Viewpoint / Engineering Biology

The Startup Process for CPT Codes

How has the landscape changed?

In the startup ecosystem, there is often some confusion around the process surrounding the application process for Current Procedural Terminology – or CPT® for short. There is a lot of focus on FDA approval, but getting the appropriate CPT® code for startup innovations is often left until the last minute – when startups are already preparing to go to market.

We brought together a small roundtable with speakers from the American Medical Association to help clarify how the CPT® process works, how to engage with the CPT® Editorial Panel, and when to apply for a new code based on type of innovation – and we took notes on a few of the key takeaways presented.

How Has COVID Disrupted Physicians and Health Systems?

  • Retail and DTC growth is on the rise, and there is an increase in physicians going to work for new models, and an increase in patient use of new models – millions have lost employer-provided healthcare coverage making 40 dollar doctor visits very tempting
  • Patients and physicians want virtual care to continue – 68% of clinician respondents are motivated to increase telehealth, and
    75% of clinicians indicated that telehealth enabled them to provide quality care
  • Patient satisfaction score for telehealth is 860/1000 – The highest of all healthcare, insurance and financial services
  • There were record digital health investments in 2020 – $20B globally! Similar levels of investments are expected in 2021 with a focus on interoperability, mental health, personalized care
    AI, genomics, precision medicine, and health at home
  • Digital medicine coding accelerated a lot in 2019-2021 – Online digital evaluation service, self-measured blood pressure monitoring, remote retinal imagine, remote optical coherence tomography, etc.

New Care Delivery Models Are Emerging

  • Tech-enabled healthcare services – Companies that offer healthcare through technology
    • Clinical staff employed as 1099s
    • No brick and mortar footprint
    • Bundled services into a recurring fee such as PMPM or per unit
    • 50-75%+ gross margin
  • Pure-play healthcare services – Companies that offer healthcare in person
    • Primarily utilize technology for practice management
    • Electronic medical record keeping, billing, coding, scheduling, and patient communication
    • Bill through claims or cash pay; fee-for-service or fee-for-value
    • Clinical staff are full-time employees
    • 30-60% gross margin depending on if there is a B&M footprint

How Have Physicians Been Managing the Pandemic?

  • Reduction in small practices – The percentage of physicians who own their own practice has been falling over the long and short term (75% in 1980s to 44% today)
  • Otherwise consistency in how physicians organize – Other than the decrease in solo practices, there is some consistency in how physicians organize (multi-specialty group, single specialty group, etc.), and there has been a gradual increase of physicians who work in very large practices (12% in 2012 to 17.2% today); there has also been a sharp jump in physicians from physician-owned practices to hospital system-owned practices – 60% in 2012, 49% in 2020 – this could be because of physician burnout
  • Patient experience in physician-owned practices is typically a little bit higher. There is genuine concern around the decreasing number of physician-owned practices. The complexity and hurdles for physicians to manage their own practices keep getting higher and higher
  • Private equity is now in the mix, with some practices owned by PE
  • Compensation is changing – Physicians are increasingly compensated with salary + bonus, with a reduction around productivity metrics. Their compensation is also getting a lot more complicated
  • How do physicians evaluate new innovations?
    • Does the innovation work?
    • Will they get paid? (It’s important to understand how your innovation may or may not be reimbursed)
    • Can they get sued/are they liable?
    • How does it integrate into their workflow?
  • The face of the physician workforce is changing – More diversity, more women, more focus on digital, less hierarchical teams

What is the CPT®?

A unified language of descriptive terms and unifying codes. It accurately describes all services and all procedures – medical, surgical and diagnostic services including telehealth, digital medicines and therapeutics, vaccines, and AI. Its intended use is for reimbursement, but its ancillary effect is that it enables effective, standardized, reliable nationwide communication among physicians, patients, and third-parties (e.g. nurses).

CPT® codes are a common language, and consumers want this language in a format they can understand. CPT® has consumer descriptors available to make it clear how treatments are actually being done. This is important, because when it comes to health equity, this helps remove barriers to patient-physician relationships and increases adoption – everyone is on the same page (literally).

