When to Use HCPCS Level II Codes: Billing for Supplies, Equipment, and Drugs

HCPCS Level II codes are standardized codes used to bill for medical supplies, equipment, and drugs in patient care. Unlike CPT codes, which describe physician services and clinical procedures, HCPCS Level II codes ensure that all materials, medications, and durable medical equipment are accurately documented and reimbursed.

What HCPCS Level II Codes Are

HCPCS Level II codes (Healthcare Common Procedure Coding System) are alphanumeric billing codes used to describe non-physician services, medical supplies, and durable medical equipment. They start with one letter- A-V, and then four digits.

These codes address very broad areas of items that are necessarily part of patient treatment, such as:

• Surgical supplies
• Injectable medications
• Orthotics and prosthetics
• Ambulance transport
• Durable medical equipment (DME).

CPT and HCPMS are the two components that comprise the entire language of medical billing. CPT is used to deal with clinical procedures and HCPS Level II is used to cover the gaps by coding the physical items and ancillary services related to care. 

This is why understanding HCPCS in medical billing is important for accurate reimbursement and compliance.

Why Are HCPCS Level II Codes Needed in Addition to CPT Codes for Medical Billing?

HCPCS Level II codes are required because CPT codes do not identify medical supplies, durable equipment, or drugs provided during patient care. CPT codes only describe physician services and clinical procedures, while HCPCS Level II codes capture item-based resources that must be billed separately for accurate reimbursement.

These codes are used to bill non-procedural items, including:

• Disposable medical supplies, such as injection materials
• Take-home or post-procedure equipment, such as splints and braces
• Drugs and injectable medications administered in medical facilities

For example:

• A CPT code may describe the procedure of administering an injection.
• The drug administered during that injection must be billed using an HCPCS Level II J-code.
• A CPT code for fracture care does not include the splint or brace applied after surgery, which requires an HCPCS Level II L-code.

Without accurate HCPCS Level II coding, claims may be denied, underpaid, or flagged for incomplete documentation, because payers expect both procedure-based codes (CPT) and item-based codes (HCPCS Level II) to fully represent the services and supplies provided.

How the HCPCS Level II System Is Managed by CMS

The Centers for Medicare & Medicaid Services (CMS) administers and maintains the HCPCS Level II code set to ensure consistent and accurate medical billing nationwide. CMS is responsible for controlling code updates, pricing changes, and coverage alignment across public and private payers.

CMS manages the HCPCS Level II system through the following activities:

• Adding new codes and retiring obsolete codes on an annual basis
• Assigning codes to new medical technologies and emerging treatments
• Coordinating with commercial insurers and Medicare Administrative Contractors
• Publishing monthly updates related to pricing adjustments and coverage determinations

In addition to code maintenance, CMS monitors national code usage to reduce billing inconsistencies related to medical supplies and durable medical equipment. Accurate billing depends on the use of current and valid HCPCS Level II codes, which makes regular review of CMS publications essential for compliant claim submission.

When to Use HCPCS Level II Codes (Clear Scenarios)

HCPCS Level II codes are used anytime a billing scenario involves supplies, drugs, DME, or services not covered under CPT. 

There are particular cases where Level II codes are necessary. Below are the primary conditions that call for their use.

1. Medical Supplies Billing

Medical supplies are among the most common areas requiring HCPCS Level II codes. They are not professional services as they are used in the course of patient care, and therefore, they are not subject to CPT guidelines.

Examples include:

• Surgical dressings
  Gauze, wound packing, bandages, and composite dressings are some of the items that are coded under A-codes under HCPCS.
• Catheters
  Urinary catheters, intravenous catheters and other such supplies also belong in the A-code category.
• A-code examples:
  A4216- Sterile water/saline
  A4450- Tape, non-waterproof
  A4351- Intermittent urinary catheter

Using the correct HCPCS A-code ensures that your medical supplies billings are accurately reimbursed by payers.

