HIPAA—The Fundamental Coding Rule

Accurate reporting depends on coders knowing payers’ controlling standards.

By Michael D. Miscoe, Esq., CPC, CASCC, CUC, CCPC, CHCC, CRA

The primary task when coding is to accurately represent the health care services and supplies provided to a patient using CPT® and HCPCS Level II codes, as well as the reasons or conditions that prompted the service using ICD-9-CM codes. Unfortunately, payers do not apply these standard code sets uniformly.

The HIPAA Code Set Standard

In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA). As a part of that law, Congress added a section to the existing Social Security Act (SSA) entitled Administrative Simplification. The underlying purpose of this legislation was to increase utility of electronic data interchange (EDI) through standardization of electronic transactions. To accomplish this, the codes used to report services were established. Four years later, on Aug. 17, 2000, the Department of Health and Human Services (HHS) published regulations (45 CFR §160, 162) detailing the transaction and code set standards mandated under the HIPAA statute (65 FR 50312-01). The effective date of the rule was Oct. 16, 2000 and the compliance date was Oct. 16, 2002.

The regulations require all covered entities, including all health plans and practically all providers, use ICD-9-CM Volumes 1 and 2 (including the official guidelines for use), as maintained and distributed by HHS, for the reporting of diseases, injuries, impairments, other health problems and their manifestations, and causes of injury disease, impairment, or other health problems (45 CFR §132.1002(a)(1)).

The regulations require that a combination of HCPCS Level II, as maintained and distributed by HHS, and CPT®, maintained and distributed by the American Medical Association (AMA), be used to report physician services and other health care services (45 CFR §162.1002(a)(5)).

HHS expressly included the guidelines for use of ICD-9 in the code set, but did not include the CPT® Editorial Panel guidance published in CPT®, or the guidelines for use published in HCPCS Level II, as being included in the code set. This omission was not accidental, as is evident in the official comments published in the Federal Register with the final rule. Although the official comments are not law, courts will give substantial deference to the official comments when attempting to interpret the meaning of a regulation.

The following relevant citations from the official comments are instructive as to how the codes in the official code set may be used.

Relevant Selections from the Official Comments

Proposed Requirements Stated In Each Subpart; Code Set Standards: HHS states that health plans, clearinghouses, and certain health care providers “have to use the diagnosis and procedure code sets,” and defines the codes in the code set were to be implemented through the transaction standard defined at part 142 of the rule. Where the transaction standard is reviewed (ANSI X12N version 4010 at that time and currently), the data element permits entry of the code only.

Comments and Responses on Proposed Standards for Code Sets and Requirements for Their Use; Proposed Code Sets; Version Control; Physician Services: “The specific data elements for which the CPT® (including codes and modifiers) is a required code set are enumerated in the implementation specifications for the transaction standards that require its use” (65 FR 50312, 50324).

Note: The implementing specifications for the 4010 standard detail that only the code and modifier are included in the 4010 transaction.

Comments and Responses on Proposed Standards for Code Sets and Requirements for Their Use; Proposed Code Sets; Training: In addressing the elimination of local codes, HHS not only established that “compliance with this regulation is required” (65 FR 50312, 50330), but also pointed out that where no national code existed to replace a local code, health plans may request a national code. In doing so, HHS cautioned, “National codes are only designed to identify an item or service; … codes are not established to carry health plan specific information … such information must be used elsewhere and cannot be embedded in the national codes.”

With this statement, HHS is pointing out that the code and description alone are included in the code set. Health plan-specific information regarding how and when the code should be used is not and cannot be included within the official code set.

Code Sets—Specific Impact of Adoption of Code Sets for Medical Data; Affected Entities: HHS notes that “adoption of standard code sets and coding guidelines for medical data supports the regulatory goals of cost-effectiveness and the avoidance of duplication and burden” (65 FR 50312, 50361).

Although HHS hints standardization of coding guidelines would support the regulatory goals of cost effectiveness, it recognizes that standardization of coding guidelines is not required by the regulation:

”Many health care providers use different coding guidelines for dealing with different health plans, sometimes for the same patient. … Some of these differences reflect variations in covered services that will continue to exist irrespective of data standardization.

“Currently, there are health plans that do not adhere to official coding guidelines and have developed their own plan-specific guidelines for use with the standard code sets, which do not permit the use of all valid codes … When the HIPAA code set standards become effective, these health plans will have to receive and process all standard codes, without regard to local policies regarding reimbursement for certain conditions or procedures, coverage policies, or need for certain types of information that are part of a standard transaction.”

In a nutshell: The regulation precludes health plan policies that require use of local codes. Nonetheless, health plans remain free to establish local reimbursement policies detailing how to use the national codes, provided they accept the national standard codes.

Implications of the Code Set Rules

The code set includes the codes and descriptions, and the modifiers and their descriptions, only. All additional information in CPT® and HCPCS Level II, including the instructions, the preface material, and all other text beyond the actual codes and descriptions—including coding guidelines—are not part of the code set. As such, this information becomes relevant to code selection only where a statutory payment rule or contractual provision expressly requires their use or incorporates these standards by reference.

For example, unless a statute or contractual provision expressly adopts the whole of the CPT® manual as the standard for code selection or usage, the text external to the code set becomes merely the AMA opinion on how to use the codes. As a result, coders should be cautious at vesting the accuracy of code selection on CPT® where the CPT® guidance is not controlling.

Bottom line: The instructions and guidance within the CPT® manual will not trump contrary controlling standards contained within a statute, regulation, or contract. Coders must determine whether the content of the CPT® book is a controlling standard for a particular payer. If not, code selection based on the guidance in CPT® may lead to an incorrect code choice.

Know Your Payer’s Rules

The official comments by HHS published with the final transaction and code set regulation clearly establish that code usage falls within the scope of reimbursement policy—something expressly reserved to individual payers. For Medicare, payment policy is dictated under the Medicare program statute and regulations, which incorporate the National Correct Coding Policy Manual, and provide for national coverage determinations (NCDs) and interpretive guidance published by the Centers for Medicare & Medicaid Services (CMS) in its Internet-only manuals (Pubs. 100-1 through 100-21).

Statutory reimbursement systems and commercial health plans may adopt Medicare standards, AMA standards, standards of their own creation, or a mixture of all three. Although the instructions in CPT® and those contained in the Medicare program guidance commonly are incorporated standards, they are not used always. There are a number of examples where AMA guidance and CMS guidance will cause a different coding result.

Although code set rules require that we all use the same codes, carriers may attach different meanings and apply vastly differing rules on how to report those codes. For this reason, every coding question should be answered with, “It depends.” Learn to check carrier rules when coding, and your accuracy will improve greatly.


Renee Dustman

Renee Dustman

Renee Dustman is executive editor at AAPC. She has a Bachelor of Science degree in Journalism and a long history of writing just about anything for just about every kind of publication there is or ever has been. She’s also worked in production management for print media, and continues to dabble in graphic design.
Renee Dustman

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Renee Dustman is executive editor at AAPC. She has a Bachelor of Science degree in Journalism and a long history of writing just about anything for just about every kind of publication there is or ever has been. She’s also worked in production management for print media, and continues to dabble in graphic design.

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