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[Informative article and history on Medicare Billing L-Codes from The O&P Edge]
16 Dec 2008 Note: a new ICD set will apply soon. ICD-10.]

L-Codes: Are They Meeting the Needs of O&P?

By Miki Fairley

Regardless of your view toward the United States L-Code system and its reimbursement methodology, there is no arguing that the system is complex, as shown by the plethora of coding seminars, manuals, and software available to help navigate its maze. But given the unique nature of O&P–the only healthcare specialty that inextricably links expertise and specialized education to providing a device–complexity may be unavoidable.

“I think the L-Code system overall accurately reflects the complexity of the prostheses or orthoses that we provide although there are a few codes that are not accurate,” says Mike Allen, CPO, FAAOP, owner of Allen Orthotics & Prosthetics Inc., Midland, Texas.

But virtually everyone agrees that there are some difficulties with the system as it exists today.

What are these? What has caused them? What are the solutions? History Sheds Light

As Nobel Prize winner Pearl S. Buck said, “If you want to understand today, you have to search yesterday.” In that spirit, delving into the past can help answer these questions.

The L-Codes helped bring order to a chaotic world. Before L-Codes, prosthetists and orthotists simply billed their own individual fee for each individual service. Prices and terminology varied. “Some insurance companies just asked people to describe on a claim form what they did,” says Kathy Dodson, senior director for government affairs for the American Orthotic & Prosthetic Association (AOPA). “Some insurers had developed a coding system, but there was no consistency [among] different companies, or sometimes even within the same company at different locations. There was no uniform method in O&P for billing and describing services and devices provided.”

“When I first entered the O&P field 34 years ago, there were no L-Codes, no procedure codes,” recalls Jim Kaiser, CP, CEO and clinical and administrative director at Scheck & Siress, Oakbrook Terrace, Illinois, and vice president of the AOPA Board of Directors. “It was difficult for insurers to compare apples to apples.”

“I remain convinced that no more effective approach [than the L-code system] has been developed anywhere else in the world–despite the limitations of this approach.” –John Michael, MEd, CPO, FAAOP, FISPO

“Payers wanted help in developing a consistent, logical method to describe ways services were being provided,” says John Michael, MEd, CPO, FAAOP, FISPO, an O&P consultant, author, lecturer, and former president of the American Academy of Orthotists and Prosthetists (the Academy).

Birth of the L-Code

AOPA and Blue Cross Blue Shield of South Carolina developed the first template for the L-Code system in the 1970s. Blue Cross Blue Shield of South Carolina applied the pilot system in 1979; other insurance companies followed. “It seemed successful both from the insurers’ point of view and the practitioner point of view because now everybody was speaking the same language, and it was easier for practitioners to bill claims–they could just indicate the code,” Dodson says.

A base code described the simplest possible procedure, including costs of materials, related costs, and the professional services involved, explains Michael. In addition to the base code, there was a series of add-on codes that could be applied if more-complex care was appropriate. “The system consistently and accurately described the various levels of complexity of care,” Michael says. “Once you became adept at using it, you could very precisely describe what had been done. There was an allowable associated with each level of complexity and technological sophistication.” Thus, fees were directly related to the services delivered.

As the profession went through the learning curve of the new methodology, there were some glitches.

“Many of the practitioners were not using the codes appropriately,” Allen recalls. “We would be using the same codes but different descriptors. [We] were having problems interpreting the codes. However, our use of the L-Code system has gotten much better because now we’ve been working with it longer.

“It’s not the smoothest coding system–some codes and descriptions are clear, but so many others are vague and subject to interpretation.” –Joyce Perrone

The Health Care Financing Administration (HCFA), the previous name of the Centers for Medicare & Medicaid Services (CMS), adopted the South Carolina system and established the Healthcare Common Procedure Coding System (HCPCS) in 1978. The HCPCS was established to provide a standard coding system for describing the specific items and services provided in healthcare delivery. L-Codes are included in HCPCS Level II codes.

