The hcpcs level ii coding system has which of the following characteristics?

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:

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.)

Responsibility for HCPCS Level II Codes HCPCS level II codes are developed and maintained by the CMS HCPCS Work- group and do not carry the copyright of a private organization. They are in the public domain, and many publishers print annual coding manuals. Some HCPCS level II references contain general instructions or guidelines for each section; an Appendix summarizing additions, deletions, and terminol- ogy revisions for codes (similar to Appendix B in CPT); or separate tables of drugs or deleted codes. Others use symbols to identify codes excluded from Medicare coverage, codes where payment is left to the discretion of the payer, or codes with special coverage instructions. In addition, most references provide a complete Appendix of current HCPCS level II national modifiers. CMS has stated that it is not responsible for any errors that might occur in or from the use of these private printings of HCPCS level II codes. Types of HCPCS Level II Codes HCPCS level II codes are organized by type, depending on the purpose of the codes and the entity responsible for establishing and maintaining them. The four types are: Effective January 1, 2005, CMS no longer allows a 90-day grace period (tradition- ally, January 1 through March 31) for reporting discontinued, revised, and new HCPCS level II national codes on claims. There is also no 90-day grace period for implementing mid-year HCPCS level II national coding updates. Permanent national codes Miscellaneous codes Temporary codes ● ● ● ● Modifiers Note: When claims are to be submitted to one of the four regional MACs, DMEPOS deal- ers that have coding questions should check with the Medi- care Pricing, Data Analysis and Coding (PDAC) Con- tractor, which is responsible for providing suppliers and manufacturers with assistance in determining HCPCS codes to be used. The PDAC has a toll- free helpline for this purpose at (877) 735-1326. PDACs have replaced SADMERCs (statistical analysis durable medical equip- ment regional carriers). Permanent National Codes HCPCS level II permanent national codes are maintained by the CMS HCPCS Work- group, which is composed of representatives of the major components of CMS, Medicaid State agencies, and the Medicare Pricing, Data Analysis and Coding (PDAC). The CMS HCPCS Workgroup is responsible for making decisions about additions, revisions, and deletions to the permanent national alphanumeric codes. Decisions regarding changes to the permanent national codes are made only by unanimous consent of all three parties. As HCPCS level II is a national coding system, none of the parties, including CMS, can make unilateral deci- sions regarding permanent national codes. These codes are for the use of all private and public health insurers. Miscellaneous Codes HCPCS level II miscellaneous codes include miscellaneous/not otherwise classified codes that are reported when a DMEPOS dealer submits a claim for a product or service for which there is no existing HCPCS level II code. Miscellaneous codes

allow DMEPOS dealers to submit a claim for a product or service as soon as it is approved by the Food and Drug Administration (FDA), even though there is no code that describes the product or service. The use of miscellaneous codes also helps avoid the inefficiency of assigning codes for items or services that are rarely furnished or for which payers expect to receive few claims. Claims that contain miscellaneous codes are manually reviewed by the payer, and the following must be provided for use in the review process: Complete description of product or service Pricing information for product or service Documentation to explain why the item or service is needed by the beneficiary Note: Decisions regarding MAC temporary codes are made by an internal CMS HCPCS workgroup, and other payers may also use these codes. Note: Whenever a perma- nent code is established by the HCPCS National Panel to replace a temporary code, the temporary code is deleted and cross-referenced to the new permanent code. Before reporting a miscellaneous code on a claim, a DMEPOS dealer should check with the payer to determine if a specific code has been identified for use (instead of a miscellaneous code). Temporary Codes HCPCS level II temporary codes are maintained by the CMS and other members of the HCPCS National Panel, independent of permanent national codes. Permanent codes are updated once a year on January 1, but temporary codes allow pay- ers the flexibility to establish codes that are needed before the next January 1 annual update. Approximately 35 percent of the HCPCS level II codes are tem- porary codes. Certain sections of the HCPCS level II codes were set aside to allow HCPCS National Panel members to develop temporary codes, and deci- sions regarding the number and type of temporary codes and how they are used are made independently by each HCPCS National Panel member. Temporary codes serve the purpose of meeting the short-time-frame operational needs of a particular payer. Although the HCPCS National Panel may decide to replace temporary codes with permanent codes, if permanent codes are not established, the temporary codes remain “temporary” indefinitely. Categories of Temporary Codes C codes permit implementation of section 201 of the Balanced Budget Refine- ment Act of 1999, and they identify items that may qualify for transitional pass- through payments under the hospital outpatient prospective payment system (OPPS). These are temporary additional payments (over and above the OPPS payment) made for certain innovative medical devices, drugs, and biologicals provided to Medicare beneficiaries. These codes are used exclusively for OPPS purposes and are only valid for Medicare claims submitted by hospital outpa- tient departments. G codes identify professional health care procedures and services that do not have codes identified in CPT. G codes are reported to all payers. H codes are reported to state Medicaid agencies that are mandated by state law to establish separate codes for identifying mental health services (e.g., alco- hol and drug treatment services). K codes are reported to MACs when existing permanent codes do not include codes needed to implement a MAC medical review coverage policy. Q codes identify services that would not ordinarily be assigned a CPT code (e.g., drugs, biologicals, and other types of medical equipment or services). S codes are used by the BCBSA and the HIAA when no HCPCS level II codes exist to report drugs, services, and supplies, but codes are needed to implement private payer policies and programs for claims processing.

