Reimbursement Report

Reimbursement Coding Systems and Innovative Medical Devices

By Gordon B. Schatz, J.D.
June 8, 2016


• Categories: 05-Quality/Regulatory, RC - Medical Device Audits, Certification & Verification, Reimbursement Report

Reimbursement billing codes are an essential component of a comprehensive medical device reimbursement strategy. In today’s world of device sales, customers regularly ask, “Will I get reimbursed for this product?” and “What code do I use?” Understanding codes, using them correctly, and obtaining new ones can be essential to product positioning, pricing, launch and customer support.

Hospitals, ambulatory surgical centers, physicians, clinical labs, diagnostic imaging centers and home medical device suppliers place codes on the claim form to the patient’s insurance company to describe a procedure performed, a product provided, and the patient’s diagnosis. Codes are crucial because:

• The code can trigger a non-coverage decision (if the payer views the product as investigational, experimental or lacking sufficient evidence of improved outcomes.)
• If covered, the code can identify an existing payment amount for the procedure or product
• The code can enable data collection specific to the device
• The code can create short-term additional payment or lead to higher payment over the long term

Coding Systems

Historically, most codes described a broad class of products or procedures. Over time, coding systems have become increasingly more specific and can more accurately capture innovative medical technologies.

1. Hospital Inpatient ICD-10-Procedure Coding System

Hospitals use ICD-10-PCS codes to describe procedures rendered to patients admitted as inpatients. The prior ICD-9-CM system has not only been updated with significantly greater specificity in procedures, but a new sub-section, named Section X, has been created and includes codes describing technologies that may qualify for a new technology Medicare Severity-Diagnosis Related Group (MS-DRG) add on payment. Examples include:

• X2C0361       New technology, cardiovascular system, extirpation, coronary artery, one site, percutaneous, orbital atherectomy technology, new technology group 1.

As of May 2016, CMS is considering new codes for the coming year codes, which may include:

• XRG1092      New technology, joints, fusion, vertebral joint one, open, interbody fusion device, nanotextured surface, new technology group 2.

Even if no additional payment is available in the short term, these codes, if used appropriately by hospitals, can channel hospital charge data that will be important in assigning the technology procedure to an MS-DRG, the Medicare payment category for the hospital.

2. Hospital Outpatient HCPCS C codes

In the hospital outpatient setting, Healthcare Common Procedure Coding System (HCPCS) C-codes are available to enable transitional pass-through payments for certain medical devices that: 1) substantially improved treatment compared to all available alternatives; and 2) the costs of the device are not insignificant compared to the payment amount in the corresponding Medicare hospital outpatient Ambulatory Payment Classification (APC). While most of the additional payment associated with the C-codes are now built into the APCs, C-codes can still be important for “new” devices. Prior C-codes included:

• C1713 Anchor/screw for opposing bone to bone or soft tissue to bone (implantable)
• C1783 Ocular implant, aqueous drainage assist device
• C9356 Tendon, porous matrix of cross-linked collagen and glycosaminoglycan matrix (TenoGlide Tendon Protective Sheet) per square centimeter

3. Home care devices and HCPCS codes

One of the most important coding systems for medical devices used in the home care setting is also a class of alpha-numeric HCPCS codes for durable medical equipment, orthotics, prosthetics and surgical dressings and supplies:

• E0779 Ambulatory infusion pump, mechanical, reusable, for infusion 8 hours or greater
• E0601 Continuous positive airway pressure device
• E0983 Manual wheelchair accessory, power add-on to convert manual wheelchair to motorized wheelchair, joystick control
• A6501 Compression burn garment bodysuit (head to foot) custom fabricated
• Dynamic areas

The HCPCS coding system is managed within CMS by the HCPCS Work Group. This committee can not only approve new codes in response to requests, or revise existing codes, but also can generate codes to address CMS needs. One key factor in determining whether a new code will be created is the HCPCS Work Group’s analysis of any national program operating need.

