Medical billing relies on standardized code sets to translate complex healthcare services into claims that payers, such as Medicare, can process for reimbursement. The two primary systems are Current Procedural Terminology (CPT) codes, which describe medical procedures and physician services, and the Healthcare Common Procedure Coding System (HCPCS) Level II codes, covering supplies, equipment, and non-physician services. C codes represent a specialized, temporary subset of codes created for specific financial and regulatory purposes within this structure. They serve a highly focused role in ensuring timely payment for certain new items and services before permanent codes are established.
Defining C Codes in Billing
C codes are alphanumeric billing identifiers that belong to the HCPCS Level II code set, which is managed by the Centers for Medicare and Medicaid Services (CMS). They are uniquely characterized by the letter “C” followed by four numerical digits (Cxxxx). These codes are temporary in nature, established solely by CMS, unlike CPT codes which are maintained by the American Medical Association (AMA).
The primary function of C codes is to provide a mechanism for hospitals to report specific items or services that do not yet have a permanent code assigned to them. This temporary status is designed to bridge the gap between a new item entering the market and the lengthy process of establishing a permanent CPT or HCPCS Level II code. C codes are almost exclusively used by hospital outpatient departments for claims submitted to Medicare, facilitating billing for high-cost items, medical devices, and certain drugs in the outpatient setting.
The Outpatient Payment System Context
The existence and necessity of C codes are directly linked to the Medicare Hospital Outpatient Prospective Payment System (OPPS). The OPPS is the mechanism by which Medicare reimburses hospitals for most outpatient services, grouping them into payment categories called Ambulatory Payment Classifications (APCs). C codes are required specifically for providers billing under this system, particularly for services that qualify for “pass-through” payments.
Pass-through payments are temporary additional payments provided by the OPPS for certain new medical devices, drugs, and biologicals that meet specific criteria. This mechanism ensures that hospitals are not financially penalized for immediately adopting and utilizing qualifying new technologies before sufficient claims data exists to set a permanent, appropriate payment rate. The C code acts as the reporting tool for these items, allowing the hospital to receive separate reimbursement outside of the standard, bundled APC payment.
The use of C codes enables CMS to track the utilization and cost of these novel items as part of the pass-through process. This data collection is crucial for evaluating the technology and determining its final assignment to an Ambulatory Payment Classification or a permanent code. The temporary code thus facilitates the timely integration of medical innovation into the healthcare system.
Services Billed Using C Codes
C codes are assigned to a distinct set of services and supplies that require immediate billing capability within the hospital outpatient environment.
New Medical Devices
A major category includes new medical devices that qualify for transitional pass-through payments under the OPPS. These can be high-cost, specialized implants or equipment, such as drug-coated transluminal angioplasty catheters or certain types of internal fixation anchors. A C code is used to report the device itself during an outpatient procedure, ensuring separate reimbursement.
Drugs and Biologicals
C codes are also used for new drugs and biologicals administered in the hospital outpatient setting that meet the criteria for pass-through status. These may include newly approved injectable medications or therapeutic biological agents that are high-cost and lack an established payment rate. By using the C code, the hospital can be reimbursed for the drug cost separately, which is an important consideration for expensive pharmaceuticals.
New Procedures and Services
C codes can be assigned to new procedures or services being evaluated by CMS that do not yet fit into an existing CPT or permanent HCPCS code structure. This temporary coding allows providers to accurately bill for the service while CMS gathers the necessary information on resource consumption and clinical similarity to other services.
Transition and Expiration
The temporary nature of C codes means they are subject to a defined lifecycle that culminates in their removal from the code set. C codes are typically active for a limited period, often a few years, during which CMS collects the necessary cost and utilization data. Once the item or service has been sufficiently tracked and evaluated, CMS will retire the C code and transition the item to a permanent billing code.
This transition usually involves replacing the C code with a permanent CPT code or a permanent HCPCS Level II code, such as a J-code for injectable drugs. The permanent code is then mapped to the appropriate Ambulatory Payment Classification (APC) for ongoing payment under the OPPS. Providers must closely monitor the annual OPPS updates, as failure to transition from a retired C code to its permanent replacement can result in claim denials and delayed reimbursement.