What Is Medical Coding & How Does It Work?

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What Is Medical Coding?

Medical coding is the process of translating into standardized numeric or alphanumeric codes the words in a medical record used to describe diagnoses, procedures, services, and equipment. Medical coding takes the information contained within medical records and creates data sets that are easily handled by computer systems across different businesses, governments, countries, and languages.

Why Use Medical Billing Codes Rather Than Words?

Medical coding is done by a health care professional called a coder. Coders read hospital records, patient visit notes from doctors’ offices, procedure notes, and other types of medical records and translate each mention of a patient’s diagnosis, a procedure performed, or a service rendered into the appropriate medical code. In this way, the essence of each medical record is distilled into a manageable data set of medical codes.

In the United States, the most commonly used medical codes are codes used to describe medical diagnoses and codes used to describe services and procedures.

  • ICD-9 and ICD-10 codes describe a patient’s diagnosis. ICD-10 codes are used in countries across the planet. There are ICD-10 codes to describe diagnoses literally as simple as a freckle, and ICD-10 codes used to describe complex diagnoses like acute on chronic combined systolic and diastolic congestive heart failure.
  • CPT® codes are used to describe procedures and services rendered by physicians, nurse practitioners, and physician’s assistants. There are CPT® codes to describe things as simple as a well-baby visit in a pediatrician’s office to much more complex things like surgical procedures. CPT® codes are used primarily in the United States.
  • HCPCS level II codes are used in the United States to describe primarily non-physician based services and equipment. Examples include ambulance rides and home oxygen systems.
  • DRGs are used in the United States to describe inpatient hospitalizations.

How Medical Coding Works

The process of medical coding starts with the physician or other health care provider documenting his or her findings and interventions in the medical record. The more detailed this documentation is, the more accurately the medical coding will reflect what was actually wrong with the patient and what services were rendered.

Once the medical record has been completed by the physician, nurse practitioner, or physician’s assistant, the medical coder reads it. If the documentation in the medical record isn’t clear, the coder may have to ask the physician to clarify something before the medical coding process can be completed. The coder then applies an exhaustive set of rules and guidelines to assign the medical codes that best represent the diagnoses documented in the medical record and the services rendered or procedures performed.

Frequently, the medical coder has software to help code a medical record. However, software alone isn’t enough.

It also takes a good understanding of the guidelines, rules, and regulations surrounding the use and application of each set of codes to be able to accurately code a medical record.

The rules governing the use of each set of medical codes are very detailed and extensive. For example, one set of guidelines, rules, and regulations applies just to CPT® coding. The American Medical Association’s guidebook to CPT® coding, CPT® 2014 Professional Edition, is 976 pages. Those 976 pages are not an instruction manual; it assumes users are already fluent in the language of CPT® coding. Those 976 pages are just descriptions of CPT® codes and the guidelines for applying them.

Another equally complex set of rules and guidelines applies just to ICD-10 coding. Yet another set applies to HCPCS coding, and another to assigning a DRG for an inpatient hospitalization.

For this reason, there are specialties and even sub-specialties within medical coding. For example, one coder might specialize in hospital inpatient coding while another specializes in coding outpatient procedures. Yet another may sub-specialize by being an expert in coding only outpatient interventional radiology procedures.

Once the medical coder has coded the medical record, the codes are used to submit a claim to the health insurance company, Medicare, or Medicaid.  Because accurate medical coding requires such attention to detail and the mastery of a complex set of rules, health insurers, Medicare, and Medicaid might review the medical coding submitted with a claim for accuracy. For example, Medicare’s Recovery Audit Program reviews the medical records associated with paid Medicare Part A and Medicare Part B claims in part to make sure the record was coded correctly. If the RAC contractor finds a record it feels was upcoded, Medicare can take back part or all of the money it paid for that claim.

In addition to being used to submit, process, and pay your health insurance claim, the codes can be used as a part of your medical record, in part to define your medical history succinctly. Other uses for the information contained in data sets of coded medical records include tracking health care utilization trends, tracking epidemics, determining disease prevalence across populations or geographic territories, predicting future health care costs, helping to apply scarce financial resources where they can do the most good, research, and developing health care policy.

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