Insurance Company Requirements & the Appropriate Use of CPT Codes

Medical billing processes involve complicated code sets used by health care providers and insurance companies for reimbursement purposes. The Current Procedural Terminology, or CPT codes, exist as one of the standardized code sets used by health care providers when billing for treatments and services. When processing medical claims, insurance companies must meet certain requirements as set by government regulations.

Healthcare Common Procedure Coding System

• With the passing of the Health Insurance Portability and Accountability Act of 1996 --- also known as HIPPA --- the federal government enacted certain standardized procedures for transactions involving medical billing processes. By the year 2000, the Healthcare Common Procedure Coding System, or HCPCS, became the official coding system used for health care providers and insurance companies. The HCPCS consists of Level I and Level II code sets. Level I contains the CPT codes used by providers to describe and identity treatments and services. When billing for medical equipment or products, providers use the Level II code set. By law, insurance companies must reimburse providers according to HCPCS codes when processing billing claims.

CPT Codes

• The American Medical Association has the task of developing, revising and updating CPT codes on an annual basis. The codes consist of five-digit numbers, with each code assigned to a specific treatment or procedure administered by a health care provider. CPT codes also exist for surgical and diagnostic services provided. Each code carries a corresponding cost or price for the service involved. Health insurance companies base their reimbursement amounts on the specific codes used on a medical billing claim. As different insurance companies offer different types of health plans to providers and consumers, the price associated with each code can vary depending on the terms of the contract between the provider and insurance company.

Diagnostic Codes

• When billing for treatments and services, health care providers must show a particular treatment or service was medically necessary. Diagnostic codes --- also known as ICD-9 codes --- provide a code set that communicates medical necessity for billed services. In turn, insurance companies can only pay for services provided when the appropriate ICD-9 codes appear alongside CPT codes. Diagnostic codes indicate the type of condition being treated, so a particular condition will only correspond with certain treatment codes. In cases where a provider alters a particular treatment provided, two-digit codes, known as modifiers, must also appear alongside CPT and ICD-9 codes.

Code Categories

• CPT codes fall within different categories based on the type of treatment or procedure used. Services involving case evaluation and management make up one category of CPT codes that appear as 99201 through 99499 on medical billing claims. Anytime a provider uses a type of anesthesia, the CPT code category used includes numbers 00100 through 01999. Code categories also exist for surgery, radiology, medications and pathology and laboratory procedures. Insurance company requirements limit a company's ability to adjust for untended errors which may appear obvious to billing processors, so providers must use the appropriate code category when billing for particular treatments or procedures.