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Medical Code Sets Explained
(CPT®, ICD-10, HCPCS & More)

What are the medical code sets that coders use? The links on this page will help you get to know the major code sets used in physician office coding and facility coding.

Although the medical code sets differ, each has a role to play in representing the specifics of healthcare encounters and services in the form of numeric and alphanumeric codes. Coders review the medical record to determine the appropriate codes for an individual case. When providers and facilities submit those codes for medical billing on insurance claims, insurers have essential information to determine coverage and payment. Healthcare organizations also may use these codes internally to track and analyze areas important to the business of medicine, such as services and supplies provided overall or coding patterns for each provider.

Once you grasp how these lists of medical codes affect payment and productivity decisions, you can see why medical coding involves more than just searching medical code lists. This area is subject to complicated guidelines, regular updates, and official audits that can result in serious financial and legal consequences. Individuals involved in medical coding must keep their knowledge of the code sets and rules sharp to ensure accurate reporting and compliance. The links below will help get you on your way to a better understanding of the individual code sets.

Code Sets

CPT® stands for Current Procedural Terminology, a code set that health care providers use to identify procedures provided to patients.

In broad terms, providers report CPT® codes to insurers, and insurers use the codes to determine appropriate payment for the provider. For instance, if a provider reports 71020 (Radiologic examination, chest, 2 views, frontal and lateral) to represent a chest X-ray service, then the patient's insurer will reimburse the provider a certain amount based on the code reported.

The AMA maintains and owns the copyright to the CPT® code set, which includes codes, descriptors, and guidelines. To access a list of CPT® codes and descriptions, you'll typically use either software with procedures code lookup or a CPT® coding manual.

The CPT® code set includes three main categories

  • CPT® Category I:
    Category I CPT® codes make up the bulk of the CPT® code set. These codes have five characters. Most of the codes describe procedures and services, but some supply/material codes are present, as well. The codes are broken into sections. For example, the Evaluation and Management section includes 99201-99499. Other sections include Anesthesiology, Surgery, Radiology, Pathology and Laboratory, and Medicine. Updates to the code set are effective January 1 each year.
  • CPT® Category II:
    Category II codes are supplemental tracking codes, meaning they assist with data collection related to performance measures. The codes have five characters. The first four are digits and the final character is F, such as 0001F. Reporting these codes is often optional or specific to a performance measure program.
  • CPT® Category III:
    You'll find temporary codes for emerging technology, services, and procedures in Category III. You can identify Category III codes by the T at the end of the five-character code, such as 0071T. Use of a Category III code allows for data collection that helps inform future decisions about whether to assign the technology, service, or procedure a Category I code. New Category III codes go into effect each January and July, so providers don't have to wait for the annual CPT® update to use these cutting-edge codes.

To comprehend CPT® coding, you also need to be familiar with two-character CPT® modifiers. The modifier lets you indicate that a code is correct, but there was a specific circumstance that also needs to be acknowledged. For instance, appending modifier 22 (Increased procedural services) to a code shows the provider performed the service described by the code but the patient's individual circumstances required much more effort than a typical case. A common explanation for modifiers is that they help tell the story of the encounter.

The AMA provides CPT® coding guidelines to help explain how to use the codes and modifiers correctly. For instance, you may find there are rules listed with the code, the subsection the code is in, and the section, too, such as the Evaluation and Management (E/M) Services Guidelines. For a better understanding of the AMA's intent for the code, review the guidelines at each level, keeping in mind that individual payer guidelines may affect your use of the code, as well.

The Healthcare Common Procedure Coding System (HCPCS) has two main levels. Level I is the AMA’s CPT® codes. Level II is the code set that most people think of as simply the HCPCS code set. It includes codes for products, supplies, and services that CPT® does not include. This page talks about HCPCS level II codes, which we’ll refer to as HCPCS codes.

Examples of items represented by HCPCS medical codes include ambulance services; durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS); and even procedures and services that Medicare or another payer wants a specific code for.

