Description of Healthcare Common Procedure Coding System - Beginner Guide

The HCPCS has been selected as the approved coding set for entities covered under the Health Insurance Portability and Accountability Act (HIPAA), for reporting outpatient procedures.

The HCPCS is based upon the American Medical Association’s (AMA) “Physicians’ Current Procedural Terminology, Fourth Edition” (CPT-4). It includes three levels of codes and modifiers. Level I contains only the AMA’s CPT-4 codes. This level consists of all numeric codes. Level II contains alpha-numeric codes primarily for items and nonphysician services not included in CPT-4, e.g., ambulance, DME, orthotics, and prosthetics. These are alpha-numeric codes maintained jointly by CMS, the Blue Cross and Blue Shield Association (BCBSA), and the Health Insurance Association of America (HIAA).

Normally Level I and Level II codes are updated annually, issued in October for January implementation. However, Level II codes also may be issued quarterly to provide for new or changed Medicare coverage policy for physicians’ services as well as services normally described in Level II. These codes may be temporary and be replaced by a Level I or Level II code in the related CPT or HCPCS code section, or may remain for a considerable time as “temporary” codes. Designation as temporary does not affect the coverage status of the service identified by the code. New temporary codes that have been approved will be issued in a Recurring Update Notification instruction quarterly.

New K or Q codes may be identified from time to time and, when they are, they will be announced in a Recurring Change Request issued on a quarterly basis.
The CMS monitors the system to ensure uniformity.

Use and Maintenance of CPT-4 in HCPCS

There are over 7,000 service codes, plus titles and modifiers, in the CPT-4 section of HCPCS, which is copyrighted by the AMA. The AMA and CMS have entered into an agreement that permits the use of HCPCS codes and describes the manner in which they may be used. See §20.7 below.

• The AMA permits CMS, its agents, and other entities participating in programs administered by CMS to use CPT-4 codes/modifiers and terminology as part of HCPCS;

• CMS shall adopt and use CPT-4 in connection with HCPCS for the purpose of reporting services under Medicare and Medicaid;

• CMS agrees to include a statement in HCPCS that participants are authorized to use the copies of CPT-4 material in HCPCS only for purposes directly related to participating in CMS programs, and that permission for any other use must be obtained from the AMA;

• HCPCS shall be prepared in format(s) approved in writing by the AMA, which include(s) appropriate notice(s) to indicate that CPT-4 is copyrighted material of the AMA;

• Both the AMA and CMS will encourage health insurance organizations to adopt CPT-4 for the reporting of physicians’ services in order to achieve the widest possible acceptance of the system and the uniformity of services reporting;

• The AMA recognizes that CMS and other users of CPT-4 may not provide payment under their programs for certain procedures identified in CPT-4. Accordingly, CMS and other health insurance organizations may independently establish policies and procedures governing the manner in which the codes are used within their operations; and
• The AMA’s CPT-4 Editorial Panel has the sole responsibility to revise, update, or modify CPT-4 codes.

The AMA updates and republishes CPT-4 annually and provides CMS with the updated data. The CMS updates the alpha-numeric (Level II) portion of HCPCS and incorporates the updated AMA material to create the HCPCS code file. The CMS provides the file to A/B MACs (A), (B), (HHH), and DME MACs and Medicaid State agencies annually.
It is the MAC’s responsibility to develop payment screens and limits within Federal guidelines and to implement CMS’ issuances. The coding system is merely one of the tools used to achieve national consistency in claims processing.

MACs may edit and abridge CPT-4 terminology within their claims processing area. However, MACs are not allowed to publish, edit, or abridge versions of CPT-4 for distribution outside of the claims processing structure. This would violate copyright laws. MACs may furnish providers/suppliers AMA and CMS Internet addresses, and may issue newsletters with codes and approved narrative descriptions that instruct physicians, suppliers and providers on the use of certain codes/modifiers when reporting services on claims forms, e.g., need for documentation of services, handling of unusual circumstances. The CMS acknowledges that CPT is a trademark of the AMA, and the newsletter must show the following statement in close proximity to listed codes and descriptors:

CPT codes, descriptors and other data only are copyright 1999 American Medical Association (or such other date of publication of CPT). All Rights Reserved. Applicable FARS/DFARS apply.

If only a small portion of the terminology is used, MACs do not need to show the copyright legend. MACs may also print the code and approved narrative description in development requests relating to individual cases.

The CMS provides MACs an annual update file of HCPCS codes and instructions to retrieve the update via CMS mainframe telecommunication system.

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