Medical Billing Codes – How They Work

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

For medical billing and coding, there are three main coding guides, covering all possible codes that a medical coder can include in a claim for reimbursement. They are:

• ICD-10: International Classification of Diseases, 10th Revision, which refers to diagnosis codes.

• CPT: Current procedural terminology, which refers to procedures and services performed on the patient.

• HCPCS: Healthcare Common Procedural Coding System, which refers to the rest of the various supplies and medications delivered to the patient in the healthcare environment.

Coders combine these three sets of codes on insurance claims and then send them to insurance companies for reimbursement. This is what they are used for:

• ICD-10 diagnosis codes are used to explain to the insurance company why the patient came for health care.

For example, the code J02.9 represents a diagnosis of pharyngitis or sore throat. When the coder puts the code J02.9 on the medical claim, he tells the insurance company that the patient was seen complaining of a sore throat.

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

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

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

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

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

Each code has its own rate and is reimbursed separately by the insurance company. This means that providers do not charge and insurance companies do not pay for diagnosis codes.

Due to the nature of medical coding, it’s easy to accidentally (or on purpose) code for the wrong things. This is considered fraud or abuse and is a very serious offense punishable by fines and even imprisonment.

That’s why it’s important for coders to create safeguards against fraud and misuse of medical coding.

Proper training in medical terminology and good coding also helps make the coding process much faster and allows coders to manage more clients.

Typically, doctors code for their own claims, but medical coders need to check the codes to make sure everything is billed and coded correctly. In some situations, medical coders will need to translate patient records into medical codes.

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The information recorded by the medical provider on the patient record forms the basis of the insurance claim. This means that the doctor’s documentation is extremely important, because if the doctor does not write everything in the patient file, it is assumed that it never happened.

In addition, this information is sometimes requested by the insurer to prove that the treatment was reasonable and necessary before making a payment.

Often the doctor or hospital will have a predetermined set of commonly reported codes called a super bill or encounter form. This is a billing form that contains all commonly reported diagnosis and procedure codes used in the office.

This helps the doctor and medical coder report the correct codes. This complex medical billing software allows the medical biller to send the claims directly to the insurance companies.

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

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

The reported codes also enable the insurance company to quickly refuse payment based on treatments that are not covered. Insurance companies will also reject claims if they are not coded correctly, according to the rules of the ICD-10, CPT and HCPCS manuals.