2. Billing of Durable Medical Equipment (DME)

Durable medical equipment (DME) refers to reusable medical equipment prescribed for home use and billed using HCPCS Level II E-codes. These items require detailed documentation because they represent high-cost resources that are closely reviewed during the claims process.

DME includes medically necessary equipment such as:

• Walkers, used for patient mobility support
  
• Wheelchairs, prescribed for long-term mobility assistance
  
• CPAP and BiPAP machines, used for respiratory therapy
  

HCPCS Level II E-code examples used for DME billing include:

• E0100 – Adjustable cane
  
• E0601 – Continuous positive airway pressure (CPAP) device
  
• E0143 – Folding walker
  

Accurate DME coding directly affects reimbursement outcomes, because insurers apply higher scrutiny to expensive equipment claims. Correct use of HCPCS Level II E-codes reduces claim delays, prevents denials, and supports compliant medical equipment billing.

3. Billing of Injectable Drugs and Medications

Injectable drugs and medications administered in clinical settings are billed using HCPCS Level II J-codes, which represent the drug itself rather than the administration service. CPT codes describe the administration of a drug, while HCPCS Level II J-codes identify the medication supplied, making this distinction essential for accurate medical billing.

Common clinical scenarios that require HCPCS Level II J-codes include:

Chemotherapy drugs

Chemotherapy medications are billed using highly specific J-codes that are frequently updated. These drugs are reimbursed based on defined dosage units, such as per 1 mg or per 10 mg, which makes correct unit selection critical for compliant billing.

Infusion medications

Medications administered through intravenous infusion, including antibiotics, antivirals, and anti-nausea drugs, are billed using HCPCS Level II J-codes to capture the medication cost separately from the infusion procedure.

Common HCPCS Level II J-code examples include:

• J1100 – Injection, dexamethasone
  
• J2405 – Injection, ondansetron
  
• J9190 – Fluorouracil, chemotherapy drug
  

Accurate selection of HCPCS Level II J-codes ensures reimbursement for both clinical services (CPT) and administered medications (HCPCS Level II), reducing payment delays and preventing drug-related claim denials.

Billing of Orthotics and Prosthetics

Orthotic and prosthetic devices are billed using HCPCS Level II L-codes, which identify custom braces, supports, and artificial limbs provided to patients. These codes represent item-based medical equipment that requires precise documentation for reimbursement.

Orthotic devices billed under HCPCS Level II L-codes include supportive and corrective equipment such as:

Examples of common billable items are:

• Braces and Supports

• • • Back braces
    • Knee orthoses
    • Cervical collars

• Prosthetic Limbs

• • Artificial arms
  • Prosthetic legs
  • Replacement components

• L-code Examples

• • L1810- Knee orthosis, elastic
  • L3807- Wrist-hand-finger orthosis
  • L5856- Microprocessor knee controller

The use of orthotics and prosthetics is usually associated with expensive materials and medical necessity, which means that proper documentation and proper coding are the keys to successful reimbursement.

How Are Services Not Included in CPT Billed Using HCPCS Level II Codes?

Services that do not have a corresponding CPT code are billed using HCPCS Level II codes to ensure complete and accurate claim reporting. These services typically include non-physician services, transportation, and special-use procedures that fall outside standard physician service coding.

HCPCS Level II codes are used to bill supplemental services not represented in CPT, including:

Non-physician services

Certain clinical services performed by non-physician personnel are billed using HCPCS Level II G-codes or S-codes. These services include:

• Counseling services
• Care coordination activities
• Remote monitoring and telehealth support
  

Ambulance and medical transportation services

HCPCS Level II A-codes are used to bill transportation-related services, including:

• Ambulance mileage
• Emergency medical transport
• Specialty care transportation

Relevant HCPCS Level II code prefixes used for non-CPT services include:

• G-codes – Temporary procedures and professional services
• A-codes – Medical supplies and ambulance services

Accurate use of HCPCS Level II codes ensures complete service representation and prevents underbilling, especially when CPT does not fully describe the care provided.

