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HCPS Coding

HCPS Coding

Each year in the United States, billions of healthcare claims are processed through private sector companies as well as public health programs such as Medicare and Medicaid. These staggering numbers place a huge burden on the healthcare system and are wrought with inefficiencies.

In order to streamline the process of providing services and filing claims, it became necessary to adopt universal standards to increase efficiency while guarding sensitive information in an increasingly technology-dependent system. The Healthcare Common Procedure Coding System, or the HCPCS, is the designated standard coding system for electronic medical billing required under the Health Insurance Portability and Accessibility Act, commonly known as HIPAA.

What Is HCPCS Coding?

The HCPCS is an index of codes that applies to electronic medical billing claims between healthcare providers and insurance companies. This index is the standard coding system used to file claims electronically as required under HIPAA. It is comprised of two distinct levels referred to as level I and level II.

Level I

The codes in level I refer to procedures performed and services rendered. Healthcare providers use this sub-codex to accurately bill for physician services. Each code features a description of the service or procedure. The codes for level I are adopted from what is known as the Current Procedural Terminology, or CPT, which is copyrighted and updated annually by the American Medical Association (AMA). These codes are solely numerical codes consisting of five digits.

Level II

Codes in level II do not refer to services or procedures but rather to supplies, equipment, and non-medical services. These codes are not based off of the CPT and correspond to items such as orthopedic equipment, pacemakers, or ambulance rides. The level II codes are also alphanumerical and consist of one letter and four numbers.

As a summary, the essential differences between level I and level II codes are:

  • Level I codes are adopted from the CPT and curated by the AMA
  • Level I codes correspond to services
  • Level I codes are numerical and have five digits
  • Level II codes are for equipment or non-physician services
  • Level II codes have a letter and numbers


Without a method of achieving uniformity, public health programs were incredibly cumbersome. Claims processing was slow and inaccurate and reimbursement often took a long time. Under HIPAA, universal standards have been set with the goal of optimizing the healthcare system. It also raises standards to protect consumer privacy and sensitive medical information. All business entities transmitting this sensitive electronic personal health information (ePHI) must adopt HCPCS.

Under HIPAA, the deadline to demonstrate compliance by the adoption of HCPCS is October 1, 2015. There is a lot of work involved in transitioning to this new system. It has many intricacies and requires significant employee training to ensure compliance and avoid penalties. Quest National Services has the experience and the tools to help you create the perfect plan for you company to make a smooth transition.