What are Ancillary Services?

by Kyle Osborne

When thinking about medical care of any kind, the usual types of providers that come to mind are doctors, dentists, and nurses. It is true that these are the primary care providers that drive the medical industry and ensure that patients are getting healthier or staying healthy, but ancillary service providers far outnumber primary care providers in the US. Just about anything used to improve the health of a patient except for a physician is considered an ancillary service. This may include outpatient surgery, diagnostic imaging, physical therapy, or medical equipment and supplies. Ancillary services are a critical component of a patient’s treatment, especially after an injury related to workers’ compensation.

Ancillary service providers have been around for as long as doctors have been practicing medicine. As new techniques in medicine required specific types of supplies and equipment, a whole industry was born to research, develop, and manufacture these products. Ancillary providers range from factories churning out millions of packages of sterile gauze per day to small custom wheelchair shops and exist in great numbers all over the country. As this industry grew and became more specialized, standards were developed for specific products and how to process them for payment.

In the 1980s, the Center for Medicare and Medicaid Services began developing a coding system for ancillary services to make billing uniform and describe similarities and differences between items being dispensed by various providers across the country. Called HCPCS Level II (to supplement the Level I or CPT codes for procedures), this coding system now describes almost 4000 individual products and services and has greatly streamlined the processing of more than 5 billion claims per year submitted to public and private insurance companies. Level II codes consist of one letter followed by four digits and are printed on all bills in order to assist in cost containment and comparison. According to HIPAA, as of December 31, 2003 all ancillary services had to be billed with one of these Level II codes, effectively eliminating the local codes which had been used before then.

The term “Ancillary” has been applied to a significant amount of the medical industry, and while the administration of claims from this sector has been complicated in the past because of its regional nature, advancements in networks and new legislation has greatly simplified ordering and processing.