The CPT® has been around for a long time, but became a HIPAA mandated standard around 20 years ago. However, the code set will need to change very quickly to represent current medicine as there is an explosion of precision medicine happening right now – and all the opportunity that comes with it. Plus, with the rise of digital medicine there is more of a need than ever for interoperability. Over the last decade there have been 1,100 net-new codes added – with just over 10,000 codes in the system in 2021.

Why Care About CPT® Codes?

  • Credibility – CPT® codes are the language of medicine. Care provided by physicians is captured by CPT® codes – including how a treatment is described, characterized, and executed
  • Coverage – Insurance companies use CPT® codes to describe how procedures are covered
  • Adoption – One of the key questions that physicians ask when confronted with a new tool or procedure is whether they will be reimbursed for using it
  • Reimbursement – This is the obvious one – CPT® codes are the core piece of this process

CPT® Code Categories

  • Category I is the gold standard – contemporary, tested, and valued – This category includes evaluation & management, anesthesia, surgery, radiology, pathology, etc. 80-90% of all codes are Category I
  • Category II measures quality of patient care
  • Category III contains a lot of the more innovation areas (e.g. proprietary laboratory analyses, MAAA administration, and emerging technologies)

Getting Started

So? What does the CPT® process look like at a high level? Well, for one, while it may only take 3 months or so for a company to apply and clear the CPT® editorial panel – expect it to take much, much longer to clear the Specialty RVS Committee – this often takes years. Additionally, there are a lot of parallels with the FDA approval process as well as device development – consider CPT® to be a duplicate effort (to some extent) and don’t hold off on getting started – think about what you need in terms of CPT® requirements early on.

1. Start the Conversation – This should happen prior to FDA approval, while in the late stages. Startups should review the CPT® application process, and get advice from medical advisories. It’s important for companies to have a connection with a particular specialty, they will want that clinical reference for when they take their application to the CPT®. A startup’s innovation needs to resonate with physicians, since they will take it to physicians

2. Apply for CPT® – Applications are due 12 weeks before the panel meeting

3. The CPT® editorial panel/CMS request

    • This panel has the sole authority to create, revise, and update codes, descriptions and applicable guidelines for appropriate CPT® coding.
    • They have three face to face public meetings per year, and consist of 17 members appointed by the AMA board – representing clinical expertise from all of medicine.
    • CPT® members do not advocate for their specialty or organization once named to the panel and CPT® coding is determined using an evidence & criteria based, clinically valid, and deliberation-driven process.
    • The panel is advised by a committee of over 100 medical specialty advisories as well as organizations representing non-physician healthcare professionals (e.g. physical therapists). It is in an innovator’s best interest to have their innovation and plan reviewed by these advisories prior to submission to the CPT® editorial panel.
    • Finally, applications are reviewed by the AMA staff. Once complete, agenda and ballot items created for upcoming meeting are posted 30 days in advance and until the application is presented on the floor of the panel meeting, it can be withdrawn
    • Applicants attend and answer questions from the panel and reviewers, and there is an opportunity for input from the general audience (these meetings are public, and it is worth a startup’s time to attend these public meetings and get a feel for how they are run in advance of their own editorial panel)

4. Level of interest – The result of the review process includes accepting a code as Category I or III, rejecting, postponing, or tabling it – applications will be reviewed both by the panel members as well as their advisors and other interested parties (including tech manufacturers, third-party payers, hospitals, and others) – this may lead to revisions being required

5. Survey – As a code is approved, a survey goes out to all the medical specialties to indicate if they have interest in participating in a broad series of surveys to understand how to value this service, what are the inputs, practice inputs – even things as small as how many bandages, etc. It gets pretty granular

6. The Specialty Society RVS Update Committee (RUC) – The RUC undertakes a secondary process when CPT® codes are created. They take into account practice expenses, medical liability, physician time, liability insurance, etc. – the output of that work provides a valuation or relative value scale around the resources required to provide the work

