Department  of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
CODING  OF  PHYSICIAN  SERVICES  OFFICE OF INSPE~OR  GENERAL 
The mission of the Office of Inspector General  (OIG), as mandated by Public Law 95-452, as 
amended, is to protect the integrity of the Department  of Health and Human Services (HHS) 
programs as well as the health and welfare of beneficiaries seined by those programs.  l%k 
statutory mission is carried out through a nationwide network of audits, investigations, and 
inspections conducted by three OIG operating components:  the Office of Audit Services, the 
Office of Investigations, and the Office of Evaluation and Inspections.  The OIG also informs 
the Secretary of HHS of program and management problems and recommends courses to 
correct them. 
OFFICE OF AUDIT  SERVICES 
The OIGS Office of Audit Semites (OAS) provides all auditing services for HHS, either by 
conducting audits with its own audit resources or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors in 
carrying out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and efficiency throughout the Department. 
OFFICE OF INVESTIGATIONS 
The OIGS Office of Investigations (01) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 
unjust enrichment by providers.  The investigative efforts of 01 lead to criminal convictions, 
administrative sanctions, or civil money penalties.  The 01 also oversees State Medicaid fraud 
control units which investigate and prosecute fraud and patient abuse in the Medicaid program. 
OFFICE OF EVALUATION  AND  INSPECITONS 
The OIGS Office of Evaluation and Inspections (OEI) conducts short-term management and 
program evaluations (called inspections) that focus on issues of concern to the Department, 
the Congress, and the public.  The findings and recommendations contained in these inspection 
reports generate  rapid, accurate, and up-to-date information on the efficiency, vulnerability, 
and effectiveness of departmental  programs. 
This report was prepared  in the Philadelphia Regional Office, under the direction of Joy Quill, 
Regional Inspector General and Robert A. Vito, Deputy Regional Inspector General. 
Participating in this project were 
HEADQuAR-
REGION 
Robert A. Baiocco, F70ject Leader  W. Mark Krushat, SC.D.

Donna M. Millan, Lead AnaZyst  Wayne Powell, Bogram  Specialist

Robert A. Katz

Daniel E. Brooks

Cynthia Hansford, Administrative  Stajf

To obtain a copy of this repo~  call the PhiladelphiaRegional Of&eat  (S(N))531-9562  Depatiment  of Health and Human Services 
OFFICE OF 
INSPECTOR GENEML 
CODING  OF  PHYSICIAN  SERVICES  EXECUTIVE  SUMMARY

PURPOSE 
This report  describes  vulnerabilities  in the  maintenance,  use,  and  management  of the 
Current  Procedural  Terminology  Codes,  Fourth  Edition  (CPT-4),  as they  relate  to 
Medicare  reimbursements. 
BACKGROUND 
The  Health  Care  Financing  Administrations  (HCFA)  Common  Procedural  Coding 
System  (HCPCS)  is a three-part  procedure  labeling  system  used  to identify  services  in 
the  Medicare  Part  B program.  Current  Procedural  Terminology  (CPT-4)  codes 
identify  physician  services  and  comprise  the  first level  of HCPCS.  The  HCPCS  also 
identifies  other  sexvices such  as ambulance  services  and  durable  medical  equipment. 
Since  January  1992, HCFA  has  assigned  a relative  value  unit  (RVU)  to each  CPT-4 
code  to represent  the  resources  that  each  service  requires.  The  RVU  is now used  as 
the  basis  to  set reimbursements  for health  care  providers.  The  reimbursement  amount 
for each  code  is contained  in the  Medicare  Fee  Schedule.  In Fiscal  Year  1991, HCFA 
paid  $36.2 billion  for  867 million  semices  claimed  under  CPT-4. 
The  CPT-4  is a systematic  listing of descriptive  terms  and  identifying  codes  used  to 
describe  the  services  of health  care  providers.  It was developed  by the  American 
Medical  Association  (AMA)  in  1966.  Now in its fourth  edition,  CPT-4  contains 
approximately  7,000 codes,  each  in a five-digit  numerical  format.  In February  1983, 
HCFA  incorporated  CPT-4  into  HCPCS. 
METHODOLOGY 
We reviewed  both  the  CPT-4  system  itself  and  HCFAS management  of the  system  as 
they  affect  Medicare  expenditures.  We  conducted  this inspection  in two phases.  In 
the  initial  phase,  we gathered  documentation.  We  first compiled  25 reports  on CPT-4 
related  topics;  most  were  issued  by the  Office  of Inspector  General.  Other  sources 
included  HCF~  the  Physician  Payment  Review  Commission,  and  the  General 
Accounting  Office  (GAO).  We  then  contacted  41 medical  specialty  societies,  12 
Medicare  carriers,  the  AN@  the  American  Health  Information  Management 
Association,  the  American  Hospital  Association,  the  Blue  Cross  Blue  Shield 
Association,  and  the  Health  Insurance  Association  of America.  We  asked  each  to 
provide  documentation  concerning  pertinent  CPT-4  issues.  We  also  obtained 
additional  material  from  an on-line  search  of a data  base  of medical  journals.  These 
articles  ranged  from  descriptions  of studies  with  developed  methodologies  to 
discussions  of expert  opinions.  A companion  report,  A  Compendium  of Repotis  and 
i  Literature  on  Coding  of Physician  Sewicm,  0EI-03-91-00921,  protidesadetaded 
summary  of each  document. 
In the  next  phase,  we conducted  structured  interviews  to refine  the  issues we had 
developed.  We  interviewed  representatives  from  each  group  previously  contacted 
except  for  GAO.  In addition,  we spoke  to 23 coders  and  coding  consultants.  Our 
range  of respondents  ensured  a fair representation  of professional  opinions  and 
experience. 
This  inspection  was conducted  in accordance  with the  Quality  Standards  for  Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
FINDINGS 
Incorrect coding affects Medicare  reimbursement  and causes inequities  in payment 
under the Medicare  Fee  Schedule. 
Flaws in CPTAI codes,  guidelin~  and index ean lead to improper coding. 
.  Examples  illustrating  code  flaws occur  in most  sections  of CPT-4. 
.  Problems  in CPT-4  guidelines  and  index  also contribute  to incorrect  coding. 
.	 Some  respondents  have  criticized  the  process  that  AMA  uses  to consider 
changes,  additions,  and  deletions  in CPT-4. 
The AMA  and HCFA  have both taken some  corrective measures  to address coding 
problems. 
The methods  by which HCFA  has immrporated CPT-4 into Medicares  coding  system 
do not ensure appropriate reimbursement  to Medicare  providers. 
.	 The  HCFA  has  not  developed  criteria  or communicated  decision  rules  to the 
CPT-4  Editorial  Panel  for use in changing,  adding,  or deleting  codes  in light of 
the  Medicare  Fee  Schedules  requirements. 
.	 The  HCFA  has not  adequately  communicated  Medicare  coding  policy to 
providers. 
.	 The  HCFA  has not  developed  an efficient  or effective  process  for  establishing 
RWS  for new or modified  codes. 
A proliferation  of CPT-4 changes will undermine HCFAS ability to contain 
expenditures  under the Medicare  Fee  Schedule. 
ii  RECOMMENDATIONS 
We recommend  that HCFk 
Produce  and  promulgate  to the  AMA  and  medical  specialty  societies  clear 
coding  objectives  and  criteria  for Medicares  resource-based  payment  system 
and  encourage  them  to apply  the  objectives  in the  development  of new or 
revised  codes; 
Apply  HCFA  coding  objectives  and  criteria  when  evaluating  new  or revised 
codes  to assure  compliance  with the  needs  of the  Medicare  Fee  Schedule; 
Work  with  the  ~  Medicare  carries,  medical  specialty  societies  and  other 
related  parties  to develop  a mechanism  that  assures  a unified  and  consistent 
dissemination  of guidelines  on how to use  and  interpret  codes. 
Evaluate  the  current  process  for implementing  changes  to the  Medicare  Fee 
Schedule.  This  includes:  (1) developing  an effective  process  for  establishing 
work values  for new  or revised  codes,  (2) communicating  to the  AMA  the 
number  of annual  additions,  deletions,  and  revisions  to CPT-4  that  HCFA  could 
effectively  review,  and  (3) delaying  implementation  of new  or revised  codes, 
except  for new technologies,  until  reliable  data  is available  to predict  service 
utilization. 
We recommend  that AM/k 
.	 Consider  and  encourage  medical  specialty  use  of HCFA  coding  objectives  and 
criteria  in the  development  of new  or revised  CPT-4  codes; 
.	 Consider  a review  of the  CPT-4  index within  the  framework  of its own 
commissioned  studys recommendations; 
.	 Work  with  HCFA  to develop  a mechanism  that  assures  a unified  and  consistent 
dissemination  of Medicare  coding  policy 
.  Provide  HCFA  with  utilization  estimates  for new or revised  codes;  and 
.	 Work  with  HCFA  to arrive  at an  acceptable  number  of annual  CPT-4  code 
changes  to allow for proper  HCFA  evaluation. 
COMMENTS 
The  HCFA  and  AMA  commented  on the  draft  reports.  The  full text  of their 
comments  appear  in Appendix  E.  The  HCFA  concurred  with  the  second  and  fourth 
... 
111  recommendations  and  are  considering  the  first and  third.  Although  the  AMA 
expressed  concern  about  the  study methodology,  they  found  all but  recommendation 
five to be  fair  and  reasonable.  The  AMA  does  not  believe  that  putting  a cap on the 
number  of CPT-4  changes  per  year  is in the  best  interest  of the  Medicare  program,  its 
beneficiaries,  or medicine. 
We  recognize  the  complex  nature  of the  CPT  system  and  commend  HCFA  and  the 
AMA  for their  willingness  to take  the  necessary  corrective  actions  to improve  the 
coding  process  and  assure  the  successful  implementation  of the  Medicare  Fee 
Schedule. 
iv  TABLE  OF  CONTENTS

PAGE 
EXECUTIVE  su-MMf=Y 
1 
lNIRODUmON  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
4 
FINDINGS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
4 
Incorrect  coding  affects  Medicare  reimbursements  . . . . . . . . . . . . . . . . . . . . . . . . 
5 
Hawsin  CPT-4can  lead  toimproperco&ng  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
The  AMAand  HCFAhave  addressed  some  coding  problems  . . . . . . . . . . . . . . . .  8 
Tke  HCFAprocess  ofcode  development  is flawed  . . . . . . . . . . . . . . . . . . . . . . .  11 
An increase  ofcodesundeties  the  Medicare  Fee  Schedde  . . . . . . . . . . . . . . .  14 
.  15 
w~~A~ONS...OO000OO  O-  00- 
.  17 
COMMENTS  . . . . . . . . . ...   
..19 
ENDNOTES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
APPENDICES 
AHCPCSDeveloped  &ound  CPT-4.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  A-l 
.  B-1 
B:  The  CPTProcess  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
.  c-1 
C  Data  Sources  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
D:  Summa~of  OIGRepotison  CPT-4  . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  D-1 
E.  HCFAand  WCommentsof  Draft  Repoti  . . . . . . . . . . . . . . . . . . . . . ..E-l  INTRODUCTION

PURPOSE 
This  report  describes  vulnerabilities  in the  maintenance,  use,  and  management  of the 
Current  Procedural  Terminology  Codes,  Fourth  Edition  (CPT-4),  as they relate  to 
Medicare  reimbursements. 
BACKGROUND 
The HCFA  Common  Procedural  Coding System (HCPCS),  which includes CPT-4, is 
used to identi& Medicare  Part B seMces. 
The  Health  Care  Financing  Administrations  (HCFA)  Common  Procedural  Coding 
System  (HCPCS)  is a three-part  procedure  labeling  system  used  to identify  services  in 
the  Medicare  Part  B program.  The  HCFA  developed  HCPCS  to achieve  uniformity  in 
procedure  coding  (See  Appendix  A).  The  Current  Procedural  Terminology,  Fourth 
Edition  (CPT-4)  codes  comprise  the  first level  of HCPCS  codes  and were  incorporated 
into  HCPCS  in 1983.  In addition  to CPT-4  services,  the  HCPCS  identifies  other 
services  such  as ambulance  semices  and  durable  medical  equipment.  1  Hospitalsz  use 
CPT-4  to report  outpatient  sefices? 
The American  Medical  Association  developed  and maintains the CIT.-4 coding system. 
The  CPT-4  is a systematic  listing of descriptive  terms  and  identifying  codes  used  to 
describe  the  services  of health  care  providers$  The  American  Medical  Association 
(AMA)  published  the  first edition  of CPT  in 1966.  It consisted  of 3,634 four-digit 
numeric  codes.  The  second  edition,  in 1970, expanded  the  codes  to five digits.  The 
third  edition,  in  1973, introduced  the  modifier.5  In  1977, the  current  fourth  edition 
was published.  By 1993, CPT-4  consisted  of 6,925 codes  and  26 two-digit  numeric 
modifiers.  It is divided  into  six sections:  Evaluation  and  Management,  Anesthesia, 
Surgery,  Radiology,  Pathology  and  Laboratory,  and  Medicine. 
The  CPT  Editorial  Panel,  comprised  of 146 physicians,  governs  the  maintenance  of 
CPT-4.  In  1977, periodic  updates  of CPT were  introduced.  Currently,  the  Editorial 
Panel  meets  quarterly  and  decides  whether  to add,  delete,  or revise  codes.  Code 
suggestions,  typically,  are  channeled  through  national  medical  specialty  societies  that 
act  as intermediaries  between  the  Editorial  Panel  and  health  care  providers.  These 
societies  assist in providing  the  necessary  documentation  to support  the  medical 
necessity  of code  changes.  Editorial  Panel  decisions  may be  appealed  to the  CPT 
Executive  Committee.8  (See  Appendix  B for an illustration  of the  code  maintenance 
process). 
1

