What CPT Codes Are and How to Read Them

Why hospital prices are listed by code

A procedure name like "knee MRI" sounds simple, but hospitals generally do not price by plain-English names. They price by code. Codes give hospitals, insurers and government programs a shared language, so everyone is talking about the same service when a claim is filed.

Open a hospital's price file or a bill and you will usually see codes next to many of the lines. Knowing what the main code types mean can make those documents easier to read and can make it easier to compare the same service across hospitals. For the bigger picture first, the guide on how to use hospital price transparency files walks through the files themselves.

CPT codes: the code for a procedure or service

CPT stands for Current Procedural Terminology. A CPT code is a five-character code that identifies a specific medical service or procedure, such as an imaging study, a lab test, an office visit or a surgery. The American Medical Association maintains the codes.

CPT codes are commonly used for outpatient services. On the procedures page, services are organized so you can look at a given service and see how prices compare across hospitals.

HCPCS and MS-DRG: the other codes you may see

CPT is not the only system. Two others come up often.

HCPCS Level II codes

CMS, the federal agency that runs Medicare, maintains HCPCS Level II codes. They cover items such as supplies, drugs and some services. If a bill lists a drug or a piece of equipment, a HCPCS code may be attached to it.

MS-DRG codes

Inpatient hospital stays are often paid by MS-DRG. Rather than pricing each individual service during a stay, an MS-DRG groups the whole stay into a single category, and payment is tied to that category. An inpatient price may therefore be attached to a DRG rather than to a list of CPT codes.

Revenue codes

Hospital bills often list revenue codes as well. These identify the department or type of service, such as a lab or a pharmacy, rather than the specific procedure. They form a separate layer from CPT and HCPCS, so it helps to keep them apart when reading a bill.

Where codes appear in price files and bills

Under the CMS Hospital Price Transparency rule (45 CFR Part 180), which has applied since January 1, 2021, each hospital in the United States must post a machine-readable file of its standard charges for all items and services. The rule defines standard charges as a set of several figures: the gross charge, the discounted cash price, the charges negotiated with each payer, and the de-identified minimum and maximum negotiated charges. Rows in these files are often tied to one or more codes, which is one way to tell what a price covers.

On an itemized bill, codes generally appear beside each charge. The guide on how to read an itemized hospital bill shows how to match a code on a bill to the line items charged. If a code is unfamiliar, the billing office is one place to ask about it.

The starting point for many of these prices is the chargemaster. As the chargemaster guide explains, this is a hospital's master list of gross charges, which are list prices. Insurers generally pay negotiated rates instead, and many hospitals also offer a discounted cash price for a code. The guide on cash price versus insured rate covers that difference in more detail.

Why one procedure name can map to several codes

This is the part that confuses many people. A single everyday procedure name can match several codes, for a few common reasons.

• Variations of the service. An MRI of the same body area can be coded differently depending on whether it is done with contrast, without contrast, or both. The name sounds the same to a patient, but the codes can differ.
• Separate components. A service may involve a facility charge and a separate professional charge, each with its own code on its own bill. The guide on facility fee versus professional fee explains why one visit can produce more than one bill.
• Add-on items. Supplies, drugs or other items used during a service may be listed under HCPCS codes alongside the main CPT code.
• Different billing paths. Similar care may be billed as an outpatient service under CPT codes or as part of an inpatient stay under an MS-DRG.

The guide on why MRI prices vary shows how these differences can play out. When comparing hospitals, matching on the exact code rather than the plain-English name can make the comparison more like-for-like.

What our prices show, and what they leave out

Clear Hospital Costs publishes hospital prices for Texas and Florida, refreshed from the hospitals' files twice a week. For each hospital, a page lays out the list-price gross charge, the cash price and the rates negotiated with insurers. Those insurer figures can come from Medicare Advantage and Medicaid managed care plans too. Entries that are plainly mistakes in the source data are excluded, following the approach set out on the methodology page.

One caution applies to any of these numbers. The prices here are hospital facility charges taken from the hospitals' own files, not total costs. Physicians such as surgeons, radiologists and anesthesiologists usually bill a separate professional fee, so the full cost of a service can be higher than the facility price alone.

Using codes to ask questions

Once you know a code, it can help in a few ways. You can ask a hospital for the price of a specific CPT code rather than a general description. People who are uninsured or who choose not to use insurance can ask for a good faith estimate; the good faith estimate guide explains how that works under the No Surprises Act. And for questions about a self-pay rate, the guide on how to ask for the self-pay price offers some sample wording.

Codes are not meant to be memorized. They are a lookup tool. When a number on a price file or bill is unclear, the code beside it is often a quick way to find out what the charge covers.