14. Medical Coding


For hundreds of years, medical researchers have been inter­ested in collecting statistics related to health and disease, including the number of individuals who contract certain diseases and the number of deaths caused by those diseases. To facilitate this undertaking, it was necessary for physicians to agree on a system to classify diseases and procedures. Lists of symptoms and diseases had existed in various countries for many years, but the first comprehensive disease classifi­cation system in the United States was published in 1869 by the American Medical Association (AMA) as the Ameri­can Nomenclature of Disease. (The word nomenclature means what things are called; in essence, this book was a dictionary of diseases.)

Turning a classification system into a coding system requires systematic replacement of names with numbers or combinations of numbers and letters. This allows informa­tion to be standardized. Numbers or combinations of numbers and letters can be easily managed and manipulated by computers.


Procedure codes are a means to classify the type of care given to patients. The three main reasons for developing what have come to be called procedure codes are:

         To justify medical services to insurance companies by correlating procedures to diagnosis

          To collect statistics about the outcome and effective­ness of treatments

          To help physicians and hospitals set fees based on the amount of time and skill required to provide a specific service

In 1966 the AMA published the first edition of the Current Procedural Terminology (CPT) coding system. The original version focused primarily on surgical procedures and was one of many attempts to translate medical and surgical procedures into numeric codes.

Levels of Procedure Codes

The fourth edition of the CPT, first published in 1977, became the standard for insurance billing in the early 1980s, when it was used as the basis for a Medicare pro­cedure coding system, the Healthcare Common Procedure Coding System (HCPCS), pronounced “hick-picks.” Medi­care, the government insurance program for the elderly and disabled, is administered by the Centers for Medicare and Medicaid Services (CMS). It will be discussed in detail in Lecture 46.

Level I Codes

The first level of HCPCS codes (95% to 98% of codes used for Medicare Part B) includes the current CPT codes. Level I codes are updated annually by the AMA, which publishes code books and electronic code sets.

Level II Codes

In addition, there are additional HCPCS codes for pro­cedures, injections, and durable medical equipment covered by Medicare Part B that are not included in the CPT system. These are called LevelII codes. HCPCS Level II code books are available from several publishers and can also be ob­tained electronically from the CMS. Each medical office must purchase updated versions of code books and/or com­puter files containing all codes used for insurance billing every year. In the past there were also local codes (Level III codes) used for Medicaid (the state-run insurance plan for low-income individuals), which varied from location to lo­cation. These have been phased out and are no longer in use.


The CPT manual provides both a narrative description and a five-digit code for each procedure or service a physician or other licensed provider may perform for a patient. There must be documentation of a diagnosis in the medical record to support the need for any procedure performed for the patient and any procedure code used in billing the patient. Diagnosis coding will be discussed in the next section. In entering procedure codes on insurance claims in the outpa­tient setting, the five-digit code is sufficient for most procedures.

Sections of the CPT Manual

The CPT manual is used for most procedure coding. Its main part is divided into six sections, each of which defines the procedures and services provided for specific types of medical services. The six sections, and the range of codes for each, are as follows:

Evaluation and Management Anesthesia



Pathology and Laboratory Medicine

In each annual update of the CPT, new codes may be added for new procedures, old codes may be dropped for procedures no longer in use, and modifications may be made to current procedures. A darkened circle in front of a code indicates that the code is new. A darkened triangle in front of the code indicates that the description for the code has been changed or modified (Figure 45-1). The medical assistant must familiarize himself or herself with the impor­tant revisions each year when the new codes are published. In addition, codes must be updated in the office computer system and on office forms such as charge slips to be sure that insurance is billed correctly.

Figure 45-1 Symbols that appear Current Procedural Terminology (CPT) code manual.

