Problems with the Current HCPCS Process and Recommendations for Change

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1 Background As described on the CMS website, Level I of HCPCS is comprised of CPT-4, a numeric coding system maintained by the American Medical Association (AMA). CPT-4 is a uniform coding system consisting of descriptive terms and identifying codes that are used primarily to identify medical services and procedures furnished by physicians and other health care professionals. Decisions regarding the addition, deletion, or modification of CPT-4 codes are made by the AMA. Level II of the HCPCS is a standardized coding system that is used primarily to identify products, supplies, and services not included in the CPT-4 codes, for example, ambulance services and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) when used outside a physician's office. Level II codes are also referred to as alphanumeric codes because they consist of a single alphabetical letter followed by 4 numeric digits, while CPT-4 codes are identified using 5 numeric digits. HCPCS level II permanent codes are maintained jointly by the HCPCS National Panel (National Panel). The National Panel is comprised of representatives from America's Health Insurance Plans (AHIP), the Blue Cross and Blue Shield Association (BCBSA), and the Centers for Medicare and Medicaid Services (CMS). The National Panel is responsible for making decisions about additions, revisions, and deletions to the permanent national alpha-numeric codes. Decisions are made only by unanimous consent of all three parties. Problems with the Current HCPCS Process and Recommendations for Change I. The HCPCS National Panel appears to be an advisory committee that is not operating in compliance with the Federal Advisory Committee Act ( FACA ). A. Description of the problem: Because the National Panel includes non-federal employees who make decisions that directly impact the Medicare and Medicaid programs, we believe it may be subject to the Federal Advisory Committee Act ( FACA ). This legislation includes numerous provisions, including requirements for: Advance notice of meetings; Public meetings and opportunity for public comments; Documentation of meetings; and, Access to records. In 1998, the Government Accounting Office (GAO) issued a report on a violation of FACA related to HCFA s Technology Advisory Committee (TAC) which provided the agency with expert advice concerning whether Medicare should cover specific technologies on a national basis. 1 GAO concluded that HCFA was not operating in 1 United States General Accounting Office. Washington, D.C. Office of the General Counsel. Advisory Committee Act: Violation by Health Care Financing Administration. File: B January 13, Page 1 of 8

2 compliance with FACA. HCFA disbanded the TAC and constituted the Medicare Coverage Advisory Committee in compliance with FACA. We believe that GAO might reach a similar conclusion if asked for its opinion as to whether the HCPCS National Panel is in compliance with the requirements of FACA. B. Recommendation: CMS should ask its Office of General Counsel to determine whether the HCPCS National Panel is in compliance with the requirements of FACA. II. Meetings of the HCPCS National Panel are closed to the public and access to important information is not available. A. Description of the problem: In accordance with the requirements of Section 531(b) of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), CMS established procedures that permit public consultation for coding and payment determinations for new DME under Medicare Part B of title XVIII of the Social Security Act (the Act). CMS hosts annual public meetings that provide a forum for interested parties to make oral presentations and/or to submit written comments in response to preliminary coding and pricing recommendations for new durable medical equipment that have been submitted using the HCPCS coding modification process. The opportunity for public participation at these meetings is appreciated. However, the topics for discussion are limited to DME and the meetings are held with the CMS/HCPCS Workgroup only; it is not a meeting of the HCPCS National Panel. CMS also holds meetings that are not related to those mandated by section 531(b) of BIPA. The HCPCS coordinator schedules meetings with interested parties, at their request, to discuss their recommendations regarding possible changes to the HCPCS level II codes. These meetings are held at the Central Office of CMS. In addition to representatives from the HCPCS Workgroup, staff from Medicaid and Medicare coverage, payment and operations are invited to attend these meetings. These meetings with individual parties are important and this part of the current HCPCS process should be maintained. The Medicare HCPCS website includes a listing of items that will be discussed at upcoming meetings of the HCPCS National Panel. These lists are posted at to give the public sufficient time to submit comments for the National Panel's consideration at its upcoming meeting. The information that is listed on the website is very limited and does not give a clear picture of the issues that may be involved. The National Panel sends letters to those who requested coding modifications to inform them of the National Panel's decisions regarding their coding requests. The National Panel decisions are not publicly available. B. Recommendations: 1. The current public meetings related to DME should be expanded to include all other HCPCS products, supplies, and services. In addition, the public meeting Page 2 of 8

