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 

REGION HEADQuARRobert 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 Administration’s (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 HCFA’S 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 President’s 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 Medicare’s 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 Schedule’s 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 HCFA’S 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 Medicare’s 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 study’s 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 

lN’I’RODUmON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

Incorrect coding affects Medicare reimbursements . . . . . . . . . . . . . . . . . . . . . . . . 

Hawsin CPT-4can lead toimproperco&ng . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

The AMAand HCFAhave addressed some coding problems . . . . . . . . . . . . . . . . 

Tke HCFAprocess ofcode development is flawed . . . . . . . . . . . . . . . . . . . . . . . 

An increase ofcodesundeties the Medicare Fee Schedde . . . . . . . . . . . . . . . 

. w~~A~ONS...””””O”O000OO ““”O-” 00-”””””””””””””””””” 

. COMMENTS . . . . . . . . . ...””””””””””””” ““”””””””””””””””””””””””” 

1 

4 

4 

5 

8 

11 

14 

15 

17 

..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 Administration’s (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 AMA’s 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 HCFA’S 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 Medicine’s 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 Carn”ers - 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 President’s 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. 

Erumples ilhslruling code flaws occur inmostsections 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 dopplers”33 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 biopsy”37 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 

additions, and dehxions in CPM. 

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 HCFA’S 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


HCFA’S 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 

MEDICARE’S CODING SYSTEM DO NOT ENSURE APPROPRIATE 

REIMBURSEMENT TO MEDICARE PROVIDERS. 

We identified three flaws in the way that HCFA has incorporated CPT-4 into 

Medicare’s 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 Schedule’s 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 Medicare’s global surgical service policies.”s’ 

Clear and accurate coding advice would ensure uniform application of Medicare’s 

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 Medicare’s 

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 CODINGINFORMATION FORPROVIDERS ANDCODERS

SOURCSS OF INFORMATION � Pr.vlder� Coder 

Colleague 

�Consultants 

CPTClearinghouse 

CPTAssistant 

CPT-4 

HCFA 

Medical Spec. Sot. 

Medicare Carrier 

o% 20% 40% 60% 80Z 100% 

HoW OFTSN EACli SOURCE 1S CONTACTSD 

�lndividuti8 c.r.rstix.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 BPD’s Office of Coverage Eligibility Policy, Medical Coding Policy 

Staff, forward most CPT-4 questions directly to the AMA. The BPO, however, works 

with HCFA’S 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 AMA’s 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 RUC’S 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 HCFA’S 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 HCFA’S ability to contain 

expenditures under the Medicare Fee Schedule. 

We believe that significant increases in code changes will severely stretch HCFA’S 

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 CODE CHANGES IN THE CPT–4 MANUALI 

~1986–1992)* 

� Additionsa Deletions~Revisi.ns 

1,000 “..’, S43? . . ..ia .. . . . . . . . . . . . . . . . . . . . . . 

800 v- I 

1986 198? 19’88 1989 1990 1991 1992”’ 

Additions ] 201 I 272 I 70 I 150 I 136 I 235 I 406 Deiotioms \ 157 147 43 203 72 339 575 Revisioa@I 309 I 161 I 118 I 199 I 181 I 252 I 544 

� Annual changes � re published in th.tye.r+sfollc.wirt, CPT-4 manual. 

�* sixt~percent � re due to ch. n~es in Patholo{y �nd Laboratory codes. 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 HCFA’S 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 Medicare’s 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 study’s 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 Medicare’s resourcebased 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 HCFA’S 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 

HCFA’S 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’’,...means (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 physician’s 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 AMA’s 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, HCFA’S 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 AMA’s 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 General’s report Liver Biomies (OEI12-88-00900), 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 CPT4 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 HC’FA 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 mid1970s, 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 

Association’s 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 

1966 1973 1933-1934 1991-1992 

Medicare bqim. Tlm3rdaditioa ‘meIK!FA MedicnrepaysW 

TheAMA oftlw CPTb fhllblmwlwtl ~forwr= 

pubuskthelat ~­ editilmof the m0dKkr8m HCFCS; curim CPT4.~ F=

CPT- 3@4 ilq@lto s&d&&lhO&=d 

-1 

I [- -1[ 

A-2


——...— 
‘L.

APPENDIX B


codm- 1-

~the 1-

wrn R_ :-----l+!!!?+ 

1-Him I
 7’5 Ofcollectcdm
 I 

Issmmmia 

__— — -1 

r


I


I


I


I


I


I


I


I


I


I


I


I


–––--J 

q##dty Advism 

I 

I ~! 

\ Ei5~ 

I __ ——— — -!

