While the owners of private medical practices, hospitals, clinics, and other healthcare facilities can generally claim the cost of medical equipment, surgical equipment,and office supplies as tax write offs,1 getting properly reimbursed by insurance companies, and other payers for patient services and procedures, requires a different system altogether: medical coding.

Medical coding is the translation of healthcare diagnoses, procedures, medical services, and medical equipment into universal codes.

Medical coders are specially-trained individuals who interpret physician’s notes from patient charts and identify the appropriate code for the services or procedures provided. This not only creates a record of what was provided,it also ensures that the doctor and/or medical facility is properly reimbursed by the insurance company, CMS (Medicare/Medicaid), or other third-party payer. Accurate coding is therefore vital to the financial success of any healthcare organization.

Ahead we’ll look at the main medical coding systems used today and explore why it’s so important for healthcare administrators to code accurately.



The Different Medical Coding Systems

International Classification of Diseases (ICD)
This standardized system of classifying diagnoses and in-patient procedures is used by healthcare facilities in more than 100 countries. In fact, the majority (70%) of the world’s healthcare expenditures are distributed using the ICD system.

ICD-10 is the latest version of the system, which went into effect in October 2015. It has two parts

• ICD-10-CM, which is used in all healthcare settings for diagnosis coding.
• ICD-10-PCS, which is used in hospital inpatient settings to identify inpatient procedures.

ICD-10 replaced the previous version (ICD-9)—a significant change, as ICD-10 is more sophisticated, complex, and comprehensive than the former version.

One of the biggest complaints about ICD-9 was lack of specificity—for example, if a patient presented to the doctor’s office with a burn on his right leg, ICD-9 did not allow the medical coder to specify which leg sustained the burn. ICD-10 allows for this kind of specificity, resulting (it is hoped) in more accurate record keeping and billing.

Tens of thousands of additional codes were added to ICD-10, adding both to the specificity and the complexity of the system. The chart below highlights how significant the changes are in ICD-10.

	ICD-9	ICD-10
Diagnosis Codes	approx. 13,000	approx. 68,000
Procedure Codes	approx. 11,000	approx. 72,000
Code Length	3 to 5 digits	3 to 7 digits
Code Form	primarily numeric	alpha-numeric

Current Procedural Terminology (CPT)
Developed by the American Medical Association (AMA), CPT codes identify different medical, surgical, and diagnostic services. There are nearly 10,000 CPT codes in all, covering everything from preventive medicine services, to psychiatry, to home health services.

CPT differs from ICD in that CPT identifies the services delivered rather than the diagnosis. CPT codes consist of five-digits, in numeric or alphanumeric form. CPT codes are organized into three different categories, as follows:

• Category I: Five-digit codes that describe procedures or services.
• Category II: Alphanumeric codes used to track performance (typically used optionally); they are reviewed by an advisory body to the CPT called the Performance Measures Advisory Group (PMAG).
• Category III: Provisional codes for emerging technology, procedures, and services.

HCPCS-Level II
HCPCS stands for Healthcare Common Procedure Coding System. Developed by the Centers for Medicare & Medicaid Services (CMS), these codes are primary for identifying items, durable medical equipment, supplies, and non-physician services (such as ambulance services) that are billed to Medicare/Medicaid, as well as other healthcare payers, such as HMO plans, veteran’s health care plans, and others.

Why Accuracy Is So Important in Medical Coding

Medical coding requires an understanding of medical terminology and basic knowledge of human anatomy and physiology—without such understanding, medical billers could submit invoices to insurance companies listing the wrong medical condition or diagnosis. The resulting underpayments or overpayments would hurt medical practices financially and could land them in trouble for not complying with government regulations and/or private payer policies.



Proper Medical Coding Ensures Accurate Reimbursement
Insurance Companies, clearinghouses, and other healthcare payers rely on healthcare professionals and administrators to accurately and completely describe what medical services, tests (such as CT scans and MRI's) procedures, and medical devices (such as blood pressure monitors) were provided to patients. When a service, test or procedure appears out of place, claims may be denied or rejected. Common reasons for denials or rejections include:

• Incorrect patient information (such as name, DOB, insurance ID number, etc.)
• Incorrect codes (using confusing ICD, CPT, or HCPCS codes, for example)
• Incorrect provider information (address, name, etc.)
• Leaving out codes altogether

Then there are fraudulent coding errors, such as upcoding - intentionally listing a code for a service that wasn’t actually administered,and/or entering a code for a more expensive procedure than the patient received.

Undercoding is another fraudulent process wherein the provider intentionally leaves out a procedure or codes for a less serious one in order to avoid an audit or to try to save a patient money. It goes without saying that upcoding, undercoding, and other fraudulent submissions are absolute no-no’s to be avoided.

Let’s look at an example of a coding oversight:

A patient presents to the clinic with chronic pain in his right elbow. The physician orders an x-ray and an arthroscopy—common diagnostic tests for this problem. She also orders blood work (for an unrelated condition) but fails to note why she ordered it. The medical coder also fails to dig deeper and bills the insurance company without clarifying the reason for the blood work. While the x-ray and arthroscopy support the elbow condition, the blood work is a question mark (at least to the payer). The claim is denied or rejected.

The medical coder or biller should have queried the doctor about the blood work and whether it supported an existing or new diagnosis before billing. These kinds of errors lead to inefficiencies that negatively impact the bottom line of medical providers, hospitals, and other facilities.



Proper Medical Coding Improves Patient Safety and Outcomes
Medical coders play a larger role in improving patient safety and outcomes than they may know. The medical codes we mentioned earlier (ICD, CPT, etc.) are used in big data to assess the health of a population, identify issues with quality of care, and even influence public policy.

CPT Category II codes, for example, are periodically reviewed by an advisory board to evaluate the performance of physicians and other healthcare professionals, hospitals, and other facilities, and assess the quality of care delivered to patients.

By assigning codes appropriately and accurately, medicals coders help identify preventable complications, which could spur quality initiatives to help prevent such complications in the future; proper coding also helps organizations assess the cost associated with preventable complications.

Hospital Acquired Conditions (HACs) are one area in which medical coders can make a tremendous difference. By choosing the right code that identifies a condition as an HAC—that is, a condition that was not preexisting but rather developed as a consequence of medical care—codersplay a key role in helping organizations identify and track these preventable conditions.

In short, accurate medical coding:

• Allows for the efficient transmission of huge amounts of data to insurance companies and other healthcare payers - consider that in 2012 alone there were 928.6 million physician office visits in the U.S.
• Enables administrators to see and address inefficiencies in their organization.
• Allows for uniform documentation between different medical facilities, since the codes are universal.

Medical coding is a vital part of ensuring the health of patients, the financial health of medical facilities—even the well-being of society in general; these codes , when viewed as a composite, paint a picture of the health of a country as a whole. This information is used to address problems within individual organizations and larger systems, and it can help fuel public health initiatives.

Sources

1. http://medicaleconomics.modernmedicine.com/medical-economics/news/modernmedicine/modern-medicine-feature-articles/tax-writeoffs-what-take-what-
2. http://www.who.int/classifications/icd/en/
3. http://www.cdc.gov/nchs/data/ahcd/namcs_summary/2012_namcs_web_tables.pdf

Note: General reimbursement information is being provided only as of January 1, 2016, on an “as is” basis. Medical Device Depot makes no representation or warranties of any kind to the accuracy or applicability of any content contained herein. The information does not constitute professional or legal advice on coding or reimbursement and should be used at your soul liability and discretion. All coding, policies and reimbursement information is subject to change without notice. Before filing any claims, it is the provider’s responsibility to verify current requirements and policies with the payer.