The American Medical Association (AMA) in 1966 developed the Current Procedural Terminology (CPT) system to help classify physician and provider services [1]. It is an AMA-owned product that has grown over the last five decades to cover almost all clinical care services including laboratory tests, radiology services, and ancillary care services. It is managed and administered by the CPT Editorial Board, which meets multiple times a year to review new code applications and review existing codes. The original intent was to assist with classification, reporting, and analysis—the linkage to payment came years later. In 1983, the Health Care Finance Administration (HCFA) (predecessor to Centers for Medicare and Medicaid Services [CMS]) mandated the use of CPT codes for all services billed to Medicare [2].

Until relatively recently in US history, medical care at the physician and facility level was pure fee-for-service, with discretion as to charges and payments left largely to the providers and the insurers. Insurance companies began to negotiate contracts with providers and hospitals for lower than “standard” rates, but it was still largely based off of the “usual and customary charges” for a given geography. When Medicare and Medicaid were created, the government rapidly became the largest single insurer in the country. Unlike the private payers, however, Medicare was spending taxpayer dollars. As the traditional fee-for-service model based on usual, customary and reasonable charges (UCR) grew, the Medicare budget ballooned out of proportion to the rest of the federal budget and the economy in general. The need to standardize reporting of services, and subsequently payment of services, led to the implementation of the CPT coding system for provider services. Hospital services continue to be classified and paid thru the ICD-9 (International Classification of Disease) system. While the original ICD-9 was a diagnosis system only, a procedural code set was also created. In the late 1980s, the government commissioned a study coordinated by Harvard and led by William Hsaio to come up with a way to standardize work and value in provider services. This 3-year project led to the creation of the Relative Value Unit (RVU) as part of the Relative Value Based Reimbursement System (RVRBS). This system assigned a quantitative value to various components of care provision adjusted for cognitive, technical, complexity, and training components. It is fair to say that this created great debate and conflict among the various stakeholders, which continues to this day. However, the system is fairly deeply ensconced now and is the system we work in. When President George H. W. Bush signed the Omnibus Budget Reconciliation Act in 1991, it implemented the use of the RVRBS as the standard for payment for all Medicare services. The RVU scale quickly became the predicate system for all provider reimbursement with private and public payers.