How Is HCPCS Level II Structured? Explanation of A–V Code Prefixes

HCPCS Level II codes are structured using alphabetical prefixes (A–V) to categorize medical supplies, equipment, non-physician services, and drugs by type. This prefix-based structure allows billers to quickly identify, validate, and apply the correct codes for item-based and supplemental services that are not described by CPT.

Each letter prefix represents a distinct category of healthcare items or services, which simplifies code selection and supports consistent medical billing and reimbursement.

How HCPCS Codes Are Formed

All HCPCS Level II codes are structured in the same way:

A-V prefix + four digits 

Example: A4450, J1100, L3807

This alpha numeric system enables CMS to group codes according to the medical usage. The building can be used in a number of ways:

• Normalizes coding throughout the country.
• Streamlines payer grouping.
• Code type perfunctory identification.
• Supports comprehensive HCPCS coding (procedures + supplies + equipment + drugs)

Since every prefix denotes a certain category, billers can easily differentiate between supply codes, drug codes, DME, orthotics, etc.

Typical Groupings of Codes with Examples

The most popular HCPCS Level II prefixes in medical billing are listed below.

1. A-codes: Medical Supplies and Ambulance Services

Dressing, catheters, tubing, sterile water and emergency transportation.

Examples:

• A4216- Sterile water/saline
• A0425- Ambulance mileage

2. E-codes: Durable Medical Equipment

Reimburses reusable equipment that is prescribed to be used at home.

Examples:

• E0143- Walker, folding
• E0601- CPAP machine

3. G-codes: This is Professional or Temporary services

Commonly applied by Medicare to document services that have no CPT equivalents.

Examples:

• G0402- Initial preventive visit
• G0151- Services provided by a physical therapist

4. J-codes: Drugs & Biologicals

Injectable drugs and chemotherapy agents.

Examples:

• J1100- Dexamethasone
• J9190- Fluorouracil

5. L-codes: Orthotics and Prosthetics

Explain braces, supports, prostheses and its parts.

Examples:

• L1810- Knee orthosis
• L5856- Microprocessor knee

6. V-codes: Vision & Hearing

Applied to glasses, lenses, hearing aids, and so on.

Examples:

• V2020- Eyeglass frames

7. S-codes: Temporary Codes to Private Payers

These are not Medicare recognized codes, but common in commercial insurance claims.

 Examples:

• S0595 – Physical therapy assessment

• S1030 Custom- Fitted orthotic shoe

What Are the Major Differences Between CPT (Level I) and HCPCS (Level II) Codes?

CPT and HCPCS Level II codes differ based on whether a medical claim represents a clinical procedure or the supplies, equipment, and drugs used during care. Accurate medical billing requires selecting the correct code set to avoid claim denials, underpayment, or incomplete reimbursement.

What Does CPT (Level I) Cover?

CPT codes describe physician-performed procedures and clinical services provided directly to patients. These codes focus on professional medical work rather than physical items.

CPT codes commonly cover:

• Office visits, such as evaluation and management services
• Surgeries, including minor and major procedures
• Diagnostic testing, such as imaging and lab interpretation
• Therapy services, including physical and occupational therapy
• Medication administration, such as injections and infusions
  

CPT coding represents what the provider does during the patient encounter.

What Does HCPCS Level II Cover?

HCPCS Level II codes identify supplies, equipment, non-physician services, and drugs associated with patient care. These codes represent tangible items and supplemental services that are not described by CPT.

HCPCS Level II codes commonly cover:

• Medical supplies, such as catheters and dressings
• Orthotics and prosthetics, including braces and artificial limbs
• Durable medical equipment, such as walkers, wheelchairs, and CPAP devices
• Injectable medications, billed separately from administration
• Ambulance transport, including mileage and emergency services
• Vision and hearing devices, such as eyeglasses and hearing aids
  

HCPCS Level II coding represents what is supplied, consumed, or delivered outside the clinical procedure.

Why Do Billers Switch Between CPT and HCPCS Level II Codes?