_.  The  HCFA  assigns a Relative  Value Unit  (RVU)  to each CFT-4 code  to represent  the 
resouree  that each service requires.  The RW  is also the basis for provider 
reimbursement  under the Medieare  Fee  Schedule. 
Since January  1992, HCFA  has  assigned  a relative  value  unit  (RW)  to each  CPT-4 
code  to represent  the  resources  that  each  service  requires.  The  RW  is divided  into 
three  categories:  physician  work,  practice  expenses,  and  the  cost of professional 
malpractice  insurance.  It is used  as the  basis  to set reimbursements  for health  care 
providers.  The  reimbursement  amount  for  each  code  is contained  in the  Medicare 
Fee  Schedule.  Prior  to the  Fee  Schedule,  HCFA  paid  provider  services  on a 
customa~-prevailing-reasonable  (CPR)  charge  basis.  The  Omnibus  Budget 
Reconciliation  Act  of 1989 began  a process  to replace  the  CPR  mechanism  and  create 
more  equity  and  consistency  in reimbursements.9  The  HCFA  initiated  the  Fee 
Schedule  in January  1992 and  must  fully implement  it by 1996.  Data  developed  by 
Harvard  University  provided  HCFA  with  the  framework  to develop  RWS  in the 
initial  Fee  Schedule.  The  HCFA  consulted  with  the  AMAs Relative  Value  Update 
Committee  (RUC)  on the  development  of subsequent  RWs.10 
In fiscal year  (FY)  1991, Medicare  reimbursed  $45 billion  under  HCPCS.  The  867 
million  services  paid  under  CPT-4  account  for $36.2 billion  or 80 percent  of HCPCS 
charges.  In addition,  325 codes  (approximately  5 percent)  account  for 80 percent  of 
CPT-4  reimbursements. 
Three  groups within HCFA  govern the use of CPT-4. 
Three  groups  within  HCF~  the  Bureau  of Policy Development  (BPD),  the  Bureau  of 
Program  Operations  (BPO),  and  the  Office  of Research  and  Demonstrations  (ORD), 
govern  the  use  of CPT-4.  The  BPD  establishes  coverage  and  payment  policy, 
including  the  assignment  of RWS.  Currently,  a BPD  official from  the  Office  of 
Payment  Policy represents  HCFA  on the  CPT  Editorial  Panel.  The  BPO  implements 
coverage  and  payment  policy  and  can  issue guidelines  to its contractors  that  differ 
from  CPT-4  if code  definitions  are  unclear  or contrary  to its payment  policy.ll  The 
ORD  conducts  studies  to evaluate  Medicare  policy alternatives.  The  ORD  contracted 
with Harvard  University  to develop  RWS  for the  Medicare  Fee  Schedule. 
METHODOLOGY 
We reviewed  both  the  CPT-4  system  itself  and  HCFAS management  of the  system  as 
they  affect  Medicare  expenditures.  We  conducted  this inspection  in two phases.  In 
the  initial  phase,  we gathered  28 documents  on CPT-4-related  topics  issued  by 
government  agencies,  most  by the  OIG.  Other  sources  included  HCF~  the  Physician 
Payment  Review  Commission  (PPRC)  and  the  General  Accounting  Office  (GAO). 
Next, we gathered  other  documented  material.  To  do this, we contacted  41 medical 
2
 specialty  societies,  12 Medicare  carriers,  the  AN@  the  American  Health  Information 
Management  Association  (AHIMA),  the  American  Hospital  Association  (AHA),  the 
Blue  Cross  Blue  Shield  Association  (BCBSA),  and  the  Health  Insurance  Association  of 
America  (HIAA)  (For  a complete  list of data  sources,  see Appendix  C).  We  asked 
each  to provide  any reports,  newsletters,  position  statements,  or other  documented 
material  concerning  pertinent  CPT-4  issues.  We  also obtained  published  articles  from 
the  computer  files of the  National  Library  of Medicines  Medical  Literature  Analysis 
and  Retrieval  System  (MEDLARS).  12 These  articles  ranged  from  descriptions  of 
formal  studies  to discussions  of expert  opinions.  Our  research  dated  to back  to  1985, 
after  the  establishment  of HCPCS.  A companion  report,  A  Compendium  of Repotis 
and  Literature  on  Coding  of Physician  Services,  OEI-03-91-00921,  provides  a detailed 
summary  of each  document. 
In the  second  phase,  we conducted  structured  interviews  to refine  the  issues we had 
developed.  To  ensure  a fair  representation  of professional  opinions  and  experience, 
we interviewed  representatives  from  each  group  previously  contacted.13  In addition, 
we spoke  to 23 individuals  who currently  code  using CPT-4  or provide  coding  advice 
on the  use  of CPT-4.  We  selected  data  sources  in the  following  manner: 
Government  Agencies  - We  chose  Federal  agencies  that  regulate  or monitor  provider 
activity under  Medicare.  In the  U.S. Department  of Health  and  Human  Services, 
there  are  HCFA  and  the  OIG.  The  PPRC  and  GAO  provide  input  to Congress. 
Medicare  Carners - We  stratified  all Medicare  carriers  into  three  groups.  Each 
stratum  represented  a level  of reimbursement  activity in FY  1990: high, moderate,  or 
low.  From  each  stratum,  we selected  five carriers.  Since  one  carrier  represented 
three  jurisdictions,  the  total  number  of carriers  was  12.  We  chose  this method  to 
ensure  a fair representation  of carrier  activity. 
Heahh  Care  Trade  Groups  - We  included  the  AMA  and  the  three  groups  represented 
on the  CPT  Editorial  Panel:  the  M@  BCBS~  and  HIAA.  The  AHIMA14 also 
provided  information. 
Medical  Specialty  Societies  - We  chose  41 groups  to represent  practitioners  who use 
CPT-4  codes.  They  include  23 members  of the  Council  of Medical  Specialty 
Societies  15 13 limited-licensedlG  practitioner  groups;  and  five major  groups  of 
internal  medicine. 
Medical  Record  Codens  - We  chose  23 individuals  who  currently  code  using  CPT-4  or 
provide  coding  advice  on the  use  of CPT-4.  The  AHIMA  helped  in providing  19.  We 
identified  the  other  four  through  published  articles. 
This  inspection  was conducted  in accordance  with the  Quality  Standards  for  Inspections 
issued  by the  Presidents  Council  on Integrity  and  Efficiency. 
3
 FINDINGS

INCORRECT  CODING  AFFECTS  MEDICARE  REIMBURSEMENT  AND 
CAUSES  INEQUITIES  IN PAYMENT  UNDER  THE  MEDICARE  FEE 
SCHEDU. 
The  Medicare  program  cannot  pay providers  a fair price  for services  they render  to 
Medicare  beneficiaries  without  knowing  what  sewices  were  actually  provided.  The 
primary  mechanism  by which  physicians  inform  the  program  of the  services  they 
provide  is the  CPT-4  system.  Flaws  in the  CPT-4  system,  or provider  confusion 
concerning  the  use of these  codes,  can lead  to improper  choices  of codes  to describe 
services.  Deliberate  miscoding  also occurs.  Improper  choice  of codes will frequently 
lead  to improper  reimbursement. 
In previous  reports,  the  OIG  has identified  improper  coding  practices  which  increased 
annual  Medicare  expenditures  by over  $100 million  (See  Appendix  D).  Upcoding, 
unbundling,  and  fragmentation  were  identified  as the  most  common  forms  of 
improper  coding.  Upcoding  or code  creep  occurs  when  a provider  bills for a 
procedure  more  extensive  or intensive  than  the  one  performed.  Unbundling  involves 
billing  for each  component  code  of a larger,  single comprehensive  procedure  code. 
Fragmentation,  another  form  of unbundling,  allows the  billing for incidental 
procedures  done  as part  of a larger  procedure.  The  larger  procedure  code  would 
essentially  include  the  definition  of the  smaller  procedure(s). 
Projections  of the  total  scope  and  impact  of improper  coding  vary.  Based  on prior 
experience,  software  companies  who  specialize  in identiijing  improper  coding  practices 
for private  insurance  companies  estimate  between  3 and  17 percent17  of all claims 
are  improperly  coded.  If we assume  the  coding  practices  are  the  same  for both 
Medicare  and  private  claims,  the  impact  could  be  significant.  Based  on FY  1991 
expenditures  of $36.2 billion,  between  $1 billion  and  $6 billion  in Medicare  claims  may 
have  been  affected.  Another  expert  noted  that  health  insurers  overpaid  $5.8 billion  in 
unnecessary  claims  in  1989 because  of inaccurate  coding. 18 In a 1991 report,  Blue 
Shield  of California  projected  a 15 percent  error  rate  in claims  coding.19 
In addition  to improperly  inflating  Medicare  costs, improper  coding  can  contribute  to 
inequities  in payment  across  provider  specialties,  possibly  unclermining  the  intent  of 
physician  payment  reform.  As the  PPRC  stated  in its  1992 Annual  Reuort  to 
Congress: 
Under  the  Medicare  Fee  Schedule,  coding  issues  are  extremely

important  because  it is not  possible  to  assure  equitable  payment  under  a

national  fee  schedule  unless  each  code  represents  a similar  amount  of

work  to all physicians  who use it.  In fact,  coding  is more  important  than

previously  because  there  are  fewer  variations  in payment  and  no

specialty  differentials.n

4  FLAWS IN CPT4  CODES,  GUIDELINES,  AND  INDEX  CAN LEAD  TO 
IMPROPER  CODING. 
We  identified  several  examples  of flaws in the  CPT-4  codes,  guidelines,  and  index  that 
we believe  cause  improper  coding  practices.  Code  problems  include  ambiguous  code 
definitions,  multiple  codes  that  define  essentially  the  same  procedure,  and  individual 
codes  that  cover  an array  of significantly  different  levels of work  effort.  Specific 
coding  guidelines  that  appear  at the  beginning  of each  section  are  sometimes 
ambiguous,  particularly  in addressing  hospital  outpatient  services.  These  guidelines 
define  items  that  are  necessa~  to  appropriately  interpret  and  report  the  procedures 
contained  in that  section.  The  index, which  seines  as the  starting  point  for code 
selection,  is poorly  organized  and  often  difficult  to use. 
These  weaknesses  within  CPT-4  can  impact  users  in several  ways.  Flawed  CPT-4 
codes  give knowledgeable  users  the  opportunity  to wilfully miscode  and  cause 
confusion  for those  with legitimate  intentions.  Providers  can  submit  claims  that 
misrepresent  semices,  higher  or lower,  when  codes  do not  accurately  represent  the 
services  performed.  The  problems  with  coding  guidelines  and  the  index  compound 
any already  existing weaknesses  in the  codes. 
in
Erumples  ilhslruling  code flaws  occur  mostsections  of  CPT-4 
The  following  examples  illustrate  problems  with  specific  CPT-4  codes.  While  no single

study contains  a thorough  analysis  of the  CPT-4  system,  the  following  examples

identify  problems  in most  sections  of CPT-4.

Arnbi~uous  code  definitions

Examples  in medical  visit and  consultation  services,  arthroplasty  procedures,  and

laboratory  and  radiology  services  illustrate  this problem.

In the  past,  providers  did not  uniformly  or accurately  code  the  levels  of service  for

medical  visits and  consultations.  21  Variations  in reporting  these  services  were  due  to

coding  practices,  not  patient  characteristics  or treatment  practices.  These  coding

practices  result  from  the  ambiguity  in definitions  such  as brief  or limited.  One

report22  on consultation  codes  noted  that  71 percent  of respondents  believed  that

code  definitions  overlapped.  This lack  of clarity  resulted  in overpayments  of an

estimated  $73 million  per  year  nationwide.  An  article  on the  coding  practices  of

urologists  in Connecticut  found,  on average,  that  urologists  used  one  code  82 percent

of the  time  to record  visit services.  This  concentration  on one  code  did not  represent

the  normal  distribution  of actual  practice  patterns.  The  article  attributed  this coding

bias  to the  imprecise  definitions  of CPT-4  codes.z

Another  article  also noted  that  podiatrists  and  ortho  aedic  surgeons  disagree  on the

$ 
correct  code  to use for the  arthroplasty  procedure  of the  toe.  Due  to the  non-

specific  CPT  definitions,%  three  codes,  28153, 28160, and  28285,X are  all used.

5- Code  28285 has  the  highest  RVU  of the  three  codes  and  accounted  for more

expenditures,  $21.6 million  in FY  1991, than  the  other  two.

The  OIG  found  that  billers  of laboratory  services  cannot  bill individual  tests  under  one

profile  code  because  profile  codes  often  do not  adequately  describe  what  they

encompass. 27 A profile  is a package  of individual  tests  commonly  performed

together.  As a result,  profiles  are  subject  to interpretation.  Providers  Can increase

their  reimbursement  by billing  the  individual  tests  instead  of the  profile.

In  1987, only 2 million  laboratory  services  billed  to Medicare  were  identified  as

profiles.  However,  the  OIG  had  projected  that  more  than  55 million  laboratory

semices  should  have  been  billed  as profiles.  At one  carrier,  providers  who  coded

multichannel  laboratory  tests% individually  and  not  part  of the  lower  profile  caused

overpayments  of $2.6 million  over  a 3 year  period.

Radiology  services  (70010-79999)  were  also unbundled.  Tests  were  coded  individually

rather  than  as lower  profile  tests.  An  OIG  report  found  this practice  resulted  in

overpayments  of $1.3 million  at  one  carrier.29

Multitie  codes  that  define  essentially  the  same  Procedure

Examples  in the  Pathology  and  Laboratory  and  Surgery  sections  of CPT-4  illustrate

this phenomenon.  Within  the  surgery  section,  we specifically  target  coronary  artery

bypass  graft  (CABG)  and  arthroscopic  procedures.

In the  Pathology  and  Laboratory  section  (80002-83999),  multiple  procedure  codes

defined  essentially  the  same  lab procedure.  As new methods  were  introduced,  more

procedure  codes  were  added.  Often  these  new  codes  were  not  significantly  different

from  current  codes.  Providers  could  increase  reimbursement  by choosing  the  code

with  the  highest  payment.w

Currently,  six codes  (33510-33514,  33516)  describe  venous  grafting  in CABG  surgery.

Each  code  represents  the  number  of venous  grafts  performed.  Before  HCFA

mandated  the  use  of CPT-4,  many  carriers  listed  only three  codes  for venous  grafting.

One  code  identified  grafting  for  a single  artery,  another  for two grafts,  and  the  third

for three  or more  grafts.  An  OIG  study found  that  over  60 percent  of surgeons

interviewed  agree  that  the  same  payment  for three  or more  grafts  is appropriate  since

the  work  effort  for the  additional  grafts  is relatively  unchanged.  In addition,  50

percent  of surgeons  did not  object  to the  same  payment  regardless  of the  number  of

grafts  involved.  Some  surgeons  believed  that  higher  payments  for additional  grafts

encourage  abuse.  The  OIG  had  suggested  that  AMA  reduce  the  number  of CABG

surgery  codes  from  six to three.  This would  have  saved  an estimated  $5 million

annually.31

Arthroscopic  codes  such  as meniscectomy,  synovectomy,  chondroplasty,

debridement,  patellar  shaving, patellar  plasty, and  lateral  release  are  closely

6  related  procedures.  However,  as one  article  noted,  each  has  different  reimbursement 
implications  and  could  lead  to upcoding.32 
Codes  that  cover  an array  of sijrnificantlv different  levels  of services 
The  CPT-4  codes  that  describe  diagnostic  vascular  testing,  open  needle  biopsy,  and 
fcraniotomy procedures  identi@  different  levels  of services. 
Diagnostic  vascular  testing  codes  failed  to distinguish  between  test  types.  k  a result, 
providers  billed  brief  tests  conducted  with  inexpensive,  hand-held  devices,  with  a code 
(93910) valued  for extensive  tests with  expensive  equipment.  The  OIG  believed  the 
brief  tests  should  not  have  been  billed  separately  but  included  in the  office visit fee. 
One  report  on pocket  dopplers33 projected  annual  overpayments  of $6 million.~ 
Another,  on zero  crossers,35 estimated  annual  Medicare  savings of $16.7 million.% 
The  OIG  also found  that  open  needle  biopsy  procedures  present  coding  challenges. 
Until  recently,  there  was no clear  way to describe  an open  needle  biopsy when 
performed  as part  of a larger  procedure.  This procedure  was miscoded  under  47000
percutaneous  needle,  or 47100 -open wedge  biopsy37 along with  the  larger 
procedure  code.  Open  needle  biopsies  not  part  of a larger  procedure  are  included  in 
the  laparotomy  procedure  code  (49000). 
Four  codes  (61510,  61512, 61514, 61516)% describe  supratentorial  craniotomy,  a 
procedure  that  can take  from  one  to  12 hours. 39 The  codes  differentiate  the  types  of 
lesion,  but  not  the  extent  of work.  A surgeon  who  performs  the  12-hour  craniotomy 
fares  worse  financially  than  the  one who  takes  one  hour  since  there  are  no codes 
which  differentiate  the  levels  of service. 
l?obkms  in CPT-4  guidelines  and  iruk  also  con/ni.bute to  honed  coding. 
Most  respondents  said that  CPT-4  is well organized  (primarily  by organ  groups)  since

each  section  contains  like services.  However,  some  CPT-4  guidelines  do not  provide

sufficient  detail  to properly  direct  the  coder.  For  example,  confusion  exists in coding

multiple  procedures  in terms  of which  procedure  takes  precedence.  Terms  such as

simple, superficial,  and  deep  or complicated  are  also confusing.  Without  further

explanation,  application  of these  terms  may not  be uniform.

The  guidelines  on hospital  outpatient  services  appear  to be  a particular  problem.

In November  1988, HCFA  informed  the  CPT  Editorial  panel  of its concerns  in

applying  CPT-4  to outpatient  services.  In a December  1992 position  statement,

AHIMA  states,  attempts  to effectively  use  this (CPT-4)  coding  system  for the  hospital

setting  have  resulted  in the  inconsistent  application  of the  CPT  conventions  and  the

general  guidelines.