As explained by CMS, HCPCS includes three levels of codes:
  • Level I: The American Medical Association (AMA) Current Procedural Terminology (CPT®). The AMA owns the CPT codes and decisions regarding the addition, deletion, or revision of codes.
  • Level II: Includes codes that identify services, products, and supplies not included in the CPT codes, such as ambulance services and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS), when used outside a physician’s office.
  • Level III: Also called “local” codes, these were developed by state Medicaid agencies, Medicare contractors, and private insurers for use in specific programs and jurisdictions. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) required CMS to adopt standards for coding systems used in reporting healthcare transactions. CMS published regulations in 2000 to implement this part of HIPAA, which included elimination of the local codes by October 2000. However, under the Benefit Improvement and Protection Act of 2000 (BIPA), the elimination of local codes was postponed through December 31, 2003.
Reimbursement Methodologies Evolve

It’s important to note that an HCPCS code is totally different from reimbursement. According to CMS documentation, “HCPCS is a system for identifying items and services. It is not a methodology or system for making coverage or payment determinations, and the existence of a code does not, of itself, determine coverage or non-coverage for an item or service.”

As the L-Code system began to be implemented, a “profile” reimbursement method was used, in which a profile of each providers billing activity was developed as the basis for reimbursing that particular provider. As Allen explains, “In 1979, when I started my first company, West Texas Prosthetic Services, I applied for my Medicare supplier number. Medicare then began a profile for my company. After two years of billing charges to develop a profile, I was paid according to some computational formula based on my historical usual and customary charges.”

Obviously, facilities that systematically billed high-end rates would automatically receive higher Medicare reimbursements than facilities billing at more reasonable rates, regardless of the quality of services provided. Medicare also had the onerous responsibility of maintaining profiles on hundreds of separate facilities. Thus, the fee schedule system was born.

Allen and his colleague Jim McFarlan, CP, were heavily involved in working with Blue Cross Blue Shield of Texas in the conversion to the new fee schedules. “AOPA was very concerned about the accuracy of the fee schedules and urged practitioner involvement in every state to make sure the transition was accurate.” Practitioners responded to the call, and in Texas, “We were able to affect the allowables in 127 L-Codes,” Allen says.

When the fee schedules were created in 1989, Medicare used the usual and customary and reasonable allowables for each of the existing codes for the 12-month period comprising the last half of 1986 and the first half of 1987 to arrive at the allowable assigned to each code, Dodson explains. This fee schedule amount was basically an average of the allowables for those time frames for those codes.

This basic fee schedule only changes each year if Congress passes a bill for a change, increasing or decreasing an amount for a certain time frame, or freezing the amount. The current law states that O&P will receive an annual increase equal to the Consumer Price Index-Urban (CPI-U), unless Congress mandates otherwise.

New Codes, New Devices

Determining fees for new codes, if there is no previous or temporary code that can be crosswalked into the new code, is a complex process.

The process begins with CMS accessing information through the Durable Medical Equipment Medicare Administrative Contractors (DME MACs) to help determine the actual cost of the device and what the going payment rate is outside of Medicare.

Information is gathered from O&P practitioners, manufacturers, private insurers that may already be paying for the device, and Internet searches. CMS tends to use information from the lower end of the spectrum from manufacturers not used by, or even unknown to, the O&P community, Dodson notes.

Once CMS has sufficient information, “They do their magic and come up with an allowable,” Dodson says. The agency then deflates the fee back to costs in the 198687 base period, then reinflates it through a complex formula to factor in whatever fee increases Congress has mandated since then.

Of course, since the cost of living and overall costs of doing business have considerably outstripped congressional fee increases, the new fee frequently does not accurately reflect real-world costs.

CMS follows the rules carefully in fulfilling mandates regarding reimbursements, Michael feels. “All the problems Im aware of come from inaccurate data they have received from the
SADMERC [Statistical Analysis Durable Medical Equipment Regional Carrier] or from inaccurate definitions of codes determined by the HCPCS Workgroup that mixes apples and oranges.”
Problems, Potential Solutions

The L-Code system is not without its flaws. Persons interviewed for this article identified the following as major problems:
  • There is an overlarge number of codes, many of which are unclear and outdated.
  • New code development is not keeping pace with rapid advances in O&P technology and the time and expertise required in the service component, thereby impeding the introduction into the marketplace of new technology that can benefit patients.
  • CMS has failed to crack down on unqualified providers in states with O&P licensure, which can contribute to misuse of codes, as well as fraud and abuse. BIPA mandates that in states with licensure, O&P services must be provided by licensed practitioners. Depending on each states individual licensure law, these providers can include other disciplines as well as traditional O&P providers.
  • There is ongoing confusion of O&P with DME in the minds of payers, lawmakers, and regulatory agencies.
‘Flawed Implementation’?