4.  Physician, diagnostic imaging and clinical lab CPT codes

One of the most important coding systems is the Current Procedural Terminology (CPT) coding system for procedures performed by physicians and in the outpatient setting. This system is managed by the American Medical Association (AMA) and now includes a separate process for emerging procedures classified as Category III codes. Among other requirements, any new CPT code must describe a unique and stand-alone procedure, any underlying drug or device must be FDA approved, the procedure must be performed widely across the United States by many physicians, and the clinical efficacy must be well documented in published peer-reviewed scientific articles. Strong support from applicable medical specialty societies can be crucial for a Category I code. For Category III codes, the procedure must be currently or recently performed in humans, and have support from at least one specialty society representing physicians who perform the procedure. In addition, the actual or potential clinical efficacy of the procedure must be supported by peer-reviewed literature, and/or there is at least one IRB-approved protocol.  Examples include:

• 0042T Cerebral perfusion analysis using computed tomography with contrast administration, including post processing of parametric maps with determination of cerebral flow, cerebral blood volume, and mean transit time
• 0055T Computer assisted musculoskeletal surgical navigational orthopedic procedure with image guidance based on CT/MRI images (List separately in additional to code for primary procedure)
• 0071T Focused ultrasound ablation of uterine leiomyomata, including MR guidance; total leiomyomata volume less than 200 cc of tissue
• 0100T Placement of subconjunctival retinal prosthesis receiver and pulse generator, and implantation of intra-ocular retinal electrode array, with vitrectomy

In the specialized area of advanced molecular diagnostic clinical lab tests there are significant and dynamic developments in coding:

Two new coding structures, one under the AMA CPT and another under the McKesson Diagnostics Exchange platform, were developed to provide granular, test-specific coding for advanced diagnostic tests. With the influx of new, complex and sometimes proprietary technologies in the laboratory space, payers have become more concerned with accurately reporting, covering and paying for these services.

McKesson created the McKesson Z-Code Identifiers to complement the CPT codes and, “…to help ensure payers and providers clearly understand which test is being ordered and performed.” They have collaborated with a number of payers to implement inclusion of the Z-Code Identifier as mandatory alongside a CPT code on any submitted laboratory test claim form. http://mckessondex.com/z-codes

The AMA recently approved the development of a proprietary laboratory analyses (PLA) code set, which would include FDA approved or cleared tests and Advanced Diagnostic Laboratory Tests as defined under the Protecting Access to Medicare Act of 2014.

While the codes are yet to be created, the AMA said the code descriptors would specify the procedure’s proprietary name and clinical laboratory or manufacturer.

5.  ICD-10-CM Diagnosis Codes

ICD-10-CM diagnoses codes describe the patient’s condition(s). They are important since insurers link the diagnosis code with the product or procedure code to establish that services to a patient are medically necessary. For example, an insurer may only pay for a hip replacement, if the ICD-10- CM code reports a hip fracture. ICD-10-CM diagnosis codes have replaced the more general ICD-9-CM codes with several humorous results:

ICD-9-CM codes included:

• 410.11  Acute myocardial infarction of other anterior wall, initial episode of care
• 714       Rheumatoid arthritis
• E832     Other accidental submersion or drowning in water transport accident; includes from gangplank

The ICD-10-CM codes offer greater detail, for example:

• 121.09     St elevation (STEMI) myocardial infarction involving other coronary artery of the anterior wall
• M06.611  Rheumatoid arthritis of right shoulder with involvement of other organs and systems
• W21.03    Struck or hit by baseball
• W56.21    Bitten by orca
• W58.13    Crushed by a crocodile
• V96.13     Hang glider collision injuring occupant
• X52D       Prolonged stay in weightless environment, initial encounter
• V95.44xA Forced landing of spacecraft injuring occupant, initial encounter

Risks and Opportunities

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 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. To manage potential risks, there are a number of coding best practices:

• Conduct careful due diligence of existing codes.
• Seek coding confirmation when needed from coding authorities.
• Provide customers with carefully worded coding and reimbursement information with disclaimers, which may include:
  • “The existence and use of any particular code does not guarantee coverage or payment. Reimbursement and coding policies vary widely from payer to payer and will depend on many factors, including the payer’s determination of medical necessity and appropriateness of a procedure for a particular patient. The company recommends that the hospital/physician confirm from the patient’s insurer website or policies, what codes that payer requires for a particular procedure, if questions exist. Note that many payers do not offer specific coding guidance. The hospital/physician should also refer to any complete coding lists as the codes identified here reflect only one selection of codes. Further, many coding systems change every year.”
• Apply for new codes or changes in code descriptors to seek greater precision in codes for your innovative product.
• Apply for new codes and include information that will support favorable coverage and payment for the device.

Getting a code is not the entirety of a reimbursement strategy and does not guarantee payment. However, a code may be a crucial first step in a more comprehensive reimbursement strategy, that integrates regulatory and product management goals. For innovative medical devices, coding, as part of a reimbursement strategy can be essential for product pricing, launch, customer support and ultimately, product success.

The author thanks Jacqueline Huang, Senior Associate, specializing in molecular diagnostics and coding, and Vision Lan, Associate in Quorum’s Reimbursement Policy and Government Affairs Department for their contributions to this article.