The main body of the CPT manual is organized by section, then subsection, subheading, and finally category, each providing a finer level of detail. The back of the manual contains an alphabetic index of procedures. The most common procedures performed in a given office are usually found on the charge slip and in the computer billing program. In the office itself, the provider usually checks off the codes for common procedures done during a patient visit and writes in the name of procedures not found on the charge slip. However, the patient may be billed from the medical office for services provided in another setting—for example, when a physician visits a patient in the hospital during morning rounds, when he or she examines a patient in the emergency room or a nursing home, and when he or she performs surgery in the hospital or an outpatient surgery setting. In most locations the office bills only for office services. If the office bills for labwork done by an outside reference lab, this must be indicated on the insurance form (see Lecture 46).

Category II Codes

Category II codes are optional codes that may be used to track performance. They are not reported to insurance car­riers. The last character of these codes is the letter F instead of a digit. Category II codes are found after the six main sections of the CPT. In addition, they are updated twice a year, and codes that have been added since publication of the most recent printed edition of the CPT can be found at the CPT website maintained by the AMA. Use of the code 1159F would mean that the medical record had been reviewed and a medication list was present.

Category III Codes

Category III codes are used to report services that represent emerging technology. They are temporary codes and can be used for up to 5 years. They consist of four digits followed by the letter T These codes might be assigned to procedures (usually surgical procedures) that have not yet received U.S. Food and Drug Administration (FDA) approval. They are listed in their own section after the category II codes with an expiration date. Category III codes are updated twice a year and if available must be used instead of unlisted Category I codes. (Unlisted codes are used for procedures when no specific code can be found. They are found in the introduction to each section of the CPT manual.)


Several appendices follow the Category III codes as indi­cated in the following list:

Appendix A—Modifiers Appendix B—Additions, Deletions, Revisions Appendix C—Clinical Examples for E/M Codes Appendix D—Add-on Codes Appendix E—Modifier -51 Exempt codes Appendix F—Modifier -63 Exempt codes Appendix G—Moderate Sedation codes Appendix H—Alphabetical Clinical Topics Listing (removed and now only on the AMA website) Appendix I—Genetic Testing Modifiers Appendix J—Electrodiagnostic Medicine Listing of Sensory, Motor and Mixed Nerves Appendix K—Product Pending FDA Approval Appendix L—Vascular Families Appendix M—Deleted CPT Codes Appendix N—Resequenced CPT Codes A modifier is an addition to a procedure code that indi­cates unusual circumstances related to the procedure, such as a more extensive procedure or two procedures performed in the same session. All modifiers are listed in Appendix A. The two-digit modifier can be added to the main code after a hyphen. The modifier can also be written as a separate five-digit code for electronic billing. The five-digit modifier always begins with 099 and ends with the two digits of the modifier (Table 45-1).

Appendix B is a summary of additions, deletions, and revisions from the previous year’s manual. When the new manual is published, the medical assistant may not be able to find a code that has been used in the past. Appendix B provides a fast way to find out if the code has been deleted, changed, or included in another procedure.

Clinical examples of different codes are given in Appen­dix C. Reading these can be very helpful in learning how to decide what code to use, especially for E/M codes. The medical assistant should also become familiar with the other appendices in order to learn how to use them effectively.

Looking up CPT Codes in the Index

There are several steps in choosing a correct procedure code for a specific patient service. The first step in coding a pro­cedure is to look up the procedure in the alphabetic index at the back of the CPT manual, but the code should not be recorded at this point. The medical assistant should never code directly from the index because it does not contain descriptions of the code and may result in use of an incorrect code.

