Our bodies are complex. They break down in complex ways. We try to fix them in complex ways. We pay for the fix in complex ways. Healthcare providers need to do a million different things to fix us and they need a shorthand to say what they did. Those who pay for the fix need to know that same shorthand to pay the correct amount. Enter Medical Codes.
When a doctor provides care, they record their notes describing in great detail what they did. A billing and coding expert reads those notes and creates a list of medical codes that would apply based on the procedure. In some cases, the software might also do this work. This list is then sent to a clearinghouse that confirms that the claims are free of errors. Once confirmed, the payers approve payment to the healthcare provider per the contracted rate. Most of this is now automated and happens millions of times every day. What healthcare providers get paid depends on the codes included in the claim. Each code has a contracted payment rate unique to the provider-payer combination. Everyone laments that healthcare prices are out of control. But most don’t understand that Healthcare prices come down to these codes. So what are these Medical Codes?
ICD - International Classification of Diseases
This is a diagnosis code. It can be a disease like diabetes, an abnormality, or a symptom like a headache or back pain. The previous version, the ICD-9 version, had about 13,000 codes. ICD-10 allows regional classifications and extensions. The current version, ICD-10-CM, created by CMS, has almost 68,000 codes. They will have 3-7 alphanumeric characters. The first three characters indicate the category of the diagnosis, the next three indicate etiology, anatomic site, severity, or other clinical detail, and the last character indicates extension such as initial, subsequent, or sequela. Some codes will even make you chuckle. V97.33XD is Sucked into jet engine, subsequent encounter. All claims require a diagnosis, but reimbursements are typically not based on ICD codes. There are a few sub-types, but we won’t go into those here.
CPT - Current Procedural Terminology
This code captures what was done about the diagnosis. It can be an X-ray, Surgery, Office Visit, etc. It’s the code for outpatient procedures (i.e., those that do not require an overnight stay at the hospital). The codes are for services rendered rather than the diagnosis. There are over 10,000 CPT codes. They describe medical, surgical, and diagnostic services physicians and other health care professionals perform. CPTs are made of 5 numeric or alphanumeric characters. Unlike the ICD system, each character in a CPT code does not correspond to a particular procedure or technology. The CPT coding system must be licensed for use as it is developed and maintained by the American Medical Association (AMA), which holds the copyright. CPT codes are divided into six large sections - Evaluation and Management, Anesthesiology, Surgery, Radiology, Pathology, and Laboratory. 47350 is “management of liver hemorrhage; simple suture of liver wound or injury.” Like ICD codes, there are subcategories for CPT codes, but we won’t discuss those here.
DRG - Diagnosis Related Group
When patients are admitted as inpatient into the hospital (i.e., those procedures that require an overnight stay), they are assigned a DRG code when discharged. The code determines the all-in fixed amount that will be paid, regardless of how much the hospital spent to take care of the patient. Medicare sets the rates annually based on the inpatient prospective payment system (IPPS). If the hospital can provide care more efficiently, it can keep the difference. If the hospital spends more, then they have to take the hit. Typically these are only used for inpatient services. However, there are some experiments with outpatient DRGs. Value-based care is a continuation of this concept. Since most care is delivered in an outpatient setting, many claims will not have a DRG code. There are several subtypes like APR-DRG (All-Patient) and MS-DRG (Medicare) 3-4 digit codes. CMS works with 3M to offer groupers that classify these DRGs. There are over 25 categories with 500 groupings. 469, for example, is Major Joint Replacement or Reattachment of Lower Extremity with MCC.
NDC - National Drug Codes
These are 10-11 digit numeric codes used as a universal product identifier in the US. There are three segments to each NDC. The first set of numbers is the labeler. This labeler can be the drug manufacturer, repackager, or distributer. The second is the product code, which identifies the specific strength, dosage form (i.e., capsule, tablet, liquid), and drug formulation for a specific labeler. The third is the package code, which identifies package sizes and types. NDCs include all over-the-counter (OTC) medications, prescription medications, and insulin packages. There are over 250,000 NDCs and over 6,500 labelers (companies). 0777-3105-02, for example, is the NDC for a 100-count bottle of Prozac 20 mg.
HCPCS (“hick-picks”) - Healthcare Common Procedure Coding System
Finally, we come to the hick-picks. Created by Medicare and required for Medicare reimbursement. There are two levels - Level 1 HCPCS are actually CPTs we looked at above. Level 2 HCPCS are those procedure codes not covered by CPTs. So CPTs are actually a subset of hick-picks. They also have some overlap with NDCs. These are also 5 characters long. Commercial insurance uses them as well. Level 2 HCPCS are procedure codes that are not included in CPT codes. HCPCS include infusion, specialty medicine, management of Crohn’s disease, mammograms, represent items, supplies, and non-physician services. These also include J-codes, which are used for Injectable drugs that cannot be self-administered, chemotherapy drugs, and some orally administered drugs. J0696, for example, is for Rocephin, a typical antibiotic injected in a pediatrician’s office. Now you know what the heck a hick-pick is!
There are many other types of codes and subcategories. But let’s take baby steps - Now you know your CPTs, thirty-six alphanumerics from A to Z and 0 to 9.
Thanks for reading hick-picks!
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It's complicated not so easy to make it easier! I Will like to follow and discuss.
Also will like to find out Indian scenario
Very nicely explained Tejas👍