CPT Codes and Upcoding

The modern CPT codes in the healthcare industry today began decades ago.  Their evolution has been vital to better descriptions and better tools to minimize Medicare Fraud.

The AMA Drove the Development of CPT Codes When Medicare First Began

In the 1960s, Congress created Medicare.  That innovation quickly led to a need for a uniform system of medical billing, which was already a notion that was at that time gaining some traction in the medical community.  With Medicare in particular, such a vast healthcare program could only be manageably administered if there were some clear standards by which all healthcare providers were guided.

In response to this obvious and growing need, the American Medical Association (“AMA”) conducted a study to obtain industry input on the viability of a uniform system.  Ultimately, the AMA created the first version of the Current Procedural Terminology Codes (“CPT codes”) in 1966.  This first edition of the CPT codes organized mainly surgical procedures into standardized codes for medical records, insurance claims, and information and statistical purposes.

Several years later, in 1970, the AMA broadened the list of terms and classification codes to include diagnostic and therapeutic procedures in surgery, medicine, and the specialties, in addition to those procedures relating to internal medicine.  Around this time also, the CPT codes first took on the five-digit numeric coding system.

By 1977, the AMA recognized that the medical environment was not static. Rather, the AMA understood that the relevant CPT codes had to keep up with ever-changing medical developments, procedures, and advancements.  Thus, the AMA devised a system in which the CPT codes would be periodically updated.

CMS Adopts the CPT Codes

In 1983, the Centers for Medicare & Medicaid Services (“CMS”) officially adopted CPT codes as part of its own Healthcare Common Procedure Coding System (“HCPCS”).  Essentially, CMS’s coding system was comprised of two parts:

  1. Level I – the CPT codes themselves,
  2. Level II – CMS’s HCPCS

That same year, CMS issued a mandatory rule that CPT codes be used to identify services for the Medicare Part B program.  Three years later, CMS mandated that state Medicaid programs must also use CPT codes.  Soon after, CPT codes were required by law to be used to report outpatient hospital surgical procedures.

HIPAA and CPT Codes

In 1996, Congress passed the Health Insurance Portability and Accountability Act (“HIPAA”).  That law required the U.S. Department of Health and Human Services (“HHS”) to adopt uniform standards for coding of electronic healthcare information and transactions.  HHS adopted the AMA’s CPT codes as one standard of coding.

Finally, in 2002, the CPT codes officially became one of the methods by which healthcare providers must bill Medicare for medical services.  The relevant regulation on the subject states as follows:

The Secretary adopts the following maintaining organization’s code sets as the standard medical data code sets … (a)(5) The combination of Health Care Financing Administration Common Procedure Coding System (HCPCS), as maintained and distributed by HHS, and Current Procedural Terminology, Fourth Edition (CPT–4), as maintained and distributed by the American Medical Association, for physician services and other health care services.

45 C.F.R. § 162.1002(a)(5).

Thus, CPT codes and HCPCS are the procedure code set for:

  • Physician services
  • Physical and occupational therapy services
  • Radiological procedures
  • Clinical laboratory tests
  • Other medical diagnostic procedures
  • Hearing and vision services
  • Transportation services including ambulance

What makes CPT codes so effective is that they are very, very specific.  For example, there is not just one code for a session of psychotherapy.  There is one five-digit code for a 30-minute session, another for a 45-minute session, and yet another code for a 60-minute session.  The specificity is important because billing rates rely on the type of service provided, and the more specific, the less leeway to easily engage in upcoding or Medicare Fraud.

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