An Introduction to Medical Reimbursement Coding


The process of obtaining billing codes in the US for medical procedures such as focused ultrasound is complex. Different types of codes are needed to obtain reimbursement.

After a medical procedure is approved by a medical regulatory body (such as the US FDA), the manufacturer of the device can begin the process of obtaining a billing code. This is a critical step in the reimbursement process, because billing codes are the only mechanism by which a treatment site can be reimbursed by a payer.

In the US, only two entities generate billing codes: the Centers for Medicare and Medicaid Services (CMS) and the American Medical Association (AMA). Codes generated by both CMS and AMA fall under the Healthcare Common Procedure Coding System (HCPCS). Codes created by the AMA are called Current Procedural Terminology (CPT®) codes, and those created by CMS are simply referred to as HCPCS (pronounced “hick-picks”) codes.

CPT Codes
Also known as “Level I HCPCS codes,” CPT codes are generally five digit numbers that follow a defined taxonomy based on the organ being treated (e.g., brain, prostate, bone, etc.) as well as the form that the treatment takes (e.g., focused ultrasound, cryoablation, deep brain stimulation, etc.). See more details >

The time from application to effective date for CPT codes is about two years. For the AMA to designate a CPT code, the Coding and Reimbursement Committee (or some variant thereof) of a member specialty society (e.g., the American Urological Association, in the case of prostate cancer) must first request the new code. This means that the manufacturer of the device must lobby committee members to consider recommending the procedure to the AMA.

CPT codes are needed for specific payments to both the facility where the procedure was performed and to the treating physician. For the latter, the specialty society’s Relative Value Scale Update Committee (RUC) surveys 30 physicians who have experience with the procedure to determine fair compensation for the work performed.

There is not yet a Category I CPT code assigned in the focused ultrasound industry, although treatment of prostate cancer using focused ultrasound will be assigned a CPT code on Jan 1, 2021. It will be given the code 558xx, with the last two numbers to be determined before the end of the year.

Category III CPT codes are temporary codes used to track utilization of new or emerging medical technologies. These codes take the form of four numbers with a T on the end. In general, Category III codes are used when there are not yet enough physicians performing the procedure to complete a RUC survey. These codes sunset after about two years, with the assumption that they will be converted to a Category I CPT code by then, although the manufacturer can apply to have them extended until there is a requisite number of treating physicians for a RUC analysis. One thing to note about Category III codes is that they only include treatment facility fees; claims for the fees paid to the physician must be submitted to payers separately, often by the physician’s practice, with a separate billing code. This can place an additional burden on that practice’s billing team.

Examples in the focused ultrasound industry of Category III codes are 0398T, which is used to bill for treatment of ET and tremor-dominant Parkinson’s disease, and 0071T and 0072T, which are used to bill for the treatment of uterine fibroids.

HCPCS (Level II) Codes
Another form of temporary codes, HCPCS Level II codes, are used for the reimbursement of products, supplies, and services supplied outside of a physician’s office (e.g., focused ultrasound for the treatment of bone metastases). These “pass-through payments” are created by CMS when it doesn’t have enough information about a new technology to understand how much hospitals are paying for it and for which procedures it is used. Hospitals report these codes on their Medicare claims for two or three years from the time they are granted. CMS then uses that information to calculate how to adjust outpatient payment rates to reflect the resources involved in using that new technology. After CMS has the information it needs, the Level II code is discontinued and replaced by a CPT code.

HCPCS Level II codes start with a letter followed by four numbers. A segment of Level II HCPCS codes called C-codes – items and services for outpatient use, pass-through devices, drugs and biologicals, new technology, and other services – are currently most relevant to the focused ultrasound industry.

The advantage of a C-code is that it takes only a few months to obtain, meaning that a treatment site is more likely to adopt the new technology sooner than if it had to wait until a CPT code was granted. The disadvantage of C-codes is that they are temporary, requiring that the manufacturer later endure a more-laborious CPT code application process.

C-codes relevant to the focused ultrasound industry include C9747 (to be replaced by 558xx on January 1, 2021) for salvage therapy of radiorecurrent prostate cancer and C9734 for the treatment of painful bone metastases.

How Billing Codes are Used in Practice
There are currently more than 20,000 CPT and HCPCS codes used in the US. This means that the task of assigning the correct code on the five billion claims made each year1 to insurers for payment is difficult. If the match is incorrect, the procedure can be underbilled, overbilled, denied, or rejected outright by the insurer.

For a claim to be reimbursed properly, every procedure listed in a facility’s “chargemaster” (essentially a catalog of all procedures performed there) must be matched correctly to the corresponding billing code. That billing code must then match to the International Classification of Diseases, Tenth Revision (ICD-10) diagnosis code for which the procedure is prescribed.

For example, in the case of a site that treats ET with an internal charge code of 6100398000, which is officially described as “HB MRGFUS STEREOTACTIC ABLATION LESION INTRACRANIAL,” must be billed using CPT code 0398T and must be matched to a diagnosis code of G25.0. Failure of any of these factors to align properly will result in denial or rejection of the claim.

Correct coding and billing for any given procedure is fraught with the potential for error. As shown above, the official description of the procedure is not necessarily intuitive, creating room for potential error. Another complicating factor is that the chargemaster for most larger hospitals contains more than 40,000 unique procedures, most of which are just as cryptically described as in the example above.

Although there is a certain amount of billing automation performed through Electronic Medical Record (EMR) systems – the software programs that store patient medical data – there is very real need for human intervention in this process. As such, medical billing and coding specialists (employed by medical centers) are tasked with reviewing case records and EMR details to ensure that all factors match up correctly. For context, in 2019, the US Bureau of Labor Statistics identified more than 341,000 of these specialists2 and underscored their growing importance in estimating that this field is expected to expand “much faster than average” (at eight percent annually).

Because the sheer volume of procedures to choose from is so high, and because the outcome of errors is so impactful, billing and coding is performed at large institutions on a department-by-department basis. This allows their billing and coding specialists to become familiar with a smaller subset of overall procedures performed at the hospital and thereby reduces the risk of claim denials. To further reduce the risk of claim rejections, healthcare facilities can also use a myriad of companies called clearinghouses that consolidate and “scrub” insurance claims to ensure that their billings don’t fall into the estimated 14 percent of claims that are denied each year.

Given all of the challenges that exist for billing and coding, it’s remarkable that this step is performed with the level of accuracy that it is. Thankfully, there are many processes in place that reduce the rate of claim denials.