Medical Billing and Coding

Overview Of HCPCS Two levels of codes are associated with HCPCS, commonly referred to as HCPCS level I and II codes: ● HCPCS level I: Current Procedural Terminology (CPT) ● HCPCS level II: national codes The majority of procedures and services are reported using CPT (HCPCS level I) codes. However, CPT does not describe durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), as well as certain other services reported on claims submitted for Medicare and some Medicaid patients. Therefore, the CMS developed HCPCS level II national codes to report DMEPOS and other services. (Medicare carriers previously developed HCPCS level III local codes, which were discontinued December 31, 2003. Medicare administrative contractors (MACs) replaced carriers, DMERCs, and fiscal intermediaries. HCPCS Level I HCPCS level I includes the five-digit CPT codes developed and published by the American Medical Association (AMA). The AMA is responsible for the annual update of this coding system and its two-digit modifiers. (CPT coding is covered in Chapter 7 of this textbook.) HCPCS Level II HCPCS level II (or HCPCS national codes) were created in 1983 to describe common medical services and supplies not classified in CPT. HCPCS level II national codes are five characters in length, and they begin with letters A–V, followed by four numbers. HCPCS level II codes identify services performed by physician and nonphysician providers (e.g., nurse practitioners and speech therapists), ambulance companies, and durable medical equipment (DME) com- panies (called durable medical equipment, prosthetics, orthotics, and supplies [DMEPOS] dealers). Orthotics is a branch of medicine that deals with the design and fitting of orthopedic devices. Prosthetics is a branch of medicine that deals with the design, production, and use of artificial body parts. ● Durable medical equipment (DME) is defined by Medicare as equipment that can with- stand repeated use, is primarily used to serve a medical purpose, is used in the patient’s home, and would not be used in the absence of illness or injury. ● Durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) include artifi- cial limbs, braces, medications, surgical dressings, and wheelchairs. ● Durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) dealers supply patients with DME (e.g., canes, crutches, walkers, commode chairs, and blood- glucose monitors). DMEPOS claims are submitted to DME Medicare administra- tive contractors (DME MACs) that replaced durable medical equipment regional carriers (DMERCs) that were awarded contracts by CMS. Each DME MAC covers a specific geographic region of the country and is responsible for processing DMEPOS claims for its specific region. When an appropriate HCPCS level II code exists, it is often assigned instead of a CPT code (with the same or similar code description) for Medicare accounts and for some state Medicaid systems. (Other payers may not require the report- ing of HCPCS level II codes instead of CPT codes, so coders should check with individual payers to determine their policies.) CMS creates HCPCS level II codes: Medical Billing and Coding

For services and procedures that will probably never be assigned a CPT code (e.g., medications, equipment, supplies) ● To determine the volumes and costs of newly implemented technologies New HCPCS level II codes are reported for several years until CMS initiates a process to create corresponding CPT codes. When the CPT codes are published, they are reported instead of the original HCPCS level II codes. (HCPCS level II codes that are replaced by CPT codes are often deleted. If not deleted, they are probably continuing to be reported by another payer or government demonstra- tion program.) ExAMPlE: HCPCS level II device code C1725 is reported for the surgical supply of a “catheter, transluminal angioplasty, nonlaser method (may include guidance, infu- sion/perfusion capability)” during vascular surgery. Thus, when a CPT code from range 35450–35476 is reported for a transluminal balloon angioplasty procedure, HCPCS level II device code C1725 is also reported as the surgical supply of the catheter. cOding tip: HCPCS LeveL ii NatiONaL COdeS The HCPCS level II national coding system classifies similar medical prod- ucts and services for the purpose of efficient claims processing. Each HCPCS level II code contains a description, and the codes are used primarily for billing purposes. ExAMPlE: DMEPOS dealers report HCPCS level II codes to identify items on claims billed to private or public health insurers. HCPCS is not a reimbursement methodology or system, and it is important to understand that just because codes exist for certain products or services, cover- age (e.g., payment) is not guaranteed. The HCPCS level II coding system has the following characteristics: ● It ensures uniform reporting of medical products or services on claims. ● Code descriptors identify similar products or services (rather than specific prod- ucts or brand/trade names). ● HCPCS is not a reimbursement methodology for making coverage or payment determinations. (Each payer makes determinations on coverage and payment outside this coding process.). Medical Billing and Coding

