More about Coding


Medical coding starts with a patient encounter in a physician’s office, hospital, or other care delivery location. When a patient encounter occurs, providers detail the visit or service in the patient’s medical record and explain why they furnished specific services, items, or procedures.

Accurate and complete clinical documentation during the patient encounter is critical for medical billing and coding, AHIMA explains. The golden rule of healthcare billing and coding departments is, “Do not code it or bill for it if it’s not documented in the medical record.”

Providers use clinical documentation to justify reimbursements to payers when a conflict with a claim arises. If a service is not sufficiently documented in the medical record by providers or their staff, the organization could face a claim denial and potentially a write-off.

Providers could also be subject to a healthcare fraud or liability investigation if they attempt to bill payers and patients for services incorrectly documented in the medical record or missing from the patient’s data altogether.

Once a provider discharges a patient from a hospital or the patient leaves the office, a professional medical coder reviews and analyzes clinical documentation to connect services with billing codes related to a diagnosis, procedure, charge, and professional and/or facility code.

Several types of code sets are used for different purposes during this process, including:


Diagnosis codes are key to describing a patient’s condition or injury, as well as social determinants of health and other patient characteristics. The industry uses the International Statistical Classification of Diseases and Related Health Problems, Tenth Revision (ICD-10) to capture diagnosis codes for billing purposes.

The ICD-10 code set has two components: the ICD-10-CM (clinical modification) codes for diagnostic coding, and the ICD-10-PCS (procedure coding system) for inpatient procedures performed in the hospital.

There are more than 70,000 unique identifiers in the ICD-10-CM code set alone.  The ICD coding system is maintained by the World Health Organization, and is used internationally in modified formats.

CMS transitioned the industry to the ICD-10 system in 2015. The codes indicate a patient’s condition or injury, where an injury or symptom is located, and if the visit is related to an initial or subsequent encounter.

These codes support medical billing by explaining why a patient sought medical services and the severity of their condition or injury.


Procedure codes complement diagnosis codes by indicating what providers did during an encounter. The two main procedure coding systems are the Current Procedural Terminology (CPT) codes and the Healthcare Common Procedure Coding System (HCPCS).

The American Medical Association (AMA) maintains the CPT coding system, which is used to describe the services rendered to a patient during an encounter to private payers. They work with the ICD-10 codes to round out what happened and why.

The AMA publishes CPT coding guidelines each year to support medical coders with coding specific procedures and services.

Medical coders should be aware that CPT codes have modifiers that describe the services in greater specificity. CPT modifiers indicate if providers performed multiple procedures, why a service was medically necessary, and where on the patient the procedure occurred.

Using CPT modifiers ensures that providers are correctly reimbursed for all services provided.

While private payers tend to use CPT codes, CMS and some third-party payers require providers to submit claims with HCPCS codes. The Health Information Portability and Accountability Act (HIPAA) requires the use of HCPCS codes, which build on the CPT coding system.

Many HCPCS and CPT codes overlap, but HCPCS codes are able to describe non-physician services, such as ambulance rides, durable medical equipment use, and prescription drug use. CPT codes do not indicate the type of items used during an encounter.

The HSPCS also has its own modifiers, although many of the modifiers are the same as those used by the CPT coding system.


Coders also connect physician order entries, patient care services, and other clinical items with a chargemaster code. Chargemasters are a list of the organization’s prices for each service offered at the provider organization.

This process is known as charge capture. Revenue cycle management leaders use these prices to negotiate claims reimbursement rates with payers and bill patients for the remaining balance.

Hospital billing and coding process
Hospital billing and coding process

Source: : Understanding Hospital Billing and Coding by Debra P. Ferenc, BS, CPC, CPC-I, CPC-H, CMSCS, PCS, FCS


Medical coders also translate the medical record into professional and facility codes, when applicable, explains the AAPC, formerly known as the American Academy of Professional Coders.

Professional codes capture physician and other clinical services delivered and connect the services with a code for billing. These codes stem from the documentation in a patient’s medical record.

Facility codes, on the other hand, are used by hospitals to account for the cost and overhead of providing healthcare services. These codes capture the charges for using space, equipment, supplies, prescription drugs, and other technical components of care.

Hospitals can also include professional codes on claims when a provider employed by the hospital performs clinical services. But the facility cannot use a professional code if a provider is not under an employment contract and uses the hospital’s space and supplies.

A best practice for hospitals is to integrate professional and facility coding. The University of California (UC) San Diego Health recently implemented single-path coding, which brought professional and facility coders into one platform.

“Regardless of what EHR you’re using, typically there’s a line of demarcation, firewall, or separation between ‘profee’ and facility,” explained Cassi Birnbaum, MS, RHIA, CPHQ, FAHIMA, the academic health system’s System-Wide Director of Revenue Integrity and Health Information Management.

“There are ways in our EHR to push codes from professional billing to facility billing through the charge router, but it’s not the easiest or the most straightforward process, and there are many potential points of failure.”

With professional and facility coders working in silos, Birnbaum saw duplicative efforts and decreased coding productivity.

She decided to integrate the departments using a common coding platform. Since integrating professional and facility coding, US San Diego Health has seen its clean claim rate increase and coding productivity skyrocket, with colonoscopy coding down from 12 minutes to less than five minutes.