3 should be held with the full HCPCS National Panel, not just the CMS/HCPCS Workgroup. 2. The agenda of the full HCPCS National Panel should be provided via the Internet with a brief summary of the issue, not just the name of the product, supply or service. 3. Submitted code applications should be provided via the Internet. However, any confidential and/or proprietary information in the application should be protected from public disclosure. 4. The recommendations of the CMS/HCPCS Workgroup to the HCPCS National Panel should be provided via the Internet. 5. The decisions of the HCPCS National Panel should be provided via the Internet with a brief summary of the National Panel s rationale. Notification of National Panel decisions should not be limited to those who requested coding modifications. III. The HCPCS application requires information that inappropriately delays the issuance of new codes, poses a serious obstacle to innovation and creates problems of access for Medicare beneficiaries. A. Description of the problem: The HCPCS application form requires all products to have 6 months of marketing experience prior to submitting a request for coding consideration and following FDA approval for marketing. In addition, the description of the HCPCS process on the CMS website indicates that a code may not be requested unless the product represents 3 percent or more of the outpatient use for that type of product in the national market. The requirement for 6 months of marketing data is a longstanding one. The rationale for the requirement is that [t]here must be sufficient claims activity or volume, as evidenced by 6 months of marketing activity, so that the adding of a new or modified code enhances the efficiency of the system and justifies the administrative burden of adding or modifying a code. This is an inappropriate requirement that poses a serious obstacle to innovation and creates access problems for Medicare beneficiaries. To use an example, a new drug or biological that is approved by the FDA following years of clinical studies and review should not need an additional 6 months of marketing data in order to apply for a HCPCS code. The requirement that a product represents 3 percent or more of the outpatient use for that type of product in the national market is a new one that appeared on the CMS website at the end of April This is a particularly onerous requirement. It places manufacturers in a Catch-22 situation because adoption of new products is often dependent on the availability of new codes. Further, it would seem to preclude the issuance of any new code for any new product that is targeted toward a small subset of the population. On May 24, 2004, the U.S. Department of Health and Human Services published a Notice in the Federal Register (Vol. 69, No ) seeking public Page 3 of 8

4 comment on how HHS and its agencies can work together to facilitate the development and approval of new medical technologies. One of the specific questions asked was, Do any policies and programs pose obstacles to innovation? We have identified these two HCPCS application requirements as an answer to this question. B. Recommendations: 1. Eliminate the requirement for 6 months of marketing experience before submitting a HCPCS application. 2. Eliminate the requirement for 3% share of market before submitting a HCPCS application. IV. The HCPCS process is not timely. A. Description of the problem: The HCPCS coding review process is an ongoing and continuous process. The review cycle runs from April 2nd through the following April 1st. Requests may be submitted at any time throughout the year. Requests that are received and complete by April 1st of the current year will be considered for inclusion in the next annual update (January 1st of the following year). Requests received on or after April 2nd, and requests received earlier that require additional evaluation, will be included in a later HCPCS update. This timeline, combined with the requirement for 6 months of marketing data before an application may be submitted means that a new drug or device approved by the FDA on October 2 of a given year will not receive a new HCPCS code until January 1, two years later. For example, a new device approved October 2, 2004 will not have 6 months of marketing experience until April 2, Therefore, it will be ineligible for a new code in The earliest date for a new code under the current process would be January 1, 2007 nearly 27 months after FDA approval. We believe this prolonged process for obtaining new codes is unnecessary; costly for physicians, providers and payers; and harmful to patient access to important new products and services. For example, in 2002 the fifth highest drug code in terms of allowed charges was J3490 Unclassified drugs with nearly $424 million in allowed charges. The administrative costs associated with submitting and processing unlisted codes is much higher than the costs of electronic processing of claims with unique codes. The hassle often results in delays in adopting new technologies, thereby denying patients access to technologies from which they could benefit. The lack of unique codes also reduces CMS s ability to monitor utilization and establish appropriate medical review policies. B. Recommendation: The HCPCS process should be revised to permit the issuance of new codes and updating of the system on a quarterly basis. V. The HCPCS process does not have an established mechanism for appealing a National Panel decision. Page 4 of 8