Historical PersPective of cMs reiMburseMent systeMs In 1964 the Johnson administration avoided opposition from hospitals for passage of the Medicare and Medicaid programs by adopting retrospective reasonable cost-basis payment arrangements originally established by BlueCross. Reimburse- ment according to a retrospective reasonable cost system meant that hospitals reported actual charges for inpatient care to payers after discharge of the patient from the hospital. Payers then reimbursed hospitals 80 percent of allowed charges. Although this policy helped secure passage of Medicare and Medicaid (by entic- ing hospital participation), subsequent spiraling reimbursement costs ensued. Shortly after the passage of Medicare and Medicaid, Congress began inves- tigating prospective payment systems (PPS) (Table 9-1), which established pre- determined rates based on patient category or the type of facility (with annual increases based on an inflation index and a geographic wage index): ● Prospective cost-based rates are also established in advance, but they are based on reported health care costs (charges) from which a predetermined per diem (Latin meaning “for each day”) rate is determined. Annual rates are usually adjusted using actual costs from the prior year. This method may be based on the facility’s case mix (patient acuity) (e.g., resource utilization groups [RUGs] for skilled nurs- ing care facilities). ● Prospective price-based rates are associated with a particular category of patient (e.g., inpatients), and rates are established by the payer (e.g., Medicare) prior to the provision of health care services (e.g., diagnosis-related groups [DRGs] for inpatient care). TABLE 9-1 Prospective payment systems, year implemented, and type PROSPECTIVE PAYMENT SYSTEM YEAR TYPE Ambulance Fee Schedule 2002 Ambulatory Surgical Center (ASC) Payment Rates 1994 Clinical Laboratory Fee Schedule 1985 Durable Medical Equipment, Prosthetics/Orthotics, and Supplies (DMEPOS) Fee Schedule 1989 End-Stage Renal Disease (ESRD) Composite Payment Rate System 2005 Home Health Prospective Payment System (HH PPS) (Home Health Resource Groups [HHRG]) 2000 Hospital Inpatient Prospective Patient System (IPPS) 1983 Hospital Outpatient Prospective Payment System (HOPPS) 2001 Inpatient Psychiatric Facility Prospective Payment System (IPF PPS) 2004 Inpatient Rehabilitation Facility Prospective Payment System (IRF PPS) 2002 Long-Term (Acute) Care Hospital Prospective Payment System (LTCH PPS) 2001 Resource-Based Relative Value Scale (RBRVS) System (or Medicare Physician Fee Schedule 1992 [MPFS]) Skilled Nursing Facility Prospective Payment System (SNF PPS) 1998 Current Procedural Terminology © 2015 American Medical Association. All Rights Reserved. Cost-based Cost-based Cost-based Cost-based Price-based Price-based Price-based Price-based Cost-based Price-based Price-based Cost-based Cost-based. Medical Billing and Coding

Insurance BIllIng guIdelInes General billing guidelines common to most payers include: 1. Provider services for inpatient care are billed on a fee-for-service basis. Each physician service results in a unique and separate charge des- ignated by a CPT/HCPCS service/procedure code. (Hospital inpatient charges are reported on the UB-04, discussed in Chapter 9.) ExAMPlE: The patient was admitted on June 1 with a diagnosis of bronchopneu- monia. The doctor sees the patient each morning until the patient is discharged on June 5. Billing for this inpatient includes: The development of an insurance claim begins when the patient contacts a health care provider’s office and schedules an appointment. At this time, it is important to determine whether the patient is requesting an initial appointment or is returning to the practice for additional services. (The preclinical interview and check-in of a new patient are more extensive than that of an established patient.) ExAMPlE: Section 1862 of Title XVIII—Health Insurance for the Aged and Dis- abled of the Social Security Act specifies that for an individual covered by both workers’ compensation (WC) and Medicare, WC is primary. For an individual covered by both Medicare and Medicaid, Medicare is primary. 