Problems  with  the  index were  also noted.  An AMA-commissioned  studya  identified

several  problems  with  the  index.  They  include:  too  many  reference  points,  e.g

7  procedure,  organ,  conditio~  coder  directed  to a wide range  of codes,  not  specific 
enough;  insufficient  eponymic41 entries;  codes  in the  index which  have  been  deleted 
from  te~,  procedures  in text which were  omitted  from  the  index  procedures  not 
clearly  differentiated;  limited  cross referencing,  poor  use of common  abbreviations; 
and  typographical  errors.  There  are  still concerns  that  AMA  has not  adequately 
addressed  the  recommendations  of its own study.  According  to  a HCFA  official  and 
some  coders,  the  CPT-4  index  is poorly  organized  and  the  descriptors  are  short, 
inconsistent,  and  incomplete.  Coders  perceptions  of the  CPT-4  index  maybe 
influenced  by the  level  of training  and  experience  they have  acquired  using CPT-4  or 
other  coding  systems. 
Some respondents have dicized  the process  that AM  wes  to consider dumgeq 
CPM. 
additions,  and dehxions in 
Opinions  on the  AMA  process  of revising  CPT-4  vary.  While  approximately  40 
percent  of respondents  we surveyed  expressed  satisfaction  with the  current  system  of 
addressing  coding  issues,  an equal  number  were  dissatisfied.  Some  respondents 
believe  the  Editorial  Panel  does  a good job  in balancing  requests  for unnecessary 
codes  against  those  resulting  from  valid  changes  in medicine.  Others  used  the  terms 
hostile and  closed-door  to express  their  sentiments.  Most  coders  believe  they 
should  have  a voice  in the  process  because  they  can provide  a valuable  user 
perspective  on the  application  of codes.  Half  of carrier  respondents  also prefer  to 
have  input  before  the  AMA  implements  new codes.  Opinions  on the  timeliness  of 
code  changes  were  less divisive:  56 percent  of providers  expressed  satisfaction  while 
only 24 percent  were  dissatisfied. 
THE AMA  AND  HCFA  HAVE  BOTH  TAKEN  SOME  CORRECTIVE 
MEASURES  TO ADDRESS  CODING  PROBLEMS. 
Both  HCFA  and  the  AMA  have  taken  corrective  actions  to address  some  of the 
problems  noted.  The  AMA  has  revised  codes  which  identify  medical  visit and 
consultation,  pathology  and  laboratory,  diagnostic  vascular  testing,  and  open  needle 
biopsy  procedures.  They  have  not,  however,  revised  radiology,  arthroplasty, 
arthroscopic,  and  craniotomy  procedure  codes.  Nor  have  they revised  the  CPT-4 
guidelines.  The  HCFA  has instituted  pre- and  postpayment  reviews  to identify  claims 
affected  by improper  coding.  They  have  also studied  several  approaches  to reduce 
unnecessary  codes. 
l%e AA4X% corrective acths 
The  AMA  has  addressed  several  of the  code  problems  previously  identified.  In  1991,

the  AMA  revised  office visit codes  to formulate  the  Evaluation  and  Management

section.42  Diagnostic  vascular  testing  codes  were  amended  to account  for the

different  levels  of service.  Code  47001 was added  to identify  an open  needle  biopsy

when  performed  as part  of a larger  procedure.  In  1992, there  were  945 changes  in

Pathology  and  Laboratory  codes  (446 deletions,  233 additions  and  266 revisions).

8
 These  changes  took  effect  on April  1, 1993.  Also, the  American  College  of Cardiology 
(ACC)  has petitioned  the  AMA  to revise  the  cardiac  catheterization  codes  in the 
Medicine  section  to incorporate  supervision  and  interpretation  services.43 
The  AMA  also added  vignettes  or clinical  examples  in the  1992 CPT-4  to assist in the 
selection  of Evaluation  and  Management  codes.  The  1993 CPT-4  contains  348 
vignettes  covering  29 medical  specialties. 
The  AMA  has  taken  steps  to improve  the  CPT-4  maintenance  process.  The  Editorial 
Panel  has grown  from  12 to  14 members  and  the  Adviso~  Panel  has  added 
representatives  of nine  non-AMA  specialty  groups.  A new standard  form  for 
proposed  coding  changes  should  help  establish  uniformity  in the  application  and 
review  processes.  In  1990, the  AMA  introduced  both  the  CPT  Clearinghouse  and 
CPT  Assistant  to help  bring  uniformity  and  clarity in code  application.  The  CPT 
Clearinghouse,  a phone  bank  used  to field  CPT-4  questions,  estimates  they  field  5,000 
questions  each  month.  The  CPT  Assistant  is a quarterly  newsletter  designed  to 
provide  accurate,  up-to-date  information  regarding  coding. 
Lastly,  the  AMA  recognizes  that  CPT-4  contains  flaws and  encourages  constructive 
suggestions  by all interested  parties  to address  them.  It is their  goal  to assure  the 
continual  improvement  of CPT-4. 
%  HCFAh  comdve  actions 
The  HCFA  uses pre- and  postpayment  reviews  to detect  improper  coding.a  The 
prepayment  process  involves  the  use of computerized  screens  to edit  claims.  These 
edits  are  directed  towards  high-dollar,  high-frequency  services.  In February  1991, 
HCFA  began  Phase  I of the  Correct  Coding  Initiative  (CCI).  The  CCI required 
carriers  to install  edit  screens.  These  screens  detect  secondary  codes  that  are 
components  of larger  primary  procedure  codes.  When  the  edit  identifies  the  primary 
code,  Medicare  denies  payment  for the  associated  secondary  codes.  Phase  I identified 
68 primary  codes.  Phase  11,introduced  in 1992, identified  251.45 The  edits  span  all 
six sections  of the  CPT-4  codes.  Prior  to the  CCI,  only a limited  number  of edit 
screens  were  required  for all carriers.  In FY  1991, before  all the  edits  were  installed, 
$4.6 billion  was billed  under  57 codes which would  have  been  subject  to  edits. 
All  12 carriers  contacted  have  installed  the  CCI  edit  screens.  Nine  respondents 
believe  the  screens  will reduce  unbundling  significantly.  Two mentioned  the  need  for 
more  screens.  Neither  the  OIG  nor  HCFA  has  evaluated  the  effectiveness  of the  CCI. 
We  are  aware  that  some  insurance  companies  use  a far greater  number  of edits  than 
HCFA  to detect  improper  coding  practices  in their  non-Medicare  claims.  The  HCFA 
does  permit  carriers  to use local  edits  that  existed  prior  to  1992 for Medicare  claims. 
The  HCFA  believes  that  edits  to detect  rebundling  are  complex  but  is working  with 
the  OIG  to improve  the  prepayment  screening  process. 
9

.  The  postpayment  process  involves  a comprehensive  medical  review  that  identifies

potentially  fraudulent  or abusive  practices.  Postpayment  reviews  are  expensive,  with

one  estimate  placing  the  cost at $50 to review  one  claim.ti  However,  such reviews

have  been  successful  in finding  instances  of upcoding,  and  can lead  to the

development  of prepayment  edit  screens.

The  HCFA  has targeted  the  utilization  patterns  of Evaluation  and  Management  codes

as one  postpayment  review.  Their  aim is to assure  that  coding  does  not  vary

significantly  from  expected  norms. 47 Services  under  Evaluation  and  Management

codes  account  for over  70 percent  of all Part  B claims  and  represent  35 percent  of

charges.  Therefore,  significant  cost overruns  could  occur  if providers  code  at levels

higher  than  expected.  The  HCFA  intends  these  reviews  to be  purely  informational

and  not  burdensome.~

Despite  HCFAS efforts,  one  recent  article  reported  continued  misuse  of Evaluation

and  Management  codes.  It cited  HCFA  estimates  that  doctors  are  using Evaluation

and  Management  codes  correctly  60 percent  of the  time,  while  carriers  report  accuracy

rates  ranging  from  30 to 80 percent. 49 Providers  not  providing  adequate

documentation  to support  their  claims  is the  most  common  problem  cited.  While

some  providers  say they  do not  know what  documentation  the  carrier  requires,  others

wait  for the  carrier  to reject  a claim before  submitting  the  proper  documentation.

Beyond  that,  there  may also be  a continuing  ambiguity  problem  with  the  codes

themselves.  For  example,  the  decision-making  complexity  for  code  99282 is low, for

99283 low to moderate?

A PPRC-commissioned  stud~l  cited  the  opinions  of 1,000 physicians  concerning

Evaluation  and  Management  codes.  Although  67 percent  of physicians  adequately

understood  how to use  the  new codes,  only  11 percent  believe  the  codes  are  very

accurate;  while  54 percent  thought  they were  somewhat  accurate.  The  study  also

noted  that  coding  uniformity  for Evaluation  and  Management  semices  has  improved

despite  the  33 percent  of physicians  who stated  they  did not  know  how to use  the

codes.  Lastly,  14 percent  of physicians  noted  problems  with  coding  Evaluation  and

Management  services  when  citing their  concerns  about  the  Medicare  Fee  Schedule.

For  those  who had  problems,  the  most  common  were  complexity  and  difficulty finding

a code  that  described  the  service  provided.  An  ongoing  OIG  study is examining

HCFAS implementation  of the  new visit codes.

The  HCFA  has  explored  other  methods  to reduce  unnecessary  Medicare

reimbursements.  Two  alternatives  include  packaging  and  collapsing.  Packaging

places  various  service  components  under  a broad  procedure  code.  For  example,

under  the  Laboratory  Roll-In  (LRI)52 concept,  office visits and  lab  sexvices would

be  packaged  under  a broad  visit code.  The  physician,  not  Medicare,  would  reimburse

the  lab for its services.  Under  the  current  system,  the  provider  bears  no financial  risk

when  ordering  diagnostic  tests,53  and  has no incentive  to control  unnecessary  tests.

Collapsing  reduces  the  number  of similar  CPT-4  codes,  thereby  limiting  opportunities

to upcode  by reducing  the  number  of coding  options.

10  THE METHODS  BY WHICH  HCFA  HAS  INCORPORATED  CPT-4 INTO 
MEDICARES  CODING  SYSTEM  DO  NOT ENSURE  APPROPRIATE 
REIMBURSEMENT  TO MEDICARE  PROVIDERS. 
We  identified  three  flaws in the way that  HCFA  has incorporated  CPT-4  into 
Medicares  coding  system.  We believe  these  flaws prevent  HCFA  from  ensuring 
appropriate  payments  to Medicare  providers.  First,  HCFA  has not  developed  criteria 
or communicated  decision  rules  for changing,  adding  or deleting  codes  in light  of the 
Medicare  Fee  Schedules  requirements.  Second,  HCFA  has  not  adequately 
communicated  Medicare  policy to providers.  Third,  HCFA  has not  assessed  the 
effectiveness  of the  process  for  establishing  RVUS. 
The HCFA  has not dkveloped  crderia or comnunic ated decision rules for changing 
adding or deleting cdes  in @#t  of the Mx&xme  Fee Schedhkk  re@mmWs 
The  HCFA  does  not  have  criteria  to evaluate  the  effectiveness  of CPT-4  codes  in 
meeting  the  needs  and  intent  of the  Medicare  Fee  Schedule.  Criteria  would  provide 
HCF~  the  ~  and  medical  specialty  societies  a tool  to  evaluate  the  adequaq  of 
each  code  and  its descriptor  and  allow for  consistent  development  of CPT-4.  While 
the  AMA  has  coding  guidelines,  HCFA  has not  determined  whether  they  are 
compatible  with the  goals  of the  Fee  Schedule. 
In addition  to AMA  guidelines,  the  PPRC  published  a set  of goals  to guide  the 
development  of visit codes?4  A partial  listing  of these  goals illustrate  an  example  of 
coding  criteria.  The  PPRC  believe  that  visit codes  should  be  (1) clear  and  interpreted 
uniformly  by all providers,  payers,  and beneficiaries,  (2) clinically meaningful  and 
describe  clearly  differentiated  services,  and  (3) facilitate  the  assignment  of accurate 
and  equitable  resource-based  relative  values. 
In its 1992 Annual  Reuort  to Corwress,  the  PPRC  stated: 
Adoption  of a resource-based  payment  system  places  new requirements 
on the  coding  system  because,  to provide  a sound  basis  for equitable 
payment,  each  code  must  represent  a similar  amount  of work  to all 
providers  who  use it.  Although  coding  decisions  remain  external  to the 
payment  process  for the  most  part,  HCFA  is in a good  position  to 
articulate  the  needs  for coding  changes.55 
In its  1993 Annual  Report  to Congress,  PPRC  reiterated  its concerns  and  made  more 
specific  recommendations  to HCFA.  It recommended  that: 
HCFA  should  continue  to develop  small-group  processes  to update  the 
fee  schedule  for new  codes  and  to conduct  the  periodic  review  of the 
entire  fee  schedule.  The  processes  should  be  developed  with  public 
input,  and  clear  guidelines  and  decision  rules  should  be  specified  in 
advance.  The  processes  should  include  (1) mechanisms  to promote 
11  consistent  decision  making,  (2) fair methods  and  representation  of 
involved  parties,  (3) a means  to identify  overvalued  as well as 
undemalued  services,  ways to ensure  public  accountability,  and  (4) 
feedback  to the  CPT  Editorial  Panel  when  codes  need  revision  to 
achieve  accurate  resource-based  payment.5b 
  T%eHCFA  has not adequately  communicated  Medicare  coding policy  to pmvidh 
Continued  provider  confusion  about  proper  use  of CPT-4  codes  indicates  that  HCFA 
has not  adequately  communicated  Medicare  coding  policies  to providers.  In its 1993 
Annual  ReDort  to  Con~ess,  PPRC  stated,  many physicians  reported  they  did not 
understand  major  aspects  of payment  reform,  such  as the  newly revised  visit 
codes...and  Medicares  global  surgical  service  policies.s 
Clear  and  accurate  coding  advice  would  ensure  uniform  application  of Medicares 
reimbursement  policies.  We  found  that  the  AMA  and  medical  specialty  societies,  not 
HCFA  or Medicare  carriers,  are  the  primary  source  for coding  advice.  This would  not 
be  a concern  if the  advice  given by the  other  sources  were  consistent  with Medicares 
policies.  However,  the  likelihood  of inconsistent  advice  only increases  as the  number 
of sources  increase.  Coding  consultants  are  another  source  of coding  advice.  A new 
cottage  industry  of companies  which  advertise  their  ability  to maximize  provider 
reimbursements,  both  Medicare  and  non-Medicare,  has  also found  a market  for their 
semices.  The  following  table  lists both  the  source  of coding  information  and  the 
percentage  of respondents  who cited  their  use. 
Table  1. 
SOURCESOF CODINGINFORMATIOFNO RPROVIDERAS NDCODERS
 Pr.vlder Coder 
SOURCSS  OF INFORMATION 
Colleague 
 Consultants 
CPTClearinghouse 
CPTAssistant 
CPT-4 
HCFA 
Medical Spec. Sot. 
Medicare Carrier 
o%  20%  40%  60%  80Z  100% 
HoW OFTSN EACli SOURCE  1S CONTACTSD 
lndividucti.8r.r stix.ti.~wthat  provids  coding  ndnce. 
12
 Two factors  may contribute  to limited  reliance  on HCFA  and  Medicare  carriers  for 
coding  advice.  First,  HCFA  lacks  a cohesive  approach  for addressing  coding 
questions.  The  BPDs Office  of Coverage  Eligibility  Policy, Medical  Coding  Policy 
Staff,  forward  most  CPT-4  questions  directly  to the  AMA.  The  BPO,  however,  works 
with HCFAS representative  on the  CPT  Editorial  Panel  to resolve  coding  inquires. 
Since,  HCFA  has not  assigned  staff to specifically  address  CPT-4  coding  questions, 
these  questions  are  resolved  differently  depending  on to whom  they  are  addressed. 
Second,  providers  and  coders  have  not  been  satisfied  with  carrier  responses. 
Approximately  60 percent  of providers  and  40 percent  of coders  expressed  some 
frustration  in their  dealings  with Medicare  carriers.  Problems  include:  inconsistent 
coding  advice;  non-uniform  coding  policy, especially  concerning  modifiers  and  Not 
Otherwise  Covered  codes;  lack  of knowledge  in some  specialties;  difficulty  in 
resolving  coding  conflicts;  and  lack  of timeliness  in responding  to changes  in medicine. 
All but  one  carrier  respondent  estimate  that  they receive  less than  50 calls per  month 
concerning  CPT-4  questions.  Two carriers,  in fac$  said they  forward  CPT-4  questions 
directly  to the  AMA.  The  other  ten will resolve  the  questions  themselves.  If they 
cannot,  most  will also use  outside  sources. 
The HCFA  has not developed  an #kient  or @ective  process for establkhing  RVUS for 
newormdijied  codes. 
Although  the  process  for  assigning  RVUS  is still evolving, both  HCFA  and  the  PPRC

have  questioned  the  effectiveness  of the  current  process  and  made  suggestions  for

modifying  the  process.  However,  no evaluation  of the  process  has been  undertaken,

even  on an interim  basis.