Table 45-1 Selected CPT Modifiers Used in the Medical Office
(See the Current Procedural Terminology manual, Appendix A, for
a complete list of modifiers.)
-21Prolonged Evaluation and Management Services
-22Increased Procedural Services (not used for E/M services)
-26Professional Component
-32Mandated Services
-47Anesthesia by Surgeon (not including local anesthesia)
-50Bilateral Procedure—This code is added to the second (bilateral) procedure performed at the same operation
-51Multiple Procedures (performed at the same session)
-52Reduced Services
-54Surgical Care Only—This code is used when another physician provides preoperative and postoperative care
-55Postoperative Management Only
-56Preoperative Management Only
-57Decision for Surgery (added to an E/M [Evaluation and Management] code when the physician makes the decision for surgery during an E/M visit)
-58Staged or Related Procedure by the Same Physician during the Postoperative Session
-59Distinct Procedural Service
-90Reference (Outside) Laboratory
-91Repeat Clinical Diagnostic Laboratory Test
-92Alternative Laboratory Platform Testing
-99Multiple Modifiers

It may be necessary to look up the procedure in several ways to locate the correct code. In the index, procedures may be located by looking under the name of the procedure, the anatomic location, and sometimes the diagnosis. The terms are arranged alphabetically with the main term in boldface type and modifying terms arranged below the main term. Each level of modifying term is indented further than the level above it. For example, the main term may be an anatomic location, such as the foot. The first modifying term would identify either a condition, an anatomic loca­tion, or a procedure (such as Lesion, Nerve, or Repair). When a procedure is listed in the index (as the main term or any level of modifying term), it is followed by a code or range of codes (e.g., Foot, Nerve, Excision ……………….  28055).

Both main terms and modifying terms may point to a cross­reference using the word See. (See Figure 45-2.)

Several pieces of information may be significant when choosing the correct code for a procedure:


    Size of lesion or repair

    Method of performing the procedure, test, or surgery

    Number of minutes allotted for a treatment (e.g., acupuncture)

    Complexity of the procedure or service

Selecting a Specific CPT Code

After identifying a code or code range from the index, the medical assistant should read all relevant codes carefully in the main text. It may also be necessary to review the guide­lines at the beginning of the appropriate section of the CPT manual to obtain additional information that can be helpful in choosing a code. The medical assistant should select the code that is the best match for the medical documentation

Incision and drainage

Figure 45-2 Examples of main terms and modifying terms in the index of the CPT manual when looking up the diagnosis Incision and drainage of a bursa of the foot.

and determine if it is necessary to use a modifier or an add-on code.

There are two types of CPT codes: stand-alone codes and indented codes. The stand-alone code contains a semicolon (e.g., 93000 Electrocardiogram, routine ECG with at least 12 leads; with interpretation and report). The indented code, which follows a stand-alone code or another indented code, provides only text to replace the words after the semicolon in the stand-alone code (e.g., 93005 [indent] tracing only, without interpretation and report). In the example given, the code 93000 would be used if the ECG tracing is made and the physician interprets the tracing in the same medical office. The code 93005 would be used if the ECG tracing is made in one office, but insurance should not be billed for the interpretation because it will be done by another physi­cian and billed from another office (Procedure 45-1).

Evaluation and Management

The Evaluation and Management (E/M) section contains codes for office visits provided by primary care practitioners and specialists. E/M codes cover the service-oriented, rather than the procedure-oriented, parts of medical care. It is important to determine where the service was provided when selecting the correct E/M code.

Although procedures are fairly easy to define—for instance, incision and drainage of a cyst—the amount of service provided by a physician during an office visit is more difficult to describe. One physician may consider 20 minutes an appropriate amount of time for a visit, whereas another may consider 30 minutes the minimum amount of time to spend with a patient. One physician may focus strictly on the patient’s presenting problem, whereas another may want to examine the patient more completely, especially if he or she has not been seen for several months.

The codes in the E/M section attempt to link reimburse­ment to the completeness of the examination and the amount of skill required to manage the patient’s problems. Unfortunately, this may push the physician to limit the time spent with patients. If the patient does not have well defined, complex medical problems, the visit is reimbursed as uncomplicated, no matter how much time the visit took. For example, if a patient is in the office for a recheck of an ear infection, the visit would not usually take a significant amount of time. If the patient has several questions about methods other than antibiotics that could be used to treat ear infections, it will take more time for the physician to complete the examination, even though there is no addi­tional medical problem or complication.

When determining the proper code for E/M services, the medical assistant must consider a number of factors.