“I don’t think the system is flawed,” Michael says. “In fact, I continue to think it’s one of the best, most workable systems in the world, but it is not being implemented in an effective way.

“The system was originally developed by experts and intended for the use of experts,” he continues. However, unlike the CPT codes, which have been kept under the control of the AMA, control over the L-Codes went away from traditional O&P, which may have been unavoidable, Michael observes. The result has been a muddying of the waters in the application of the system.

Again, history sheds light on today’s situation.

At the time the L-Code system was created, the overwhelming majority of O&P services were custom-made to an individual patient model, Michael explains. “However, in the 1980s, we began to see the rise of less-than-custom-made devices.” For instance, body jackets for children with adolescent idiopathic scoliosis began to be made from a basic shape or module that would fit, with modifications, about 80 percent of the patients. “It seemed like a good idea at the time; you could bypass the plaster impression stage, which…was hard on many child patients, and modify and custom-fit a patient with essentially the same results as a totally custom-made device.”

The O&P profession pursued this idea and encouraged the adoption of codes to allow certain custom-fitted devices considered by industry experts to be functionally equivalent to the custom-made alternatives.

“But once we opened that door, since Medicare steadfastly refused to have any standards for the provision of O&P care, people who had no knowledge and training started coming in, claiming they had a non-custom solution that was just as good,” Michael says.

Over time, while Medicare was becoming concerned with problems of coding accuracy, the SADMERC was systematically removing descriptors such as “custom-made,” which made the codes much less strict, more generic, and harder to apply to a specific case, he continues. “They didn’t like having multiple codes, such as one for a ‘custom-made’ solution, and another for a custom-fitted solution. When you don’t have that distinction, it’s hard for non-experts to know when a device is truly fitted with great complexity or is just barely above off-the-shelf.

“Thus, the accuracy of the coding began to erode in the 80s and accelerated in the 90s. That brings us to today, where many people now feel that some of the codes are unclear and some are inaccurate, and we continue to have access to the codes by non-experts. That sort of confusion is not getting better; in fact, it’s getting worse.”

A bright spot is that AOPA appears to be developing a better working relationship with the SADMERC, which has significant influence on the outcome of coding decisions made by CMS, Kaiser notes.

Part of the problem lies not with an unwillingness on the part of CMS to improve matters, but simply in the sheer size and complexity of its systems, Dodson says. For instance, it is difficult for the HCPCS codes to keep up with advances and changes in technology. “The development of new codes is an annual process, and it’s relatively difficult. It’s not a nimble system where changes are easily made. There certainly have been a number of instances where the technology has far outstripped the codes.”

Dodson continues, “Medicare realizes the problem, but [changing it is] not a quick process.” Currently, any changes–whether to create or delete a code or change wording to a code–have to go through the entire HCPCS Workgroup, which is responsible for not only the L-Codes, but also a multitude of others, such as E-Codes for DME, V-Codes for vision, A-Codes for therapeutic shoes, and more, including the huge number of drug codes for Medicare-covered pharmaceuticals. Its very difficult to remove outdated codes, Dodson explains. Because the HCPCS system is mandated across all insurers, CMS cannot simply remove a code that it no longer needs, since other payers may still be using it.

Regarding what appears to be non-enforcement of BIPAs “qualified provider” requirements in states with O&P licensure, Dodson notes that AOPA has called CMSs attention to the problem. “Medicare is concerned and looking into it. Part of the problem lies with its current computer systems. It’s not that CMS has simply decided not to enforce the law, but its systems don’t seem at the moment to be fully capable of editing claims to prevent payment to unqualified persons.”

However, in a development that might inspire other O&P professionals across the country, licensed O&P providers in Illinois have gotten the upper hand over unqualified claimants in the realm of private insurers, according to Kaiser. “Licensing can help the profession in many, many ways. Blue Cross Blue Shield of Illinois has already recognized licensed providers as the qualified providers to bill L-Codes, and other insurers are following the lead. For instance, Blue Cross Blue Shield is not allowing podiatrists to both prescribe and dispense foot orthotics, recognizing a potential conflict of interest in, perhaps, prescribing unnecessary orthotics.”

