Breaking up the CPT Code Monopoly?
The potential impact of RFK, Jr.'s desire to sideline the American Medical Association
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Reporting indicates that Trump Department of Health and Human Services Secretary nominee, Robert F. Kennedy, Jr., has his sights set on dismantling the American Medical Association’s (AMA) control over the language of health care services, the Current Procedural Terminology (CPT) coding system.
The American healthcare system functions on a complex framework of codes and numbers that determine how medical procedures are classified, billed, and paid for. At the heart of this system lies the CPT code set – a comprehensive listing of medical services and procedures that serves as the universal language between health care providers and insurance companies, including Medicare, the nation's largest health insurer.
This article provides a thorough analysis of the coding and valuation system, the ways in which payors use the codes, and how changes might affect the broader health care market. I cannot underscore enough how much this change could fundamentally alter the U.S. health care system, how it functions, how much certain services cost, how certain specialties are valued, relatively. Many of these changes could be positive, while others may have negative impact.
For example, changing the construction, descriptions, and billing rules around the standard office visit codes would fundamentally change the ways in which health care providers operate and how patients experience care during simple visits.
However, while the codes themselves are influential, the ways in which payors assign payment rates to the codes on their fee-schedules may be even more important. If this process is changed or if new codes are created and re-valued under a new system, it could have massive market shaping effects for health care providers, hospitals, medical device companies, laboratories, and any segment in health care services.
Needless to say, this is a critical area to watch, and, while many of RFK, Jr.’s ideas are based in conspiracy theory or otherwise threatening to the medical-industrial complex, this coding system redesign is likely to find both fierce support and staunch opposition in many circles within the Washington, D.C. health policy complex.
The CPT System: A Fundamental Overview
CPT codes are standardized, five-digit numeric codes that describe medical, surgical, and diagnostic services. The system includes more than 11,000 codes, each representing a specific medical procedure or service. These codes are organized into three main categories:
Category I codes represent the most common procedures and services performed by healthcare providers, including office visits, surgical procedures, and diagnostic tests.
Category II codes are supplemental tracking codes used for performance measurement.
Category III codes are temporary codes for emerging technologies and procedures.
When a healthcare provider performs a service, they document it using the appropriate CPT code. This code then travels through the billing system to insurers (now managed via electronic health records and electronic data interchange connections), who use it to determine reimbursement (payment) amounts.
The American Medical Association's Role: A Historical Perspective
What began as a relatively simple coding system has evolved into an essential tool that drives billions of dollars in healthcare spending. Prior to the 1960s, medical billing relied on an inconsistent patchwork of local systems and descriptive terms, leading to frequent confusion and payment disputes. The first edition of CPT, published in 1966, contained just over 3,500 codes and was primarily designed to standardize terminology for medical procedures in California. By 1970, the system had gained national recognition and was endorsed by major insurance carriers, marking the beginning of its transformation into the comprehensive language of health care we know today.
The AMA maintains and updates the CPT code set through its CPT Editorial Panel, established in 1953. This panel, composed of physicians and other healthcare experts, meets regularly (typically three times a year) to evaluate medical advances and determine how new procedures should be coded. The AMA's ownership of the CPT system is significant – they hold the copyright to the codes and charge licensing/royalty fees for their use, generating substantial revenue for the organization. In fact, a review of the AMA’s non-profit IRS Form 990 indicates that these fees are the bulk of the annual revenue for the organization.
This monopoly on the coding system has been both praised for maintaining consistency and criticized for potentially creating conflicts of interest, as the AMA and its members (i.e., physicians) benefit financially from the system's widespread adoption and essentially mandatory use.
The Evolution of CPT Codes: How New Codes Are Born
The process of adding or modifying CPT codes is rigorous and methodical. The journey typically follows these steps:
1. Initial Proposal: Healthcare providers, medical device manufacturers, or other stakeholders submit proposals for new codes when they identify gaps in the current system or when new procedures are developed.
2. CPT Advisory Committee Review: A committee of specialty societies and other healthcare organizations reviews proposals and provides input on their merit and potential impact.
3. CPT Editorial Panel Evaluation: The panel reviews proposals that pass initial screening, considering factors such as:
Clinical efficacy and widespread usage
FDA approval (for device-related procedures)
Published peer-reviewed literature
Support from the relevant medical specialty societies
The Editorial Panel is alleged to be representative of all medical professionals. Twelve of its twenty-one members are appointed by major medical specialty societies along with several other leadership seats. Then there is one seat for the Blue Cross Blue Shield Association, a seat for America’s Health Insurance Plans, a seat for the American Hospital Association, one at-large member organizational member, and one seat for an umbrella organization that represents private health insurers.
