Lesson: HCPCS and Coding

Compliance
INTRODUCTION
In this lesson, we’re going to take a closer look at HCPCS, focusing on Level II,
LESSON
coding compliance. HCPCS AND
There will be many times when you’ll have to speak with insurance company CODING
representatives—perhaps to inquire about the status of your claim, to find out
why an item or service was not paid, or to discuss other insurance-related issues. COMPLIANCE
In many situations, the insurance company representatives can be a help to you
by giving suggestions and pointing out rules that you may have overlooked.
However, sometimes you may encounter uncooperative insurance carrier
personnel. In all cases, remember to be professional and bring any problems to
the attention of your supervisor.

In this lesson you’re going to learn about selecting codes by using source
documents. What’s a “source document”? Source documents are the actual
patient health records, whether it’s the office note, consultation report, progress
note, operative report, or diagnostic evaluation. These may be paper based or
electronic. Keeping accurate and thorough patient health records is critical to
the provider’s role of furnishing quality health care to patients. The link between
good documentation practices and proper reimbursement is also important.

To work in health care, it’s imperative that you become familiar with what
constitutes correct documentation because reimbursement for the physician’s
services is based on what’s documented. Because of the importance of correct
documentation, we’ll spend some time here detailing the importance of correct
documentation.

It’s important to have sound health records that chronologically document all
patient care because these records serve the following functions:

• T hey enable the physician and other healthcare professionals to plan and
evaluate the patient’s treatment.

• T hey enhance communications and promote continuity of care among

physicians and other healthcare professionals involved in the patient’s care.

• They facilitate claims review and payment.

• They reduce hassles related to medical review.

• T hey serve as a legal document to verify the care provided, which can be
helpful in defending against an alleged professional liability claim.

The health record should be complete and legible. Most physicians dictate
their patient encounters and then have the dictation transcribed. The physician
should read, sign, and date all dictated medical records before they’re placed in
the patient’s chart (Figure 6). A signature alongside the note indicates that the
physician read the transcription and approved the information. When Medicare

MEDICAL CODING 29
 audits a medical record and the record can’t be read by at least two people, it’s
considered illegible, and the services won’t be reimbursed.

FIGURE 6—All paper medical records should be complete and legible and signed
by the physician before they’re placed in the patient’s chart.

Payers differ in signature requirements, but obtaining a full signature is the

best practice. CMS, which administers Medicare, doesn’t specify whether a full
signature is required or whether initials are permitted. Many commercial payers
don’t require signature or initials, but because medical records can and often do
become legal documents, a full signature is generally the best practice.

The documentation of each patient encounter should include the date, reason
for the encounter, appropriate history and physical exam, review of lab and/or
x-ray data, assessment, and plan for care. The CPT and ICD codes reported on the
health insurance claim form should reflect the documentation in the medical
record and support the medical necessity. An important phrase to remember in
the insurance world is, “if it wasn’t documented, it wasn’t done!”

What are medically necessary services? Payers define medically necessary services
as those that adhere to standards of good medical practice, match up with the
diagnosis, and provide the most appropriate level of care in the most appropriate
setting. The definition of medical necessity may differ among insurers. Medically
necessary services may or may not be covered services, depending on the health
plan.

The most important step in coding protocol is to code and report only those
conditions and procedures that are documented in the medical record. If you
know a service or procedure was provided, but it’s not stated in the medical

30 MEDICAL CODING
record, either you must have the physician make an addendum to the record or
you must not code for the undocumented service.

Choosing the primary diagnosis and then linking the diagnosis to the procedure
are critical steps for proper reimbursement. Many insurance carriers have code-
linkage edits (ICD/CPT matching) built into their claims-processing systems. The
physician’s claim can be denied for ICD/CPT “mismatch.” For example, a claim
is submitted and the diagnosis billed is migraine headache, but the procedure
billed is a chest x-ray. Now that’s a mismatch that probably will kick out the claim!

In this lesson, you’ll also be introduced to coding from progress notes,

consultation reports, and diagnostic reports. “SOAP notes” are a popular method
for physicians to document their findings. Many times it’s the medical assistant
or nurse who documents the patient’s chief complaint and the description of the
presenting problem. The medical assistant or nurse can also record the patient’s
current, past, and social medical history and/or the patient’s family history. When
a patient completes a questionnaire as part of the registration process, that
questionnaire becomes part of the medical record as well. It’s important that the
physician sign and date any patient questionnaire and nursing notes to indicate
that he or she read the information.

