HCPCS is used in the operation of medical office administration and billing. It is a code set up to help insurance providers and medical staff communicate more effectively when billing for medical services, products and procedures. There is specialized training for this type of work, which is often used by one or two office personnel to properly handle billing issues with third-party providers.


The letters HCPCS are the acronym for Heathcare Common Procedure Coding System. The name stands for a system used to organize and sort medical claims processed for payment in the United States each year. There are people working in medical offices who specialize in knowing this system.


Level I codes were created before the 1980s as a way for medical administration staff to standardize billing and other records for insurance payments. As new procedures and systems came into use, Level II was created during the 1980s to accommodate the newly added services and supplies. Level III came into existence around 2003 because of new procedures and medical tools becoming available to localized markets. This system was created by the director of Health and Human Services, which gave authority of the system to the Center for Medicare and Medicaid Services (CMS) under the 1996 Health Insurance Portability and Accountability Act (HIPAA) legislation.


Level I of the coding system is used for medical treatments and tools when billing insurance companies. Level I is used for any in-patient or office visits where the treatment or supplies is used in the medical facility. Level II is used when billing for ambulance services, prosthetics, orthotics and other supplies used outside of the doctors office. Level II is mostly used by Medicare and other insurance to cover items outside of an office visit.


There are three levels of HCPCS codes. These are known as levels I, II and III. The first level is used for Current Procedural Terminology (CPT) codes which are numbered codes of groups of five numbers maintained by the American Medical Society and are used for identification of medical services and procedures. Level II codes are used as a method to code services, supplies and other procedures not used in CPT code. Level II codes are made up of single letters followed by four numbers. Level III codes are used for local coding when the procedure or service is not listed within the other two levels.


The oversight of the coding system is maintained by both the American Medical Association (AMA) and the CMS. The system is run as a clearinghouse for administration purposes to centralize and better organizes billing procedures. Questions and issues in dealing with this system are sent to the clearinghouse for clarification. These issues can include proper code use, new code issues, or insurance and billing claims using the system

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