         For coding purposes, the patient is either an estab­lished patient (one who has been seen in the previous 3 years) or a new patient (one who has not had ser­vices performed by any provider in the medical office in the previous 3 years). There are separate groups of codes for each type of patient. New patients are expected to take longer to examine and are reim­bursed at a higher rate. The patient is also either an outpatient (one who has not been admitted to a health care facility) or an inpatient (a patient who has been formally admitted to a health care facility). Although most services for patients who are inpatients are billed by the health care facility itself, physicians who are not employees of that facility bill for visits to the patient during a hospital admission, for inpatient consultations, for providing reports for some diagnos­tic tests performed at the hospital (such as cardiac stress tests), for critical care and intensive care services, as well as care for visits to patients in nursing homes.

          There are separate groups of codes, depending on where the service is provided and whether the physi­cian is the patient’s primary care provider or a consul­tant. A medical service could have been provided in the office, in a nursing home, in a hospital to a patient who has been admitted, or in a hospital emergency department. The E/M section of the CPT manual is divided into several subsections, and it is important to select a code from the correct subsection, depend­ing on the service that the physician provided and the location where the service was provided.

          The level of service depends primarily on three key factors:

             The extent of the medical history (number of body systems discussed)

             The extent of the physical examination (number of body systems examined)

             The complexity of medical decision making

Medical History

History taking consists of four levels: (1) problem focused, (2) expanded problem focused, (3) detailed, and (4) comprehensive.

    A problem-focused history is one that addresses the chief complaint, with a brief history of the illness or problem.

    An expanded problem-focused history addresses the chief complaint, a brief history of the present illness or problem, and a review of systems that have to do with the chief complaint.

    A detailed history addresses the chief complaint, an extended history of the present illness, and a review of body systems, including other systems beyond those related to the chief complaint. Family history is also reviewed as it relates to the present problem.

    A comprehensive history includes a chief complaint; an extended history of the present illness; a review of all body systems, especially those directly related to the present problem; and a complete family history.

Physical Examination

    A problem-focused examination is limited to the affected body system or organ.

    An expanded problem-focused examination is related to the affected body system, as well as other organs or systems that might be symptomatic. For example, the patient may be followed for angina (recurrent chest pain) and have a new complaint of calf pain when walking.

    A detailed examination includes the affected body systems or organs and other related systems or organs.

    A comprehensive examination is a multisystem examina­tion, or a complete examination of one system.

Medical Decision Making

Medical decision making can be straightforward or have a low, moderate, or high level of complexity. If a patient has one problem, medical decision making is usually straight­forward. When a patient has multiple problems, especially if they are causing severe or life-threatening symptoms, the decision-making process is more complex. For example, if a new patient has poorly controlled diabetes mellitus type 1, fever, and an increased white blood count, the decision­making process for the physician would be highly complex (Figure 45-3).

Secondary Factors

As secondary factors, the following may be considered when choosing an E/M code:

    Coordination of care


    The nature of the patient’s problem

    The amount of time spent with the patient Coordination of care refers to time spent arranging other services for the patient, such as home care or admission to a hospital or nursing home. Counseling includes discus­sions with the patient and/or family members reviewing the need for or results of diagnostic tests, discussing available treatments and their risks and benefits, giving instructions, and so on. The nature of the patient’s problem tends to determine the amount of service required and is usually found in the code description. For example, the description of code 99201 includes the following statement: “Usually the presenting problem(s) are self limited or minor.” The amount of time spent is included in code descriptions as a guideline for code selection, but they are used for code selection only if more than 50% of the visit includes coun­seling the patient and/or family.

Figure 45-3 In the Evaluation and Management Section of the CPT manual, the type of decision making is one of the three key factors in selection of the correct level of service.

