CPT� Codes: What Are They, Why Are TheyNecessary, and How Are They Developed?

Peggy Dotson*

Healthcare Reimbursement Strategy Consulting, Bolivia, North Carolina.

Qualified healthcare professionals (QHPs) need to identify the professionalservices they provide and to report those services in a way that can be uni-versally understood by institutions, private and government payers, re-searchers, and others interested parties. The QHPs’ data are used to trackhealthcare utilization, identify services for payment, and to gather statisti-cal healthcare information about populations. Each year, in the United States,healthcare insurers process over 5 billion claims for payment.1 To ensure thathealthcare data are captured accurately and consistently and that healthclaims are processed properly for Medicare, Medicaid, and other health pro-grams, a standardized coding system for medical services and procedures isessential. The Current Procedural Terminology (CPT�) system, developed bythe American Medical Association (AMA), is used for just these purposes. TheAMA system provides a standard language and numerical coding methodologyto accurately communicate across many stakeholders, including patients, themedical, surgical, diagnostic, and therapeutic services provided by QHPs. TheCPT descriptive terminology and associated code numbers provide the mostwidely accepted medical nomenclature used to report medical procedures andservices for processing claims, conducting research, evaluating healthcareutilization, and developing medical guidelines and other forms of healthcaredocumentation.

BACKGROUNDHistory of Current ProceduralTerminology coding development

The first publication, in 1966, ofthe American Medical Association(AMA) Current Procedural Termi-nology (CPT�) edition of standard-ized codes and terms was a meansto code procedures (mainly surgi-cal) for medical records, insuranceclaims, and information for statisti-cal purposes.

By 1970, the AMA had broadenedthe system of terms and classifica-tion codes to include diagnostic andtherapeutic procedures in surgery,medicine, and the specialties as wellas procedures relating to internalmedicine. This timeframe also coin-cided with the introduction of thefive-digit numeric coding system.With the release of the fourth edi-tion of CPT in 1977, the AMA in-troduced a system for periodic

Peggy Dotson, RN, BS

Submitted for publication July 22, 2013. Ac-

cepted in revised form October 9, 2013.

*Correspondence: Healthcare Reimbursement

Strategy, Bolivia, NC 28422 (e-mail: peggy_

dotson1@yahoo.com).

Information regarding coding, coverage, and payment is provided as a service to our readers. Everyeffort has been made to ensure the accuracy of the information. Providers, suppliers, and manu-facturers are responsible for case-by-case assessment, documentation, and justification of medicalnecessity. However, Mary Ann Liebert, Inc., and the author do not represent, guarantee, or warrantythat the coding, coverage, and payment information is error-free and/or that payment will be received.The ultimate responsibility for verifying coding, coverage, and payment information accuracy lies withthe reader.

j 583ADVANCES IN WOUND CARE, VOLUME 2, NUMBER 10Copyright ª 2013 by Mary Ann Liebert, Inc. DOI: 10.1089/wound.2013.0483

updating of the codes to keep up with the ever-changing medical environment.

In 1983, CPT was adopted as part of the Centersfor Medicare & Medicaid Services (CMS), Health-care Common Procedure Coding System (HCPCS).This HCPCS code set is divided into two principalsubsystems: (1) Level I of the HCPCS, which com-prised the CPT and (2) Level II of the HCPCS (seeMarcia Nusgart’s article).1,2

Level I CPT codes are the numerical codes usedprimarily to identify medical services and proce-dures furnished by qualified healthcare profes-sionals (QHPs). CPT does not include codesregularly billed by medical suppliers other thanQHPs to report medical items or services. The AMAis responsible for all decisions for additions, dele-tions, or revisions of the CPT codes [Level I HCPCScode set]. CPT codes are updated annually.