7. Centers for Medicare and Medicaid Service (CMS) & Medicare payment schedule – Medicare will look at the RUC when they are taking a look at their fee schedules. Medicare implements a resource-based relative value scale. So services that have higher intensity operative procedures will have much more value than a standard office visit. This is the objective process for how costs are evaluated – the Resource-Based Relative Value Scale (RBRVS). When looking at the RBRVS – remember that the CPT® and RUC determine the RBRVS

Bonus comment: There has been an increase in the number of Category III codes being applied for. In the past, many thought of Category III as the kiss of death because it’s a non-reimbursed level code, however private payers are starting to reimburse for them (albeit, that takes some effort from the companies). Category III codes used to have a shelf life of 5 years, but it seems to be longer now, before they are moving to Category I

What are the high-level components needed for Category I and Category III applications?

  • The proposed descriptor must be unique, well-defined and describes a procedure or service which is clearly defined and distinguished from existing procedures and services already in CPT®
  • The description structure, guidelines, and instructions are consistent with current Editorial Panel standards for maintenance of the code set
  • The proposed descriptor for the procedure or service is neither a fragmentation of an existing procedure or service nor currently reportable as a complete service by one or more existing slides – however, procedures and services frequently performed together may require new or revised codes
  • The structure and content of the proposed code descriptor accurately reflects the procedure or service as typically performed
  • The descriptor is not proposed as a means to report extraordinary circumstances related to the performance of a procedure or service already described in the CPT® code set
  • The procedure or service satisfies the category-specific criteria
  • Category I is a more stringent standard:
    • All devices and drugs necessary for performance of the product or service have received FDA clearance if that is required
    • There is widespread use across the US
    • The procedure is performed frequently with intended clinical use/high volume (unless it’s a rare clinical condition with low volume)
    • Must be consistent with current medical practice
    • Clinical efficacy is documented in literature that meets the requirements set forth
  • Category III is a less stringent standard:
    • The procedure or service is currently or recently performed in humans, and at least one of the following criteria has been met: The application is supported by at least one CPT or HCPAC advisor representing practitioners who would use this procedure or service, or the actual (or potential) clinical efficacy of the procedure or service is supported by peer reviewed literature, or there is at least one Institutional Review Board approved protocol of a study of the procedure or service being performed, a description of a current and ongoing US trial outlining the efficacy, or other evidence of evolving clinical utilization

How do functionally similar devices differentiate themselves for the CPT® – For example, monitoring something with a needle vs. external to the body?

In the majority of cases the treatment won’t be connected to a specific device – it won’t be proprietary or a brand name – it will be about the work being done. So, the key differentiator becomes: How is the service different?

Depending on the answer to that question, something will either be worthy of a brand-new code, or a code-change application. Code change applications are when an applicant is just looking for a change to an existing application (e.g. it’s not a brand new set of work,  it’s something very similar – and a startup is just asking for that code to be modified). However, if there is a brand new set of work, or perhaps if there is a supply code associated with the service, and the type of supply was really different, a separate code will be needed

What does the CPT® code change application actually look like at a high-level?

  • Name/address
  • Legal forms
  • FDA status
  • Rationale
  • Proposed new code descriptor, parentheticals, guidelines
  • Current CPT® codes in use, differences from other established codes
  • Who typically provides the service?
  • Conditions to treat
  • Utilization data
  • Studies/literature
  • Known guidelines/policy
  • Clinical vignette and description of service
  • Final attestations & signature

How much guidance does the American Medical Association offer during the CPT® process?

The AMA is not a consultant – however they have a lot of organized materials and resources, as well as a CPT® network where they can answer specific coding questions for a small free. Innovators can also ask questions about the application for free. When an innovator puts in a new application it’s assigned to an AMA staff member who will serve as a bit of a shepherd.

Coding guidance resources: https://www.ama-assn.org/practice-management/cpt/need-coding-resources

More information on submitting an application: https://www.ama-assn.org/practice-management/cpt/cpt-code-change-applications

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