What are HCPCS codes?

What are 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.

What are the types of HCPCS Level II codes?

All HCPCS Level II codes are five characters in length, beginning with a letter and followed by four digits. The letter (A through V) represents the code chapter. Some of the most common HCPCS Level II code types, or chapters, are:

  • E-codes: Used to report all durable medical equipment
  • G-codes: Used to report temporary procedures and professional services
  • H-codes: Used to report rehabilitation services
  • J-codes: Used to report all non-orally administered prescription medications and chemotherapy drugs

What’s the difference between ICD-10-CM codes and HCPCS codes?

CMS and the National Center for Health Statistics created two medical code sets, the ICD-10-CM and the ICD-10-PCS, based on the tenth edition of the International Classification of Diseases, a medical coding system designed by the World Health Organization. Many countries use national variations of the ICD-10 to map diseases to broader morbidities.

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

What’s the difference between NDC and HCPCS codes?

The National Drug Code (NDC) is a unique 11-digit, 3-segment number that identifies all prescription and non-prescription drugs in the U.S. The FDA publishes all listed NDC numbers in an NDC Directory, which is updated daily. A drug’s NDC is usually found on the medication’s label or outer packaging. The first segment of an NDC, the labeler code, is assigned by the FDA; the remaining segments identify the product and the trade package size.

For many physician-administered drugs, coders must submit both the drug’s NDC number (along with the NDC qualifier, number of NDC units used, and the NDC unit of measure) as well as the drug’s HCPCS Level II code.

As there are often several NDCs linked to a single HCPCS code, it’s important to correctly identify the drug and manufacturer during billing. Essentially, accurate reimbursement is typically based on the HCPCS description and units of service. Documentation for state rebate programs is typically based on the NDC units. In recent years, more and more payers have been requiring the use of NDC codes in an effort to better manage specialty drug spend.

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.

What are coding crosswalks?

Many providers use publicly available coding crosswalks to simplify coding complexity. There are many different types of NDC/HCPCS crosswalk tools available, which are intended to clarify which NDC drugs are assigned to which HCPCS billing codes. The crosswalks also include information on the NDC package size and number of billable units, as defined by the HCPCS code descriptor.

However, most crosswalks are intended to support only drugs covered by Medicare Part B; as a result, they do not include all available drugs. For more coding assistance, many providers turn to additional tools, like MMIT’s RC Claim Assist solution. This provider-facing website is accessible from a payer’s provider or network portal. It gives providers actionable coding and units for billing drugs administered under the medical benefit.

RC Claim Assist helps providers search for the correct CPT, HCPCS Level II, and NDC codes, quickly converts HCPCS/CPT drug code units to NDC drug code units, and references AWP and WAC pricing for each HCPCS/CPT code. Pharma manufacturers can also use it for assistance with provider education campaigns to ensure that providers avoid common coding errors and are paid appropriately.