1. CHAPTER 8 PROCEDURE CODING: CODING PROCEDURES, SERVICES, AND ITEMS
UNDERSTANDING HOSPITAL BILLING AND CODING
CHAPTER 8 PROCEDURE CODING: CODING PROCEDURES, SERVICES, AND ITEMS
The objective of this chapter is to provide an overview of the history and purpose of coding procedures, services, and items provided during a hospital visit.
Copyright © 2011, 2006 by Saunders an imprint of Elsevier Inc.

2. HISTORY AND PURPOSE OF PROCEDURE CODING
The history of classifying and coding procedures, services, and items does not date back as far as coding conditions in the 17th century
Procedure coding systems were developed in the 1960s to provide a standardized system for providers to report procedures to third-party payers for reimbursement
Historically, physicians and other providers submitted a written description of the procedures and services rendered on the claim to explain charges
Today, procedure coding is a vital function in the hospital billing process
Prior to the use of standardized coding systems, payers experienced difficulty because tracking, monitoring, and statistical analysis utilizing the written descriptions was a very complex process.

3. HISTORY AND PURPOSE OF PROCEDURE CODING
HOSPITAL CODING AND BILLING PROFESSIONALS
Hospital coding professionals
Must master coding principles and applications to accurately describe services, procedures, and items and to obtain proper reimbursement
Hospital billing professionals
Understanding of procedure coding is critical to ensure compliance with coding guidelines and to obtain accurate reimbursement
Hospital billing professionals need to achieve a good understanding of coding procedures to ensure compliance with coding guidelines and payer requirements.

4. HISTORY OF PROCEDURE CODING SYSTEMS
Procedure coding systems were developed to provide a standardized method of reporting procedures and services to payers for reimbursement
Current Procedural Terminology (CPT)—AMA 1966
Medicare National Codes—CMS 1980
ICD-9-CM Volume III Procedure Codes—1970
Health Care Common Procedure Coding System (HCPCS)—adopted by CMS 1983
Level I CPT
Level II Medicare National Codes
Review each of the coding systems listed on the slide, implementation date and use.
Refer students to Figure 8-3 and key point Boxes 8-3, 8-4, 8-5, 8-6, and 8-7.

5. CURRENT PROCEDURAL TERMINOLOGY (CPT)
Published by the AMA in 1966 to provide a standardized system for reporting procedures and services. The 4th edition of CPT is currently used for reporting.
CPT codes have five numeric or alphanumeric digits
Examples: 99204, 0037T, or 4009F
CPT contains two-digit modifiers
Examples: 25, 51, 91
Discuss highlights on slide.
Modifiers describe circumstances not explained by the CPT code itself.

6. MEDICARE NATIONAL CODES HCPCS LEVEL II
Developed in the 1980s to provide a standardized system for reporting supplies, equipment, medication, and other items to Medicare carriers. In 1983 CMS adopted the Health Care Common Procedure Coding System (HCPCS) Level I CPT and Level II Medicare National codes.
HCPCS Level II codes have five alphanumeric digits
Examples: A4455 or J1610
HCPCS contains two-digit modifiers
Examples: F1, GA, or TC
Prior to HCPCS, payers provided reimbursement for various items, but CPT did not contain codes to describe them. For example: crutches

7. ICD-9-CM VOLUME III PROCEDURE CODES
EVOLUTION OF ICD-9-CM VOLUME III PROCEDURE CODES
International Classification of Diseases (ICD)
Revised in the 1970s to include a classification of hospital procedures
International Classification of Diseases, 9th Revision, Clinical Modification Volume III Procedures are currently used for reporting significant procedures
Volume III procedure codes are two to four digits
Examples: 03, 03.0, 03.09
The ICD was revised many times over the years, and eventually a classification of hospital procedures was included, ICD-9-CM Volume III.
ICD-9-CM Volume III procedures are used today for the reporting of significant procedures and services performed in the hospital or other facility.
The third and fourth digits provide more detail about the procedure, differentiate between unilateral or bilateral, surgical approach or technique, or by condition type such as direct or indirect.

8. HEALTH CARE COMMON PROCEDURE CODING SYSTEM (HCPCS)
HCPCS was adopted in 1983 by HCFA (CMS) for submission of claims to Medicare carriers. HCPCS consists of two levels of codes:
Level I CPT
Level II Medicare National Codes
Level III Local Regional (eliminated in 2003)
Prior to 1983, many different coding systems were utilized in the United States.
The billing process was extremely complex because of the variations in payers’ guidelines, claim forms, and coding systems.
Prior to the adoption of the HCPCS coding system not all payers acknowledged level II codes.