In 1983, CMS mandated that CPT codes be usedto report services for Part B of the Medicare Programand in 1986 required state Medicaid programs toalso use the CPT codes. As part of the OmnibusBudget Reconciliation Act in 1987, CMS mandateduse of CPT for reporting outpatient hospital surgicalprocedures. As part of the Health Insurance Port-ability and Accountability Act (HIPAA) of 1996, theDepartment of Health and Human Services desig-nated CPT and HCPCS as the national standards forelectronic transaction of healthcare information.

Today, the CPT coding system is the preferredsystem for coding and describing healthcare ser-vices and procedures in federal programs (Medi-care and Medicaid) and throughout the UnitedStates by private insurers and providers ofhealthcare services.

Types of CPT codesThe CPT code can be identified by one of the

following three categories.Category I CPT codes describe distinct medical

procedures or services furnished by QHPs and areidentified by a 5-digit numeric code [e.g., 29580:Unna boot]. New Category I CPT codes are releasedannually.

Category II CPT codes are supplemental track-ing codes, also referred to as performance mea-surement codes. These numeric alpha codes [e.g.,2029F: complete physical skin exam performed]are used to collect data related to quality of care.Category II codes are released three times a year inMarch, July, and November by the CPT EditorialPanel.

Category III CPT codes are temporary trackingcodes for new and emerging technologies to allowdata collection and assessment of new services and

procedures. They are used to collect data in theFDA approval process or to substantiate wide-spread usage of the new and emerging technologyto justify establishment of a permanent Category ICPT code. Category III CPT codes are issued in anumeric alpha format [e.g., 0307T: near-infraredspectroscopy study for lower extremity wounds].

New Category III CPT codes are released bian-nually (January and July) with a 6-month delaybefore activation for implementation in the Medi-care system. Codes released on January 1st areeffective July 1st, and codes released on July 1stare effective January 1st. The codes usually remainactive for five years from the date of implementa-tion, if the code has not been accepted for place-ment in the Category I section of CPT.

Obtaining a CPT Level III code requires lessclinical data and has a shorter review timeframe.It allows billing and tracking through the localand regional contractors for Medicare and otherpayers. There are no assigned fees to these codes,but payment is available at the discretion ofthe Insurance Carriers or Medicare contractors.When considering payment, the Medicare con-tractors and insurers consider evidence of effec-tiveness, improved outcomes, and potential costsavings.

Criteria used by the CPT Advisory Committeeand the CPT Editorial Panel for evaluating Cate-gory III code for emerging technology include anyone of the following for consideration:

1. A protocol for a study of procedures beingperformed.

2. Support from the specialties that would usethe procedure.

3. Availability of U.S. peer-reviewed literature.

4. Descriptions of current U.S. trials outliningthe efficacy of the procedure.

DISCUSSIONWho manages the CPT process?

The responsibility to update or modify code de-scriptors, coding rules, and guidelines for the CPTcode set lies with the AMA CPT Editorial Panel,authorized by the AMA Board of Trustees. Thepanel comprised 17 members [11 physicians nomi-nated by the national medical specialty societies; 4physicians nominated from the Blue Cross and BlueShield Association, America’s Health InsurancePlans, the American Hospital Association, and theCMS; and two seats reserved for members of theCPT Health Care Professionals Advisory Commit-tee (HCPAC)]. Five of these members serve as the

584 DOTSON

panel’s Executive Committee. In addition, the CPTAdvisory Committee supports the panel. Membersof CPT Advisory committee are primarily physi-cians nominated by the national medical specialtysocieties represented in the AMA House of Dele-gates as well as the AMA HCPAC, organizationsrepresenting limited license practitioners and otherallied health professionals. The Performance Mea-sures Advisory Group, which represents variousorganizations concerned with performance mea-sures, also provides expertise.

How is a new code developed?Any individual QHP, medical specialty society,

hospital, third-party payer, and other interestedparty may submit an application for changes toCPT for new or revised codes to the CPT EditorialPanel. This ongoing process has a schedule forsubmission deadlines and meetings of the CPTPanel, which can be found on the AMA site.3 It isimportant to understand that an applicant needs tocarefully plan to submit their request in the ap-propriate timeframe to coincide with the scheduledmeetings for the CPT Editorial Panel reviews.