5 A. Description of the problem: For many years, there was no description of a process under which a denial of a request for a new code could be appealed. The CMS website for HCPCS issues recently was improved and it now includes the following statement regarding reconsiderations: Changes to the HCPCS process are currently under consideration. At the present time, the mechanism to request a reconsideration of a National Panel coding decision is to submit another application in a subsequent coding cycle. The new application should include information that is new or different from the previous application, that substantiates your request. This is a welcome clarification, but the present mechanism that is described is insufficient to constitute a meaningful appeals process. B. Recommendation: A meaningful appeals process should include the following: 1. The basis for the initial denial should be clearly stated and provided to the applicant in a timely fashion. 2. Appeals should be heard in a timely fashion and the timelines for submitting appeals should be clearly stated. 3. The opportunity to appeal a decision should not be limited to the submission of new or different information. 4. There should be an opportunity for an in-person presentation. 5. The individual(s) or organization(s) hearing appeals should be identified. 6. The final authority on appeals should be identified. VI. The current HCPCS process for temporary national codes does not comply with the requirements of HIPAA and the MMA. A. Description of the problem: HIPAA required CMS to adopt standards for coding systems that are used for reporting health care transactions. CMS published regulations to implement this part of the HIPAA legislation in the Federal Register on August 17, 2000 (65 FR 50312). These regulations established the HCPCS level II codes as the standardized coding system for describing and identifying health care equipment and supplies in health care transactions that are not identified by the HCPCS level I, CPT-4 codes. Prior to December 31, 2003, Level III HCPCS were developed and used by Medicaid State agencies, Medicare contractors, and private insurers in their specific programs or local areas of jurisdiction. Level III codes were also referred to as local codes. Local codes were established when an insurer preferred that suppliers use a local code to identify a service, for which there is no level I or level II code, rather than use a "miscellaneous or not otherwise classified code." The final regulations that identified HCPCS as the standardized coding system provided for the elimination of level III local codes by October 2002, at which time, the regulations provided, only the level I and level II code sets could be used. CMS decided to eliminate local codes because local codes do not support the objectives of the HIPAA legislation, which calls for an efficient coding system that meets uniform standards and requirements. The elimination of local codes was postponed as a result of Page 5 of 8

