Category I, II, and III Code Designations

Current Procedural Terminology (CPT) coding, the national standard code set for billing of procedures/services to Medicare and other third-party payers, currently recognizes three levels of codes designated as Category I, Category II, and Category III. The following is a detailed explanation of the Category I, II and III codes under CPT and how they relate to the Health Care Financing Administration Common Procedure Coding System (HCPCS) codes.

Background

The Secretary of Health and Human Services chose the CPT system as the national standard code in August 2000. The creation of a single coding system was mandated by the Health Insurance Portability and Accountability Act (HIPAA) of 1996, which cited shortcomings in the CPT system. To ensure that CPT would be chosen as the national standard, the AMA initiated the CPT 5 Project to respond to perceived deficiencies in CPT-4,create uniform instruction and interpretation, and guarantee the correct application of coding. Recommendations of the CPT 5 Project have been implemented gradually since 1998, with completion of the recommended changes to be recognized in 2003. As part of the CPT 5 Project, already existing codes became Category I and new Category II and III categories were recommended and approved by the CPT Editorial Panel.

Category I

CPT Category I codes are the familiar five-digit codes that describe a procedure or service (eg, 71010 – single view chest). To be considered as a Category I code, CPT requires that the service or procedure be widely accepted in the medical community, that Food and Drug Administration approval of a drug or device associated with the procedure be documented or imminent within a given CPT cycle, and that the service or procedure has proven clinical efficacy as evidenced by many peer-reviewed journal articles. These codes are also known as HCPCS Level I codes. The Category I (HCPCS Level I) codes are created and maintained by the CPT Editorial Panel and are released annually, with implementation January 1. Once a procedure is approved as a Category I code, the code is referred to the Relative Value Update Committee (RUC) for a valuation recommendation. The relative value unit (RVU) assignment for a particular code is determined by the amount of work, practice expense and malpractice expense associated with the procedure. The RUC makes a recommendation to CMS on physician work and practice expense "direct inputs". It is CMS that makes the final determination on the assignment of RVUs. Medicare payment is then determined by multiplying these RVUs (adjusted by geographic locality) by a conversion factor. The RVUs assigned are published yearly in the Federal Register in the "Medicare Physician Fee Schedule."

Category II

The CPT Category II codes are "optional" performance measurement codes with alphanumeric code designations (eg, 2000F – blood pressure measured). These codes are used to track the performance of certain services or test results that contribute to quality patient care. Examples of Category II codes are services that are typically included in evaluation and management (E/M) services or that are a component of another service. These codes were established to decrease the need to audit charts manually for this information. The reporting of a Category II code is optional and is not required for correct coding. Because Category II codes are used for informational purposes only, no payment is associated with these codes. It is anticipated that interest in Category II codes may increase given "pay for performance" initiatives being considered by CMS and private payers.

The current breakdown of Category II codes includes:

Composite Measures		0001F-0005F
Patient Management		0500F-0503F
Patient History		1000F-1008F
Physical Examination		2000F-2004F
Diagnostic/Screening Processes or Results		3000F-3002F
Therapeutic, Preventive or Other Interventions		4000F-4018F
Follow-up or Other Outcomes		5000F-(no codes at this time)
Patient Safety		6000F-(no codes at this time)

Note: CPT Category II performance measurement codes have no relationship to the HCPCS Level II codes developed by CMS for billing Medicare. The HCPCS Level II codes describe medical services and supplies not contained in CPT. For example, codes Q9945-Q9951 are codes used for the separate billing of low osmolar contrast material supplies. HCPCS Level II codes are also assigned to clarify Medicare coverage policy, eg, when CPT codes have been established, but CMS wants to further differentiate the types of procedures/services covered by Medicare.

Category III

Creation of the CPT Category III codes was necessitated by HIPAA's elimination of the HCPCS Level III codes (also known as local codes). The HCPCS Level III codes were developed by individual carriers to identify those procedures not yet identified by a HCPCS Level I or II code. Whereas the Category I codes pertain to clinically recognized and generally accepted services, the Category III codes are used to designate newly emerging technologies and to track their usage in the medical community. When a Category III code is assigned, it must be used in place of the unlisted procedure code. The use of a Category III code, unlike the unlisted procedure code, permits data collection to substantiate widespread usage of the specific procedure or service that is in the FDA approval process.

Similar to the CPT Category II codes, Category III codes will be identified by an alphanumeric code (e.g., 0144T). Category III codes, if covered, are reimbursable under payer policy (ie, reimbursement is carrier-determined).

Recognizing the need to have CPT III codes available for use as soon as possible, the CPT Editorial Panel approved the early release of CPT III codes. These codes are available through the American Medical Association's Web site, which is updated semiannually in January and July. These codes are then published in the next yearly update of the CPT manual.

The Category III codes are temporary codes and will be updated to a Category I code only if they meet the Category I requirements as described above. If a Category III code is not upgraded to a Category I code within five years, it will be sunset unless a continued need for the code is demonstrated.

Updates to Procedure Codes

Newly established CPT codes are published annually in the CPT manual, effective January 1 each year. The CPT 2006 code book contains a listing of the Category I, II, and III codes assigned. The Category II and III codes are listed in a separate section of the CPT code book following the Medicine section.

Medicare's HCPCS Level II codes are published in the Federal Register, "Medicare Physician Fee Schedule," and are updated throughout the year in transmittals sent to carriers, intermediaries, and providers.