9. HIPAA: HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996
HIPAA Title II Administrative Simplification outlines the following standard code sets adopted for reporting procedures and diagnoses:
HCPCS Level I CPT
HCPCS Level II Medicare National Codes
International Classification of Diseases, 9th Revision, Clinical Modification, Volume III, procedures
International Classification of Diseases, 9th Revision, Clinical Modification, Volume I and II, diagnosis
These are the code sets that had been previously used, but became official standard code sets adopted by HIPAA.
Refer students to Figure 8-5.

10. PURPOSE OF PROCEDURE CODING SYSTEMS
To provide a standardized system for providers to report procedures and services.
Procedure codes describe services provided during a patient’s hospital visit
Charges are submitted to third-party payers for reimbursement
Procedure code data also are used for statistical purposes
Charges are submitted to third-party payers for reimbursement, and the charges are explained with procedure codes.

11. UTILIZATION OF PROCEDURE CODE DATA
Data collected through the use of procedure coding systems are utilized for:
Research to maintain public health and safety
Education to provide knowledge to healthcare professionals and the public
Administrative to evaluate, monitor, and pay for healthcare services
Review highlights on slide.
Refer to Figure 8-6 and discuss examples of utilization for research, education and administration.

12. PROCEDURE CODING DEFINED
Coding is the assignment of numeric or alphanumeric code(s) to all healthcare data elements of outpatient and inpatient care
Procedure coding is the process of translating written descriptions of procedures, services, drugs, and equipment from the patient record in to numeric or alphanumeric codes
Discuss highlights on slide.

13. PROCEDURE CODING: AN ESSENTIAL COMPONENT OF BILLING
Procedures, services, and items are recorded in the patient’s medical record
Charges for services are posted by departments through the chargemaster or by HIM professionals
All charges are described using a procedure coding system
Remind students that the billing process begins at admissions and ends when a claim is paid in full.

14. PROCEDURE CODING SYSTEM RELATIONSHIPS
DOCUMENTATION
MEDICAL NECESSITY
CLAIM FORMS  CMS-1500
 CMS-1450 (UB-04)
REIMBURSEMENT
Refer students to Figure 8-9.

15. PROCEDURE CODING SYSTEM RELATIONSHIPS DOCUMENTATION
The medical record is the foundation for coding because it contains information regarding the patient’s condition, treatment, and response to treatment
Coder must code ONLY procedures, services, supplies, equipment, and medications that are recorded in the patient’s medical record
Emphasize the importance of documentation in all aspects of patient care, from the physician’s orders to the filing of the claim.
Through every step of a patient’s care, services are documented and posted through the chargemaster.

16. “IF IT IS NOT DOCUMENTED, DO NOT CODE IT”
GOLDEN RULE IN CODING
“IF IT IS NOT DOCUMENTED, DO NOT CODE IT”
Discuss the highlights on the slide

17. PROCEDURE CODING SYSTEM RELATIONSHIPS MEDICAL NECESSITY
Medically necessary services are those that are reasonable and medically necessary to address the patient’s medical condition
Medical necessity is determined based on standards of medical practice
Procedure codes are submitted with diagnosis codes that explain the medical necessity for procedures, services, or items provided
Payers will only pay for services that are covered and considered reasonable and necessary.
Payment determination is based on the procedure and diagnosis codes submitted.
Medicare and its fiscal intermediaries publish national coverage determinations outlining diagnosis codes that support medical necessity, for specified procedures.

18. PROCEDURE CODING SYSTEM RELATIONSHIPS CLAIM FORMS
Claim forms are used to submit charges for services rendered to payers for reimbursement
CMS-1500
 Physician and outpatient services
 Procedure codes are recorded in Block 24D
CMS-1450 (UB-04)
 Hospital facility charges for services provided on an outpatient, inpatient, and non-patient basis
 Procedure codes are reported in FL 44 and FL 74a-e
This should be a refresher for your students. Review the relationship of claim forms CMS-1500 and the CMS-1450 (UB-04).
Refer students to Table 8-1, Figure 8-12, and Figure 8-13

19. PROCEDURE CODING SYSTEM RELATIONSHIPS UB-04 CLAIM FORM
ICD-9-CM Volume III Procedure Codes are used to report significant procedures. Significant procedure is defined by the Uniform Hospital Discharge Data Set (UHDDS) as one that is: 1. surgical in nature, or
2. carries a procedural risk, or
3. carries an anesthetic risk, or
4. requires specialized training
Infusions, heart catheterizations, and surgeries are examples of significant procedures
Emphasize Volume III procedures are used only to code significant procedures on hospital inpatient cases. Some payers may require them for Ambulatory Surgery claims.
Ask the students why an electrocardiogram, complete blood count, and magnetic resonance imaging are not significant procedures.
Refer the students to key points Box 8-15.

