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The Healthcare Common Procedure Coding System, abbreviated as the HCPCS, refers to a set of codes utilized for electronic medical billing and coding. It has become the standard under the Health Insurance Portability and Accountability Act, or HIPAA, which requires all entities transferring sensitive personal health data electronically to adopt stringent guidelines.

Additionally, any healthcare providers participating in Medicare or Medicaid must adopt the HCPCS under the HIPAA guidelines. The HCPCS was initially subdivided into three levels but has recently been revised to include only two levels.

Level II vs. Level I

There are several essential differences between the two levels of the HCPCS. Level I is primarily designed to provide codes for procedures performed or services rendered in order to accurately bill health insurance providers. Level II does not apply to services rendered but rather to equipment utilized during the procedures or non-medical services provided.

The main differences between the HCPCS level I and level II include:

  • Level I codes are only numerical while level II codes are alphanumerical
  • Level I codes are for medical procedures and level II codes are for products or equipment used
  • Level I codes are determined by the Current Procedural Terminology (CPT), curated by the AMA
  • Level II includes items like prosthetics or hearing devices

The History of the HCPCS

The HCPCS developed out of an increasing need for consistency in an increasingly globalized medical community. Inconsistencies or errors put a tremendous strain on the healthcare system and delay reimbursement for services rendered. The HCPCS borrowed level I codes from the CPT and level II codes are maintained by the Centers for Medicare and Medicaid Services (CMS). Initially, the CMS allowed for three levels of codes but they soon simplified the index by removing the third level, which often dealt with non-uniform local codes.


Under HIPAA, all health care providers who participate in public health programs or use electronic personal health information (ePHI) must conform to the standards outlined in HIPAA or face steep penalties. Any healthcare providers fitting into these categories are given specific dates by which they must demonstrate compliance.

The guidelines specified by HIPAA can be extremely labyrinthine and it is easy to make costly errors. Quest National Services has years of experiences preparing businesses for making the transition to HIPAA compliance. Speak with a representative to see how Quest National Services can protect your business.