HCPCS codes are five-character alphanumeric codes. The first character is a letter, and the remaining four characters are digits, such as V5261 (Hearing aid, digital, binaural, BTE). Various types of providers can submit HCPCS codes on claims for insurers to receive reimbursement. However, the existence of a HCPCS code does not guarantee coverage or payment.

There are a variety of types of HCPCS codes. Below are some examples (not a complete list of HCPCS code types):

  • Permanent national codes: CMS maintains the permanent national codes that are available for both public and private insurers.
  • Miscellaneous/not otherwise classified codes: Specified codes within HCPCS simplify reporting items and services that don’t have more specific national codes, such as items newly approved for marketing by the FDA or services that providers rarely perform and report.
  • Temporary national codes: CMS establishes temporary codes to help with operational needs, such as when a code is needed between annual updates or time is needed to determine whether a permanent code is warranted. Private payers may also accept these codes. Example of temporary codes include C codes used primarily by OPPS hospitals, G and Q codes that represent services and supplies not represented (at least not identically) in the CPT® code set, and K codes for DME MACs. There are also HCPCS codes that are not payable by Medicare, such as S codes used by private insurers and possibly Medicaid, and T codes used mostly by Medicaid.

There are also HCPCS modifiers that you may append to provide additional information about the circumstances surrounding the use of the code. While CPT® modifiers are typically two digits, HCPCS modifiers are either two letters or alphanumeric. Payers may accept HCPCS modifiers appended to both HCPCS and CPT® codes. Similarly, certain CPT® modifiers may be appropriate for use with HCPCS codes. An example of a HCPCS modifier is F1 (Left hand, second digit).

Each payer may have its own rules regarding application, coverage, and payment for HCPCS codes, so be sure to be aware of the individual payer’s policies so you know what to expect for a particular case.

International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM) is based on the World Health Organization’s ICD-10 statistical classification of disease. The National Center for Health Statistics (NCHS) is responsible for use of ICD-10 in the U.S. ICD-10-CM replaced ICD-9-CM effective Oct. 1, 2015, for medical claim reporting purposes.

ICD-10-CM codes are also commonly called diagnosis codes. The codes represent conditions and symptoms as well as reasons for encounters, such as Z23 (Encounter for immunization). Don’t confuse ICD-10-CM codes with ICD-10-PCS codes. PCS codes are procedure codes used by inpatient hospitals.

ICD-10-CM codes are alphanumeric and range from three to seven characters. Multiple provider types use ICD-10-CM codes. For instance, physicians submit ICD-10-CM codes on claims to show medical necessity for a certain procedure or service, and inpatient facilities use ICD-10-CM codes when calculating DRGs.

All of the ICD-10-CM areas listed in the bullets below are important for helping you pinpoint the correct code. The ICD-10-CM Official Guidelines advise you to use both the Alphabetic Index and Tabular List before selecting a code:

  • Tabular List: The Tabular List is the listing of ICD-10-CM codes divided into chapters according to body system, condition, or other category. Within the Tabular List, you’ll find codes, official descriptors, and instructions that will help you apply the codes correctly. The instructions may list additional diagnoses that a code applies to, supply sequencing rules, or tell you which diagnoses are excluded from a code.
  • Alphabetic Index: The Alphabetic Index lists terms and the codes (sometimes incomplete) that apply to them. The indexes and tables below are part of the Alphabetic Index.
  • Index to Diseases and Injuries: Whether you need to find a code for Aarskog’s syndrome or zygomycosis, this index can point you to where to look first. The entry may specify a code or tell you another index entry to check.
  • Index of External Causes of Injury: External cause codes help explain the events surrounding an injury, and this index is specific to those codes. During the ICD-10-CM transition, coders often pointed to external cause codes to show how highly specific the code set can be, with examples like V91.07XA (Burn due to water-skis on fire, initial encounter) being popular. But these codes serve an important function for areas like workers’ compensation and collection of statistics for research and policy decisions by helping to tell more of a case’s story.
  • Table of Neoplasms: This table simplifies the process of locating a neoplasm code by allowing you to cross-reference an anatomic location with the diagnosis of primary malignant, secondary malignant, Ca in situ, benign, uncertain behavior, or unspecified.
  • Table of Drugs and Chemicals: For poisoning cases, you can look up the drug or chemical to see the different codes based on whether documentation shows it was accidental, intentional self-harm, assault, undetermined, or underdosing. There is also a column for adverse effect codes.