Coding from operative reports can be difficult. You must have a good
understanding of medical terminology as well as a correct idea of the actual
procedure performed. Effective communication with the physician is essential for
accurate coding.

Working in a physician office, you’ll often encounter Evaluation and Management

codes. The Evaluation and Management (E/M) codes cover those services
generally considered to be the office visit, hospital visit, consultation, or ER visit.
To determine the proper code for these types of services, numerous factors must
be taken into account. These codes are used frequently by coders. In a pediatric
or family practice, it’s entirely possible that most of your codes will come from
this category.

More and more healthcare employers are learning how experienced coders
can make a difference in their office’s reimbursement practices. After you’ve
gained some billing and coding experience, you might want to consider taking
a national coding certification examination. This program has not focused on
coding, except as an entry-level skill for medical billing specialists. But with
experience on the job, you can become skilled as a coder, and obtaining the
certification shows that you’re a coding professional as well as an expert. These
certifications are becoming well known in the industry, and now many healthcare
providers will only hire those who are certified for some advanced coding
positions.

MEDICAL CODING 31

STUDY TIP
You can access the HCPCS
Level II codes (provided
by the CMS for free) by
following these steps:
1. Go to the CMS Web
site (http://www.cms.
gov/Medicare/Coding/
HCPCSReleaseCodeSets/
index.html?redirect=/
HCPCSReleaseCodeSets/).
2. Click on HCPCS - General
Information.
3. Scroll down to the
“Related Links” section, and
click on Alpha-Numeric
HCPCS.
4. Click on 2018 HCPCS
Index.
5. Click on 2018 HCPCS
Index (PDF, 206KB).
6. Save the document to
your hard drive for your
personal use.
7. Repeat these steps to
download the 2018 Alpha-
Numeric HCPCS File (ZIP,
1MB) and the 2018 HCPCS
Table of Drugs (PDF,
309KB).
32
OBJECTIVES
After completing this lesson, you’ll be able to
• Understand the two levels of HCPCS
• Review HCPCS modifiers
• Identify code linkages
• Understand coding accuracy
• R
 eview federal laws, regulations, and penalties relating to coding
compliance
• Explain the National Correct Coding Initiative (NCCI)
• Understand coding ethics
ASSIGNMENT 4: INTRODUCTION TO HCPCS
AND CODING COMPLIANCE
In your textbook, Comprehensive Health Insurance: Billing, Coding, and
Reimbursement, read and study Chapter 8, “HCPCS and Coding Compliance,” on
pages 182–200.
In the previous lesson, we touched on HCPCS when we talked about CPT.
Remember, HCPCS (pronounced HIC-pics) is the Healthcare Common Procedure
Coding System. There are several different levels within the HCPCS classification
system, with the most commonly used level being the CPT level, or Level I, codes
that we discussed previously. Level II HCPCS codes are known as national codes.
According to the CMS, Level II codes are used mainly to identify products,
supplies, and services not included in the CPT-4 codes. These can include
• Ambulance services
• Durable medical equipment
• Prosthetics
• Orthotics
• Nonphysician supplies
These Level II codes were created to provide reporting and billing mechanisms
MEDICAL CODING
for codes not covered under CPT. Unlike the Level I (CPT) codes, which consist of
five-digit codes, the Level II HCPCS codes consist of four digits preceded by an
alphabetical character ranging from A through V.

FAST FACT!

HISTORY OF HCPCS
Ambulance services,
durable medical
equipment, prosthetics,
HCPCS originally stood for HCFA Common Procedure Coding System. HCFA was the orthotics, and supplies
acronym for the Health Care Financing Administration, which is now known as are often referred to by
the Centers for Medicare and Medicaid (CMS), thus the coding system was named the acronym DMEPOS.
after that organization. Today, HCPCS stands for Healthcare Common Procedure
Coding System. HCPCS was established in the 1980s to provide a standardized
coding system for describing the specific procedures and services in health care. STUDY TIP
In 1983, HCPCS was initially created to represent physician and nonphysician Be sure to review the
services under Medicare. As your textbook describes, prior to that time there was HCPCS Level II example
no uniform system for coding procedures and services, which meant that there on page 186 of your
was no good way to collect reimbursement. Since then the usage has expanded. textbook.
In 2003, the HHS gave authority to the CMS to maintain and distribute HCPCS
Level II codes under HIPAA. They’re updated on January 1 of each year, just like
CPT (Level I) codes. Today, Medicare, Medicaid, as well as private health insurers
all use HCPCS codes for billing and claims processing.