The  RW  assignment  process  has  already  undergone  some  changes.  In developing

the  initial  set of values  for  the  1992 Medicare  Fee  Schedule,  HCFA  relied  primarily

on data  from  Harvard  University.  For  new values  in the  1993 Fee  Schedule,  HCFA

considered  recommendations  from  AMAs Relative  Value  Update  Committee  (RUC).

Recommendations  from  RUC  will also serve  as the  basis  for changes  in the  1994 Fee

Schedule.

The  RUC  recommendations  are  reviewed  by HCFA  staff  and  a panel  of Carrier

Medical  Directors  (CMD),  then  published  in the  Federal  Register  for comment.

Comments  on RWS  published  in November  1991 and  November  1992 were

reviewed  by a panel  of CMDS and  medical  specialty  society  representatives.  In  1993,

HCFA  rejected  35 percent  of the  RUCS recommendations.

Concerns  expressed  by HCFA  and  the  PPRC  indicate  that  an early  assessment  of the

RW  development  process  maybe  warranted.

.	 The  RUC  is not  following  HCFAS methodology  for assigning  RWS,  and  may 
be  incorrectly  assigning values  to new codes  that  are  split from  another  code. 
13
 	 The  current  RUC  process  does  not  project  utilization  for  new  and  revised 
codes.  These  projections  are  needed  to assure  that  changes  to  the  Fee 
Schedule  do not  adversely  affect  the  requirement  for  budget  neutrality. 
	 There  is no public  oversight  of the  process  itself.  The  PPRC  has  recommended 
publishing  and  allowing  public  comment  on processes  and  decision  rules; 
soliciting  input  from  all interested  parties,  particularly  non-Medicare  payers  and 
consumers;  and  public  review  of the  process  to assure  compliance  with  decision 
rules. 
our  own analysis  indicates  that  these  concerns  raise  questions  about  the  effectiveness 
of the  process  as it currently  operates.  An early  assessment  could  result  in 
modifications  designed  to improve  the  overall  effectiveness  of the  process. 
A proliferation  of CPT-4 changes will undermine HCFAS ability to contain 
expenditures  under the Medicare  Fee  Schedule. 
We  believe  that  significant  increases  in code  changes  will severely  stretch  HCFAS 
already  limited  resources  to the  point  where  they will be  unable  to effectively 
implement  and  manage  the  Medicare  Fee  Schedule.  As shown  in the  following  table, 
there  has been  a dramatic  increase  in the volume  of annual  changes  to  CPT-4.  This 
increase  has  coincided  with the  advent  of the  Medicare  Fee  Schedule  in January  1992. 
Until  the  Fee  Schedule  is fully implemented  in 1996, we believe  the  volume  of code 
changes  will be  at or above  1991/1992 levels.  Entire  sections  of CPT-4  are  now being 
revised  and  proposals  are  pending  to split a large  number  of individual  codes  into  two 
or more  codes. 
Table  Z  [1  I 
CODE  CHANGES  IN  THE  CPT4  MANUAL
~19861992)* 
 Additionsa Deletions~Revisi.ns 
v
1,000  .., 
S43?. . ..ia  ... . . . . . . . . . . . . . . . . . . .. 
800  - I 
1986  198?  1988  1989  1990  1991  1992 
Addition]s 201 I  272 I  70  I  150 I  136 
Deiotiom\s 157  147  43  203  72  I  32335 9 I  450675
RevisioaI@309 I  161 I  118 
I  199  I 181  I 252  I 544 
  * sAninxuta~l perccheanntg es  re  red uep ubtlois hcehd.   n~iens  tinh .tPaytheol.o{ry +fosllc.nwdi rt,L aboCrPaTto-4ry   macnoudaels..   These  ser~ices   re  relmbur=ed 
under    clinical  di. tncmtic  I.beratory  fee  schedule  but  sti[l  rqUIM   n  ev.lu.  tion  by  HCFA  ntaff. 
14   For  each  CPT-4  code,  HCFA  must  assign  an accurate  work  value  and  estimate  service 
utilization  to project  future  expenditures.  Section  1848(c)(2)(B)  of the  Social  Security 
Act  also requires  that  changes  to the  Medicare  Fee  Schedule  have  a budget  neutral 
effect  on these  expenditures.  58 This  evaluation  process  has  already  had  a significant 
impact.  According  to HCF~  its adjustments  in 1992 of RWS  for new  and  revised 
codes  avoided  an increase  in expenditures  of $30 million  in 1993.  However,  an 
increased  workload  for HCFA  staff reduces  their  effectiveness  in performing  this 
necessary  evaluation. 
Lastly, we are  also concerned  about  the  nature  of recent  code  changes.  The  HCFA 
has  expressed  a concern  that  many  of the  CPT-4  code  changes  appear  to be  an 
opportunity  to revalue  work  RWS  through  a process  outside  of our  usual  notice  and 
comment  rulemaking  process.  We believe  that  any effort  to  circumvent  the  intent  of 
the  Medicare  Fee  Schedule  could  undermine  physician  payment  reform  and  should  be 
addressed. 
15
 RECOMMENDATIONS

Our  findings  indicate  that  additional  improvements  could  be  made  with  the  CPT-4 
codes  and  in HCFAS management  and  articulation  of Medicare  policy.  To  this  end, 
we make  recommendations  to HCF~  which  develops  and  implements  Medicare 
policy,  and  the  ~  who has  developed  and  maintains  CPT-4. 
We recommend  that HCFA 
Produce  and  promulgate  to the  AMA  and  medical  specialty  societies  clear 
coding  objectives  and  criteria  for Medicares  resource-based  payment  system 
and  encourage  them  to  apply  the  objectives  in the  development  of new  or 
revised  codes; 
Apply  HCFA  coding  objectives  and  criteria  when  evaluating  new or revised 
codes  to assure  compliance  with the  needs  of the  Medicare  Fee  Schedule; 
Work  with  the  ~  Medicare  carriers,  medical  specialty  societies  and  other 
related  parties  to develop  a mechanism  that  assures  a unified  and  consistent 
dissemination  of guidelines  on how to use  and  interpret  codes. 
Evaluate  the  current  process  for implementing  changes  to the  Medicare  Fee 
Schedule.  This includes:  (1) developing  an e~ective  process  for establishing 
work  values  for new or revised  codes,  (2) communicating  to  the  AMA  the 
number  of annual  additions,  deletions,  and  revisions  to CPT-4  that  HCFA  could 
effectively  review,  and  (3) delaying  implementation  of new  or revised  codes, 
except  for new technologies,  until  reliable  data  is available  to predict  service 
utilization. 
We recommend  that Ah@  to the extent that they do not conflict with Federal 
antitrust guideline 
Consider  and  encourage  medical  specialty  use  of HCFA  coding  objectives  and 
criteria  in the  development  of new or revised  CPT-4  codes; 
Consider  a review  of the  CPT-4  index within  the  framework  of its own 
commissioned  studys recommendations; 
Work  with HCFA  to develop  a mechanism  that  assures  a unified  and  consistent 
dissemination  of Medicare  coding  poli~, 
Provide  HCFA  with utilization  estimates  for new  or revised  codes;  and 
Work  with HCFA  to arrive  at an  acceptable  number  of annual  CPT-4  code 
changes  to allow for proper  HCFA  evaluation. 
16  COMMENTS

Both  HCFAand  the~generally  agreed  tithom  recommendations.  Their 
comments  and  our  responses  are  summarized  below.  A complete  version  of the 
comments  appears  in Appendix  E.  Changes  were  made  to the  draft  report  to 
incorporate  some  of the  HCFA  and  AMA  remarks. 
17CFA Conuwnis 
The  HCFA  comments  focused  on the  report  recommendations.  They  generally 
concurred  with  our  recommendations  and  have  begun  to take  action.  With  respect  to 
our  first recommendation,  HCFA  is considering  developing  a policy  statement  to 
delineate  clear  coding  and  objectives  and  criteria  to the  AMA  for Medicares  resource-
based  payment  system.  They  plan  to evaluate  whether  such  a policy statement  would 
improve  coding  accuracy. 
The  HCFA  concurred  with  our  second  recommendation  to apply  its coding  objectives 
when  evaluating  new  or revised  codes  and  recognize  that  improvements  can be  made 
in the  coding  process.  They  believe,  however,  that  the  OIG  should  balance  its report 
by citing HCFAS major  role  in the  development  of the  new evaluation  and 
management  codes  and  clinical  examples.  The  HCFA  feels  that  these  new codes 
have led  to greater  uniformity  in coding  practices. 
The  HCFA  agreed  in principle  with  our  third  recommendation  that  greater  guidance 
to physicians  on the  use  and  interpretation  of codes  is needed.  However,  they were 
reluctant  to commit  to a specific  set of actions,  and would  like to study this issue 
further.  The  HCFA  feels  their  work  in communicating  the  changes  in evaluation  and 
management  codes  to the  medical  community  was highly successful  and  should  be 
recognized.  Additionally,  HCFA  believes  the  OIG  should  also highlight  their 
continued  cooperation  with Medicare  carriers  and  the  AMA  in identifying  and 
addressing  coding  issues. 
The  HCFA  concurred  with  our  fourth  recommendation  to evaluate  the  current 
process  for implementing  changes  to the  Medicare  Fee  Schedule  and  has  taken 
significant  action.  These  changes  should  allow HCFA  to set values  that  ensure  that  the 
integrity  of Medicare  Fee  Schedule  is maintained.  These  changes  were  detailed  in 
HCFAS Notice  of Proposed  Rule  Making,  Medicare  Program:  Revisions  to Payment 
Policies  Under  the  Physician  Fee  Schedule,  that  appeared  on pages  37996 and  37997 
of the  July  14, 1993 Federal  Register. 
OIG  Response 
We  commend  HCFA  for strengthening  its process  for implementing  new  codes  and 
their  associated  values.  We believe  these  actions  are  significant  and  facilitates  an 
orderly  implementation  of the  Medicare  Fee  Schedule. 
17  We  continue  to believe  that  HCFA  needs  clear  coding  objectives  to support  the  intent 
of the  Medicare  Fee  Schedule  and  urge  HCFA  to share  those  objectives  with the 
AMA.  We  also hope  that  HCFA  will continue  to work with  the  ~  Medicare 
carriers,  medical  specialty  societies,  and  other  related  parties  to develop  a policy for 
improving  coordination  of coding  policy. 
m?
AMA  Comments 
The  AM_& with  one  exception,  agreed  with the  recommendations.  They  stressed  the

importance  of working  with HCFA  and  all affected  parties  to strengthen  the  CPT

system.  They  strongly  disagreed  that  HCFA  should  delay  implementation  of new

codes  pending  the  availability  of reliable  utilization  data.  They  feel  the  best  approach

is to work with HCFA  to proactively  manage  code  changes.  They  also note  that  a

recently  revised  process  for submitting  code  changes  should  provide  the  best  possible

utilization  estimates.

The  AMA  believes,  however,  that  our  methodology  has  limitations.  They  feel  the

literature  was scarce,  not  found  in publications  with  high standards  of peer  review,  and

not  suited  to generalization.  The  AMA  also believe  too  much  emphasis  was placed  on

the  comments  from  the  structured  interview  process  which  may be  flawed  due  to the

bias  of some  respondents.

The  AMA  did not  dispute  the  primary  finding  that  incorrect  coding  affects  Medicare

reimbursements  but  questioned  several  others.  However,  they believe  the  reports

wrongly  suggests  that  incorrect  coding  is inherently  the  fault  of the  CPT  system  and

only leads  to Medicare  overpayments,  not  underpayment.  They  feel  it is possible  that

flaws in the  CPT  codes,  guidelines,  and  index  can lead  to improper  coding  and  are

seeking  improvements  to address  these  concerns.  Nevertheless,  they  did not  agree

that  the  examples  provided  are  necessarily  indicative...and,  in most  cases,  no longer

apply.  Lastly,  the  AMA  questioned  our  assessment  of process  of developing  codes,

their  values  and  the  ultimate  impact  on Medicare  reimbursements.  They  believe  these

issues  are  quite  complex...and  are  continuing  to explore.

OIG  Response

We  recognize  the  complex  nature  of the  CPT  system  and  commend  the  AMA  for

their  work  to make  the  necessary  improvements  when  needed.  We  did not  intend  this

study  to be  the  final word,  but  the  opening  of a dialogue  that  will lead  to

improvements  in code  development  and  assignment  of their  associated  work  values.

18
 1. Section  4501 of the  Medicare  Carrier  Manual  states  that  tivel  II contains 
alphanumeric  (A-V)  codes  which  cover  physician  and  non-physician  services  not 
included  in CPT-4.  They  are  maintained  jointly  by HCF~  the  Blue  Cross  and  Blue 
Shield  Association,  and  the  Health  Insurance  Association  of America.  Level  III 
contains  local  alphanumeric  (W-Z)  codes  needed  by HCFA  contractors  for services 
not  previously  covered. 
2. Section  3627.8 of the  Medicare  Intermediam  Manual  states  this term  applies  to 
acute  care  hospitals,  long-term  care  hospitals,  rehabilitation  hospitals,  psychiatric 
hospitals  and  hospital  based  Rural  Health  Clinics  (RHCS).  It does  not  apply  to 
independent  RHCS,  hospital  based  or independent  End  Stage  Renal  Disease  facilities, 
Skilled  Nursing  Facilities,  Home  Health  Agencies,  Comprehensive  Outpatient 
Rehabilitation  Facilities,  Outpatient  Physician  Therapy  facilities,  hospices  or Christian 
Science  Sanitoria. 
3. Section  3626.4 of the  Medicare  Intermediary  Manual  requires  hospitals  to use the 
CPT-4  portion  of HCPCS  to report  significant  outpatient  surgical  procedures  (clinical 
diagnostic  lab  services  had  been  and  continue  to be  coded  using HCPCS.  Significant 
surgery  is defined  as incision,  excision,  amputation,  introduction,  repair,  destruction, 
endoscopy,  suture  or manipulation). 
4. Provider  in this report  represents  both  physicians  and  non-physicians.  Section 
1861(r\  of the  Social  Securitv  Act  states  the  term  physician,..m. eans  (1) a doctor  of 
medicine  or osteopathy  legally  authorized  to practice  medicine  and  surgery  by the 
State..,(2)  a doctor  of dental  surgery  or of dental  medicine  who  is legally  authorized  to 
practice  dentistry  by the  State,  (3) a doctor  of podiatric  medicine...but  ordy with 
respect  to functions  which  he is legally  authorized  to perform  as such by the  State...(4) 
a doctor  of optometry,  but  only with respect  to...items  or services...which  he is legally 
authorized  to perform.,.by  the  State  (5) a chiropractor  is licensed  as such by the  State. 
5. A modifier  indicates  that  the  service  or procedure  has been  altered  by some  specific 
circumstance.  It does  not  change,  but  enhances,  the  code  and  its definition.  Modifiers 
can be used  in two-digit  or five-digit  forms.  A modified  procedure  can be  reported  by 
either  adding  the  two-digit  modifier  to the  original  five-digit  code  or using the  five-digit 
modifier  in addition  to the  original  code.  For  example,  under  certain  circumstances  a 
service  or procedure  is partially  reduced  or eliminated  at the  physicians  election.  This 
can be  reported  by adding  the  two-digit  modifier  -52 or using the  five-digit  code  09952 
in addition  to the  original  procedure  code. 
6. The  AMA  nominates  10 members  to the  Editorial  Panel.  The  Blue  Cross  and  Blue 
Shield  Association,  the  Health  Insurance  Association  of America,  the  American 
Hospital  Association,  and  the  Health  Care  Financing  Administration  nominate  the 
remaining  four  members  from  their  own ranks. 
7. There  are  85 national  medical  specialty  societies  involved  in maintenance  of CPT-4. 
The  CPT  Advisory  Committee  (CAC)  represent  76 groups  from  the  AMAs  House  of 
19

