Pokes like a stick: Addressing the pain of CPT codes

Providers know the drill: You translate services or products provided to your patient into an AMA-generated CPT code for entry into the patient’s medical record and often into a superbill or insurance claim which is submitted to an insurer. The CPT codes are used by insurers to determine how much coverage is due and what’s left for patients to pay.  

So, what’s the problem? 

You probably already know the answer. As the rights holder, the AMA charges exorbitant annual fees to providers for the use of CPT codes, a practice that is, in my opinion, patently unethical. 

The AMA says that it needs to charge a fee for CPT codes to cover the costs of developing and maintaining the codes, and to protect its intellectual property.

Hogwash.

First, any copyright or patent attorney will tell you that you don’t need to charge a fee to protect intellectual property. You simply need some combination of IP symbols, trademarks, copyright notices, or terms and condition listings to get that job done. Sure, there is some expense in all of that, perhaps the occasional litigation, but nothing that would justify the inordinate fees currently required by the AMA of providers. 

Secondly, CPT codes are mandatory. Claims don’t get processed, and nobody gets paid without them. The optics are one of exploitation. Further, there’s no other coding option for providers, and the US government has signaled its approval for the AMA to act as the sole purveyor of CPT codes.  What you have then is, to many observers, a federally sanctioned monopoly. 

Runaway numbers

The AMA Royalty Rate schedule for 2025 has fees starting at about $100 for single-provider practices, with an additional $18.50 for each additional user in the business.^[1]

It’s not just practices that are paying for the codes. Any healthcare entity touching a CPT code pays the AMA for the right to use it including those same insurance companies processing claims. HIPAA requires it. If you use a code, you pay for it. 

Really, though, my beef is less about the expense and more about the idea that practices have no other option but to pay for a service that is essentially mandatory in healthcare yet available through no other service. This from a group whose mission is to advocate on behalf of the very people to whom they demand CPT codes payment. I can’t make sense of it.  

The AMA does not disclose what it makes from CPT code fees, specifically. (Why not?) In its 2023 annual report, the AMA listed $308 million in revenue from “Royalties and credentialing products.” The next largest revenue center was membership dues which collected $33.3 million in 2023. As you can see, royalties and credentialing of products (largely, CPT codes) is far and away the largest source of revenue for the AMA.^[2]

Again, I’m not opposed to the AMA making money. But the AMA’s exclusive and obscenely prosperous oversight of CPT codes is an unsavory way to do it. Further, the practice only fuels the recent narrative that the 160-year-old national association has become less aligned with doctors and more beholden to government agencies.^[3] For many healthcare professionals, the AMA is just getting too political.  

Time for a handoff? 

At the end of the day, CPT codes are largely about facilitating accuracy and consistency in the insurance billing process. It’s an important but routine interaction between provider and patient insurer. Does the AMA have to be the third party in the transaction? Should it be?  

Maybe it’s time to put CPT code administration in the hands of an entity with less of a conflict of interest. 

I can think of at least two entities that make more sense to me than the AMA for CPT code admin. Since insurers set prices, shouldn’t they too be the overseer of the CPT codes on which they rely? Perhaps America’s Health Insurance Plans (AHIP), a national trade organization that represents all health insurance providers, picks up CPT code management.  

Or what about the group already in charge of managing ICD-10 codes, those being the National Center for Health Statistics (NCHS) and Centers for Medicare & Medicaid Services (CMS)? Perhaps consolidating the myriads of medical codes across the sector into single oversight could simplify a few processes within practices.

What about an open-source approach? 2.5 billion creators from public and private sectors around the world with critical works or information to share utilize Creative Commons to establish free, open license agreements.  

Short of that, how about reducing the disingenuous CPT code fees? That would be a huge revenue hit for the AMA to be sure. But if the AMA wants to regain relevance and footing as a true advocate for healthcare professionals nationwide, then taking that hit would send a profound message to that end.  

Addressing needs

Like the dysfunctional technology rife in healthcare today, CPT codes poke like a stick in the side of the gut. It doesn’t feel right. It isn’t right. At a sector level, I believe that the CPT code problem can be resolved the same way we’re working to fix healthcare technology at MediSprout: by applying thoughtful design to a solution that is influenced by nothing more than the needs of providers and patients. 

From there, it’s all about courage and leadership.  

Samant Virk, MD, is founder and CEO of MediSprout

1. AMA Internal End User License Agreement Royalty Rates for 2025, 2026, and 2027, https://compliance.ama-assn.org/hc/en-us/articles/16197630737431-Internal-End-User-License-Agreement-Royalty-Rates-for-2025-2026-and-2027
2. 2023 AMA Annual Report, https://www.ama-assn.org/system/files/2023-ama-annual-report.pdf.
3. Southwest Journal of Pulmonary Critical Care & Sleep, A call for change in healthcare Governance, https://www.swjpcc.com/editorials/2024/5/16/the-decline-in-professional-organization-growth-has-accompan.html#:~:text=There%20is%20little%20doubt%20that,in%20pay%20for%20different%20specialties.