The International Classification of Diseases, Tenth Revision, Procedure Coding System (ICD-10-PCS) is a code set adopted under the Health Insurance Portability and Accountability Act (HIPAA) for hospital inpatient healthcare settings. ICD-10-PCS replaced ICD-9-CM, vol. 3, effective Oct. 1, 2015, for medical claim reporting purposes.

ICD-10-PCS codes are procedure codes, not to be confused with ICD-10-CM diagnosis codes. The ICD-10-PCS codes have seven characters with each character representing specific information. This code set uses the numbers 0 to 9 and all letters of the alphabet except for the letters I and O, which can look too much like the numbers 1 and 0, causing confusion. An example of an ICD-10-PCS code is 07CF0ZZ. Below you can see an image from the code’s TCI SuperCoder details page that illustrates how each character has a separate meaning.

PCS Tables: The structure of the ICD-10-PCS code set lends itself to the use of tables to determine final codes. These PCS Tables are an essential part of correct reporting using ICD-10-PCS. Below is an image of the B32 table. Note the definitions for the first three characters (B32) at the top and the options for the final characters listed beneath that. As you work through the table, you must stay on the same row. For instance, the table below has two rows. Suppose Y is the correct fifth character. Y is available only on the top row, so you must continue selecting options from the top row to complete the code. You can’t have Y from the top row as the fifth character and then choose 2 from the bottom row for the sixth character.

In addition to PCS Tables, coders who use the ICD-10-PCS code set should be aware of these elements:

  • Index: ICD-10-PCS has an Index that includes the terms in the tables as well as common procedure terms. While many code sets indicate that consulting the index is an essential part of locating the correct code, the ICD-10-PCS guidelines state that you may choose a code directly from the PCS tables without checking the ICD-10-PCS Index.
  • Definitions: The terms (aka values) in characters three through seven have official definitions. For instance, for Section 1 (Obstetrics), Character 3 (Operation), resection is defined as “cutting out or off, without replacement, all of a body part.” Definitions are included in each ICD-10-PCS annual update. Your online ICD-10-PCS resource also may include definitions. For example, if you look at the image of 07CF0ZZ above, you can see that the values for characters three, four, and five are underlined, indicating they are clickable. Subscribers to TCI SuperCoder packages with ICD-10-PCS included can log in to click those terms and view official definitions that apply to their code.

Ambulatory Payment Classifications (APCs) are the typical unit of payment for Medicare’s Outpatient Prospective Payment System (OPPS). CMS assigns items and services (or more specifically codes describing items and services) to APCs based on costs and characteristics. CMS assigns a payment rate to the APC, and that rate applies to each service in the APC.

There are also New Technology APCs that may represent items and services that don’t have their own CPT® or HCPCS codes. New Technology APCs are defined only by cost. The clinical characteristics are not part of the APC assignment. CMS pays the service under the New Tech APC until it collects enough data to assign the service to a clinical APC group, usually in two to three years, although it can be less or more.

Each APC has four digits, such as 1515 (New Technology - Level 15 ($1301 - $1400)) and 5312 (Level 2 Lower GI Procedures).

Some of the services that Medicare pays separately are below:

  • Certain diagnostic and therapeutic procedures
  • Blood and blood products
  • Certain clinic and emergency department visits
  • Certain drugs, biologicals, and radiopharmaceuticals
  • Brachytherapy sources
  • Corneal tissue acquisition
  • Certain preventive services.

