Medical Billing Codes – How Do 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 for healthcare.

There are three main coding guides for medical billing and coding that contain all the possible codes that the medical coder can add to the reimbursement claim. Them:
• ICD-10: International Classification of Diseases, 10th Revision, with reference to diagnostic codes.
• CPT: Current Procedure Terminology that refers to procedures and services performed on the patient.
• HCPCS: The Healthcare Common Procedural Coding System, which refers to the rest of the various supplies and medications supplied to the patient in the healthcare setting.

Coders combine these three sets of codes for insurance claims and then send them to insurance companies for reimbursement. Here’s what they’re used for:
• ICD-10 diagnostic codes are used to explain to the insurance company why the patient has come to healthcare.

For example, code J02.9 represents a diagnosis of pharyngitis or sore throat. When the coder puts the code J02.9 on medical request, he tells the insurance company that the patient was seen because he was complaining of a sore throat.
• The CPT, or procedure, codes that inform the insurance company what procedures were performed on the day they were seen.

For example, the code 99213 is used to represent a typical office visit. When the coder adds code 99213 to the claim, it tells the insurance company that the medical provider has made a mid-level office visit.
• HCPCS or supply codes are used to represent any other miscellaneous services or supplies provided to a patient on the day they are seen.

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

Medical providers only bill CPT and HCPCS codes as they represent actual patient services and supplies.

Each code is charged a separate fee and is reimbursed separately by the insurance company. This means that providers do not bill and insurance companies do not pay for diagnostic codes.

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

Therefore, it is important for coders to establish safeguards against medical coding fraud and abuse.

Good training in medical terminology and proper coding helps the coding process go much faster and allows coders to manage more clients.

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

The information recorded in the patient chart by the healthcare provider forms the basis of the insurance claim. This means that the doctor’s documentation is extremely important, because if the doctor doesn’t write everything down on the patient chart, then it’s like it never happened.

Also, these data are sometimes requested by the insurer to prove that the treatment was reasonable and necessary before paying.

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Often times, the doctor or hospital will have a predetermined, widely reported set of codes called the superbille or encounter form. This is a billing form containing all commonly reported diagnostic and procedural codes used in the office.

This helps the doctor and medical coder report correct codes. This sophisticated medical billing software allows the medical bill holder to submit claims directly to insurance companies.

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

The codes reported told the insurance company what treatments were given on the day the doctor saw the patient, on the date of service. The insurance examines the codes and the benefits of the patient and determines the amount of payment.

Reported codes also allow the insurance company to quickly decline payment based on uncovered treatments. Insurance companies will also deny claims if they are not correctly coded according to the rules of the ICD-10, CPT and HCPCS guidelines.

About Lily Hammond

I have been working as an insurance consultant in my own insurance agency since 1998. Because I've been doing this for so long, I know every detail and I'm here to help you. You can find my e-mail address and work phone on the contact page.

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