T codes are reported to state Medicaid agencies when no permanent national codes exist, but codes are needed to administer the Medicaid program. (T codes are not reported to Medicare, but can be reported to private payers.) Modifiers HCPCS level II modifiers are attached to any HCPCS level I (CPT) or II (national) code to clarify services and procedures performed by providers. Although the HCPCS level II code and description remain unchanged, modifiers indicate that the description of the service or procedure performed has been altered. HCPCS modifiers are reported as two-character alphabetic or alphanumeric codes added to the five-character CPT or HCPCS level II code. ExAMPlE: Modifier -UE indicates the product is “used equipment.” Modifier -NU indicates the product is “new equipment.” cOding tip: HCPCS level II modifiers are either alphabetic (two letters) or alphanumeric (one letter followed by one number) (Figure 8-1). ExAMPlE 1: A patient sees a clinical psychologist for 30 minutes of individual psy- chotherapy (CPT code 90832). Report: 90832-AH ExAMPlE 2: A Medicare patient undergoes tendon excision, right palm (CPT code 26170) and left middle finger (CPT code 26180). Report: 26170-RT 26180-59-F2

The alphabetic first character identifies the code sections of HCPCS level II. Some are logical, such as R for radiology, whereas others, such as J for drugs, appear to be arbitrarily assigned. The HCPCS level II code ranges are as follows: A0021–A0999 A4206–A9999 B4000–B9999 C1713–C9899 E0100–E999 G0008-G9472 H0001–H2037 J0120–J8499 J8501–J9999 K0000–K9999 L0000–L4999 L5000–L9999 M0000–M0301 P0000–P9999 Q0035–Q9974 R0000–R5999 S0000–S9999 T1000–T9999 V0000–V2999 V5000–V5999 Transportation Services Including Ambulance Medical and Surgical Supplies Enteral and Parenteral Therapy Outpatient PPS Durable Medical Equipment Procedures/Professional Services (Temporary) Alcohol and Drug Abuse Treatment Services Drugs Administered Other Than Oral Method Chemotherapy Drugs Temporary Codes Orthotic Procedures and Devices Prosthetic Procedures Medical Services Pathology and Laboratory Services Q Codes (Temporary) Diagnostic Radiology Services Temporary National Codes (non-Medicare) National T Codes Established for State Medicaid Agencies Vision Services Hearing Services

Organization of Coding Manual Because of the wide variety of services and procedures described in HCPCS level II, the alphabetical index (Figure 8-2) is very helpful in finding the correct code. The various publishers of the reference may include an expanded index that lists “alcohol wipes” and “wipes” as well as “Ancef” and “cefazolin sodium,” making the search for codes easier and faster. Some references also include a Table of Drugs (Figure 8-3) that lists J codes assigned to medications. Some pub- lishers print brand names beneath the generic description, and others provide a special expanded index of the drug codes. It is important never to code directly from the index and always to verify the code in the tabular section of the cod- ing manual. You may wish to review the HCPCS level II references from several publishers and select the one that best meets your needs and is the easiest for you to use. If you have difficulty locating the service or procedure in the HCPCS level II index, review the list of codes and descriptions of the appropriate section of the tabular list of codes to locate the code. Read the code descriptions very carefully. You may need to ask the provider to help select the correct code.

determiNiNg Payer reSPONSibiLity The specific HCPCS level II code determines whether the claim is sent to the: ● Primary MAC that processes provider claims ● DME MAC that processes DMEPOS dealer claims