Some packaged items are listed here:

  • Supplies, including certain diagnostic radiopharmaceuticals, contrast agents, stress agents, implantable biologicals, and skin substitutes
  • Ancillary services
  • Anesthesia
  • Operating and recovery room use
  • Lab tests
  • Procedures represented by add-on codes
  • Pacemakers and other implantable devices
  • Inexpensive drugs
  • Guidance, image processing, and imaging supervision and interpretation services
  • Observation services.

CMS creates comprehensive APCs packaging payment for all items and services for certain procedures. The policy packages payment for items and services both typically and not typically packaged under OPPS. But the payment doesn’t include services that can’t be paid under OPPS by stature, that must be paid separately by statute, or that can’t be covered outpatient department services.

CMS provides quarterly updates to the OPPS website with files that include HCPCS codes, status indicators, APC groups, and OPPS payment rates:

  • Addendum A includes columns for the APC, group title (descriptor), status indicator, relative weight (which determines payment rate when multiplied by a conversion factor), payment rate, national unadjusted copayment, minimum unadjusted copayment, and an asterisk to indicate if there’s been a change.
  • Addendum B includes columns for the HCPCS codes (CPT® codes are HCPCS Level I codes, so they’re present here along with HCPCS Level II codes), short descriptor, status indicator, APC, relative weight, payment rate, national unadjusted copayment, minimum unadjusted copayment, and an asterisk to indicate if there’s been a change.

Diagnosis-related groups (DRGs) are a classification system for inpatient discharge billing. MS-DRGs are Medicare Severity DRGs, which were developed for classifying claims for Medicare patients.

Each DRG has three digits. Here are some MS-DRG examples:

  • 570 (SKIN DEBRIDEMENT W MCC)
  • 571 (SKIN DEBRIDEMENT W CC)
  • 572 (SKIN DEBRIDEMENT W/O CC/MCC).

As in the example DRGs above, you should check for references to CC, MCC, or both in DRG descriptors. CC stands for complication or comorbidity. MCC stands for major complication or comorbidity. The presence of complications and comorbidities may increase payment from Medicare to reflect the increase in hospital resource use, so it’s important to choose the correct DRG from the range. Medicare provides lists of ICD-10-CM codes that qualify as CCs and MCCs.

MDCs: Similar MS-DRGs are in ranges called Major Diagnostic Categories, or MDCs. For instance, DRGs 570, 571, and 572 (our examples from above) all fall into MDC 09 (Diseases and disorders of the skin, subcutaneous tissue and breast). MDCs have played an important role in the initial DRG creation process. Physician panels divided principal diagnoses into MDCs to help bring order to DRGs. Diagnoses in each MDC typically correspond to a single organ system (such as respiratory or circulatory) or etiology (such as malignancy or infectious disease) and often are related to a specific medical specialty. When possible, the diagnosis falls under the organ system rather than the etiology, so pulmonary tuberculosis is in the respiratory system MDC, for example.

Procedures: Another factor in the creation of DRGs was whether the case requires an operating room procedure. If so, the type of surgery is important because of its relationship to resource use, such as major surgery, minor surgery, or surgery unrelated to the principal diagnosis. More details are available in Medicare’s MS-DRG Definitions Manual documents.

Medicare performs yearly reviews to determine changes to the MS-DRGs. The following information plays a role in classifying cases into MS-DRGs for payment under the inpatient prospective payment system (IPPS):

  • Principal diagnosis (based on ICD-10-CM coding)
  • Up to 25 additional diagnoses (based on ICD-10-CM coding)
  • Up to 25 procedures performed during the stay (based on ICD-10-PCS coding).

In some cases, the patient’s age, sex, and discharge status also may play a role in the final DRG classification.

Groupers: DRG groupers are tools that assist with calculating payments for inpatient hospital stays. Each case under Medicare’s IPPS gets categorized into a DRG, which a grouper program helps a coder determine to support proper reporting and payment.

DRG Range List