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HCPCS in a Nutshell

These codes are key to getting reimbursed for meeting quality measures
By Erika Van Wagner and Gina Zinanni

By now you have probably noticed that Medicare, Medicaid, and commercial payers alike are moving from traditional fee-for-service reimbursement to “value-based” reimbursement that requires meeting and reporting on quality measures. The Centers for Medicare and Medicaid Services (CMS) made the first move with implementation of the Physician Quality Reporting System (PQRS) and now other commercial payers are following suit. How are these payers determining whether physicians are providing more “value”? Many of the determinations are based on Current Procedural Terminology (CPT) Category II and Healthcare Common Procedure Coding System (HCPCS) Level II coding on the physician’s claims. The following article gives you the definitions of these specific coding mechanisms and explains when and how they should be applied.

HCPCS is a standardized coding system that was created to ensure health care claims are processed in a consistent and orderly manner. HCPCS contains two code sets, published in two separate manuals, which are CPT and HCPCS Level II.

CPT was developed in 1966 and is maintained by the American Medical Association (AMA). The CPT book is updated annually; providers receive it in October in order to prepare for changes that will take place the following January. CPT is a coding system used primarily to identify medical services and procedures furnished by physicians and other health care professionals. The most frequently used codes are known as the Category I codes and can be found in the CPT manual where they are broken down into the following categories:

  • Evaluation and Management (99201-99499)
  • Anesthesia (00100-01999)
  • Surgery (10021-69990)
  • Radiology (70010-79999)
  • Pathology and Laboratory (80047-89398)
  • Medicine, which includes vaccines, drugs, psychiatry, ophthalmology, testing, and procedures not considered surgical (90281-99607)

Also included in the CPT manual are Category II and Category III codes.

Category II codes and modifiers were developed to track performance measurement. Providers who submit quality measures via claims are using Category II codes to do so. All Category II codes fall within 0001F-9007F. Modifiers include 1P, 2P, 3P, and 8P. Many practices use Category II codes internally to track practice quality measures since this method is easier than reviewing charts or manually tracking quality measures.

Category III codes are a set of temporary codes used to identify emerging technology, services, and procedures. These codes can remain in the Category III set for up to five years. At that time, a code will either be promoted to Category I or removed altogether. All Category III codes fall within 0019T-0380T.

HCPCS Level II is a coding system developed in 1980 and is maintained by CMS. It is updated quarterly. Payers alert providers of code changes as the occur since no annual book of codes is produced.

HCPCS Level II is used primarily to identify products, supplies, and services not represented in the CPT code set. Because Medicare and other insurers cover a variety of services, supplies, and equipment that are not identified by CPT codes, the Level II codes were established for submitting claims for these items. Although relative value units (RVUs) are not assigned these codes, they are billable and reimbursable by most payers. Level II codes are broken down into the following categories:

  • Level II Modifiers
  • Medical and Surgical Supplies (A)
  • CMS Hospital Outpatient Payment System
  • Dental Procedures
  • Durable Medical Equipment (DME)
  • Temporary Procedures/Professional Services (G)
  • Drugs and Chemotherapy Drugs (J)
  • Temporary DME for Regional Carriers (K)
  • Orthotics and Prosthetics (L)
  • Temporary Codes assigned by CMS (Q)
  • Temporary National Codes by Private Payers (S)
  • Temporary Codes by Medicaid (T)
  • Vision and Hearing Services (V)

It is important that practices familiarize themselves with the entire HCPCS system to ensure appropriate coding and claims reporting of quality measures. To view the entire HCPCS in a Nutshell presentation, visit

Erika Van Wagner is the vice president of managed care at PBC Advisors, LLC, in Oak Brook. Gina Zinanni is a senior consultant with PBC Advisors, LLC. PBC Advisors provides business and management consulting and accounting services to physician practices and hospital systems. For more information about PBC Advisors, please visit

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