In June, Applied Policy’s diagnostic experts introduced a new series, “IVD Test Reimbursement: Coverage, Coding, and Payment.” For our August edition, we take a deeper dive into coding.

What is coding and why is it important?

Coding is the language used to report medical procedures, supplies, products, and services on health insurance claims to Medicare and other payers. The data provided by codes allows healthcare services to be accurately reported (and therefore reimbursed). Ultimately, as coding data evolves and grows along with medical discoveries and innovation, patient care and outcomes are improved.

Healthcare Common Procedure Coding System (HCPCS)

For diagnostic tests and services, HCPCS the is the standardized coding system that providers use to report medically necessary services they perform. HCPCS is divided into two subsystems, Level I and Level II:

• Level I is comprised of Current Procedural Terminology®^[1] (CPT®) codes which consist of five numeric digits.
• Level II HCPCS codes identify products, supplies, and services not included in the CPT code set. Level II codes consist of a letter followed by four numeric digits.

When an existing code is insufficient to describe an item or service, labs may use an unlisted code or request a new CPT code.

What are CPT codes?

The Current Procedural Terminology (CPT) codes offer doctors and health care professionals a uniform language for coding medical services and procedures to streamline reporting, increase accuracy and efficiency. CPT codes are also used for administrative management purposes such as claims processing and developing guidelines for medical care review.

The CPT terminology is the most widely accepted medical nomenclature used across the country to report medical, surgical, radiology, laboratory, anesthesiology, genomic sequencing, evaluation and management (E/M) services under public and private health insurance programs.[2]

The development and management of the CPT code set relies on a rigorous, transparent, and open process led by the American Medical Association’s (AMA’s) CPT Editorial Panel. Created more than 50 years ago, this AMA-convened process ensures clinically valid codes are issued, updated, and maintained on a regular basis to accurately reflect current clinical practice and innovation in medicine.

CPT code descriptors are clinically focused and, for IVD tests, are usually analyte-specific, meaning that the code descriptor describes the concentration of a specific substance in a sample. The AMA recommends providers report the most specific code available for a given test. For example, Table 1 (below) shows the CPT code and descriptor for a respiratory panel test for SARS-CoV-2, Flu A, Flu B, and respiratory syncytial virus (RSV). The code descriptor identifies the specific detection method, target analytes, and technique for the test.

CPT code	Long Descriptor
87637	Infectious agent detection by nucleic acid (DNA or RNA); severe acute respiratory syndrome coronavirus 2 (SARS-Co-V-2) (Coronavirus disease [COVID-19]), influenza virus types A and B, and respiratory syncytial virus, multiplex amplified probe technique.

 

There are various types of CPT codes:

Category I

Category I codes are the main and most utilized code category, and their descriptors correspond to a procedure or service. Category I codes have five numeric digits and are updated January 1^st of each year. Each code describes a unique procedure that must be reported with its assigned code. FDA approval or clearance must be obtained for codes or procedures that require such approval prior to Category I code assignment.

Codes in Category I are for procedures or services that are performed by many physicians or other qualified health care professionals across the U.S. with frequencies consistent with intended clinical use, consistent with current medical practice and with established clinical efficacy as documented in the literature. Category I codes may be reported with modifier codes when applicable. When a specific Category I code is not available in the CPT code set, a code designated for an unlisted procedure is reported.

Category II

These alphanumeric tracking codes are supplemental codes used for performance measurement. Using them is optional and not required for correct coding.

The codes track performance measurements developed by national organizations, evidence-based measurements and measurements that address clinical conditions of high prevalence, risk, or cost. Category II tracking codes for performance measurements are released three times yearly after each AMA Editorial Panel meeting. They are updated annually in the CPT codebook. 

Category III

These are temporary alphanumeric codes for new and developing technology, procedures and services. They were created for data collection, assessment and in some instances, payment of new services and procedures that currently don’t meet the criteria for a Category I code.

After five years, the Category III code is either deleted or an application for Category I status is requested. These codes are updated twice per year in January and July and are updated annually in the CPT codebook.

Proprietary Laboratory Analyses (PLA) Codes

Recently added to the CPT code set, these codes describe proprietary clinical laboratory analyses and can be either provided by a single (“solesource”) laboratory or licensed or marketed to multiple providing laboratories that are cleared or approved by the Food and Drug Administration (FDA)).

PLA codes were developed for laboratories or manufacturers seeking a way to identify their tests more specifically. Tests assigned to PLA codes must be performed on human specimens and must be requested by the manufacturer or clinical laboratory that offers the test.

Moving Forward

Medicine is rapidly evolving, and new, emerging technologies require CPT codes to accurately describe them to Medicare and private payers. Clinical diagnostic innovations — next-generation sequencing, immunotherapy, companion diagnostics, telehealth, artificial intelligence — must be carefully assessed to determine whether a new or updated CPT code is needed.

It is critical for manufacturers and developers to understand how and when CPT codes are updated as they are creating new products, services and systems that use CPT content.

Next month, we will be wrapping up our series on IVD test reimbursement by discussing “payment.”

[1] CPT codes, descriptions and other data only are copyright 2020 American Medical Association (AMA). All Rights Reserved. CPT is a trademark of the AMA.

[2]https://www.ama-assn.org/practice-management/cpt/cpt-overview-and-code-approval#:~:text=CPT%C2%AE%20code%3F-,What%20is%20a%20CPT%C2%AE%20code%3F,reporting%2C%20increase%20accuracy%20and%20efficiency