4. Public Comment Period: Proposed changes are posted for public comment, allowing stakeholders to provide feedback.
5. Final Decision and Implementation: Approved codes are published in the annual CPT update, typically with an effective date of January 1st of each year.
The entire process can take 12-24 months from proposal to implementation, ensuring thorough vetting but sometimes lagging behind rapid medical advances. The process itself is well-designed, but it is the make-up of the panel and its iron grip on the language of health care services that raises eye brows.
Medicare's Implementation: From Code to Payment
The next most critical component of the coding system after the AMA’s publishing role, is the valuation and pricing processes maintained by both public and private insurers. Generally, the process starts with the Centers for Medicare and Medicaid Services (CMS). Medicare's adoption and pricing of CPT codes represents one of the most influential aspects of the system, as many private insurers follow Medicare's lead in setting reimbursement rates. The process involves several key steps:
Code Valuation
Medicare relies on the AMA's Relative Value Update Committee (RUC) to recommend values for new codes. The RUC assigns relative value units (RVUs) based on:
Physician work (time and skill required)
Practice expense (overhead and equipment)
Professional liability insurance costs
Here is a good overview of the Relative Value Unit.
CMS Review and Rate Setting
The Centers for Medicare & Medicaid Services (CMS) reviews RUC recommendations and sets final values, which are then converted to dollar amounts using a conversion factor. This process includes:
Analysis of supporting documentation
Comparison with similar services
Budget neutrality adjustments
A public comment period
Implementation and Coverage Decisions
Medicare must also determine:
Whether the service meets medical necessity criteria
Which providers can bill for the service
Any coverage limitations or requirements
Quality measures and documentation requirements
These rules occur during the rulemaking process each year on the Medicare Part B Physician Fee Schedule. This is an incredibly influential process that that not only influences the billions in direct spending from Medicare Part B, but also acts as the benchmark rates for private insurers and state Medicaid fee schedules.
Economic and Ethical Implications
The CPT system's influence on health care extends far beyond simple billing mechanics, creating several significant economic and ethical considerations.
Ethical Considerations
One one hand, it makes sense that an organization representing physicians designs the language of physician billing. Accountants set accounting rates and systems. Lawyers set their own systems and standards. It is commonplace for professions to manage these types of systems for themselves and to self-govern. Professional institutions are a bed rock of modern society. However, given the unique nature of health care services and the relationship to public health programs, this is a more complex situation.
On the other hand, the AMA is unelected and has outsized influence over government spending and the delivery of care in government programs. The AMA also does not represent a majority of practicing physicians as members, so there are questions around how much it represents the thoughts and beliefs of the entire profession. Similarly, the coding system is also used to describe services provided by non-physicians such as physical therapists, nurses, ultrasound technicians, and psychologists who often do not have official representation in the process.
However, the most impactful and questionable system is that of the RUC process where there is major influence over Medicare spending and payment rates that shape the care delivery markets, the quality of care, and health innovation.
Economic Impact
While not the domain of the AMA, the coding and billing system's complexity requires substantial administrative resources, contributing to higher healthcare costs. A single hospital might employ dozens of coding specialists, and individual providers must invest in ongoing training and software systems.
The code valuation process can also create economic distortions. Procedures that are easily quantifiable and procedural tend to be valued higher than cognitive services like counseling or care coordination, potentially influencing physician specialty choices and practice patterns. The language of billing fundamentally shapes the mix and cost of services delivered to the general public.
Importantly, for innovative technology companies seeking to improve certain processes, the licensing fees to use the AMA’s coding language may present significant barriers to entry and innovation.
Access to Care
The coding system can also affect patient access to care in several ways:
New procedures may face delays in receiving codes and coverage
Services without specific codes may be harder to obtain
Complex documentation requirements may discourage providers from offering certain services
Now, it is easy to blame the system here for complexity and slowness, but this is a monumental task. Maintaining a language that describes the breadth and depth of medical innovation is daunting.
Innovation and Medical Progress
Interestingly, the coding system's structure can also influence the direction of medical innovation. Manufacturers and providers may focus development efforts on procedures likely to receive favorable coding and payment determinations, potentially at the expense of other promising but harder-to-code approaches. Building a new procedure or service based on existing and well-reimbursed code is often a better business strategy than seeking a new code.
Conclusion
The CPT coding system represents a crucial but complex component of both American and international health care infrastructure. While it provides necessary standardization and enables billing processes, its influence extends far beyond simple administrative functions. The system shapes medical practice patterns, influences innovation, and affects healthcare costs and access.
RFK Jr.’s mission to redesign this process is one to watch closely as it will impact anyone who works, innovates, or invests in health care.