New CMS Coding Policies Foster Medical Innovation

June 12, 2019

Diverse group of young doctors standing together in a hospital corridor discussing a patient's diagnosis

When it comes to revenue integrity, we like to keep an eye on new CMS coding policies in light of how that affects the hospital revenue cycle. CMS has just announced changes to its coding policies for new medical technologies. In general, the policy updates are designed to foster innovation and speed to market for technologies that can improve medical outcomes and drive healthcare costs down. And with this move, we will see related medical procedure code updates.

CMS Administrator Seema Verma, in a presentation at the Medical Device Manufacturers Association Annual Meeting, May 2nd, stated her reasoning behind the policy updates, saying, “Our vision is ambitious yet achievable: to protect and secure Medicare and ensure beneficiaries have access to the latest medical technologies. There is no greater need for innovation than in American health care. Today’s innovation and technology will be drivers for reducing costs, improving quality, and increasing access to health care for all Americans for years to come.”

In a policy review article, MedTech Dive provides the context that these moves will enable medical device companies “to apply for a new permanent Healthcare Common Procedure Coding System (HCPCS) code twice a year, instead of annually. CMS also recently eliminated a requirement for a new product to have a 3% market share to be eligible for a new code.”

Rule changes like these generally provide both opportunities and pitfalls for our hospital clients. We always examine related medical procedural coding to look for ways to recover lost income. Though we don’t focus on recovery of revenue from medical device coding, we have learned that a range of new procedural coding is spawned when a technology evolves. In an excellent coding overview article on “Reimbursement Coding Systems and Innovative Medical Devices,” Gordon B. Shatz, writing for MedTech Intelligence, summarizes the strengths and weaknesses of related coding strategies:

“Obtaining a new code can result in denial of coverage if the payer sees the new technology as an ‘emerging procedure’ that does not have sufficient evidence of improved net health outcomes to support coverage. Creating a new code can open the door for a lower payment, compared to products in other codes. Using an existing code enables the company to follow on the heels of prior products/procedures and can give more predictability to coverage and payment. For manufacturers of innovative devices, responding to customer reimbursement inquiries, there may be a tendency to recommend the codes that lead to coverage and high payment. This may be entirely appropriate if the codes accurately reflect the product and procedure. Recommending certain codes, however, can expose the manufacturer to allegations by the government that the company is causing the hospital or doctor to file a false claim for payment.”

University of New Hampshire published an article a few years ago that lays out some ways new medical devices impact hospital revenue integrity. First noting that, “the increase in healthcare costs can be attributed to a variety of different factors such as the aging population, defensive medicine, hospital costs increases, changes in insurance and much more.” The writers go on to note that, “A big contributing factor to the increase in cost is medical technology.”

Increase in cost for new technology is one of the pitfalls. But as the writers note, many technologies also lower costs. “Medical technology includes new practices such as robotic surgery, telemedicine, electronic medical records, and a variety of new drugs on the market. In many cases these new technologies increase the costs of health care, however, they can also help lower the costs of health care. The development of new vaccines may be pricey up front, but in the long run they will help stop the spread of viruses and disease and therefore lower treatment costs. New technology could also include better screening for a disease which would then lead to better treatment.”

Consequences of new CMS coding policies

The coding policies for new medical technologies will bear consequences across your revenue cycle in several ways, including capturing new procedures via coding that result from device introduction. Can coders keep up with the increasing pace? An article on “The impact of technology on medical billing and coding,” in Health IT Outcomes, observes, “Although the Centers for Medicare & Medicaid Services (CMS) — the organization responsible for releasing the ICD-10 codes — has been providing updated guidelines frequently, there are concerns that this is still not agile enough to capture all the latest diagnostic tools and procedures. As medical research continues to grow at an astonishing pace, we may soon be reaching a breaking point where introduction of new guidelines every few months may simply not be adequate to capture all the latest technologies available to treat patients.”

Part of the answer to this puzzle will be found in the HCPS coding updates — the Healthcare Common Procedure Coding System, mentioned in the presentation by CMS Administrator Verma. The American Academy of Professional Coders™ (AAPC), founded in 1988, makes this note about HCPS:

“Sometimes described as the ‘hall closet of coding,’ HCPCS Level II meets several needs. The code set is made up of five-character, alpha-numeric codes mainly representing medical supplies, durable medical goods, non-physician services, and services not represented in the Level I code set (CPT®). HCPCS Level II includes services such as ambulance, durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), when used outside a physician’s office. This coding system is also used as an official code set for outpatient hospital care, chemotherapy drugs, Medicaid, and other services. The Blue Cross Blue Shield Association and the American Dental Association (ADA) post their procedure codes as part of HCPCS Level II. The Centers for Medicare & Medicaid Services (CMS) regularly uses HCPCS Level II to post codes for the tracking of demonstration projects and new technologies.”

As we’ve observed in the past — coding and related policies are quite a mouthful, and often a mouth full of acronyms. Because of all this evolution, hospitals will find revenue enhancing opportunities both from new devices and proper procedural coding associated with them. In a related article, MedTech Dive observes that, “Breakthrough devices coming onto the market would be considered ‘new and not substantially similar to an existing technology’ for the purposes of an add-on payment, beginning with applications received for fiscal year 2021.”

The bottom line? As we learn with each client hospital, innovation brings both new coding opportunities along with caution when it comes to revenue integrity. From ICD-10, to HCPS, to CPT coding, understanding new CMS coding policies and keeping abreast of strategies for procedural coding relating to newly introduced medical devices is increasingly essential for the revenue cycle.

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