Payment strategies: Unscramble the alphabet soup of medicare payment systems

Advances in Skin & Wound Care,  Jul/Aug 2001  by Schaum, Kathleen D

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The new Medicare payment systems mandated and implemented by the Balanced Budget Act of 1997 introduced wound care professionals to unfamiliar coverage, coding, and payment terminology. If the questions I have received are an indication, confusion reigns regarding the terminology. Clearly, wound care professionals need help unscrambling this payment alphabet soup and mastering the language. Only then will they be able to communicate about payment issues with each other and with payers, who release payment only when professionals describe their work in terms that payers can understand.

Coding Systems

When chefs prepare alphabet soup, they begin with the soup stock base. When skin and wound care professionals want to bill Medicare for their services, they must begin by learning the 3 major coding systems on which Medicare bases its payment systems:

CPT* is an abbreviation for Current Procedural Terminology. It is a listing of descriptive terms and identifying codes for reporting the medical services and procedures that physicians provide to patients. Each procedure or service is identified with a 5-digit code. The CPT Editorial Panel of the American Medical Association revises and publishes the CPTs annually with the assistance of physicians representing all specialties of medicine and with important contributions from many third-party payers and government agencies.

The CPT code directly affects the payment amount to physicians and nonphysician practitioners paid by the RBRVS payment system (see RBRVS). It also directly affects the payment amount to hospital outpatient departments paid by the APC payment system (see APC).

HCPCS is an abbreviation for Health Care Financing Administration Common Procedure Coding System. There are 3 levels of codes within the HCPCS coding system:

-Level I HCPCS codes. The American Medical Association's CPT codes (see below) make up the Level I HCPCS codes.

-Level 11 HCPCS codes. These are national alphanumeric HCPCS codes published and updated annually by the Health Care Financing Administration (HCFA) central office. With the exception of codes beginning with Q, additions, revisions, and deletions are made by a panel comprised of representatives from the Blue Cross/Blue Shield Association, Health Insurance Association of America, and HCFA. Codes beginning with Q are updated only by HCFA.

The Level II HCPCS codes represent services not included in the CPT codes, such as ambulance, audiology, physical therapy, speech pathology, vision care, injections, durable medical equipment, orthotics, and prosthetics. In contrast to the 5-digit CPT codes, Level II codes consist of 1 alphabetic character (a letter between A and V) followed by 4 digits.

Physicians, suppliers, and hospital outpatient departments must use Level IT HCPCS codes when billing Medicare. The Level II HCPCS code directly affects the payment amount to suppliers paid according to the Durable Medical Equipment Regional Carriers (DMERC) fee schedule.

-Level III HCPCS codes. These are local HCPCS codes used to denote new procedures or specific supplies for which national codes have not been assigned. These 5-digit alphanumeric codes use the letters W through Z, followed by 4 digits. Each local Medicare carrier may create local codes as the need dictates. Carriers are required to obtain approval from the HCFA central office before they implement local codes. Medicare carriers are responsible for providing sites of service with the Level III local HCPCS codes.

The Level III HCPCS code directly affects the payment amount to suppliers paid according to the local carrier's discretion.

ICD-9-CM is an abbreviation for International Classification of Diseases 9th Revision, Clinical Modification. It is a statistical classification system that arranges diseases and injuries into groups according to established criteria. Most ICD-9-CM codes are numeric and consist of 3, 4, or 5 numbers and a description. The codes are revised approximately every 10 years by the World Health Organization with annual updates issued each year in October by HCFA.

The Medicare Catastrophic Coverage Act of 1988 requires health care professionals to include an appropriate ICD-9-CM code for each procedure, service, or supply billed to Medicare. To comply with the regulations, health care professionals must convert the reason the patient needs procedures, services, or supplies from written statements that include specific diagnosis, signs, symptoms, and/or complaints into ICD-9-CM diagnosis codes. The diagnosis code used should be the one at the highest level of specificity. If a 5th-digit subclassification is provided, the provider must use the 5th-digit code.

HCFA has prepared guidelines for using ICD-9-CM codes and instructions on how to report them on claim forms. In addition, HCFA has directed Medicare intermediaries and carriers to provide health care professionals with a written copy. Professionals should obtain a copy of the guidelines from their Medicare intermediary and/or carrier because implementation of HCFA requirements varies from one intermediary/carrier to another.