What are Healthcare Common Procedure Coding System (HCPCS) codes?
The Healthcare Common Procedure Coding System (HCPCS) is a collection of standardized codes used in medical billing to represent various medical procedures, services, products and supplies in claims to Medicare, Medicaid, and many third-party payers.
HCPCS is divided into Level I and Level II. Level I consists of Current Procedural Terminology (CPT-4) codes, which are unique identification numbers (and accompanying descriptions) for all medical services and procedures provided by healthcare professionals. These codes are published annually by the American Medical Association.
Level II HCPCS codes identify products, supplies, and services that are not included in the CPT codes, such as ambulance services, durable medical equipment, and medication administered in a physician’s office. Most pharmaceutical products managed under the medical benefit have HCPCS codes. These codes are published quarterly by CMS.
How are HCPCS codes used?
When a coder receives a medical report, they take notes on which procedure was performed and which products were prescribed, injected, infused, or delivered to the patient. Then they find the applicable and relevant codes to use within the claim. HCPCS manuals include a large drug table to help coders find the right code for each medication product.
Although HCPCS codes were initially developed for use with Medicare claims, many commercial health plans—but not all—have adopted them. Coders must be familiar with the policies and guidelines for various payers.
HCPCS Level II codes are frequently used in conjunction with CPT and ICD-10-CM codes to report what service was provided to a patient, what was used to treat or assess that patient, and the reasons why that service was provided. Generally speaking, medical coders use these three code sets when submitting medical claims to report:
- HCPCS Level I (CPT codes): What the provider did
- HCPCS Level II codes: What the provider used
- ICD-10-CM: Why the provider chose this treatment/service
Why are updates to HCPCS coding important?
HCPCS Level I codes, or CPT codes, are updated every year. Certain code ranges are also updated quarterly, or biannually in January and July. HCPCS Level II codes are updated on a quarterly basis.
Due to the frequency of coding changes, health plans must regularly update their reimbursement schedule. To reduce incorrect payments, many payers choose to use a tool like MMIT’s ReimbursementCodes solution to identify pricing and coding updates for drugs covered under the medical benefit.
Providers must also stay current with billing requirements, as incorrect coding can delay claim approvals and impact patient access to needed therapies. Changes in HCPCS coding can cause a drug product to move to a different billing code, which can in turn affect its price.
Pharma manufacturers must also stay informed about how their products are coded, as additions and deletions can create widespread confusion. When providers bill for a product under a code that is no longer in use, the result is either a denied claim or inaccurate reimbursement. Eventually, frustrated providers could decide to prescribe alternative therapies, which can result in reduced utilization for manufacturers.
For example, CMS recently began issuing new HCPCS Level II codes to identify generic drugs approved under the 505(b)(2) pathway. As generics approved via this pathway are not therapeutically equivalent to their reference drug, they are considered single source drugs. Each will now carry a unique HCPCS J code, and providers will need to select the correct one for any administered drugs. If the provider pairs an NDC with the wrong J code on a claim form, the claim could be denied. Payers will also need to update their systems to ensure that the correct NDC crosswalks back to the correct J code. Because many J-code drugs are expensive, there can be a huge cost differential per unit based on the chosen code.