 .    Delegates.  The  Health  Care  Professionals  Advisory  Committee  for CPT  (HCPAC) 
represents  nine  non-AMA  groups  who use  CPT-4. 
8. The  Executive  Committee  of the  CPT  Editorial  Panel  includes  the  chairman,  vice 
chairman  and  three  other  members  selected  by the  entire  Editorial  Panel.  One 
member  must  be  a third-party  payor  representative.  Currently,  HCFAS representative 
to the  Editorial  Panel  serves  on its Executive  Committee. 
9. Commerce  Clearing  House,  Inc., Commerce  Clearirw  House  Medicare  and 
Medicaid  Guide  Extra  Edition  with  an explanation  by Gail  R. Wilensky,  Ph.D. 
(Chicago:  Commerce  Clearing  House,  1991). 
10. The  AMAs Relative  Value  Update  Committee  (RUC)  provides  HCFA  with 
recommendations  for RVUS  to  accompany  new or revised  CPT-4  codes.  The  RUC  is 
composed  of one  representative  each  from  22 medical  specialty  societies,  the 
American  Medical  Association,  the  American  Osteopathic  Association  and  the  CPT 
Editorial  Panel.  There  is also a non-voting  HCFA  representative  on the  RUC. 
However,  HCFA  does  have  veto  power  over  RUC  recommendations. 
11. In its comments  to the  Office  of Inspector  Generals  report  Liver  Biomies  (OEI-
12-88-00900),  HCFA  states  . . . as of January  1, 1992, HCFA  has  the  authority  to 
establish  uniform  national  definitions  of services,  codes  to represent  services,  and 
payment  modifiers  to the  codes.  Therefore,  HCFA  can issue guidelines  that  are 
different  from  those  in the  CPT-4  manual.  To  the  extent  that  instructions  in the  CPT-
4 manual  are  unclear  or are  contrary  to payment  policy  associated  with physician 
payment  reform  rules,  HCFA  will issue guidelines  that  will supersede  any CPT-4 
manual  instructions.  In order  to ensure  uniform  payment  policy, HCFA  will annually 
issue  a Medicare  Fee  Schedule  data  base  tape  which will include  payment  policy 
indicators  for each  code  to the  carriers. 
12. The  MEDLARS  allows access  to a data  base  of medical  journals  in its MEDLINE 
subfile.  The  MEDLINE  contains  more  than  20 years  of data  tiom  over  3,000 major 
medical  journals. 
13. We  did not  interview  a representative  from  the  General  Accounting  Office  since 
they  do not  use  CPT-4. 
14. The  American  Health  Information  Management  Association  is the  professional 
health  care  organization  of nearly  34,000 credentialed  specialists  in the  field  of health 
information  management.  Primarily,  they  collect,  analyze,  and  manage  beneficiary 
health  care  records.  They were  formerly  know  as the  American  Medical  Records 
Association. 
15. The  Council  of Medical  Specialty  Societies  is an educational  and  scientific 
organization.  Each  of its members  have  examining  boards  recognized  by voting 
membership  in the  American  Board  of Medical  Specialties. 
20
 16. Section  1861(r)  of the  Social  Securitv  Act  defines  physician as it is used  in the 
Medicare  program.  A physician includes  both  full and  limited-licensed  practitioners. 
A limited-licensed  practitioner  may only practice  on specific  portions  of the  body. 
Examples  include  podiatrists  or optometrists. 
17. National  Medical  Audit,  a San Francisco-based  division  of benefits  consultants 
Mercer  Meidinger  Hansen,  Inc. estimate  that  12 to  15 percent  of all physician  billing 
involves  gaming  or overcharging;  Robert  D. Hertenstein,  M,D.,  a surgeon  and  medical 
director  for Caterpillar  Inc., worked  with Health  Payment  Review,  Inc. to develop  the 
CodeReview  software.  He  estimates  nine  to  17 percent  in savings.  Gabrieli  Medical 
Information  Systems,  Inc., a Malvem,  PA software  firm  claims  it can  save 3 percent  to 
5 percent  on the  total  benefit  dollars  paid  out  or one  to five dollars  per  claim. 
18. Nancy  Coe  Bailey,  How to Control  Overcharging  by Physicians;  Business  and 
Health  (August  1990):  13-14. 
19.  Sophia  W. Chang  and  Harold  S. Luft,  Reimbursements  and  the  Dynamics  of 
Surgical  Procedure  Innovation,  Medical  Innovation  at the  Crossroads--Volume  11: 
The  Chanting  Economics  of Medical  Technology  Edited  by Annetine  C. Gelijns  and 
Ethan  A. Halm.  (Washington,  D.C.:  National  Academy  Press,  1991), 108. 
20.	 Physician  Payment  Review  Commission,  Annual  Report  to Comzress 
(Washington,  D.C.:  GPO,  1992), 46. 
21. Health  Care  Financing  Administration,  Medical  Visits to Medicare  Patients: 
Phvsician  Codirw  Practices  by Sally Trude  ([Washington,  D.C.]:  U.S. Department  of 
Health  and  Human  Services,  Health  Care  Financing  Administration,  Contract  Number 
99-C-98489/O-08,  1992), 41, and  Office  of Inspector  General,  Problems  with  Codirw  of 
Phvsician  Services:  Medicare  Part  B (OAI-04-88-00700)  ([Washington,  D.C.]:  U.S. 
Department  of Health  and  Human  Services,  Office  of Inspector  General,  1989), 4-6. 
22. Office  of Inspector  General,  Medicare  Phvsician  Consultation  Services  (OAI-02-
88-00650)  ([Washington,  D.C.]:  U.S. Department  of Health  and  Human  Services, 
Office  of Inspector  General,  1988), 9. 
23. Peter  Albertson,  M.D.  and  Edward  A. Kamens,  M.D.,  Variations  in Coding 
Practices  Among  Connecticut  Urologists  for the  Medicare  Population,  Connecticut 
Medicine  (September  1990):  508-511. 
24. An  example  of an arthroplasty  procedure  would  be  the  removal  of the  head  of 
the  proximal  phalanx  in the  second  toe  to straighten  the  toe  and  relieve  a painful 
dorsal  hyperkeratosis. 
25. The  Podiatric  Medicare  Monthly  (Winter  1993):  2-4. 
26.28153- Resection,  head  of phalanx,.  28160- l-kmiphakmg@Omy  or 
21
 interphalangeal  joint  excision,  toe,  single,  each.  28285- Hammertoe  operation;  one 
toe  (e.g., interphalangeal  fusion,  fellating,  phalangectomy). 
27. Office  of Inspector  General,  Ensurirw  Amxomiate  Use  of Laboratory  Sefices:  A 
MonomaPh  (OEI-05-89-89150)  ([Washington,  D.C.]:  U.S. Department  of Health  and 
Human  Services,  Office  of Inspector  General,  1987), 8. 
28. Office  of Inspector  General,  Review  of Multichannel  Laboratory  Claims  Processed 
bv Emuire  Blue  Cross  Blue  Shield  Under  Title  XVII  of the  Social  Securitv  Act  (A-02-
85-02030, A-02-86-02013,  A-O2-87-O1O26,A-O2-88-O1OO1) ([Washington,  D.C.]:  U.S. 
Department  of Health  and  Human  Semites,  Office  of Inspector  General,  1985, 1986, 
1987, 1988). 
29. Office  of Inspector  General,  Review  of Radioloirv  Services  Paid  by Empire  Blue 
Cross  Blue  Shield  Under  Title  XVIII  of the  Social  Securitv  Act  (A-02-86-62022) 
([Washington,  D.C.]:  U.S. Department  of Health  and  Human  Semites,  Office  of 
Inspector  General,  1987), 2-4. 
30. Office  of Inspector  General,  Ensurin~  Atmromiate  Use  of Laboratory  Services:

A Monograph  (OEI-05-89-89150),  8-9.

31. Office  of Inspector  General,  Corona ry Arterv  Bvuass  Graft  Sunzery  (OAI-09-86-

00070)  ([Washington,  D.C.]:  U.S. Department  of Health  and  Human  Services,  Office

of Inspector  General,  1987), 20.

32.  Chang  and  Luft,  Reimbursements  and  the  Dynamics  of Surgical  Procedure

Innovation,  108.

33. A pocket  doppler  is an inexpensive  screening  device  used  for in-office  ultrasound

tests  of arteries  and veins.

34. Office  of Inspector  General,  Pocket  Dotmlers:  A Mana~ement  Advisory  Report

(OEI-03-91-00401)  ([Washington,  D.C.]:  U.S. Department  of Health  and  Human

Services,  Office  of Inspector  General,  1991), 3.

35. Zero  crossers  are  ultrasonic  testing  devices  used  for in-office  diagnostic  tests  of

arteries  and veins.  They  are  a technological  step  above  pocket  dopplers.

36.	 Office  of Inspector  General,  Zero-Crossers  (OEI-03-91-00460)

([Washington,  D.C.]:  U.S. Department  of Health  and  Human  Services,  Office  of

Inspector  General,  1991), 7.

37. Office  of Inspector  General,  Liver  Biomies  (OEI-12-88-00901)  ([Washington,

D.C.]:  U.S. Department  of Health  and  Human  Services,  Office  of Inspector  General),

1992), 4.

22

  38.61510  Craniectomy,  trephination,  bone  flap  craniotom~  for  excision  of brain 
tumor,  supratentorial,  except  meningioma. 
61512  . . . ; for excision  of meningioma,  supratentorial. 
61514  . . . ; for excision  of brain  abscess,  supratentorial. 
61516  . . . ; for excision  or fenestration  of cyst, supratentorial. 
39. Chang  and  Luft,  Reimbursements  and  the  Dynamics  of Surgical  Procedure 
Innovation,  107. 
40. Coopers  and  Lybrand,  Cost-Benefit  Analvsis  of a Uniform  Procedural  Coding 
Svstem  for Phvsician  Semites  (American  Medical  Association:  Privately  commissioned 
and  published,  1989), 36-40. 
41. An  eponym  identifies  the  name  of an individual  who  is most  closely associated  with 
a procedure,  e.g, McBride  procedure  (28292). 
42. Evaluation  and  Management  (E/M)  codes  are  used  to identify  office  services; 
hospital  observation  services;  hospital  inpatient  sewices;  consultations;  emergency 
department  services;  critical  care  sefices;  neonatal  intensive  care;  nursing  facility 
services;  domiciliary,  rest  home,  or custodial  care  services;  home  services;  case 
management  services;  and  preventative  medicine  services.  Each  group  contains 
several  levels,  usually  three  or five, which  describe  the  nature  of the  patient  and  the 
level  of service.  There  are  99 E/M  codes  in the  1993 CpT-4. 
43. Cardiologists  have  traditionally  used  90000 series  codes  to prevent  the  codes  from 
labeling  them  as radiologists.  Currently,  HCFA  states  that  radiology  codes  (75000 
series)  should  be  used  along  with cardiology  codes  to ensure  complete  reimbursement 
for cardiac  catheterization  services. 
44. Section  1842(a)(2)(B)  of the  Social  Securitv  Act  requires  HCFA to  apply 
(safeguards  against  unnecessary  utilization  of services  furnished  by providers.  These 
safeguards  come  k  the  form  of both  pre- and  postpayment  reviews. 
45. Billing a total  abdominal  hysterectomy  (51840)  along  with its component  parts  was 
cited  an  example  of a gaming  practice.  One  of the  edits  under  the  CCI  address  this 
problem. 
46. Coe  Bailey,  How to Control  Overcharging  by Physicians,  14. 
47. Dennis  L. Olmstead,  Medicare  Monitoring  of Payment  Reform,  Pennsylvania 
Medicine  (March  1992), 16-17. 
48. RBRVS  Briefs,  Texas  Medicine  (March  1992), 58. 
49. Carol  Stevens,  Coping  with Payment  Reform:  Avoiding  the  Most  Common 
Mistakes,  Medical  Economics,  19 October  1992, 102. 
23
 50. Marleeta  Jones,  ART,  RBRVS IS Still Evolving:  Seven  Issues  of Interest  to 
Physicians  and  Health  Information  Professionals,  Joumalof  AHIMA63  (September 
1992) 44-45. 
51. Physician  Payment  Review  Commission,  Annual  Report  to Congress  (Washington, 
D.C.:  GPO,  1993), 110-115. 
52. Office  of Inspector  General,  Ensurirw  Atm romiate  Use  of Laboratory  Services:  A 
MonomaDh  (OEI-05-89-89150),  14. 
53. Health  Care  Financing  Administration,  Packating  Phvsician  Services:  Alternative 
Approaches  to Medicare  Part  B Reimbursement  by Janet  B. Mitchell  Ph.D.  (HCFA 
Contract  number  500-81-0054)  ([Washington,  D.C.]:  U.S.  Department  of Health  and 
Human  Setices,  Health  Care  Financing  Administration,  1987). 
54. Physician  Payment  Review  Commission,  Sumey  of Visits  and  Consultations: 
1991-1, 78 
55.  Physician  Payment  Review  Commission,  Annual  Report  to Corvzress:  1992, 47. 
56.	 Physician  Payment  Review  Commission,  Annual  Re~ort  to Comress:  1993, 195-
199. 
57.  Physician  Payment  Review  Commission,  Annual  Report  to Comzress:  1993, 110. 
58. Under  Section  1848(c)(2)(B)  of the  Social  Security  Act, HCFA  is allowed  a $20 
million  tolerance  in physician  reimbursements  to meet  its goal  of budget  neutrality. 
24
 APPENDIX  A