Annual lists of valid HCPCS level II codes give providers complete billing instructions for those services. When the doctor treats a Medicare patient for a broken ankle and supplies the patient with crutches, two claims are generated. The one for the fracture care, or professional service, is sent to the primary Medicare administrative contractor (MAC); the claim for the crutches is sent to the DME MAC. The physician must register with both, review billing rules, comply with claims instructions, and forward claims correctly to secure payment for both services. If the doctor is not registered with the DME MAC to provide medical equipment and supplies, the patient is given a prescription for crutches to take to a local DMEPOS dealer. Some services, such as most cosmetic procedures, are excluded as Medicare benefits by law and will not be covered by either MAC. Splints and casts for traumatic injuries have CPT numbers that would be used to report these sup- plies or services to the local MAC. Because the review procedure for adding new codes to level II is a much shorter process, new medical and surgical services may first be assigned a level II code and then incorporated into CPT at a later date. Patient Record Documentation The patient record includes documentation that justifies the medical necessity of procedures, services, and supplies coded and reported on an insurance claim. This means that the diagnoses reported on the claim must justify diagnostic and/or therapeutic procedures or services provided. The patient’s record should include documentation of the following: ● Patient history, including review of systems ● Physical examination, including impression ● Diagnostic test results, including analysis of findings ● Diagnoses, including duration (e.g., acute or chronic) and comorbidities that impact care ● Patient’s prognosis, including potential for rehabilitation When DMEPOS items are reported on a claim, the DMEPOS dealer must keep the following documents on file: ● Provider order for DMEPOS item, signed and dated ● Signed advance beneficiary notice (ABN) if medical necessity for an item cannot be established An advance beneficiary notice (ABN) (discussed further in Chapter 14 of this textbook) is a waiver signed by the patient acknowledging that because medi- cal necessity for a procedure, service, or supply cannot be established (e.g., due to the nature of the patient’s condition, injury, or illness), the patient accepts responsibility for reimbursing the provider or DMEPOS dealer for costs associ- ated with the procedure, service, or supply. When the provider reports DMEPOS items on a claim, the provider must keep the following documents on file: ● Diagnosis establishing medical necessity for the item ● Clinical notes that justify the DMEPOS item ordered ● Provider order for DMEPOS item, signed and dated ● Signed advance beneficiary notice if medical necessity for an item cannot be established

DMEPOS Claims For certain items or services reported on a claim submitted to the DME MAC, the DMEPOS dealer must receive a signed certificate of medical necessity (CMN) (Figure 8-4) from the treating physician before submitting a claim to Medicare. A copied, electronic, faxed, or original certificate of medical necessity (CMN) must be maintained by the DMEPOS dealer and must be available to the DME MAC on request. The certificate of medical necessity (CMN) is a prescription for DME, services, and supplies. DME MAC medical review policies include local coverage determinations (LCDs) (formerly called local medical review poli- cies, or LMRPs) and national coverage determinations (NCDs), both of which define coverage criteria, payment rules, and documentation required as applied to DMEPOS claims processed by DME MACs for frequently ordered DMEPOS equipment, services, and supplies. (National policies are included in the Medi- care Benefit Policy Manual, Medicare Program Integrity Manual, and Medicare National Coverage Determinations Manual.) If DMEPOS equipment, services, or supplies do not have medical review policies established for coverage, the general coverage criteria applies. The DMEPOS equipment, services, or supplies must: ● ● ● Fall within a benefit category Not be excluded by statute or by national CMS policy Be reasonable and necessary to diagnose and/or treat an illness or injury or to improve the functioning of a malformed body DME MACs are required to follow national policy when it exists; when there is no national policy on a subject, DME MACs have the authority and responsi- bility to establish local policies. Because many DMEPOS dealers operate nation- ally, the CMS requires that the medical review policies published by the DME MACs be identical in all four regions.

aSSigNiNg HCPCS LeveL ii COdeS Some services must be reported by assigning both a CPT and a HCPCS code. The most common scenario uses the CPT code for administration of an injec- tion and the HCPCS level II code to identify the medication administered. Most drugs have qualifying terms such as dosage limits that could alter the quantity reported (see Figure 8-3). If a drug stating “per 50 mg” is administered in a 70-mg dose, the quantity billed would be “2.” If you administered only 15 mg of a drug stating “up to 20 mg,” the quantity is “1.” Imagine how much money providers lose by reporting only the CPT code for injections. Unless the payer or insurance plan advises the provider that it does not pay separately for the medication injected, always report this combination of codes. It is possible that a particular service would be assigned a CPT code and a HCPCS level II code. Which one should you report? The answer is found in the instructions from the payer. Most commercial payers require the CPT code. Medicare gives HCPCS level II codes the highest priority if the CPT code is gen- eral and the HCPCS level II code is more specific. Most supplies are included in the charge for the office visit or the proce- dure. CPT provides code 99070 for all supplies and materials exceeding those usually included in the primary service or procedure performed. However, this CPT code may be too general to ensure correct payment. If the office provides additional supplies when performing a service, the HCPCS level II codes may identify the supplies in sufficient detail to secure proper reimbursement. Although CMS developed this system, some HCPCS levels I and II services are not payable by Medicare. Medicare may also place qualifications or conditions on payment for some services. As an example, an ECG is a covered service for a car- diac problem but is not covered when performed as part of a routine examination. Also, the payment for some services may be left to the payer’s discretion. Two CMS publications assist payers in correctly processing claims. The Medicare National Coverage Determinations Manual advises the MAC whether a service is covered or excluded under Medicare regulations. The Medicare Benefit Policy Manual directs the MAC to pay a service or reject it using a specific “remark” or explanation code. There are more than 4,000 HCPCS level II codes, but you may find that no code exists for the procedure or service you need to report. Unlike CPT, HCPCS level II does not have a consistent method of establishing codes for reporting “unlisted procedure” services. If the MAC does not provide special instructions for reporting these services in HCPCS, report them with the proper “unlisted procedure” code from CPT. Remember to submit documentation explaining the procedure or service when using the “unlisted procedure” codes.

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