6 section 532(a) of BIPA, which directed CMS to maintain and continue the use of local codes through December 31, Unfortunately, it appears that the members of the HCPCS National Panel have developed a process for issuing temporary national codes that is contrary to the HIPAA objective of an efficient coding system that meets uniform standards and requirements. CMS, BCBSA and AHIP maintain their own series of codes that are independent of the permanent national codes. Decisions regarding the number and type of temporary codes and how they are used are not made by the National Panel but are made independently by each National Panel member. Temporary codes are for the purpose of meeting, within a short time frame, the operational needs of a particular insurer that are not addressed by an already existing national code. The National Panel may decide to replace temporary codes with permanent codes. However, if permanent codes are not established, temporary codes could remain as "temporary" codes indefinitely. The C, G and Q codes are used by Medicare, however several other series of codes exist and often lead to confusion among providers because these codes may be duplicative. The K codes were established for use by the DMERCs. The H codes are used by those State Medicaid agencies that are mandated by State law to establish separate codes for identifying mental health services. The T codes are designated for other uses by Medicaid State agencies. The S codes are used by the BCBSA and the AHIP to report drugs, services, and supplies for which there are no national codes but for which codes are needed by the private sector to implement policies, programs, or claims processing. Their purpose is to meet the particular needs of the private sector. These codes are also used by the Medicaid program, but they are not payable by Medicare. There are over 500 S codes in the HCPCS system describing physician services, drugs, DME, supplies and clinical lab services. The major problems with this system of temporary national codes are: There are temporary codes that clearly duplicate national codes. Thus, the codes violate the requirements of HIPAA. The process used by each National Panel member is not known and the public is not given the opportunity to participate. Approximately 35 percent of the level II HCPCS codes are temporary codes. This large percentage of temporary codes is problematic because the process for developing temporary national codes is even less transparent than the process for developing permanent HCPCS codes. Many of the codes are inconsistent with the following basic principle of HCPCS that is described on the CMS website: HCPCS is a system for identifying items and services. It is not a methodology or system for making coverage or payment determinations, and the existence of a code does not, of itself, determine coverage or noncoverage for an item or service. Temporary codes should be issued to identify and describe medical services, supplies and procedures, independent of Page 6 of 8

7 the process for making determinations regarding coverage and payment. They should not be issued for administrative purposes or to facilitate claims payment. Section 731 of the MMA requires CMS to make certain improvements in the national and local coverage determination process to respond to changes in technology. Included in this section is a requirement that Not later than July 1, 2004, the Secretary shall implement revised procedures for the issuance of temporary national HCPCS codes under part B of title XVIII of the Social Security Act. The system of temporary national codes described above is totally unacceptable as a process for the issuance of temporary national HCPCS codes. B. Recommendations: 1. The current system of setting aside sections of HCPCS for different payers must be rejected as the system for temporary national codes because it is inconsistent with HIPAA and MMA. 2. CMS should work with the other members of the HCPCS National Panel to develop a single, timely and open system for issuance of uniform temporary national codes. 3. The AMA CPT Editorial Panel staff should be involved in preliminary discussions regarding temporary national codes to avoid any duplication of effort between Category III CPT codes and temporary national codes. 4. Consideration should be given to including representatives of the medical profession and industry in the development of a new process for issuing temporary national codes. 5. Temporary national codes should be issued on a quarterly basis. 6. The current series of S codes should be cross-walked to appropriate nationally accepted coding nomenclature (HCPCS or CPT) and the future needs of BCBSA and AHIP should be addressed through a single, timely and open system for issuance of uniform national codes. VII. The Statistical Analysis Durable Medical Equipment Regional Contractor (SADMERC) has been delegated excessive authority under the HCPCS process. Its decisions are not public and there is no apparent process for appeal. A. Description of the problem: A preliminary step in the process for recommending a modification to the alpha-numeric coding system, for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), is to contact the Statistical Analysis Durable Medical Equipment Regional Contractor (SADMERC). They assist in determining if a current National HCPCS Code exists which describes the product category. If the SADMERC determines that a current code exists, then an application cannot be submitted. We acknowledge the importance of having a single point of contact for determining whether a current code exists. However, by delegating this authority to the SADMERC, CMS has created a process whereby an applicant for a new code does not have the opportunity to make its case either to CMS or the full HCPCS National Panel. Further, Page 7 of 8

8 the decisions of the SADMERC, which could serve as a valuable educational tool, are not available to the public. Finally, there is no apparent process for appealing the decisions of the SADMERC. B. Recommendations: 1. For an interested party seeking a new code, the decision of the SADMERC, in determining whether a current National HCPCS Code exists, should be tentative pending review and approval by CMS. 2. The decisions of the SADMERC should be provided via the Internet with a brief summary of the rationale. 3. A process for appealing the decisions of the SADMERC must be established. Page 8 of 8