HCPCS DEVELOPED  AROUND  CPT-4 
The  HCFA  developed  HCPCS  to achieve  uniformity  in procedure  coding.  In the  mid-
1970s, the  Medicare  and  Medicaid  programs  were  using  multiple  procedure  coding 
systems.  After  HCFA  was formed  in 1977, they  established  project  teams  to integrate 
Medicare  and  Medicaid  operations.  At that  time,  there  were  a wide variety  of medical 
procedural  terminology  and  coding  systems  (MPTCS)  in use by Medicare  Carriers, 
State  Medicaid  agencies  and  their  fiscal agents.  The  goal  of one  project  team  was to 
develop  one  coding  system  to reimburse  both  hospital  (Part  A)  and  physician  (Part  B) 
services.  This  effort  was  abandoned  since Part  A  services  were  reimbursed  on a cost 
basis  and  Part  B on a fee-for-sewice.  The  HCFA  then  shifted  its focus  to developing 
separate  systems. 
The  HCFA  established  the  Medicare/Medicaid  Integration  Project,  Number  Two 
Team  (MMIP-2)  to  develop  a common  system  to reimburse  physician  services.  The 
MMIP-2  determined  that  the  lack  of a common  system  made  it difficult  and  costly for 
Medicare/Medicaid  payment  and  utilization  data  to be  exchanged,  merged,  or 
compared,  complicated  application  of the  Medicare  Physician  Economic  Index  as 
procedural  terminology  systems  change;  presented  severe  problems  to HCFA  in 
preparing  timely,  comparable  data  for  Congressional  testimony  and  inquiriey  and  (4) 
impeded  the  development  of integrated  claims  processing  systems. 
The  MMIP-2  noted  that  implementation  of uniform  system would  provide  several 
benefits.  The  benefits  would  permit  the  development  of more  effective  fraud  and 
systems;  lead  to improve  cost  and  utilization  analysis;  and  facilitate  greater  uniformity 
in Medicare  and  Medicaid  program  administration,  quality  standards,  coverage  and 
reimbursement  determinations. 
The  MMIP-2  established  three  goals for the  new system.  The  codes  should:  (1) 
identify  physician  actions  clearly,  (2) fulfill the  needs  of both  physicians  and  third-party 
payers,  and  (3) allow for continual  maintenance  and  update. 
The  MMIP-2  studied  three  options.  They  could  select  CPT-4,  another  procedural 
coding  system,  or develop  a distinctive  HCFA  system.  These  other  procedural  coding 
systems  included  the  California  Relative  Value  Studies  (CRVS);  the  International 
Classification  of Diseases,  Ninth  Revision,  Clinical  Modification,  Volume  3 (ICD-9-
CM);  the  Systemized  Nomenclature  of Medicine  (SNOMED);  and  the  Blue  Shield 
Associations  Coding  and  Nomenclature  Manual. 
During  1978, assessments  of the  alternatives  were  performed  by HCFA  and  a HCFA 
contractor.  They  used  CPT-4  as the  focal  point  for examining  other  systems.  Those 
studies,  particularly  the  one  done  at South  Carolina  Blue  Shield,  determined  that 
A-1  conversion  to CPT-4  would  not  adversely  affect  reimbursements.  Therefore,  in 
January  1979, MMIP-2  recommended  that  CPT-4  be  chosen  as the  basis  for 
developing  the  HCPCS  system. 
In February  1983, the  AMA  agreed  to let HCFA  use  its CPT-4  system  as part  of 
HCPCS.  After  signing the  agreement  with the  ~  HCFA  mandated  the  use  of 
HCPCS.  By October  1986, HCFA  required  State  Medicaid  agencies  to use HCPCS. 
Beginning  July  1, 1987, section  9343(g)  of the  Omnibus  Budget  Reconciliation  Act 
(OBRA)  of 1986 required  hospitals  to use HCPCS  to reimburse  outpatient  services. 
The  OBRA  1986 mandated  the  use  of HCPCS  in hospital  outpatient  settings  for the 
following  services:  July  1, 1987- surge~,  October  1988- radiology  services;  October 
1989- o~her non-radiolo~  diagnosti~se-fices;  October  16, 1991- all other  services  not 
previously  specified  except  for supplies,  drugs  (other  than  drugs  used  for  cancer 
chemotherapy,  ambulance  services,  and  end-stage  renal  disease  (ESRD)  services. 
Figure  1.  CPT-4 Milestones 
CPT  MILESTONES 
1973  1933-1934  1991-1992 
1966 
Medicare bqim.  Tlm3rdaditioa  meIK!FA  MedicnrepaysW 
TheAMA  oftlw CPTb  fhllblmwlwtl  ~forwr= 
pubuskthelat  ~
editilmof the  m0dKkr8m  HCFCScu;rim  CPT4.~  F=
CPT-3@4  ilq@lto  s&d&&lhO&=d 
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* Reprinted  from  the  American  Medical  Associations  CPT  Assistant 
  APPENDIX  C

DATA  SOURCES 
Gov~Ag& 
U.S. Department  of Health  and  Human  Services,  Office  of the  Secretary, 
Office  of Inspector  General 
U.S. Department  ofHealth  and  Human  Services,  Health  Care  Financing 
Administration 
U.S.  Congress,  General  Accounting  Office,  Human  Resources  Division 
U.S.  Congress,  Physician  Payment  Review  Commission 
M&are  Ckmiem 
Aetna  Life  Insurance  Company  - Arizona

Aetna  Life  Insurance  Company  - Hawaii

Aetna  Life  Insurance  Company  - Oregon

Blue  Cross  and  Blue  Shield  of Iowa  - Iowa

Blue  Cross  and  Blue  Shield  of Kansas,  Inc. - Kansas

Blue  Cross  and  Blue  Shield  of Maryland  - Maryland

Blue  Cross  and  Blue  Shield  of North  Dakota  - Wyoming

Blue  Cross  and  Blue  Shield  of Rhode  Island  - Rhode  Island

Blue  Cross  and  Blue  Shield  of South  Carolina  - South  Carolina

Empire  Blue  Cross  and  Blue  Shield  - New York

Blue  Shield  of California  - California

Pennsylvania  Blue  Shield  - District  of Columbia/Delaware/New  Jersey

Hwlth  (kre  i%ade Group 
The  American  Hospital  Association

The  American  Medical  Association

The  Blue  Cross  and  Blue  Shield  Association

The  Health  Insurance  Association  of America

The  Health  Information  Management  Association

M&al  Sily  Socieiies 
American  Academy  of Allergy  and  Immunology  (#)  (ACAC)

American  Academy  of Dermatology  (#)  (ACAC)

American  Academy  of Family  Physicians  (x)  (ACAC)

American  Academy  of Neurology  (#)  (ACAC)

American  Academy  of Ophthalmology  (#)  (ACAC)

American  Academy  of Orthopedic  Surgeons  (#)  (ACAC)

American  Academy  of Otolaryngology  - Head  and  Neck  Surgery  (#)  (ACAC)

c-1 
.  American  Academy  of Pediatrics  (#)  (ACAC) 
American  Academy  of Periodontology  (&) 
American  Academy  of Physical  Medicine  and  Rehabilitation  (#)  (ACAC) 
American  Academy  of Physician  Assistants  (&)  (HCPAC) 
American  Association  of Neurological  Surgeons  (#)  (ACAC) 
American  Association  of Oral  and  Maxillofacial  Surgery  (&) 
American  Chiropractic  Association  (&) 
American  College  of Cardiology  (*) (ACAC) 
American  College  of Chest  Physicians  (*) (ACAC) 
American  College  of Clinical  Pathologists  (#)  (ACAC) 
American  College  of Emergency  Physicians  (#)  (ACAC) 
American  College  of Gastroenterology  (*) (ACAC) 
American  College  of Obstetricians  and  Gynecologists  (#)  (ACAC) 
American  College  of Physicians  (#)  (ACAC) 
American  College  of Preventative  Medicine  (#)  (ACAC) 
American  College  of Radiology  (#)  (ACAC) 
American  College  of Surgeons  (#)  (ACAC) 
American  Nurses  Association  (&)  (HCPAC) 
American  Occupational  Therapy  Association  (&)  (HCPAC) 
American  Optometric  Association  (&)  (HCPAC) 
American  Osteopathic  Association  (&)  (ACAC) 
American  Physical  Therapy  Association  (&)  (HCPAC) 
American  Podiatric  Medical  Association  (&)  (HCPAC) 
American  Psychiatric  Association  (#)  (ACAC) 
American  Psychological  Association  (&)  (HCPAC) 
American  Society  of Anesthesiologists  (#)  (ACAC) 
American  Society  of Clinical  Oncology  (*) (ACAC) 
American  Society  of Colon  and  Rectal  Surgeons  (#)  (ACAC) 
American  Society  of Internal  Medicine  (*) (ACAC) 
American  Speech-Lmguage-Hearing  Association  (&)  (HCPAC) 
American  Urological  Association  (#)  (ACAC) 
National  Association  of Social  Workers  (&)  (HCPAC) 
Society  of Thoracic  Surgeons  (#)  (ACAC) 
The  Society  of Nuclear  Medicine  (#)  (ACAC) 
I& 
#  Members  of the  Council  of Medical  Specialty  Societies  (23) 
&  Limited-Licensed  Physicians  (13)
* 
Internal  Medicine  and  Its Major  Subspecialties  (5) 
ACAC  AMA  CPT  Advisory  Committee  Members

HCPAC  Health  Care  Professionals  Advisory  Committee  for CPT

c-2  APPENDIX  D

SUMMARY  OF OIG REPORTS  ON CPT-4 
Report  Title  CPT-4 Section  Annual 
Effect 
Medicare Physician Consultation  Sewices  Evaluation and Management  $73.OM 
0402-88-00650,  June 1988 
Corona~  Artety Bypass Grafi Swgery  Surgery  $5.OM 
OAI-09-86-00070,  August  1987 
Pocket Dopplers  Medicine  $6.OM 
OEI-03-91-00461, June 1991 
Zero Crossers  Medicine  $16.7M 
OEI-03-91-00460,  August 1991  I I 
Review of Multichannel  Laboratory  Claims
 Pathology and Laboratov  $0.9M 
Processed by Empire Blue Cross/Blue Shield
 ($2.6M/ 
Under Title XVII of the Social Security Act
 3 years) 
4-02-85-02030, March 1985

A-02-86-02013, June 1986

A-02-87-01026,  September 1987

A-02-88-01001,  October 1988

Review of Radiolo~  Services Paid by Empire
 Radiology  $1.3M 
Blue Cross/Blue Shield Under Tit~eXVII of

the Social Security Act

A-02-86-02022,  April 1987

Manipulation  of Procedure Codes by
 All Sections  $12.2M 
Physicians to Maximize Medicare and

Medicaid Reimbursements:  A Management

Adviso~  Repoti

A-03-91-00019,  August  1991

D-1

____..    . D-2 
.-   APPENDIX  E 
COMMENTS  ON DRAFT  REPORT 
E-1  *. +
.
. 
HealthCare 
,* ~,.vn.-,-.<
Jf DEPARTMENTOFHEALTH&HUMANSERVICES  Financing Administration 
5

: 
-0  7
 Memorandum 
-%+ +.w
Date  ?4AR81994 
From  Bruce  C. Vladec  .&L< 
Administrator   
~ 
Subject 
office  of Inspector  General  (OIG)  Draft  Repo~  Cag  f  h~iti_se.Mw%n 
(OEI-03-91-O0920),  and A Compendium  of Reports and Literature  on C-g  of 
To  Physician  Service% (OEI-03-91-00921) 
. . 
.June  Gibbs  Brown 
Inspector  General 
We  reviewed  the above-referenced  draft reports which raise  concerns  about 
~tig 
practices  and their irnpaet orI Medicare  policy objectives. 
We concur with the seeond  and fourth recommendations  contained  in tie  re~rt 
and are considering  the first and third.  Our detailed  comrnenfi  on the report 
findings  and recommendations  are attached  for your consideration. 
Thank  you for the opportunity to review and cornrnent on these  draft reports. 
please  advise  us if you would like to discuss our position  on the remnmendations 
at your  earliest  convenience. 
Attachments 
m
xi% 
IXG%A8 
nmal 
a=y 
DATE  8ENT  comments  on Office  of Insuector  General  (OIG)  Draft  ReDorfi: 
Codin~ofPhwicianS  etices,(  OEI-O3-9l-OO920].  andA 
Com~endium  of Reuorts  and  Literature  on Coding  of Phvsician 
Services. 
(OEI-03-91-00921) 
Recommendation  1 
The  Health  Care Financing Administration  (HCFA)  should  produce  and 
promulgate  to the  American  Medical  Association  (AMA)  and  medical  specialty 
societies  clear  coding  objectives  and  criteria  for  Medicares  resource-based  payment 
system  and  encourage  them  to apply  the  objectives  in the  development  of new or 
revised  codes. 
HCFA  Response 
We  are  considering  developing  a policy  statement  delineating  clear c-g

objectives  and criteria for Medicares  resource-based  payment -m  ad  ~fo~~g

the AMA  Current Procedural Terminology  (CPT)  co~ittee  of our priorities.  We

pian to evaluate  whether the issuance  of a general  set of coding  objecti=  would

improve  coding  accuracy.

Recommendation  2 
HCFA  should  apply  its coding  objectives  and  criteria  when  ev~uating  new or 
revised  codes  to assure  compliance  ~th  the  needs  of fie  Med&re  Fee  Schedule. 
HCFA  Resuonse 
We  concur.  We agree  that  improvements  ~n  be  made  in the  coding  process. 
However,  to give the  report  greater  balance,  we suggest  hat  oI~  include  in the 
final report a description of the imprmemen~  ~  tie  ~~g  -m  iII which HCFA 
has had a major role+ and the policies  hat  HCFA  h=  ~~ed  tO guard against 
coding  changes  leading to greater expendi~r~  ~  pticulaq  OIG  should ck 
HCFAS  role  in the major improvements  retie  ~  ev~uation  ~d  management 
physician visit codes  in 1992  such as the creation  of add.ition~  more  p=~  ad 
descriptive  codes  to distinguish among  various  levels  of p@i&n  visits.  HCFA 
developed  several  clinical exampks  for ~ch  sp~~ty  ~  q~  the ux  of the new 
codes.  Despite  some continuing  ei~ents  of ~fision  ~ong  physicians  about the 
codes  these  changes have led to gr~~r  u~ormity  ~  tie  U=  ~  visit c.otk 
,  Page  2 
In addition,  HCFA  has established  several  methods  to guard  against  coding  changes 
leading  to the  circumvention  of the  relative  value  scale  and  escalation  of 
expenditures.  Some  of the  steps  that  OIG  urges  HCFA  to take  to establish  more 
effective  methods  of assigning  re~ative vaiue  units  (RVUS)  for new and  revised 
codes  were  announced  by HCFA  in a notice  of proposed  rulemtig  (NPRM) 
published  on July  14, 1993, a copy of which is attached.  We would  like  OIG  to 
mention  these  efforts  in order  to provide  a Context  and  accurate  representation  of 
HCFAS  efforts  in improving  coding  of medical  seMces. 
The  NPRM  describes  our  concerns  about  tie  escalation  of new and revised  codes 
as well  as our  intentions  regarding  assignment  of RVIJs  to these  cases  if we could 
not  readily  ensure  budget  neutrality.  We have  held  extensive  discussions  with  the 
AMA  on  other  changes  that  would  be  desirable  in the  CPT  process.  For  e=mp~e, 
the  AMA  is going  to close  the  CPT  prtiss  2 months  earlier  beginning with the 
1995 CPT,  which  will allow  HCFA  to review  tie  coding  changes  and the  proposed 
RVU  values  in a more  deliberative  manner.  ~,  the AMA  is going to require  all 
specialty  societies  to identify the coding  changes  that  are  pianned and their relative 
priority for the next 4 or 5 years.  This would allow  the AMA  to put more

discipline  in the  CPT  process  and  would  a]]ow  HcF&  ~rough  its representative  on