Medical claims often require both CPT and HCPCS Level II codes because procedures and supplies are reimbursed separately. CPT codes report the clinical service, while HCPCS Level II codes capture the items or drugs used to perform that service.

For example:

• CPT = procedure performed
• HCPCS Level II = supply, equipment, or drug used during the procedure
  

Correct use of HCPCS Level II codes ensures that all billable components are captured, which supports full reimbursement and compliant medical billing.

How to Determine the Correct HCPCS Level II Code

Selecting the correct HCPCS Level II code requires reviewing clinical documentation, payer rules, and the type of service, supply, or drug provided. Simply matching a description is insufficient for accurate medical billing and reimbursement.

When a CPT Code Is Not Enough

HCPCS Level II codes are used when a service, supply, or drug is not represented by a CPT code. Common situations include:

• Medication administration – CPT covers the administration; HCPCS J-codes cover the drug itself
• Durable medical equipment – Walkers or wheelchairs require HCPCS E-codes
• Wound care supplies – Use HCPCS A-codes
• Orthotics and braces – HCPCS L-codes are necessary
  

Level II codes are required whenever supplies or equipment are absent from a CPT-coded procedure.

Reviewing CMS Code Lists and Updates

CMS maintains and updates the HCPCS Level II code set annually to reflect new codes, deletions, revised descriptions, coverage changes, and fee schedules. Billers should regularly consult:

• CMS HCPCS Quarterly Updates
• DME MAC publications
• Medicare Physician Fee Schedule amendments
  

Staying current ensures accurate billing of medical supplies, drugs, and DME and prevents claim denials.

HCPCS Level II Billing Documentation Requirements

Proper documentation is essential for accurate HCPCS coding and clean claim submission. Level II claims require evidence supporting:

1. Medical Necessity
   

   • Provider order or prescription
     
   • Diagnosis supporting the need
     
   • Proof the item is suitable for home use
     

2. Detailed Item Descriptions
   

   • Type of item, size, quantity, and duration
     
   • Manufacturer or model (if applicable)
     
   • Lot or batch numbers for drugs
     

3. Supporting Forms
   

   • Certificates of Medical Necessity (CMNs)
     
   • Prior authorization forms
     
   • Advance Beneficiary Notices (ABNs) for Medicare patients
     
   • Delivery and supplier records
     

Strong documentation ensures compliance, accurate coding, and timely reimbursement.

How to Apply HCPCS Level II Codes in Real-World Billing

HCPCS Level II codes are used to bill supplies, equipment, and medications that are not represented by CPT codes. The following examples demonstrate correct usage in common clinical scenarios.

Example 1: Billing a Walker

Scenario: A patient receives a standard folding walker after knee surgery.

• CPT code: Covers the surgical procedure
  
• HCPCS Level II code: E0143 – Walker, adjustable or fixed folding
  

Explanation: Equipment issuance has no CPT code. HCPCS Level II codes ensure that durable medical equipment is properly billed and reimbursed.

Example 2: Billing an Injectable Drug

Scenario: A patient receives an injection of dexamethasone at a clinic.

• CPT code: 96372 – Covers drug administration
• HCPCS Level II code: J1100 – Injection, dexamethasone, 1 mg
  

Note: The total administered dose must be translated into relevant HCPCS units for accurate billing.

Example 3: Billing Orthotics

Scenario: A patient requires a knee orthosis for chronic instability.

• CPT code: 97760 – Orthotic training services
• HCPCS Level II code: L1810 – Jointed knee orthosis, elastic

Explanation: While CPT covers the provider service, HCPCS Level II codes capture the physical orthotic supplied, ensuring complete and compliant billing.

What Are the Most Common HCPCS Level II Billing Errors and How Can They Be Avoided?

HCPCS Level II billing errors frequently cause claim denials, delayed payments, or under-reimbursement. Awareness of common mistakes ensures accurate coding and reduces financial losses.

1. Using CPT Codes Instead of HCPCS

Error: Billing supplies, equipment, or drugs under CPT codes.

