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Medical Coding is the critical element of a revenue cycle and drives the communication between healthcare providers and insurers. It stimulates the reimbursements made by the payers, which makes accurate Coding essential. In this article, we revisit the basics of Medical Coding and talk about some of the career opportunities that are available in the Medical Coding space as well as the best practices we can adopt to improve reimbursements while being compliant.

What Is Medical Coding?

As medical coding practitioners recognize, the quality of medical Coding is a significant factor in obtaining reimbursements from healthcare payers. Further, Medical Coding is also critical to the maintenance of patient records and is a crucial enabler for population health analytics.

Type of Medical Codes

Medical Coding involves the following types of codes.

  1. ICD Codes
  2. CPT Codes
  3. HCPCS Codes
  4. DRG Codes
  5. Modifiers


The ICD was initially designed as a health care classification system, providing a method of diagnostic codes for classifying diseases, including nuanced classifications of a wide variety of signs, symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or illness.

The ICD is a classification system developed collaboratively between the World Health Organization (WHO) and ten international centers so that the medical terms reported by physicians, medical examiners, and coroners on death certificates can group them for statistical purposes. In the United States, the National Center for Health Statistics, which is a part of the Centers for Medicare and Medicaid Services, manages any amendments to the ICD codes alongside the WHO.

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The Current Procedural Terminology (CPT®) codes offer doctors and health care professionals a uniform language for coding medical services and procedures to streamline reporting, increase accuracy and efficiency.

Administrative management purposes, such as claims processing and developing guidelines for medical care review, also use CPT codes.

The CPT terminology is the most widely accepted medical nomenclature used across the country to report medical, surgical, radiology, laboratory, anesthesiology, genomic sequencing, evaluation and management (E/M) services under public and private health insurance programs.

All CPT codes are five-digits and can be either numeric or alphanumeric, depending on the category. CPT code descriptors are clinically focused and utilize common standards so that a diverse set of users can have a common understanding across the clinical health care paradigm.


The HCPCS (Healthcare Common Procedure Coding System) levels I and II is another coding system used in the US. HCPCSare used for billing Medicare & Medicaid patients. The Healthcare Common Procedure Coding System (HCPCS) is a collection of codes that represent procedures, supplies, products, and services that can be provided to Medicare beneficiaries and individuals enrolled in private health insurance programs.

  1. Level I codes consist of the AMA’s CPT codes and are numeric.
  2. Level II codes are the HCPCS alphanumeric code set and primarily include non-physician products, supplies, and procedures not included in CPT.
  3. Level III codes, also called HCPCS local codes, were developed by state Medicaid agencies, Medicare contractors, and private insurers for use in specific programs and jurisdictions and are still included in the HCPCS reference coding book. Some payers prefer that coders report the Level III codes in addition to the Level I and Level II code sets. However, these codes are not nationally recognized.


CPT modifiers (also referred to as Level I modifiers) are to be used to supplement the information or adjust care descriptions to provide extra details concerning a procedure or service offered by a physician. Code modifiers help further describe a procedure code without changing its definition. Often, HCPCS codes are also used as modifiers. These codes, consisting of two-digit alphanumeric characters, provide additional information about the medical procedure performed. They are typically used to define further the part of the body where the procedure was performed, help identify multiple procedures performed in the same session, or situations where a procedure was started but discontinued.


DRG Codes (Diagnosis Related Group) is a system to classify hospital cases into one of approximately 500 groups, also referred to as DRGs, expected to have similar hospital resource use. As most insurance companies pay according to the DRG used, the accuracy of all components is essential to getting accurate reimbursements.

Uses of Medical Coding

Uses of Medical Code Sets include the following:

Medical Codes are the universal language of understanding between payers and providers and hence used for communication and billing purposes. The financial criticality for both payers and providers means that providers have to be compliant and accurate in Coding for medical treatment provided. Issues on account of inaccurate Coding


Up-coding is when a code is recorded for a higher level of service or procedure than what is documented in the patient’s chart. Up-coding is a serious offense and hence accurate, and compliant coding is essential.


Conversely, if the code that is ascribed is at a lower level of complexity or cost than what is documented, it is called down-coding. More often than not, down-coding is done unintentionally and requires both the clinician and the coders to be educated on the losses the practice may incur on account of down-coding

Population Health Management.

Diagnosis codes are used to analyze disease patterns in population groups and provide information for national-level health trends. It enables federal and state governments to plan for the resources needed to combat prevalent health issues and also launch initiatives to prevent and treat the affected population.

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