1-——-———


* Reprinted from the American Medical Association’s 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 S’ily 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


Processed by Empire Blue Cross/Blue Shield


Under Title XVII of the Social Security Act


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


Blue Cross/Blue Shield Under Tit~eXVII of


the Social Security Act


A-02-86-02022, April 1987


Manipulation of Procedure Codes by


Physicians to Maximize Medicare and


Medicaid Reimbursements: A Management


Adviso~ Repoti


A-03-91-00019, August 1991


Pathology and Laboratov $0.9M 

($2.6M/ 

3 years) 

Radiology $1.3M 

All Sections $12.2M 

D-1


____.— .— ——.
D-2 

—.- —— 
APPENDIX E 

COMMENTS ON DRAFT REPORT 

E-1 
.

,* ~,.vn.- *.+­,-.<

5


. 

‘: 

-0 Jf -% ++.w7


Date 

From 

Subject 

To 

. . 

HealthCare 

DEPARTMENTOF HEALTH&HUMANSERVICES Financing Administration 

Memorandum 

?4AR81994 

Bruce C. Vladec .&L< 

Administrator ‘ 

~ 

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 

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]. and”A 

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 Medicare’s 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 Medicare’s 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 

HCFA’S 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 

HCFA should evaluate the current process forimplementing 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, HCFA’S 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 

pr=we budget neutrality, we will delay implementation of new or revised c~es, 

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 

some insurance companies U= a far greater number of edits than 

HCFA to detect improper coding practices in their nonMedicare 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 

high dollar, high frequency sexvice~ we me wor~g wifi OIGtodevelop a Request 

for Proposal to develop edits on an OngCiirlg basisfor 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(.) 

consideration the se~ices beingpr~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 

AMA’s Relative Value Update Committee (RWJC). HCFA a~ndees poin~d out 

in the exit conference that HCFA rejected 35 percent of the RWC’S 

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 

OIG’S list of respondents “expressed satisfaction with the current system addressing 

coding issues . . .“ (page 8). 
. American MedicalAssociation 

Physicians dedicatedtotheIIeallhorAmerica 

James S. Todd,~ 515Northstatesweet 

Executive \’ioe President ChicasO, Illinois80610 

October & 1993 

Bryan B. Mitchell


Principal Deputy Inspector General


~epartrnent of Health & Human Services


Wfice of Iaspector General


Washington, DC 20201


DCWMr. Mitchell:


312464-5000 

3124$4-4184Fax 

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. T’houghout 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 possibleWhi!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 sufficientlevel of ciarity, accuracy,andprofessionalacceptanceto a!lowthe H~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 prom’s ~~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 your ba&~~d SeaiOn mat we believe would Stre~@en 

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, “CYI’is 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 (CP’T). 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 WF’CS (e.g., dental SCMCCS)yet 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 OIG’Smethods 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 garnered tiIX the literature mUSKbe viewed somewhat 

skepticallyandis notwell suited, in our 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% IZ’WtIK@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~ We JCIIOWof 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 SSSeSSthe 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 

Wdyfurdlerconcluded 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


Pr@ise dollar figure with coding errors. Andagain, 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 CSSaS,no 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 

in the C~t, pertairdng to the correct use Ofthese 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 

OIG had previously “suggested that the AMA modi~ Waling for CAB(3” as we werb not provided 

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 session Ushlg~ 

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 

of the type of lesion being operated on is, ~ a clinical sense, a better proxy forthe 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 severity, hospital sehedulirtg)that 

arc not directly 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 

quickly to issuesthat have been presented to i%includingthe publication of the hospa ou~atient 

version of CP’I’. 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~ ~ges, addltion$ ~d 

deketionsin.CPT 

The CPT’15ditoriaIPanel 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 

ZPPCZISprocess 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 HCFA’S internal operations, 

we would stro@y disagree with yOUrfindings on page 13 that “HCFA has not developed 211 

efficient or ef%etiveprocess for establishing RVU’Sfor 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 ecmstructivesuggestions Orconcerns expressed by 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 

HCFA’S abiIity to contain expenditures under the Medicare Fee scheduie”. NOr~aLio~hiP h= 

been”established between the number of CP’I’ mding changa and Medicare expenditures. Your 

statement that RVUSfor codes that 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 

tOHCFA’S 1992refinement process, which focused on the 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 “crOSSwdk”tOtie 

new or revised section and hm mkti for tie CPT p~e]’s ~d tie RUC’S 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 t’rammission 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 Clfighouse USerSof those policies as a way of supplementing HCFA’Seffo~. 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 

nOt believe that putting a “cap” ou tie numb~ Ofcm ch~:~per y- ~ in the best interes~ of 

the Medicare program, its beneficiaries, or of medicine, A “c@” artificially constrains improvements 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 y ]~ge numbers Of ch~ges seen in (XT “mthe past twO 

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 argue thatsuch a delay would be 

it’ICOt&Wtwith HCFA’SCongressionalmandate to 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 HCFA’Sinput, 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 

attachments 

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