Leading the Business of Healthcare
RCM Advisor

Quarter 2 2023 - Volume 28, ISSUE 2

Changes in Coding Over the Last 30 Years

Coding Corner

By Melody W. Mulaik, MSHS, RCC, RCC-IR, CPC, COC

As we celebrate HBMA’s 30th anniversary, it is only fitting that we should take the time to reflect on some of the changes we have seen in coding and reimbursement. A lot has changed in 30 years. Some improvements, such as standardization in denial reasons, have been welcomed by the industry. Others, including the transition to ICD-10-CM, came with much resistance. As we review the scope of the updates and revisions at a high level, it is no wonder that we have become adept at adjusting to change and challenges.

The creation of the International Billing Association (IBA), which was the original association name that eventually became HBMA, was created to bring like-minded billing companies together to address the ever-growing complexity of billing and coding. The association was founded a few years after the creation of the resource-based relative value scale (RBRVS) system for physician reimbursement in 1991. Before we talk about reimbursement, let’s first look at the history of coding.

The American Medical Association (AMA) determined in April 1960 that standardization was needed for the classification of healthcare services. They created the first Current Medical Terminology (CMT) handbook which was published in June 1962. The focus of the handbook was to standardize the terminology of the Standard Nomenclature of Diseases and Operations (SNDO) and International Classification of Diseases (ICD), to allow for the analysis of patient records. Procedural information was dropped in the transition from the SNDO to CMT, but was released separately as the Current Procedural Terminology (CPT-1) in 1966; it was focused primarily on surgical procedures.

Subsequently, CPT-2 was released in 1970 and expanded the codes to a five-digit system and existing chapters were greatly expanded, or new ones added, to cover anesthesia, radiology, laboratory, pathology, and specialized medicine services such as physical therapy, pulmonary function testing, etc. CPT-3, introduced in 1973, brought two-digit modifiers into the mix, significantly changing the way many services such as assistant surgeon, co-surgeons, etc., were reported. In 1977, CPT-4, the version we still use today, was released and included myriad updates designed to address rapidly changing technological advances. Simultaneously, an update process was created to allow for input from the physician community and other stakeholders.

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Despite the creation of procedure codes, there was no mandate for any payor, including Medicare, to use these codes until 1983 when the Health Care Financing Administration (the former name for CMS) adopted CPT® exclusively for the reporting of physician services for their beneficiaries. Four years later, CPT® coding was mandated for the reporting of all outpatient hospital and other ambulatory sites delivered to all federally funded beneficiaries. At this point, private payors still had the freedom and flexibility to dictate their own coding and billing requirements which created many challenges for providers. It was not until the Health Insurance Portability and Accountability Act of 1996 (HIPAA) addressed this dilemma in the Administrative Simplification provisions (AS), requiring that all payors adhere to standard code sets set forth by the Secretary of Health and Human Services (HHS). In August 2000, CPT® was officially adopted for reporting all physician services and outpatient hospital procedures.

Similarly, ICD-9-CM was designated under HIPAA as the standard code set for diagnosis reporting by covered entities. ICD-9-CM also included a procedure classification that is the standard code set hospitals must use for reporting inpatient procedures. In January 2009, CMS announced that the United States would switch over to the 10th edition of the ICD on October 1, 2013. However, in August of 2012, CMS issued a Final Rule that pushed the ICD-10 implementation date back to October 1, 2014. Subsequently, in a Final Rule published in the Federal Register on August 4, 2014, CMS changed the implementation date to October 1, 2015, as required by the Protecting Access to Medicare Act of 2014 (PAMA).

Now to reimbursement. As previously mentioned, the AMA/Specialty Society Relative Value Scale Update Committee (RUC) was established in 1991. The RUC was established as a way for physicians and other healthcare providers to provide CMS with input on valuation for services reimbursed by CMS. The relative value units (RVUs) of physician work, practice expense, and malpractice, as we know and use them today, vary somewhat from when first introduced. Practice expense transitioned in January 1999 to resource based as per the location where the services were rendered, and in January 2000 the malpractice or personal liability insurance (PLI) was added.

The Medicare Physician Fee Schedule (MPFS) became effective on January 1, 1992. Legislation passed in 1989 for CMS to create the MPFS and change how physicians were paid. Prior to the creation of the MPFS, physicians would bill for services and were paid by Medicare based on charges for services, which also meant charging patients for any amount above what Medicare paid. Private payors set their own policies with many paying a percentage of charges. So, CMS, with the help of the AMA, developed RBRVS and the RVUs as we know them today, which are based on practice expense, work, and malpractice.

The last 30 years have brought significant coding and reimbursement reforms. Regardless of the required change, HBMA members have always been willing to rise to the challenge and ensure that their staff and their clients are appropriately equipped for success. Who knows what the next 30 years will bring!

Melody W. Mulaik, MSHS, CRA, RCC, RCC-IR, CPC, COC, FAHRA, is the president of Revenue Cycle Coding Strategies. She is a frequent speaker and author for nationally recognized professional organizations and publications. Melody’s areas of expertise include coding and compliance, management engineering, and operations improvement, and she is nationally recognized for her extensive radiology expertise.