• Impact:
  • Denials due to incorrect coding system
  • Loss of payment for supplies or equipment
  • Claim reprocessing delays

Clarification: CPT codes only cover physician procedures and administration services. HCPCS Level II codes are required for drugs, dressings, braces, and durable medical equipment (DME).

2. Selecting the Wrong HCPCS Prefix

Error: Choosing an incorrect letter category, such as using an A-code instead of an E-code.

• Impact:
  • Misclassification of items
  • Incorrect reimbursement
  • Claim refusals for invalid code usage

Solution: Knowledge of HCPCS prefixes (A, E, J, L, etc.) is essential for accurate coding.

3. Missing Documentation for DME

Error: Incomplete documentation for durable medical equipment claims.

• Required documentation:
  • Prescriptions or provider orders
  • Proof of medical necessity
  • Delivery receipts
  • Proper modifiers

Impact: Missing documentation often leads to denials, especially for items billed under E-codes.

4. Private Payer Variations (S-Codes)

Error: Failing to follow commercial payer guidelines when S-codes are required.

• Impact:
  • Billing errors using national HCPCS codes instead of provisional payer-specific codes
  • Claims rejected due to outdated code sets
    

Solution: Verify payer policies before filing claims for supplies, DME, or drugs.

Conclusion: 

HCPCS Level II codes are essential for billing items, supplies, and services not represented by CPT codes. These include medical supplies, durable medical equipment (DME), drugs and injectables, orthotics and prosthetics, and non-physician services.

HCPCS Level II codes are used for billing items such as:

• Surgical dressings, catheters, and wound care supplies
• Walkers, wheelchairs, CPAP devices, and other durable medical equipment
• Infusion and chemotherapy drugs
• Braces and limb prosthetics
• Temporary Medicare services and vision/hearing items
  

HCPCS Level II prefixes categorize these items for accurate billing:

• A-codes: Supplies, catheters, and dressings
• E-codes: Durable medical equipment
• J-codes: Injectable medicines and drugs
• L-codes: Orthotics and prosthetics
• G-codes: Temporary Medicare services
• V-codes: Vision and hearing items
  

Correct use of HCPCS Level II codes ensures:

• Complete and accurate billing of all items and services
• Clean claims submission and prompt payment
• Compliance with CMS and payer regulations
• Reduced errors and prevented underbilling or revenue loss
• Proper documentation of medical necessity

In summary, mastering HCPCS Level II coding supports accurate medical billing, maximizes reimbursement, and maintains alignment with CMS standards.

Frequently Asked Questions

1. When should HCPCS Level II codes be used instead of CPT codes?

Use HCPCS Level II codes whenever the claim involves supplies, equipment, drugs, orthotics, prosthetics, or services that CPT does not cover. CPT refers to procedures; HCPACS refers to items and non-physician services.

2. What types of items or services are covered under HCPCS Level II codes?

HCPCS Level II codes cover a broad range of non-physician services, medical supplies, and equipment not covered by CPT codes. These codes are primarily used for billing tangible medical products such as durable medical equipment (DME), injectable drugs, ambulance services, and orthotics/prosthetics.

3. Who assigns and maintains HCPCS Level II codes?

The Centers for Medicare & Medicaid Services (CMS), through its Alpha-Numeric Editorial Panel, assigns and maintains all HCPCS Level II codes. CMS manages the code set by performing annual updates and quarterly revisions for additions, deletions, and changes.

4. How are HCPCS Level II codes structured?

HCPCS Level II codes are structured as a five-character alphanumeric code, beginning with a single letter (A-V) followed by four numeric digits. The letter prefix identifies the general category or type of the item or service, such as ‘E’ for durable medical equipment or ‘J’ for injectable drugs. This standard structure helps categorize similar items for efficient billing.

5. Do HCPCS Level II codes require documentation for reimbursement?

Yes, detailed documentation is mandatory for reimbursement of HCPCS Level II claims. Required documents include prescriptions or orders and proof of medical necessity to justify the billed supplies or services. Proper documentation, including quantity and unit details, is essential to ensure a clean claim and avoid denials.