the  CPT  editorial  board,  to influence  the scheduling  of coding  changes. 
Recommendation  3 
HCFA  should  work with the AMA,  Medicare  earners,  medical  specialty societies 
and other  related  parties to develop  a mechanism  hat  assures a unified and 
consistent  dissemination  of guidelines  on how to  use  and  interpret codes. 
HCFA  Response 
we  agree  there  is a need  for greater  HCFA guid~ce  to  physicians on how to use 
and interpret  new codes  particularly  for cod=  qected  to be high volume  and 
where  the definition  is not precise.  H~ever,  we  ~e  not  prepared  at this  time  to 
commit  to a specific  set of actions  and wouid  we  to ~sider  M  issue further. 
We  note  that our effort to communicate  he  intqxetation  of the new evaluation 
and management  codes  mentioned  above, which was the  most  s@ifkant  set of 
changes  in several  yea~  was  highly  SUUXXSfU1.HCFA  participated in and led 
several  educational  effor@  such as having  fie  ~e~  send  out  Spedal  publications 
on the use of the new cods  speciai  semisl~  and tio~ation  in the carrier 
newsletters  that are distributed to every physician  ~  fie  ~un~.  b  addition, we 
have worked  extensively  with C.arnermedical  d~ecto~  to iden~  ~~  of continued 
confusion  and developed  recommendations  for clarification  and guidance  on 
documentation  to be used  by he  AMA/cm  and  ul~a~ly  to be u~d  to distribute  Page  3 
to  physicians  and  carriers  to improve  the  consistency  in  the  use  of these  codes.  We 
have worked  close]y with AMA  who has distributed  our  recommendations  to 
specialty  societies  on two occasions.  We (HCFA  and  AMA)  are currentiy in the 
pr~ess  of preparing  recommendations  for the  CPT  panel  to consider  for revisions 
of the  CPT  definitions.  We will consider  these  types  of  efforts  for  communicating 
the  correct  use and interpretation  of new codes. 
Recommendation  4 
for
HCFA  should  evaluate  the  current  process  implementing  changes  to the 
Medicare  Fee  Schedule.  This  includes  (1) developing  an  effective  process  for 
establishing  work values  for new or revised  codes,  (2)  communimting  to the  AIvI.A 
the  number  of annual additions,  deletions,  and  revisions  to  CPT-4  that HCFA  could 
effectively  review,  and  (3)  delaying  implementation  of new  or  revised  code% except 
for  new technologies,  until  reliable  data  are available  to  predict  service  utilization. 
HCFA  Resuonse 
We  concur,  and have made the recommended  changes: 
1.  We developed  an effective  process  for establishing  work  values  for new and 
revised  codes  that  preserves  budget  neutrality,  protects  primary  care,  and  is fair  and 
equitable  to all concerned. 
2.  With  the  tighter  deadline  for making CpT changes  and the establishment 
of a long-term  coding  workplan,  HCFAS  ability  to  review  established  RWS  for 
new  and  revised  codes  will  be  greatly enhanced. 
3.  If reliable  data  are  not available  to predict  sex-vice  utilization  needed  to 
budget  neutrality, we will delay implementation  of new or revised  c~es, 
pr=we 
except  for new technologies,  until reliable  data are available  to predict  service 
utilization.  See page 37997 of the July 13 NPRM. 
Technicai  Comments 
OIG  attributes  the entire  $450 million  in expenditures  resulting  horn  the  1992 RW 
refinement  process  to new and revised codes.  Actually,  only a small  fraction of 
these  dollars was attributable  to coding changes.  The  bulk was due to changes 
made  to values  of existing codes.  The year 1993 was  atypical  since  the  values 
assigned  to all codes  in 1992 were considered  finterim and subject  to cornmenw. 
Numerous  changes were  made in response to comments  requiring  the  $4S0 million 
adjustments.  For 1994, oniy a 0.1 percent adjustment  to  all  RWS  (about  $30 
million)  was needed  to maintain budget neutrality due  to the establishment  of new 
or revised  codes.  Page  4 
The  next to last paragraph  on page  9 of the  report  states: 
Neither  the  OIG  nor  HCFA  has  evaluated  the  effectiveness  of 
the [Comect Coding  Initiative].  However,  we are  aware that 
greater
some  insurance companies  U=  a far  number of edits  than 
HCFA  to detect  improper  coding  practices in their non-
Medicare  claims. 
While  it is true that HCFA  has  fewer  edi~  ~an  -e  private  cornpti~  HCFA 
also  allows  its carriers to use local  edi~  which  existed  prior  to l=  tius  ~~e~g 
the overall  number  of edits.  ~  addition,  whfle HCFA  Wmently  uses  edits ody for 
wor~wg ifOi IGto
high  dollar,  high frequency  sexvice~  we me  develop  a Request 
OngCbiaisrligs
for Proposal  to develop  edits on an  for use by carrier systems.  We 
wouid  like these points  to be  added  to  tie  paragraph  to provide  an  accurate  context 
for describing  the number of edits  HCFA  uses 
In addition,  the  report  does  not recognize  the  complexity  of developing  rebun~g 
edits  in the context of the fee  schedule.  We need to e~re  fiat  the proposed 
rebundling  edits reflect  the interpretation  of codes by different  physi- ~clu~g 
physicians  in different  specialties.  Aso,  with the advent of a fee  schedule  which 
links a definition  of the work for each  code,  Medicare must carefiuy  be  me 
combinations  of codes  being  proposed  for rebun~g.  HCFA  must take tit(.) 
being
consideration  the se~ices  pr~ided  under  his  cm  de  and  determine  what 
services  were  included  in the code  when  the  relative  work value  was assigned.  ~ 
the semices  considered  part of the code  changed through rebundling,  the work 
value  of the individual code,  and c~es  ~~~  tie  f~i~y,  must be reassessed  for 
consistency. 
ln the exit conference  on this inspection,  OIG  ill~mted  it would  discuss  in its 
report the fact that I-ICFA does  not bl~dly  a~pt  r~~erdations  from the 
AMAs Relative  Value  Update  Committee  (RWJC).  HCFA  a~ndees  poin~d  out 
in the exit conference  that HCFA  rejected  35  percent  of the  RWCS 
recommendations  last year.  We beheve  fi~  ~~  ~ould  be  ~Wd  on page  13 of 
the report to represent  what actually  occurred. 
Statements  citing findings of previous  OIG  stu&s  should indicate  that dollar 
amounts  of overpayments  are estimates.  F~c@s  mat Me&care  overpaid  specific 
doliar amounts  due  to cxxitig  problems  ~e  b-on  ~ple  &@  and  are  estimates 
who=  correspondence  Mfi  tie  a~~  ~e~mcnt  ~  depend  on tie  quality of 
sample  selection,  sampling variability,  and other technical  factors.  TO  XCUra*lY 
COnveythe uncertainty that a~panies  ~ch  ~~men~  wc  suggest  using the te~ 
estimated liberally for citations  of previous  OIG  findings.  On  page  5 of tie 
    Page  5 
repo~  for  example,  the  fifth sentence  from  the  bottom  would  read,  this  lack  of 
clarity  resulted  in esttialed  overpayments  of $73 miilion  per  year  nationwide. 
several  other  instances  occur  in the  report  and  in the  companion  report. 
The  reference  to su~ey  responses  from  providers  on  pages  7 and  8 is unciear 
because  in the methodology  description  (pages 2-3), 110 providers  are mentioned  as 
respondents.  The methodology  section  describes  the respondents  as medkai 
specialty  societies  Medicare  carriers, the ~  and other organizations.  h 
common  usage,  such entities  are not providers per se; rather, providers refer to 
individual  deliverers  of medical care.  It is unclear, for example,  which entities  on 
OIGS list  of  respondents  expressed  satisfaction  with  the  current system addressing 
coding  issues  . . . (page 8).  .  American MedicalAssociation 
Physiciandse dicatetdotheIIeallhorAmerica 
James S. Todd,~  515Northstatesweet  312464-5000 
Executiv\eio e President  ChicasOIl,l inoi8s0610  3124$4-418F4ax 
October & 1993 
Bryan B. Mitchell

Principal Deputy Inspector General

~epartrnent of Health & Human Services

Wfice of Iaspector General

Washington, DC  20201

DCWMr. Mitchell:

Th- you for allowing the American Me&aJ Association(AMA) the opportunity to munent  On 
your draft report Coding of Physicians Services.  I appreciate your kind comments on the 
coop~uoII  you have received from the AMA staff in development of this draft.  Thoughout the 
research and analysis process we have, in turn, been impressed by the objectiveness of the projeet 
staff and their obvious dedication to providing the best report possible-
Whi!e the stated objective of your report is w describe the vulnerabilities in the maintenance, USe 
and management of CPT as they rchte  to Medicarereimbursement,  it seems that we share the 
same ultimate goal  thti of making certain that the Physician  Current Procedural Terminology 
(~  is ata sufficientlevelof ciarity,accuracy,andprofessionalacceptanceto a!lowtheH~ti 
Care FinancingAdministration(XT-A) to effectively and efficiently administer the  Mdicxe 
proe$y%lrn. 
The CPT system is of extreme importance to physicians.  It alJows physi~~  to rePofi the 
services they provide in terms that are clinically meaningful to them.  Accordingly, tie Am  ~ 
dedicated to supporting and improving CPT and weicomes constructive criticism from S@ source 
including, of course, that of the OffIce of the Inspector General (OIG).  It is in that spirit fi~  we 
have reviewed your draft report and in which our COmrmxtsOnyour report are offered.  TOthe 
degree that there are, in fq  vulnerabiiities in the C!PTmaintenance system, the AMA 
appr=k~  i-g  of those, and you may be assured that we plan to take every step possible to 
address them. 
Few would dispute the notion that the adoption of CPT by Medicare in 1983has provided a tool 
to dlow  13CFAto bring urqmecedenteduniformity ~d  ~n~l  to the Medicare Part B pro~-
Md  for the fwst time since the proms  ~~plion  in lg&5, cn  hx  provided the federd 
IZOV-ent  with the ability to implement, monitor and evahmte national payment policies.  We 
%TWwith your obsenation  th~  with the impkmentation of the Physician Paymmt Reform on 
JmWXY1, 1992, the CPT system has taken on increased importance.  We believe that, while 
continuing impmvaents  are needed, tie  r~atiom~ip  ~~  A,MAh=  established with HCFA 
Conccmingthe C.PTsystem, its modifications and relative value updating, was critical in e~ling 
that new system  to be  implemented witi a very high level of operational efficiency.  This 
relationship is, in our view,  an excellent example of tie  we  of publi~private  partnerships th~ 
will be so critical as we move toward a reformed health care system.  Bryan IL Mitchell 
Page 2 
With one exception that will be discussed, we fmd your recmnrneodatiom to AMA to be fiiir ti 
reasonable. Several of the activitiesyou suggestarc, in fa~  already underway.  Our major 
concern rehtes  to the seaions of your draft report which cite nurnemus alleged flaws in the CPT 
system.  While we would be the first to point out that cPT  is not perf~  we are concerned that 
your listing of thmc examples (most of which have b=  id~fi~  ad  ~rr~~  ~@  i= 
-g  (51  maintenance-prooessj  may create a distorted perception of the usefulness of CPT to 
Medicare. 
Bssed on the organization of your repo~  our comments are grouped into four sections: 
  background; 
  methodology; 
  findings; and 
  recommendations. 
BACKGROUND 
We offer a few tinor  sugg@Ons  for  believe would Stre~@en 
your  ba&~~d  SeaiOn  mat  we 
your report overalL Fir% we wouid recommend that your report include a more precise definition 
Of~.  As noted in the CPI  publication  ~  Wpyri@ted by the AMA, CYIis a systemtiC 
listing of descriptive terms and ideutifyiig codes fbr reporting medicd  se#ices  md procedures 
performed by physicians. me  descriptor is the key to each code, not the code number itwdf. 
Next,  the  statement  concerning  hospital use of HCPCS is somewhat misleading.  J4a~lY, 
hospitals use only Level 1 of HCPCS (CPT). Thii Medic=e  pm- fimi~on  ~  ~atd 
hospitals in coding outp~tien~s~ic~,  ~  hospi~  frqu~~y  provide servi~  that might be more 
accurately reported using Level 2 of WFCS (e.g., dental SCMCCSy)et they m  ~rr~rlY 
prohibited from doing so by HCFA. 
lWd,  there is an inaccuracy in the statement on modifiers, as referred to in endnot~5.  S~~Y 
speaking, QI is not a CPT modifier, but one that has been established by IICFA on a ~Por$rY 
basis.  And lastly, there is a ~ographicsi  error on page 2, TheRVU is divided into wee 
categories  physician (not physical) work, practice expense.... 
METHODOLOGY 
Ile  OIGSmethods redyprimarily on two sources of information:  literature review (~d  o*~ 
published documents); and personal interview.  We understand that these methods wcm relid  on 
due to resource constraints witiin tie  OIG. ~ile  both these sources have merits and are= 
important part of any investigation, we have concerns about the degree to which they CUIbe  Bryan B. Mitchell 
Page 3 
rtdied upon exclusivelyto produce definitive results.  We strongly believe that the methodology 
Used has SeriOUShtitations. 
First, we note hat the lit~rure  hat was  ~cover~  d~~g  your  e.xhaus$ive  computerized SeSrch* 
W= scarce ~d,  ~ gm~,  IIOtfound in pub]i~o~  ~m have tie  high  st~~ds  of peer review. 
Accordingly, we believe that information  literature mUSKbe viewed somewhat 
garnered  tiIX  the 
skepticallyandis notwellsuited,inour view, to generalization. 
Second, in light of the scarcity of reliable literature, a great deal of ~phasis  was placed on the 
structured inteaviewprocess.  While an effort was clearly made to interview a wide sP~m  of 
phy$icins,  ooding experts and claims processors, we question the degree to which it is possible ti 
conduct such interviewswithoutinjectingimportantselection, pre-existing opinion9~  -g 
biases into the process.  For example: 
*  It is widely recognized that many so-calkd @iig  Uperts  (e.g,,  COnmkantS,software 
mmpank$  profit by perpetuating a perception that ~  is ove.r+ompli~ed  and vague. 
$imikdy  it is to their advantage to overstate the degree of unbundling and upending that 
exists so that they might be engaged to correctthe situation.  Accordingly, we b~ieve 
findings such as those listed on page 4 cannot safeiy be concluded to be valid. 
	 You soiicited the views of medical record coders, 23 individuals,  19 of whom were 
recommended by the American Health Information Management Association (AHIMA). 
ASI am sure you are aware,AHIMA has formal policy positions in opposition to the 
continued usage of CPT in, at leas~ some patient setrings.  WC seriously qwstion the 
degree to which such a group of interviewees, even wi& the best intentions, could present 
a truly balanced view of the merirs of CPT. 
  Most of the work was done during the fall of 1992, a period in which there exis@ 
uemendOuSfhstration  and resentment among some physicians (and the national medic~ 
specialty societies) for policy decisions made by 13cl?A in implementing the RBRVS 
$X4X% IZWtIK@ly  the unjustifiably low conversion factor and some components of the 
GPCIS. Because of this, some physicians and or&izations  were  unhappy wfi  eve~~g 
tkaiing with Medkare payments, coding included.  some,  in fitq  blamed the ~  wd~ 
for the payments that were far lower rhan believed appropriate.  ~us  any study condutied 
during this period, particutariy one based so heavily on interviews, would certatiy 
develop a much more negative view of CPT, than would the same study if it w=e  being 
conductedtoday. 
In sum, we believe there are important limi~iom  in tie  me~odology  of your study.  While we 
recognize that practiodities may have di~ted  your appro@,  we ~SO believe those IirnitatiOnS 
should be acknowledgedand taken into account when making drawing conclusions or ~  *ng 
recommendations.  Bryan B. Mitchell 
Page 4 
I%st, your study concludes thaI inmrrect  ding  affects  lvledicare  reimbursement.  WCdo nOt 
dispute this as surety some incorrecxcoding wes  places and this may impaa Medkare payments. 
Your study seems to sugg~t,  however, titi  in~~e~  coding is inherently a fault of the CPT 
system and that when inmrrect Wdbg  oars  ~  it on]y ]UI&  to Medicare overpayments.  We 
suspect that where in~rr~  ~d~g  do=  oc~t,  ~~e  may be m~@]e  -es  many Ofwhich are 
. . 
totally remov~  fiom tie  ati  ~d~g  syst~o  ~  ~ditio~  WeJCIIOWof no studies th~ have 
~ught  to quantify undxing  (~~ough  we h~e  sipifi~t  w~otaJ  evidence of such) ~d  in 
the dmxme of these d- it k not possible to a~@y  SSSeStShe overall impaa of md~g 
accuracy on Medicarepayments. 
On the point of ding  accumcy your study ~SOimP]i~ thti tie  C.PT error rate is high 00U cite 
SSmuch ss 15 or ]7 p~c@,  but thk is not put in ~propriate  context or compared with Other 
reporting mechanisms.  A 1992arrkle in the Journal of the American Medical Association 
(JAMA), for example, reports on a study of hospital medical reccwdcoding and conoludes that 
hospital rcpotig  error rate (that ~, MTOmwx  we~  large enough to cause a change in 13RG 
assignment) dropped tO 15p- ~  19gs from ~mo~  2I percent in 198S. In-patient hospital 
coding is generally done by trained medical r~rds  pmf~iotlals  using the ICD-9-C14 system and 
tht? end date of the study (198g) w= ~ f@ five y- tier  he  ~R(3  system  went into effect. The 
Wdyfurdler
concluded th~  mtion~ly,  ~~e  hospi~  rqo~ng  errors did not result in significant 
overreimbursetnent. 
similarly,  your extrapolation hat  b~twe~  $1 ad  $6 billion in M~i~e  claims may have b

@eCtd  by improper coding is ex~me]y  susp~t.  ~e  ]i~ramr~ U@  to make these assumptions

is not @rrent, does not address the issue of potential undercoding,  and the studies refer to so

many different phenomena (e.g., m~ic~lY  UmUSaX-y semices, undocumented services =d

gene~  @ding errors) that it is impossible, with the limited information available, to atzribute ~Y

And
Pr@ise dollar figure with coding errors.  again, coding errors, in and of thems4ves,  do not

direcdy imply structural problems with a coding system.

