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By Herb Newborg

AMA Monopoly on CPT Codes: Blocking Comparison Shopping and Fraud Detection
The AMA receives the bulk of it’s nearly $300 million in annual revenue from royalties and book sales by controlling these codes. But what are the unseen costs?

The American Medical Association has a federally approved "monopoly" of the codes that providers use to define Medicare and Medicaid outpatient services. Third party payers also use these codes which are central to our nation’s outpatient medical billing system.

Current Procedural Terminology (CPT) codes are numbers assigned to every task and service a medical practitioner may provide to a patient including medical, surgical and diagnostic services. They are then used by insurers to determine the amount of reimbursement that a practitioner will receive by an insurer.

The AMA receives the bulk of it’s nearly $300 million in annual revenue from royalties and book sales by controlling these codes.

By aggressively guarding its copyright in court, the AMA has also been able to control who uses the codes and who knows what about the cost of doctor services.

The intellectual property rights in a federally mandated billing system for Medicare and Medicaid has a major impact on public policy. Americans should not have to pay more for their health care because the AMA owns the nation's outpatient billing system.

The federal government sets the costs that doctors can charge Medicare and Medicaid for various medical procedures. But by owning the codes that define each procedure and controlling who has access to that information, the AMA is keeping the public in the dark about "comparison shopping" for doctors and forcing private insurers to adopt the AMA's billing standards as well.

The current Medicare billing system has been in place since 1983, when the federal government granted the AMA exclusive use and copyright of the "current procedural terminology" (CPT) code system for the purpose of reimbursing Medicare and Medicaid bills from doctors for outpatient services.

Prior to 1983, there were various competing coding systems. But the Department of Health and Human Services (HHS) signed an agreement with the AMA to develop its own set of codes to be used by health care practitioners to submit bills for reimbursement to Medicare and Medicaid. The current CPT coding system was the result of this joint effort between HHS and the AMA.

Medicare and Medicaid then declared CPT a required component of anyone billing the Medicare system. Insurance companies followed suit and adopted CPT as well.

Next, in 1996, Congress authorized HHS to select the code sets the health care industry must use for processing electronic health care claims. HHS mandated use of the codes it had jointly developed with the AMA (the CPT system).

But this monopoly system has hampered efforts to reduce fraud in billing the government and in allowing patients to shop for reasonably priced health care.

The AMA has been able to impose on the entire nation the AMA's obviously self-interested policy against consumers comparison shopping for medical care based on price by suing Web sites and others to prohibit them from posting comparisons of doctor and other medical fees on the Internet using the CPT code. Comparison shopping and proper billing to avoid mistakes and fraud are two of the most potent weapons we have to combat the routine double-digit increases in health care costs.

Unfortunately, the AMA has taken these weapons away.