Choosing a taxonomy code in applying for your National Provider Identifier: Guidance from the APA Practice Organization

What licensed psychologists need to know before selecting a taxonomy code for HIPAA compliance

by Legal & Regulatory Affairs Staff

Practitioners who apply for their National Provider Identifier (NPI) need to decide which and how many “taxonomy codes” to choose in completing their application.

The NPI is intended for use in identifying practitioners when they transmit health information electronically — for example, in submitting claims for payment and referral authorizations. All "covered entities" under the Health Insurance Portability and Accountability Act (HIPAA), which includes all health professionals who are required to comply with this federal law, must obtain an NPI no later than May 23, 2007.

As part of the application process, the Centers for Medicare and Medicaid Services (CMS) require that all types of health professionals list a "taxonomy code" or codes. A taxonomy code is a 10-digit alphanumeric identifier used to describe your health care practice and the professional services you provide. As of November 2006, there are two 'general codes' in the taxonomy code list — 'psychologist' and 'neuropsychologist,' as well as 17 'specialty' codes associated with the general code, 'psychologist.'

APA was not included in the process of developing the psychology-related codes for the taxonomy code list. We believe that these codes do not accurately portray the practice of psychology.

Unfortunately, there is no published guidance from CMS regarding how to choose a code. Should practitioners choose a general code only, or one or more of the specialty codes? How do practitioners decide whether they "specialize" in an area of practice enough to identify themselves by one of the specialty codes?

Adding further confusion to this issue is that a practitioner's choice of taxonomy code may carry reimbursement or credentialing implications. This is the case even though the Centers for Medicare and Medicaid Services (CMS) included the taxonomy codes in the NPI process to help distinguish among health professionals, not for use by insurers in governing reimbursement. Officials with CMS have assured us that the agency does not intend for the Medicare or Medicaid programs to use the taxonomy codes to restrict the kinds of services that a health professional may bill and be reimbursed for providing.

Even so, private insurers have access to your taxonomy code information. Because these codes have not routinely been used by private insurers for psychology, it is difficult to predict the impact of these codes on reimbursement. We do not yet know of any specific situations where insurers are using the taxonomy codes in connection with reimbursement.

The APA Practice Organization remains wary that third party payers may limit or deny reimbursement based on a psychologist's choice of taxonomy codes. For example, an insurer might deny payment for services that a psychologist provides to children if that practitioner has not chosen the specialty code for 'children' from the taxonomy code list. Alternatively, insurers could decide not to pay for services that they believe are represented by certain specialties. For example, an insurer may not cover counseling and decide that all of the services furnished by psychologists who chose "counseling" as one of their taxonomy codes represent uncovered counseling services.

The APA Practice Organization is actively monitoring the potential for misuse of taxonomy code information and intends to take necessary actions to address any unintended uses of the taxonomy codes. But the fact of the matter is that, at the present time, we just do not know how payers may use this information.

With this as background, the APA Practice Organization evaluated the issue of choosing taxonomy codes and has identified at least three strategies:

One strategy would be to choose all the taxonomy codes that represent any area in which you practice. (You may opt to pick only the specialty codes and not a general taxonomy code.) This might have the advantage of protecting psychologists from being denied reimbursement or admission to a panel on the grounds that they did not choose a specific specialty. However, if an insurer sees any of the taxonomy code areas as representing services that the insurer does not cover, there is the risk that the company would argue that all of your services relate to that taxonomy code and deny payment for the services. In addition, if a psychologist selects a long list of specialty taxonomy codes, insurers might consider the practice so broad that they would question the practitioner’s expertise in any one of the specialty areas chosen.

A second strategy would be to list only the general "psychologist" or "neuropsychologist" code. This may protect you against being pigeonholed into a particular specialty area. However, there could be a risk of payment denials if an insurer decided to only pay for services in a particular practice area when the services were furnished by psychologists who identify themselves as specializing in that area — such as only paying for services to children when a practitioner chose the "child, youth, and family" taxonomy code.

A third strategy would be to choose the code or codes that most accurately reflect your practice in its entirety, that is, the services you spend the majority of your time providing. For example, licensed psychologists with a broad-based practice might elect to choose just the "psychologist" code. On the other hand, psychologists who focus in specific practice areas may want to choose a specialty code or codes in addition to a general code. For example, a neuropsychologist who focuses on providing services to geriatric clients may wish to choose the general 'neuropsychologist' code as well as the specialty code, "adult development and aging." If that neuropsychologist also furnishes services such as psychotherapy, feedback, and or cognitive rehabilitation, he or she may also want to choose the "clinical psychologist" code. The APA Practice Organization generally advises practitioners to take this third approach. Though no strategy is risk-free, this option represents a balance of the above two strategies and may minimize the risk of negative reimbursement consequences until we have a better sense of how insurers will use these codes.

Guidance from the APA Practice Organization may change when it becomes clearer how insurers will handle the codes. The NPI process permits practitioners to add or delete codes at any time.

The APA Practice Organization has expressed our concern to the organizations involved that the taxonomy code list in its present form is inconsistent with the way that psychology is practiced. We are continuing to communicate with these groups in seeking appropriate revisions to the code list. We will apprise our members of any future changes.

Further, we also stand ready to respond to any instances in which insurers use the taxonomy codes in inappropriate ways, for example, to make reimbursement decisions or for credentialing purposes. So please notify the Practice Directorate if you encounter this situation by calling toll-free 800-374-2723, ext. 5886 or sending an e-mail.