20. PROCEDURE CODING SYSTEM RELATIONSHIPS UB-04 CLAIM FORM
PRINCIPAL PROCEDURE The principal procedure is one performed for definitive treatment of the principal diagnosis or the procedure that most closely relates to the principal diagnosis
When a patient is hospitalized, this is the procedure that is performed to treat the principal diagnosis or the procedure that most closely relates to the principal diagnosis.
Refer students to Figure 8-14

21. PROCEDURE CODING SYSTEM RELATIONSHIPS REIMBURSEMENT
Procedure codes are submitted to payers for reimbursement using a claim form
Reimbursement is payment from a payer to a provider for services rendered
Reimbursement is provided when services are covered in accordance with the patient’s plan and when the services are considered medically necessary
Discuss highlights on slide.
For example, a payer will not usually pay for a lung biopsy if the diagnosis code does not represent a medical condition that would indicate the need for a biopsy such as a lung mass and family history of lung cancer.

22. PROCEDURE CODING SYSTEM VARIATIONS HOSPITAL SERVICES CATEGORIES
The procedure coding systems required vary based on the following hospital service categories.
Outpatient services
Inpatient services
Non-patient services
Discuss the highlights on the slide – variations based on hospital categories of service.
Refer to Table 8-2.

23. PROCEDURE CODING SYSTEM VARIATIONS OUTPATIENT SERVICES
Outpatient services are those provided on the same day the patient is released.
Procedure code requirements
 HCPCS Level I—CPT codes
 HCPCS Level II—Medicare National codes
Some payers may require ICD-9-CM Volume III procedure codes on ambulatory surgery claims
Refer students to Figure 8-15.
Variations - Outpatient services

24. PROCEDURE CODING SYSTEM VARIATIONS INPATIENT SERVCES
Inpatient services—the patient is admitted with the expectation of being in the hospital for more than 24 hours (overnight)
ICD-9-CM Volume III Procedures codes are required for reporting significant procedures performed during the inpatient stay. NOTE: Services, procedures, and items provided during an impatient stay are posted through the chargemaster utilizing HCPCS codes.
Variations - Inpatient services
Significant procedures

25. PROCEDURE CODING SYSTEM VARIATIONS NON-PATIENT
A non-patient procedure is one where a specimen is received by the hospital laboratory/pathology department and processed when the patient is not present.
HCPCS Level I CPT codes
HCPCS Level II Medicare National codes are required for reporting these services
Patient is not present.
Department personnel post non-patient services through the chargemaster.
Refer students to Figure 8-20.

26. HCPCS LEVEL I—CURRENT PROCEDURAL TERMINOLOGY (CPT) CONTENT
Introduction
Category I Codes
Category II Codes
Category III Codes
Appendices
Index
Procedure Coding Systems should provide the students with a review of material they have already learned, with the exception of Volume III Procedures.
Review - CPT coding manual contains an introduction, six sections of codes with descriptions, appendices A–N, and an index.
The six sections of codes are divided into 3 categories.
Appendices provide assistance with code selection, the update of internal systems, and modifier usage.
Index is alphabetical list of main terms and subterms that represent services and procedures.

27. HCPCS LEVEL I—CURRENT PROCEDURAL TERMINOLOGY CATEGORIES
Category I Codes are used to report services, procedures and items Five numeric digits (99204, 71020)
Category II Codes are supplemental tracking codes for the measurement of performance Five alphanumeric digits (4009F)
Category III Codes are temporary codes used to describe emerging technologies Five alphanumeric digits (0037T)
Define each of the categories.
Emphasize the explanation of Category II and III codes.
Ask the students to explain the purpose of “Category II and III” codes. (Category II – Performance Tracking – Category III – New technology)
Refer students to Figure 8-21.

