or change. At the beginning of the year, the CMS workgroup receives requests for additions and changes from manufacturers, coders, special interest groups and professional associations. The workgroup’s delicate dance is how to properly provide the best coding for Medicare, Medicaid and commercial payers; serve beneficiaries fairly; ease coding and complement the federal, state and commercial payer budgets impacted by the codes.
External requests for codes and changes go through two tiers of consideration:
1. Does the item belong in the HCPCS Level II code set?
2. Which HCPCS code should be used?
Considerations for the first tier include a product’s status with the Food and Drug Administration (FDA), the request’s appropriateness for HCPCS as opposed to another code set and a national need for the code or change. Considerations for the second tier include existing codes to modify or augment with an additional code, sections in which to place the code, and upcoming projects. The CMS workgroup makes decisions and prepares for public meetings held in late spring.
CMS also makes preliminary recommendations regarding the applicable Medicare payment category and methodology that would be used to set a payment amount for the items. The preliminary coding and payment recommendations are posted on the HCPCS website as part of the public meeting agendas. The meetings cover drugs and biologicals, orthotics and prosthetics, durable medical equipment, supplies, and other possible codes. Presentations are evaluated by representatives from CMS, the Statistical Analysis Durable Medical Equipment Regional Carrier (SADMERC), and other interested parties.
Proponents for new or changes to existing codes make their arguments, present data, and demonstrate items for which codes are being considered. Presenters range from a patient who has invented a new device to major corporations. Each receives an equal hearing followed by questions.
Following the public meetings, the workgroup reconvenes and considers all the input. CMS also reconsiders its Medicare payment recommendations. Payment determinations for non-Medicare insurers, (e.g., state Medicaid agencies or private insurers) are made by the individual state or insurer.
Internal changes are requested by CMS workgroups like the OPPS organization, which maintains the dynamic C codes for ASC and OPPS pass-through payments. The Addendum B of OPPS often includes codes either not provided on the CMS HCPCS website or before they are posted in support of the Outpatient Code Editor.

Now Where IS that Code?

Once a code is approved, it’s announced via transmittals, press releases, and through CMS’ HCPCS Web pages. Your payers may post changes on their Web sites, and data can be purchased through the federal National Technical Information Service (NTIS) and health care data providers and publishers.
Most changes since the previous posting of the whole data set are posted free annually. The file, which incorporates four years of changes to the code set, can be found at in early November. Most HCPCS Level II code books, because of the budgetary realities of publishing, use this annual file as their basis. HCPCS Level II codes, because of their use in so many situations, can change throughout the year. Quarterly changes are posted here.
Changes to particular codes and modifiers, especially those in the C and G sections, can happen any time. Sometimes, effective dates are a quarter or more away, and other times, they’re retroactive and can disrupt an existing claim. It’s important to remain current with the CMS Web site to stay on top of this dynamic set.

So Where Can I Find Help?

Besides your colleagues, AAPC’s forums, your local payers and intermediaries and CMS itself, CMS recommends the American Hospital Association (AHA) to answer written questions submitted.
Should you have questions about whether codes are covered by SADMERC or reimbursement amounts for a covered drug or DME item, go to the Palmetto website.

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