Step 1: AMA staff determines if the request isnew. If the Editorial Panel has already reviewedthe request, the staff will notify the requestor of thepanel’s coding recommendation. If the request is anew issue or includes significant new informationon an item that the panel reviewed previously, theapplication moves to step 2.

Step 2: Refer application to the CPT AdvisoryCommittee for evaluation and commentary. Theprocess allows at least 3 months for the AMA staffto prepare all the submitted materials and dis-pense them to the Editorial Panel reviewers. Steps1 and 2 are complete when all appropriate CPTAdvisors have responded and all information re-quested of an applicant has been provided to AMA.

Step 3: Refer application to the CPT EditorialPanel. The 17 member CPT Editorial Panelmeets three times each year and addresses nearly350 major topics per year, usually involving morethan 3,000 votes on individual items.4

� AMA staff prepare an agenda item that in-cludes the application, compiled CPT Advisorcomments, and a ballot for decision by theCPT Editorial Panel.

� Thirty days before a scheduled meeting, thepanel members receive the agenda documentsand the CPT Advisor comments. The panelmembers can confer with experts as appropriate.

� If an applicant does not receive the CPT Ad-visor support, then the applicant is notified 14days before each CPT Editorial Panel meet-ing. Applicants can withdraw their applica-tions up until the agenda item is called at themeeting.

� Applications that have not received any CPTAdvisor support will be presented to the CPTEditorial Panel for discussion and possibledecision.

Step 4: CPT Editorial Panel takes an action andpreliminary approvals. If applying for a Category Ior Category III code, the CPT Editorial Panel votesand determines into which category the code(s)should be assigned. A decision can result in one ofthe following four outcomes:

1. Add a new code or revise the existing no-menclature; this change would appear in aforthcoming volume of the CPT Book.

2. Refer to a workgroup for further study.

3. Postpone to a future meeting [to allow sub-mittal of additional information in a newapplication].

4. Reject the request.

Step 5: AMA staff inform the applicant of the CPTEditorial Panel’s decision. Applicants or otherinterested parties can seek reconsideration of thepanel’s decision. Information of this process isavailable on the AMA/CPT website.5

Step 6: Refer code to AMA/Specialty Society Re-lative Value Update Committee (RUC). Once thenew/revised CPT codes are approved by the CPTEditorial Panel, the code is then referred to the RUC,which will conduct a survey of QHPs from relevantmedical specialties that provide the service or pro-cedure. This survey will measure the QHP workinvolved in performing the service/procedure to de-termine an accurate relative value recommendationfor the service.6 The RUC committee schedule canbe accessed at the AMA website.3

Step 7: Implementation of the new/revised CPTcode.

� Category I service and procedure CPT codesare updated annually and effective for use onJanuary 1 of each year, except for Category Ivaccine product codes, Molecular Pathology,which are released January 1st or July 1st.The new CPT book, with the newly released

UNDERSTANDING CPT CODES 585

codes, is released in the fall to allow for im-plementation on January 1.

� Category II codes are released for reportingthree times yearly (March 15th, July 15th,and November 15th) to become effective threemonths subsequent to the date of release, al-lowing 3 months for implementation.

� Category III codes are released for reportingeither January 1st or July 1st of a given CPTcycle and become effective six months subse-quent to the date of release.

NOTE: This entire new CPT Code applicationprocess can take from 18 to 24 months.

What do the CPT Advisory Committeeand CPT Editorial Panel need?

Success in obtaining a new or revised CPT codeis dependent on understanding the process andpreparing an application with the complete in-formation required. Obtaining support from theappropriate medical community, society, or pro-vider group that requires or endorses the needfor the code is essential for the CPT approvalprocess.