Blue Cross Blue Shield of Illinois has established a specific network of licensed O&P providers, Kaiser continues. Scheck & Siress had recommended that the insurer look into the over-utilization of certain L-Codes, and how these were being abused by unlicensed providers. “They evaluated the situation and found that it is unquestionably in their best interests to restrict the billing of L-Codes to licensed providers,” Kaiser says, adding, “This is a goal we would like to see established nationwide.”
Ideas for Solutions

Both Kaiser and Allen have ideas for improving the L-Code system, albeit opposing ones. Noting that O&P practice and technology has changed greatly in the 30-plus years since the system was created, Kaiser feels that reimbursement should reflect the far greater amount of time and expertise now required for follow-ups. He suggests deleting all L-Codes not related to custom O&P, such as those for off-the-shelf orthoses, and restricting L-Code billing to certified and/or licensed orthotists, prosthetists, and pedorthists, who would have to meet continuing education requirements to keep up with new technology and other advances. Non-custom categories could be billed under another type of code and could allow billing by other providers as well as traditional O&P. Besides opening the door for fairer reimbursement for the increase in time and expertise required at the higher level of O&P care, restricting the L-Codes in this way could eliminate much of the current fraud and abuse, Kaiser believes.

Allen would like to see the codes reach a higher level of specificity for accurate description of devices, which might require more codes, he notes. He also would like to see all the codes that relate to orthotics, prosthetics, and pedorthics brought under the L-Code umbrella, rather than being included in other code listings. In a practical way, this would simplify billing and maintaining a coding database in the facility; rather than searching several code sets, the practitioner could simply search one, he notes. Coding updates and changes could be more quickly and easily incorporated into the database.

One bright spot Allen sees is the development of the CMS National Correct Coding Initiative (NCCI) to promote correct coding methodologies and to control improper coding. Although the NCCI Coding Policy Manual currently covers very little O&P, if it extends further, it could be a valuable aid. ( Editor’s note: For more information, visit www.cms.hhs.gov/NationalCorrectCodInitEd )

As for the near future, it appears that CMS may consolidate some codes and their associated reimbursements, according to some of the persons interviewed. The industry needs to be
vigilant, they add, to help ensure that any code and reimbursement changes accurately reflect provider time, expertise, associated costs, and contemporary O&P practice, and are not
simply for the purpose of reducing reimbursements.
Separating O&P from DME

Impeding progress in coding and reimbursement issues is the ongoing problem of separating O&P from DME in the minds of legislators, CMS, insurers, and the public–a dragon that has yet to be slain.

“On the books, we are legally separate from DME,” Dodson says. “We are a separate benefit, paid under a different system. The problem comes in with the administration of Medicare. Since [O&P is] small, it’s not financially feasible for Medicare to have a totally separate claims processing system for us.” O&P has been grouped with DME administratively since both involve supplying devices.

“[AOPA] constantly works to educate not only payers and lawmakers about the difference and what O&P is and does, but also the general publicand we are stepping up that campaign.” For instance, AOPA recently placed an ad in the financial section of USA Today to explain and promote O&P.

“But there’s no magic bullet where everyone is going to wake up one day and say, Of course, O&P is different!?” says Dodson. “Frankly, it’s an ongoing effort.”

Joyce Perrone, Promise Consulting Inc., Pittsburgh, Pennsylvania, also sees the confusion with DME as a major underlying problem for O&P in legislation and reimbursement.

“O&P is small; we don’t have the financial backing that the AMA and the big pharmaceutical companies have. That’s why we have to be more vocal. We can’t just have a victim mentality and say, Well, that’s just the way it is. We can’t just have a small handful of people who are vocal–we all have to be vocal and involved to be listened to on the Hill and in CMS.”
Better Bottom Line

Although facility owners may not be able to change everything on the big stage, they can make their own business operations more efficient and thus more profitable, Perrone points out. “Stay on top of coding changes, analyze contracts carefully before signing on the dotted line, know where you’re making money, where you’re losing money,” she advises. “Bird-dog supplier invoices to see if you’re actually being billed at the prices quoted in the sales representatives spiel.

“This industry has some of the smartest and kindest people you’d ever meet,” she continues. “They should be getting the rewards they deserve. We’re so small–but in the care that only we can provide to the patients who need us, we’re so important.”

Miki Fairley is a contributing editor for The O&P EDGE and a freelance writer based in southwest Colorado. She can be contacted via e-mail at miki.fairley@gmail.com