A second finding leads you to ~nc]ude  vat  flaws ~  @r  cods,  @elhes  and index can led

tO improper coding, and provide seve~  i[lustra~ons$ Here again we do not argue with the

possibility that this can occur and are always seeking ways to improve the guidelines, ~dex etc.

But we do not believe your illustrafio~  we ne~sfiy  indi~tive  of tie  alleged pmbl~  yOU

identi~  and are, in most CSSaSn,o longer appli~ble.  we offer co~ents  on each ar~  YOU

identi~.

Ambiguous code definitions

we  agr~  thaq prior to 1992, providers did not uniformly code levels of semices for ofilce vkits,

Wnsuhations and other evaluation and management senices.  It is for preeisely that reason *Z

the AMA invested over three y=  of res~ch  ~d  s~dy  in the r~isio~  of the Evaluation md

Management codes.  These ~ding  re~kio~  were b~ed  On empirical data provided by the

H~~d  University  t- that  dev~op~  we ~RVS  me~~o]ogy<  R~u]~g  c~es  were subject

tO extensive comment by phWici~,  payers ~d  otier  groups and were the subject of extt?SSiVe
 Bryan B. Mitchell 
Page 5 
pilot testing and training programs by the AMA, HCFA and others.  Only now is limamre 
beginning to appear that discusses these new codes.  Reli@cc on outdated information to 
demonstrate flaws in the system can lead to an inaccurate view of CPT as it is used CUXTCMJY. 
We concur that there may be some confusion c~n~~g  the use of arthroplasty procedures Of 
the toe.  We will pursue the development of this issue and address it either through the CPT 
Editorial Panei or by publishing clarification in CFT AssLstmW 
ne  issue of laboratory panels has also already been addressed.  In CPT 1993, the Editori~ 
Panei eliminated the majority of disease or organ panels.  The ones that reb  ~  sptificaljY 
defined as to the components that Me inc~ud~.  Fu~er,  we have pu~lished educational materiak 
Of
in the C~t,  pertairdng to the correct use  these codes.  (Copy attached) 
Multiple codes thnt define essentially the same procedure 
Again, the information in this report does  not reflect current coding.  In ~  ~  witi tie 
extensive assistance of the ~oilege of American pathologists, the Editorial Panel began the =k  Of 
eliminating outmoded and duplicadve codes from the laboratory section.  In ~=  ~,  whi~ 
will be avaiiable later this month, this task will have largely been compieted. 
Coronary Artery Bypass grafts have also been addressed by the Editorial Panel.  The Walesfound 
in the current CPT reflect the techniques being performed.  We were surprised to 1- tia  tie 
OIGhad previously suggestedthat the AMAmodi~  Waling for  CAB(3  as we werb  notprovided 
with a copy of that repo~  nor had  we been  made  aware  that  the  issue  was  being  pUrSUed.  ne 
Witoriai  Pad  adopted the existing codes (not the ones referred to in your drti  report) only aft~ 
empirical demonstration that the pmcedur~  iIWOived signific~~y  diff~ent  amounts of physician 
work, while the report your cite relies on surg~n  intcmie~s prior to RBRI?S. Further, it k our 
understanding that adoption of th~e  new ~des  by HCFA will not r~uit  in my additional HC!FA 
expenditure for CABG.  Thus,  we  sw  no j~tification  for your ~nclusion  that a reductioxiin the 
number of cod=  wouldhave  saved S5 million annually. 
Endoscopic and arthroscopic procedures represent a speciai challenge to coding.  B-use  of tie 
large number of procedures that can be performed during one operative sessionUshlg~ 
endoscope, it is particularly difficult to develop ~  appropriate number of d~~iptors  without 
compromising data quality. CPT 1994 contains a new section on sinus endoscopy ad  tie 
Editorial Panel wiil continue to work on this  issue  in future years. 
Codes that  cnver an array  of significantly different levels of service 
ne  isSU= liSted as problems in this section have all been resolved.  For example, the cod= for 
dia~ostic  vascuhr  teting  have been signifi~[]y  revked and pocket dopp~er  procedures have 
specifically been deleted  from CPT.  Ekyan B. Mitcbel[ 
while we CQncur that the time required to ptiorm  a supmtent,orial  craniotomy  may vary, the USC 
for
of the type of lesion being operated on is, ~ a clinical sense, a better proxy  the amount of 
physicisn time and intensi~.  It is not appropriate fix a clinical coding system to mtew~ 
Operationson the basis of time spent, ss time can be impti  by many fictors (e.g., training and 
skill of the physician, availability of assistants, individual we  hospital sehedulirtg)that 
severity, 
arc notdirectly associated wi~ the typic~ physici~  work iIIVOfVed.  me  ~de  should represent a 
clinical description of the operation, not the tiie  it takes to perform it. 
Problems in  CPT-4  guidelin~  and index alSO contt%buteto incorrect coding 
The Pmel has been working for SWerSI yems to S~mtiCZIIy  replace x)jeotives that may have 
multiple meanings such as superficial  and deep.  There are sections of CPT, howev=,  ~@ 
as the muscle groups, where such terms have specific clinical meaning and should appfOpri~elY 
remain. 
Concerning the guidelines on hospital OU~atients~iw,  ~  19w the usc of @I  was mandated 
by Congress for hospiti  outpatient use,  ~~e  tie ~i~ri~  PSJWIwas not asked for its views 
concerning the applicability of CPT m his  e~imnm~~  the Panel h=  responded positively ~d 
quicklyto issuesthat have beenpresentedto i%includingthe publication of the hospa  ou~atient 
version of CPI. In this volume, wc ~~ude  specific H~A  ~id~ines  for CPT use by hosptis. 
~Owever, our  ability to help H@A  ~mit  his  ~Orm~On  h=  b~n  ~pcred  by a ]ack Of 
cooperation by the hosp,iudcoding uea  within HCFA.  Contributing to the difficulties that 
hospitals experience are the HCFA reporting guiddines themselves.  For e%=pie,  ~~A 
guidelines do not permit hospitals to report modifkrs, yet modifiers are an integral Pm  of tie 
CPT system. 
YOU  are alSOaware tiat  the Ameri~  HospiK~  Association  (voting  member)  ~d  Ameriean  HWh 
Information ManagementAssociation (non-vo[~g)  have had repres~~tion  on ~C  Edkdd  P~el 
for several years.  The purpose of tie  inclusionof th~e  gTO~pS WS.Sto  sp~ific~ly  seine the needs 
Ofthe hospital users of CPT. 
Some respondents  have ~ti&~  the pro(&  hat  AMA W=  to ~nsid~  addltion$  ~d 
~ges, 
deketionsin.CPT 
The CPT15ditoriaIPanel prOCeSSh=  be~  significutiy  revis~  to ZHOWfor a fbll range Of 
CO~~tS  from groups seeking, ~d  ~ose ~X tight  be aff~ted  by, ~ding  ~~g~.  A specific 
ZPPCZIpSrocess has been instituted to allow for further exchange of information.  All pmicipat~g 
organizations have  the opportunity  to pr~ent  fiomatlon  in writing  or  in person  to the  Editorial 
pSneL  We are also aware that HCFA Cmier  Medical nir~rs  provide hput to their HCFA 
representative prior to the ~i~ri~  p~~  m~gs.  we  be]ieve  our  process  is open,  cielldmrate 
ad  that  it contains  sut%cient  due  process  safeguards.  It iS our  belief that many groups that 
express dissatisfaction are those same groups  ~~  have  had  l~ge  code-spli~g  proposals  tUrnd 
down by the Panel in its continuing effofi to provide  a pr~m  b~~ce  w  @ing  modification.  Bryan B. Mitchell 
Page 7 
While we cannot speak directly to many of your points concerning HCFAS internal operations, 
we would stro@y  disagree with yOUrfindings on page 13 that HCFA has not developed 211 
efficient or ef%etiveprocess for establishing RVUSfor new or revised codes. Your observation 
that the process for ~signing RWS  is still evolving is correct, but it is important to also note that 
many of the improvementsmade in the evoiution of this process have been made in direct 
response to ecmstructivesuggestionsOrconcerns expressedby HCFA ~d  PPRC.  AMA~d 
HCFA staff have deveIopedpositive and productive working relationships and worked closeiy 
together to develop new pmc~ures  for gathering anti repofig  information on new  and  revised 
COd@.ASa resuk, the C-ier  M~i~  ~ir~~rs  ~nsidm~  fie ~uc  recommendationsfor the 
1994 RVS to be Wmiderab]y befier thm the first set, with one reviewer stating they were a 
thousand times better.  Likewise,  HCFA has made substantial efforts w allow for more pubiic 
ov~ight  of this process.  In a Proposed Rule publishedJuly 14 in the Fedeml Reuistet, HCFA 
outlined its plans for RVS refinemen~ for 1994 and lW5 and provid~  a boday  period for public 
Comment. 
L=tly,  we would disagree  witi  your  finding  Mat a pr@iferation  of  CPT  changes  wiIl undermine 
HCFASabiIityto containexpendituresunder the Medicare Fee scheduie.  NOr~aLio~hiP h= 
beenestablished between the  number  of  CPI mding  changa  and  Medicare expenditures.  Your 
statement thatRVUSfor codesthat were new or r~js~  in 1992would have increased Mediare 
expenditures by $4S0 million is inaccurate.  The expenditure increase to which you refer was due 
tOHCFAS 1992refinementprocess, which focusedonthe relative values assignw to 9xifiiW 
codes ~d  had nothing to do wi~  ChSIIgeSin ~1.  ~e  re]atio~bip  between CPT coding ch=ges 
and Medicare expenditure  i5 a~~ly  quite  comp[ex  ad  is m  issue  that  the  AMA, HCFA, md 
RUC are continuing to explore. 
The statements  cited in your repo~  reg~ding  tie  typ~  of ch~ges  being  made  in  CPT are from a 
~  Rule that is open to comment and which has been the subject of considerable discussion 
within the medical community.  We strongly disagree with the characterization of chagm.  be~g 
made by CPT as simply sp]i~ing a ]~ge numb- of individu~ ~des  into two  or more codes in ~ 
effort to circumvent the USUaInotice  and  comment  process.  The  changes  being made to cm  Me 
generalIy  quite complex,  Whole  sections may be zevised and there may be many new cod~ 
added, many  revisions,  and  a number  of deletions within a section.  In (Xhercases, entire sections 
of CPT are deleted and  a new  section  with  new numbers and descriptors is created.  HNA  h= 
itSe]facknowledgedthat it is often diftlcult to predict how the old section will crOSSwdktOtie 
new or revised section and hm mkti  for tie  CPT p~e]s  ~d  tie  RUCS  Msistance  in this  regard. 
RECOMMENDATIONS 
AS indicated  above,  wi~  one  re]ative~y  minor  exception,  we  find  most  of your  recmunendations 
for  AMA LObe appropriate and reasonable.  We would,  however,  1ike to  make  a few obsetwations 
about each.  Bryan B. hfitchell 
Page 8 
. 
Recommendation #1 
We agree that cooperation fi n~~sa,ry  and we most willing@ work witi  HCFA to disseminate 
itiormation  OnHCFA program requiremen~ ~d  on Wdhg ~d~in~  that are consistent with 
those requirements.  We wouid point OUGhowever, that the new CPT  submission fiITIIS~ave, 
inherent in them, an expanded set of coding obje@ves, several of which were provided bY 
HCFA. 
Recommendation #2 
We will continue to purstte the issue of index refinement  directly.  We agreewith your previous 
obsemation that coders perceptions of the CPT index may be influenced-by the iev~ Of-g 
and experience they have squired  Uing ~T  or o&er mding systerns (@culariy  ICD-9<M). 
U h Ourhope that those Ot@ZStiOnSor ~ividu~  that have found problems with the currextt 
hd=  would time  forward with specific sugg~otts  ~r  improvement nd  bc willing to be pm  of 
the overail index enhancement process. 
Recommendation #3 
We agree with this recommendation concerning development of better mechanisms fOr trammis
sion of national uniform Medicare @ding po]icies and are wiliiig to work with HCFA X 
qpmpriate.  To the degree that HCFA has established national uniform Me&are  coding polici% 
we would be pleased to enter those into our CPT Clearinghouse Data Base and infOrm Clfig
house USerSof those policies as a way of supplementing HCFASeffo~.  We would be mckt 
willing for HCFA to publish its policies, on a reguiar basis, in the @  Assistant.  With this 
being accomplished, HCFA may wish to consider identification of the CPT As- tas  the 
offlciai source of (XT  coding information. 
Recommendation #4 
We  agree with this rmmmendation  ~ncerning  the n~  for relative v~ue recommendations to be 
accompanied by data on anticipated u~@ion  and have ~r~dy  taken steps to implement it. 
However, we stress the fact that these  Utilization  fi~res  Wj]] OIIJybe estixrMtes hat  may  need to 
be revised based on actual program experience. 
Recommendation #5 
We believe that AMA and HCFA  should  work  ~ge~~  to  mwge  md  plan  the  changes  to ~ 
on ~  annual  and  longer  term  basis.  We have taken preliminary  steps  to  accomplish  this.  We  do 
Ofcm ch~:~
nOt believe that putting a cap ou tie  numb~  per y- ~ in the best interes~ of 
the Medicare program, its beneficiaries, or of medicine,  A c@ artificially constrains improve
ments in the coding system, many of which in fact, xe  YYeededby HCFA to enable them to 
implement Congressionally mandated changes in the physician payment system.  Bryan B. Mitchell 
Page 9 
It is our  strong  belief  that the  rc]ativel  seen  in (XT  mthe  past  twO 
y  ]~ge  numbers  Of  ch~ges 
YWS  represents needed  adjustmentsto better define physicians services and to accomplish the 
limdamental gO~Sof the OBRA 89 pbysici~  pa~~t  Ref@n md will not beoome a permanent 
feature of the CPT maintenanceprocess. 
with  respect  w  your  r~mmendarions  to HCFA,  we wouid  only  like  to comment  on the  i3St 
demeritof your  recommendation  #4 concerning  delay in code  implementation.  AMA would 
strong]y disagree with HCFA if hey  sought to delay impi~en&tion  of new codes pending their 
obtaining reliable data on utilization.  First, we wouid arguethatsuch  a delay would be 
itICOt&WtwithHCFASCongressionalmandateto make payment for physicians seflices bxed 
on (determined) resource costs.  Next, as a practical matter it is impossible to collect definitive 
ut~~o~  da~ U~CSSphysici~  have &e oppo~ni~  ~  repo~ tie  code on the claim form, ~d 
third, such a delay would ca~e  great Wnfision ~ong  physici~  who participate in private 
health insurance programs  where  SUChnew  codes  would be accepted and implemented,  Here 
again,  we  beiieve that the best approach, with HCFASinput, is to prcmctivelyrn=%e  the number 
Of ~ual  coding changes and u[i]ize tie  new CPT submission proc~s  to provide the best possible 
utilization estimates. 
Thank  you again for  the opportunity  to provide  comments  on  your  draft  report.  We would be 
hWpy to meet with your suff to review our commen~ if ~~  would be heipfu] in preparation Of 
yOMfhal  report.  In the event that you choose to move directly to a fins) report, we would 
appreciate your consideration of publishing our ~mmen~  ~ong with that final document. 
James S. Todd,  MD 
JST:dcl 
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