The major information requirements for a new orrevised CPT code application include the following.

� A complete description of the procedure orservice (e.g., describe in detail the skill andtime involved. If a surgical procedure, includean operative report that describes the proce-dure in detail).

� A clinical vignette, which describes the typi-cal patient and work provided by the physi-cian/practitioner.

� The diagnosis of patients for whom this pro-cedure/service would be performed.

� A copy(s) of peer reviewed articles publishedin the U.S. journals indicating the safety andeffectiveness of the procedure.

� Frequency with which the procedure is per-formed and/or estimation of its projectedperformance.

� A copy(s) of additional published literature,which further explains the request (e.g., prac-tice parameters/guidelines or policy statementson a particular procedure/service).

� Evidence of FDA approval of the drug or de-vice used in the procedure/service if required.

� Rationale why the existing codes are not ad-equate and can any existing codes be changedto include these new procedures without sig-nificantly affecting the extent of the service?

Where can I find more information?The AMA website has all the information avail-

able concerning the CPT process, access to the ap-plication forms, the schedule for the CPT EditorialPanel, and the reconsideration process forms.7

CPT is a registered trademark of the AMA.

AUTHOR DISCLOSURE AND GHOSTWRITING

No competing financial interests exist. Noghostwriters were used to write this article.

ABOUT THE AUTHOR

Peggy Dotson, RN, BS, earned her nursingdiploma in 1971 at Our Lady of Lourdes School ofNursing (Camden, NJ), and graduated from Phi-ladelphia University (Philadelphia, PA) in 1993with a Bachelor’s of Science degree. She has 9 yearsof experience in clinical practice working in surgi-cal, coronary care, intensive care, and as a fieldtrainer for the Mercer County Paramedic Project inNew Jersey. She worked for 23 years in Bristol-Myers Squibb’s ConvaTec Division in varyingroles, including clinical trial monitor for ostomy,wound care, and incontinence devices; medicalsales representative; sales management; interna-tional marketing; worldwide business develop-ment; and Director of Reimbursement & PayerAlliances, analyzing the U.S. healthcare marketand developing strategic approaches for the com-pany. Since 2003, she is the owner and President ofHealthcare Reimbursement Strategy Consulting,which evaluates healthcare policy, coverage, cod-ing, and payment issues, and the impact of re-imbursement on the healthcare market. She servesthe Association for the Advancement of WoundCare (AAWC) as the Chair of the RegulatoryCommittee (2008 onward) and a member of theAAWC Quality Measure Task Force and FinanceCommittees. Since 2012, she serves on the Board ofthe Alliance for Wound Care Stakeholders.

586 DOTSON

REFERENCES

1. U.S. Centers for Medicare & Medicaid Services:HCPCS—General Information. www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/index.html

2. Nusgart M: HCPCS coding: an integral part of yourreimbursement strategy. Adv Wound Care 2013; 2:576.

3. American Medical Association: CPT Editorial PanelProcess—AMA/Specialty Society RVS UpdateProcess. www.ama-assn.org/go/cpt-calendar

4. American Medical Association: CPT� Process—Howa Code Becomes a Code. www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your

-practice/coding-billing-insurance/cpt/cpt-process-faq/code-becomes-cpt.page

5. American Medical Association: CPT Application Fre-quently Asked Questions. www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/cpt/cpt-process-faq.page

6. The American Gastroenterological Association: TheRUC Process. www.gastro.org/practice/coding/the-ruc-process

7. American Medical Association: CPT—Current Pro-cedural Terminology. www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/cpt.page

Abbreviationsand Acronyms

AMA¼ American Medical AssociationCMS¼ Centers for Medicare & Medicaid

ServicesCPT¼ Current Procedural Terminology

HCPCS¼ Healthcare Common Procedure CodingSystem

HIPAA¼ Health Insurance Portability andAccountability Act

QHP¼ qualified healthcare professional

UNDERSTANDING CPT CODES 587