What Is Medical Coding and Billing Used For?

Medical coding is a recognized profession. Coders convert medical reports into sets of codes. The codes are then used by insurance companies to determine which claims get compensated. A typical medical report reveals a patient’s health status, the physician’s diagnosis, prescriptions and other treatment procedures used by the healthcare provider. This is important information to coders.


Reasons for coding medical reports

  • Coding facilitates efficient transfer of data – Diseases are getting more complex and more data has to be conveyed to the insurance companies. As disease and injuries become more complicated, doctors have to produce a lot of information on a single patient’s case. A stat by the CDC (Centers for Disease Control) shows that there were more than 1.2 billion patient visits in the last one year. These were patients who went to the emergency room, doctor’s office or outpatient area. What if there were only five pieces of coded data per visit? That would amount to six billion individual sets of data per year. How would all this data be transmitted efficiently without a logical system of coding?
  • Coding supports standardized documentation – To boost the work of the CDC and other organizations that research and track medical trends, coding is used. It gives each disease or condition a particular code. This code is then used in every state. Hence, you only need a specific code to find out how prevalent a disease is.
  • Coding facilitates evaluation of a given treatment method – Large hospitals must evaluate and appraise their treatment procedures. They just use medical coding to find this out. As well, government agencies use coding to evaluate the incidence of a certain disease.

So far you know why medical coding is used. Next, we will briefly explain three types of medical coding to you.

  • International Classification of Diseases codes – ICD codes were created by the World Health Organization in the 1940s. They provide consistent terms for describing causes of death, injury or disease. There is always a number after ICD. This number represents a number of revisions the particular code has received over the years. In the billing procedure, coders use ICD codes to establish medical necessity.
  • Current Procedure Terminology codes – Simply known as CPT codes, the Current Procedure Technology codes are designed and overseen by the American Medical Association. They are upgraded every year. CPT codes consist of a 5-digit numeric code, with three categories. The first category is applied severally and is subdivided into six ranges: Surgery, Medicine, Evaluation and Management, Anesthesia, Radiology, Pathology, and Medicine. The second category codes signify performance measurement while the third category codes correspond to medical technology.
  • Healthcare Common Procedure Coding System Codes – The HCPCS codes belong to the CMS organization. They stand for all equipment, processes, and services not supported by the CPT codes. This is where ambulance trips, prosthetics, robust medical equipment and some drugs come in. HCPCS codes are continuously used in Medicare and Medicaid plans.

Now you know the importance of medical coding and billing, you should study further.