Initially, there was also a HCPCS Level III, which included the “local codes.”
These codes were developed and used by state Medicaid agencies, Medicare
contractors, and private insurers to cover local services not identified in HCPCS FAST FACT!
Level I or II codes. In 1996, HIPAA required CMS to adopt standards for coding According to the CMS,
systems that are used for reporting healthcare transactions. These regulations U.S. healthcare insurers
eliminated Level III local codes, and they were phased out on December 31, 2003. process over 5 billion
claims for payment each
year. Can you imagine
HCPCS MODIFIERS what that would be
like if we didn’t have a
As we discussed in the previous lesson, modifiers are two-digit (alphabetical or standardized coding and
alphanumeric) codes that are appended to the back of a HCPCS code to provide reporting system?
additional information about the code. Think about it as a way to help explain a
procedure when there isn’t a specific code that covers it (Figure 7).

MEDICAL CODING 33
 STUDY TIP
FIGURE 7—Modifiers can help explain procedures that aren’t fully described by an
Refer to Table 8.2 on
existing code.
page 187 of your textbook
to see a list of HCPCS
Modifiers are important because they help explain things that may not seem
modifiers.
apparent on first glance from payers. For example, maybe the physician performs
two procedures during one surgery on one patient. The insurer may only pay
100% of the allowed amount for the first procedure, but only a percentage of that
for the second procedure. Using a modifier that indicates multiple procedures
will help the payer better understand what to reimburse.

CPT CODES AND BILLING

VIRTUAL FIELD TRIP
To support billing requirements, CPT codes must be supplied on a standard form
Visit the CMS to see a
in order to comply with data exchange regulations. The CMS-1500 form is the
copy of the CMS-1500.
standard claim form to bill Medicare and durable medical equipment regional
Go to www.cms.gov/
carriers (DMERCs). The National Uniform Claim Committee (NUCC) is responsible
Medicare/CMS-Forms/
for the design and maintenance of the CMS-1500 form.
CMS-Forms/downloads/
cms1500805.pdf.

FRAUDULENT CLAIMS
In the previous lesson, we touched on unbundling and how it can be seen
as fraudulent if it continues to happen from one provider. As your textbook
describes, this type of fraud is covered by the Federal Civil False Claims Act.

34 MEDICAL CODING
Believe it or not, the False Claims Act (FCA) was first enacted by Congress in 1863!
Then, the government was concerned that suppliers of goods to the Union Army
during the Civil War were defrauding the army. Since then (as you can imagine),
the FCA has been amended several times to reflect current happenings. One of
the current amendments to the FCA makes it illegal to submit claims for payment
to Medicare or Medicaid that are known to be false (Figure 8).

STUDY TIP
Be sure to review
Figure 8.1 on page 189 of
your textbook.

STUDY TIP
Review Figure 8.2 on
page 191 and
Figure 8.3 on pages
FIGURE 8—Under the FCA, it’s illegal to submit false claims to Medicare or 192–193 of your textbook
Medicaid. to see examples of the
Federal Civil False Claims
HIPAA created the Healthcare Fraud and Abuse Control Program to help identify Act in action.
instances of fraud and abuse. As your textbook discusses, the Office of Inspector
General (OIG) works with the Department of Justice (DOJ) to investigate and
prosecute these claims.

NATIONAL CORRECT CODING INITIATIVE

In 1996, the CMS implemented the Medicare National Correct Coding Initiative
(NCCI) to promote national correct coding methodologies and to help control

MEDICAL CODING 35
 improper coding and inappropriate payments. According to CMS, “NCCI code
FAST FACT! pair edits are automated prepayment edits that prevent improper payment when
There’s also a NCCI certain codes are submitted together for Part B-covered services.” The NCCI helps
for Medicaid, but it providers avoid coding and billing errors and payment denials by telling them
varies greatly from the which procedures and services can’t be billed to Medicare for the same patient
Medicare NCCI. within the same day.

CHECK YOUR LEARNING 4

Complete the following questions to test your knowledge.
Do not send the answers to the school.

Complete the “Chapter Review” exercises on pages 200–203 in

the textbook, Comprehensive Health Insurance: Billing, Coding, and
Reimbursement.

Check your answers with those found at the end of this learning guide.
If you are accessing this lesson online, click on Check Your Learning
Answers in the left-hand menu of this lesson group.

36 MEDICAL CODING