6/1 6/2–6/4 6/5 Initial hospital visit (99xxx) Three subsequent hospital visits (99xxx × 3) Discharge visit (99xxx) ExAMPlE: Dr. Adams and Dr. Lowry are partners in an internal medicine group practice. Dr. Adams’ patient, Irene Ahearn, was admitted on May 1 with a chief complaint of severe chest pain, and Dr. Adams provided E/M services at 11:00 a.m. at which time the patient was stable. (Dr. Lowry is on call as of 5:00 p.m. on May 1.) At 7:00 p.m., Dr. Lowry was summoned to provide critical care because the patient’s condition became unstable. Dr. Adams reports an initial hospital care CPT code, and Dr. Lowry reports appropriate E/M critical care code(s) with modifier -25 attached. 2. Appropriately report observation services. The Medicare Benefit Policy manual (PUB 100-02), Section 20.5—Outpatient Observation Services, defines observation care as “a well-defined set of specific, clinically appropriate services, which include ongoing short-term treatment, assess- ment, and reassessment before a decision can be made regarding whether patients will require further treatment as hospital inpatients or if they are able to be discharged from the hospital. Observation status is commonly assigned to patients who present to the emergency department and who then require a significant period of treatment or monitoring before a decision is made concerning their admission or discharge. Observation services are covered only when provided by the order of a physician or another individual authorized by state licensure law and hospital staff bylaws (policies) to admit patients to the hospital or to order outpatient tests. In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours. In only rare and exceptional cases do reasonable and necessary outpatient observation services span No subsequent hospital visits or discharge day codes are reported because the global surgery package concept applies. more than 48 hours. Hospitals may bill for patients who are direct admis- sions to observation. A direct admission occurs when a physician in the community refers a patient to the hospital for observation, bypassing the clinic or emergency department (ED).” ExAMPlE: A 66-year-old male experiences three or four annual episodes of mild lower substernal chest pressure after meals. The condition is unresponsive to nitroglycerin and usually subsides after 15 to 30 minutes. The patient’s physician has diagnosed stable angina versus gastrointestinal pain. On one occasion, while in recovery following outpatient bunion repair, the patient experiences an episode of lower substernal chest pressure. The patient’s physician is contacted and seven hours of observation services are provided, after which the patient is released. 3. The surgeon’s charges for inpatient and outpatient surgery are billed according to a global fee (or global surgery package), which means that one charge covers presurgical evaluation and management, initial and subsequent hospital visits, surgical procedure, the discharge visit, and uncomplicated postoperative follow-up care in the surgeon’s office. 4. Postoperative complications requiring a return to the operating room for surgery related to the original procedure are billed as an additional pro- cedure. (Be sure to use the correct modifier, and link the additional pro- cedure to a new diagnosis that describes the complication.) 5. Combined medical/surgical cases in which the patient is admitted to the hospital as a medical case but, after testing, requires surgery are billed according to the instructions in items 3–4. ExAMPlE: Patient is admitted on June 1 for suspected pancreatic cancer. Tests are performed on June 2 and 3. On June 4 the decision is made to perform surgery. Surgery is performed on June 5. The patient is discharged on June 10. This case begins as a medical admission. decision is made concerning their admission or discharge. Observation services are covered only when provided by the order of a physician or another individual authorized by state licensure law and hospital staff tests. In the majority of cases, the decision whether to discharge a patient from the hospital following resolution of the reason for the observation care or to admit the patient as an inpatient can be made in less than 48 hours, usually in less than 24 hours. Medical Billing and Coding