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STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

OGC Op. No. 08-05-09

The Office of General Counsel issued the following opinion on May 20, 2008 representing the position of the New York State Insurance Department.

Re: Health Insurance, Submission of Claims

Question Presented:

Must an insurer utilize the CPT codes furnished by a physician in submission of a claim, and not “bundle” several discrete procedures into one code in payment of a claim?

Conclusion:

N.Y. Ins. Law § 3224-b(a) (McKinney 2008) does not preclude an insurer from “bundling” separate CPT codes in a single CPT code in the evaluation and payment of a claim.

Facts:

An ophthalmologist reports that she would perform a detailed examination, either for a new patient under CPT code 92004, or for an established patient under CPT code 92014, and decide that a further test was required. Accordingly, she would perform a corneal topography under CPT code 92025. The insurer would either indicate that the diagnostic procedure was encompassed within the first code as Evaluation and Management Services (“E/M”), or was experimental. The ophthalmologist further reports that the Center for Medicare and Medicaid Services (“CMS”) will process claims for similar procedures using the Medicare equivalents of both CPT codes.

The New York State Ophthalmological Society’s interpretation of Insurance Law § 3224-b is that the statute prohibits bundling:

In essence,…this law requires that all health plans must “accept and initiate the processing of all health care claims submitted by a physician pursuant to and consistent with the current version of the American Medical Association’s Current Procedural Terminology (CPT) codes, reporting guidelines and conventions and the Centers for Medicare and Medicaid services healthcare common procedure coding system (HCPCS).”

They must recognize the code and “all the associated material contained in the CPT Book” per the reporting guidelines and conventions definition promulgated by the American Medical Association (AMA)….

[This statute] then gives health plans the wide latitude to deny the service per their own in-house policy, but they cannot ignore the code/service by combining or bundling it with other services.

They must “accept and initiate” thereby processing the service as separate and distinct and, after denial if dictated by [this statute]; normal contractual provisions would then apply.

For example, a health plan bundles or combines a diagnostic test with an Evaluation and Management (E&M) exam service, claiming it is part of and incidental to the exam. However, plans ignore the fact that both the test and the exam have separate codes. Additionally, they are not being consistent with the current version of the American Medical Association’s CPT codes, reporting guidelines and conventions (all associated material contained in the AMA CPT book), which states that the “actual performance and interpretation of diagnostic tests or studies during a patient encounter are not included in the levels of E&M service.

Physician performance of diagnostic tests or studies for which specific CPT codes are available may be reported separately, in addition to the appropriate diagnostic code.” (Source: Evaluation & Management Services Guidelines – Page 3 – 2007 AMA CPT.)

Health plans must, therefore, accept (recognize) the code as separate and distinct and process as separate line items. They are then free to apply their own policies and may deny the service according to the dictates of [this statute].

Analysis:

New York Insurance Law § 3224-b(a) is germane to the inquiry. That statute, which addresses the form in which claims may be submitted by health care providers, provides in pertinent part as follows:

Processing of health care claims: This subsection is intended to provide uniformity and consistency in the reporting of medical services and procedures as they relate to the processing of health care claims and is not intended to dictate reimbursement policy.

. . .

(2) Subject to the provisions of paragraph three of this subsection, a health plan shall accept and initiate the processing of all health care claims submitted by a physician1 pursuant to and consistent with the current version of the American medical association's current procedural terminology (CPT) codes, reporting guidelines and conventions and the centers for medicare and medicaid services healthcare common procedure coding system (HCPCS) (emphasis added).

(3) Nothing in this section shall preclude a health plan from determining that any such claim is not eligible for payment, in full or in part, based on a determination that: (i) the claim is not complete . . .(ii) the service provided is not a covered benefit under the contract or agreement, including but not limited to, a determination that such service is not medically necessary or is experimental or investigational; (iii) the insured did not obtain a referral, pre-certification or satisfy any other condition precedent to receive covered benefits from the physician; (iv) the covered benefit exceeds the benefit limits of the contract or agreement; (v) the person is not eligible for coverage or is otherwise not compliant with the terms and conditions of his or her contract; (vi) another insurer, corporation or organization is liable for all or part of the claim; or (vii) the plan has a reasonable suspicion of fraud or abuse. In addition, nothing in this section shall be deemed to require a health plan to pay or reimburse a claim, in full or in part, or dictate the amount of a claim to be paid by a health plan to a physician.

The purpose of the CPT codes is explained by the AMA in its publication listing the codes:

CPT is a systematic listing and coding of procedures and services performed by physicians. Each procedure or service is identified with a five-digit code. The use of CPT codes simplifies the reporting of services. With this coding and recording system, the procedure or service rendered by the physician is accurately identified.

The AMA publication also addresses the limitations of CPT codes:

Inclusion in CPT does not represent endorsement by the American Medical Association of any particular diagnostic or therapeutic procedure. Inclusion or exclusion of a procedure does not imply any health insurance coverage or reimbursement policy.

Further, Classification of E/M services is explained by the AMA as follows:

The E/M section is divided into broad categories such as office visits, hospital visits, and consultations. Most of the categories are further divided into two or more subcategories of office visits (new patient and established patient) and there are two subcategories of hospital visits (initial and subsequent).

The Insurance Department is of the view that so long as the insurer commences evaluation of the submission that contains the CPT codes, the insurer is in compliance with the statutory requirement. Indeed, when the bill was before the Governor for executive action, the Department stated:

Furthermore, nothing in this section requires a health plan to pay or reimburse a claim or dictate the amount of a claim to be paid by a health plan to a physician.

In addition, the New York Health Plan Association (“HPA”), a trade association representing managed care organizations, commented that the bill, if enacted, would have “codified [then] present practice.” The American College of Obstetricians and Gynecologists (“ACOG”), too, took a view that differed from that of the position of the Society:

Unfortunately, not all insurers use the CPT code in the same way. In fact, while many insurers use the CPT code as a base, they will add additional standards for determining how payment will be made for care provided to the patient. . . . This legislation will reduce hassles faced by physicians, their staffs and their patients when submitting claims for services rendered by creating uniformity and consistency among all insurers.

In view of the AMA’s express acknowledgment about the limitations of CPT codes, and in light of the comments of HPA and ACOG, the Department adheres to its belief that there is no statutory prohibition on an insurer’s bundling of several codes for reimbursement purposes.

Further, since the AMA has indicated that “inclusion in CPT does not represent endorsement by the American Medical Association of any particular diagnostic or therapeutic procedure”, there is no legal prohibition on an insurer’s characterization of a procedure as “experimental.” To the contrary, the possibility of such a determination is recognized in Insurance Law § 3224-b(a)(3)(ii). If such a determination is made by an insurer, both the health care provider and insured have all the appeal rights conferred by Article 49 of both the Insurance Law and the Public Health Law.

In conclusion, New York Insurance Law § 3224-b does not preclude an insurer from “bundling” several CPT codes into one global code in the evaluation and payment of a claim.

For further information you may contact Principal Attorney Donald Carroll at the New York City Office.

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1 Ophthalmologists are a specialty sub-set of physicians.

(Opinion 2008-05-09)