What's the Medical Coding Process?

Medical coding is the process in which medical coders assign numerical codes to medical diagnoses and procedures in order to bill insurance companies for reimbursement for healthcare services.

For medical billing and coding, there are three main coding manuals, which contain all of the possible codes that a medical coder can include on a claim for reimbursement. They are:

  • ICD-9: International Classification of Diseases, 9th Revision, which refer to diagnosis codes.

  • CPT: Current Procedural Terminology, which refer to procedures and services performed on the patient.

  • HCPCS: Healthcare Common Procedural Coding System, which refers to the rest of the miscellaneous supplies and medicines supplied to the patient in the healthcare setting.

Coders combine these three sets of codes on insurance claims and then send them to insurance companies for reimbursement. Here's what they're used for:

  • ICD-9 diagnosis codes are used to explain to the insurance company why the patient came in for healthcare services.

    For example, the code 462 represents the diagnosis pharyngitis, or sore throat. When the coder places the code 462 on the medical claim, it tells the insurance company that the patient was seen because they were complaining of a sore throat.

  • CPT, or procedure, codes, tell the insurance company what procedures were performed on the patient on the day that they were seen.

    For example, the code 99213 is used to represent a typical office visit. When the coder includes the code 99213 on the claim, it tells the insurance company that the medical provider performed a mid-range office visit.

  • HCPCS, or supply codes, are used to represent all of the other miscellaneous services or supplies given to a patient on the day they were seen.

    These codes are not always included on a claim form because they include supplies or other services that are not included in the CPT book, such as ambulance transportation or durable medical equipment.

A medical provider

Medical providers only bill for CPT and HCPCS codes because they represent actual services and supplies given to the patient.

Each code is given an individual charge, and is separately reimbursed by the insurance company. This means that providers don't bill for and insurance companies won't pay for diagnosis codes.

Due to the nature of medical coding, it is easy to accidentally (or purposely) code for the wrong things. This is considered fraud or abuse and is a very serious offense, which can be punishable by fines and even jail time.

Because of this, it's important for coders to create safeguards against medical coding fraud and abuse.

See more on medical billing and coding fraud.

One of these safeguards is a good understanding of medical terminology, procedure description, and diagnosis. This understanding ensures that both the correct codes are sent and that the patient is treated correctly.

A good education in medical terminology and proper coding also helps the coding process go much more quickly and allows coders to manage more clients.

Usually, doctors code for their own claims, but medical coders have to check the codes to make sure that everything is billed for and coded correctly. In some settings, medical coders will have to translate patient charts into medical codes.

The information recorded by the medical provider on the patient chart is the basis of the insurance claim. This means that doctor's documentation is extremely important, because if the doctor does not write everything in the patient chart, then it is considered never to have happened.

Furthermore, this data is sometimes required by the insurer in order to prove that treatment was reasonable and necessary before they make a payment.

Often, the doctor or hospital will have a pre-determined set of commonly reported codes, called a superbill, or encounter form. This is a billing form that includes all of the commonly reported diagnosis and procedure codes used in the office.

See more on encounter forms.

This helps the doctor and medical coder report the correct codes. The provider marks the correct codes on the superbill, and the coder enters the codes into a specialized computer program, called a practice management program.

This complex medical billing software allows the medical biller to send the claims directly to the insurance companies.

Many billing and coding software packages allow the coder to enter charges and payments, send claims, and manage patient accounts all on the same system.

Data entry skills are key to being able to work within these systems successfully. Medical coders also have to have strict attention to detail to make sure that they are entering the correct codes and billing the claims correctly.

Insurance companies base their payments on the codes they receive from the medical provider.

The codes reported tell the insurance company which treatments were performed on the date of service, the day the doctor saw the patient. The insurance reviews the codes and the patient's benefits, and determines the payment amount.

The codes reported also allow the insurance company to quickly deny payment based on treatments that are not covered. Insurance companies will also deny claims if they are not coded correctly, according to the rules of the ICD-9, CPT, and HCPCS manuals.

The responsibility of the medical coder does not begin and end with medical codes.

The medical coding process also applies to pharmacy benefits, laboratory services, mental healthcare, and dental services. Each one of these services is similar to coding medical diagnoses and procedures, but varies in important ways.

In each case, coders are responsible for entering the correct codes according to the patient's treatment. The good news is that this means that there are many job opportunities for those with a knowledge of medical coding.

Sometimes coders are also medical billers. In this dual role, after they assign the codes, they file the patient insurance claim and formally start the billing process.

Related article: medical billing process.

See more on medical coding careers.

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