28. HCPCS LEVEL I—CURRENT PROCEDURAL TERMINOLOGY CATEGORY I SECTIONS
Section I - Evaluation and Management (E/M)
Section II - Anesthesia
Section III - Surgery
Section IV—Radiology
Section V—Pathology and Laboratory
Section VI—Medicine
Category I - Six sections of codes

29. HCPCS LEVEL I—CURRENT PROCEDURAL TERMINOLOGY CATEGORY II AND III
Category II Codes are supplemental tracking codes developed for use in the management of performance. Category II codes contain 5 digits ending with an “F.”
0500F-4011F
Category III Codes are temporary codes used to describe emerging technologies, services, or procedures. Category III codes contain 5 digits ending with an “T.”
0003T-0088T
Category II and III codes.
Category II codes minimize the need for chart reviews.
Refer students to Figure 8-22.
Category III codes address this problem as they describe new procedures. The category III code that would be used in place of is 0051T, which describes “Implantation of total replacement heart system (artificial heart) with recipient cardiectomy”

30. HCPCS LEVEL I CPT CONVENTIONS DEFINED
Special terms, punctuation marks, abbreviations, or symbols used as shorthand in a coding system to efficiently communicate special instructions to the coder
Discuss the highlights on the slide.
Refer students to Table 8-3.
Refer students to Figure 8-23.

31. HCPCS LEVEL I CPT CONVENTIONS AND FORMAT
Semicolon ;
Plus sign
Modifier 51 exempt 
Bullet 
Revised code symbol 
New or revised text ►◄
Conscious sedation 
Reference symbol 
Explain each of the conventions.
Refer to Table 8-3 and Figure 8-23.

32. HCPCS LEVEL II—MEDICARE NATIONAL CODES MANUAL CONTENT
Introduction
Index
Table of Drugs
Code sections
Appendices
Updates
Dicuss the highlights on the slide.

33. HCPCS LEVEL II CONVENTIONS AND FORMAT
HCPCS Level II Convention Variations
HCPCS Level II Code Section Format
HCPCS Level II Index Format
Discuss the highlights on the slide.
Conventions provide the coder with instructions.
ICD-9-CM Official Abbreviations and Symbols, Instructional Notes, and Other Conventions are outlined in Table 8-13.

34. HCPCS LEVEL II CONVENTION VARIATIONS
CONVENTIONS
New code symbol
Revised code symbol
Special coverage instructions
Not covered by or valid for Medicare
Gender-specific symbols
Quantity alert symbol
ASC groupings
APC status indicators
Age designation
Note: The symbols and abbreviations utilized to identify these conventions vary by publisher.
Explain each of the conventions.
Have students refer to pages that contain the conventions.
Refer students to the convention variations outlined in Table 8-8.
Conventions vary by publisher.

35. ICD-9-CM VOLUME III PROCEDURES CONTENT AND FORMAT
Introduction is located in the front of the ICD-9-CM Volume III and it provides information regarding conventions and coding guidelines.
Alphabetical Index to Procedures is designed to assist the coder in finding possible codes to be reviewed and selected from tabular listing of codes and descriptions.
Tabular (numeric) List of Procedures and Services consists of 17 chapters that list procedures and services based on body system.
The content and format of ICD-9-CM Volume II are vary similar to Volume I and II – Refer to Figure 8-28.
Volume III Procedure codes are 2-4 digits. Refer to Figure 8-29 to highlight the chapters.
Some payers may require Volume III codes on ambulatory surgery claims.
Volume III procedure codes are reported on the UB-04 in the FL 74a–e.
Refer students to Table 8-11.

36. ICD-9-CM VOLUME III CONVENTIONS
Official Abbreviations and Symbols
Official Instructional Notes
Official Other Conventions
Discuss the highlights on the slide.

37. ICD-9-CM VOLUME III OFFICIAL CONVENTIONS
NEC Not elsewhere classifiable
NOS Not otherwise specified
Brackets [ ]
Slanted brackets [ ]
Colon :
Brace }
Includes
Excludes
Code also synchronous procedure
Omit code
See also
Point out that many of the conventions in Volume III are also used in Volume I and II.
Highlight conventions that are only seen in Volume III: Code also synchronous procedure or omit code.
Discuss the conventions with the students and show examples of each in the ICD-9-CM Volume III coding book.

38. GOOD CODING HABITS
Coders should develop good coding habits to ensure accurate and effective coding.
DO NOT ASSUME
Identify all possible codes in the Index (Volume II)
NEVER EVER, code from the Index (Volume II)
Review each code in the Tabular List (Volume I)
Review all codes in the range
WHEN IN DOUBT, ASK
Never use an E code as a primary diagnosis
Discuss these habits and how they help to ensure accurate coding.

39. STEPS TO CODING USING ICD-9-CM VOLUME III PROCEDURES
Read the medical record and identify the main terms that represent significant procedures
Step 2 Refer to the alphabetic index, review each main term and identify possible codes
Step 3 Refer to the tabular (numerical) list and look up each code and select the code that most accurately describes the service or item
Review Steps to coding.
Read medical record carefully; remember if it is not documented, do not code it.
Give students a code to look up and walk them through each step.