When coding for E/M services, it is vital to have docu­mentation that supports the code chosen. Often the physi­cian or other primary care provider checks the appropriate box on the charge slip at the time of the patient visit. Other times, the medical assistant may ask the physician about the level of service immediately after the visit (Figure 45-4). The medical assistant may also have to review the medical record when completing the insurance claim and decide which of the categories is supported by the physician’s prog­ress note. All of the key components must meet or exceed the stated level of care to qualify for a particular level of E/M service.


Anesthesia is the administration of a drug that causes a total or partial loss of sensation. Anesthesia can be administered to provide analgesia (absence of pain) for a patient during a surgical procedure, wound closure, removal of a foreign body, childbirth, or a diagnostic test, including radiology, as well as for therapeutic radiology.

Anesthesia can be general, regional, or local. Local anes­thesia by infiltration (the most common form of anesthesia

Type of Decision MakingNumber of Diagnoses or Management OptionsAmount of Complexity and/or Data to be ReviewedRisk of Complications or Morbidity or Mortality
StraightforwardMinimalMinimal or noneMinimal
Low complexityLimitedLimitedLow
Moderate complexityMultipleModerateModerate
High complexityExtensiveExtensiveHigh

Figure 45-4 The medical assistant may need to question the physician about services provided to a patient.

used in the medical office) is included with the procedure and is not given a separate code. CPT codes for anesthesia are specified first by the anatomic region affected, then by the type of procedure. Anesthesia services are reimbursed based on a formula. Each anesthesia code is assigned a base unit value (B) which can be found in the Relative Value Guide published by the American Society of Anesthesiolo­gists. The second component of the anesthesia formula is time (T), which is measured from the time the anesthesiolo­gist first begins to manage a patient and ends when the patient is no longer under his or her care. Every 15-minute period is a unit. The final component is modifying units (M), which are assigned based on the patient’s physical status as well as circumstances related to age. The total anesthesia units (B + T + M) are multiplied by a geographic factor to determine payment for anesthesia services.

The anesthesia section has two types of modifiers: stan­dard modifiers and physical status modifiers. Standard modifiers are those used throughout the CPT code manual; physical status modifiers indicate the patient’s condition at the time anesthesia was administered. Patient condition can influence the level of complexity of administering anesthesia in the proper dose over the proper time frame. The com­plete descriptions of these modifiers are found in the guide­lines at the beginning of the anesthesia section of the CPT manual. Codes for conscious sedation (medication admin­istered intravenously over a period of time to keep a patient calm without causing loss of consciousness) are found in the Medicine section.


The surgery section is the largest section of the CPT manual. This section is organized by organ systems and within the systems by types of procedures.

Surgical procedures are coded as a surgical package. The term surgical package indicates that the code covers all routine services related to a surgery. The following areas are included in the surgical package and cannot be coded (or billed) separately:

    One evaluation and management visit that occurs after the decision for surgery has been made, either on the day before or the day of surgery

    Local or topical anesthesia or a digital nerve block

    Immediate postoperative care

    Writing orders for care after surgery

    Evaluating the patient in the recovery room

    Typical follow-up postoperative care

If complications occur during the surgery or during follow-up, treatment of the complications can be coded separately.


The radiology section of the CPT manual includes radi­ology, nuclear medicine, diagnostic ultrasound, and radia­tion oncology. Radiology codes include both the technical component (creating the image) as well as the profes­sional component (interpreting the image). If only one component is performed, this should be indicated by a modifier.

Most standard radiologic procedures are found in the diagnostic radiology subsection, including plain x-ray films, computed tomography (CT or CAT), magnetic resonance imaging (MRI), magnetic resonance angiography (MRA), and standard angiography. The codes for diagnostic radiol­ogy correspond to the anatomic site of the radiographic image, starting with the head and moving down. Some codes indicate a single view, whereas others indicate mul­tiple views. The correct code may also indicate whether or not a contrast medium was used. In the outpatient setting, there is typically no additional charge for the physician’s interpretation of the radiograph.

Pathology and Laboratory

The pathology and laboratory section of the CPT manual is organized by the type of tests performed, such as indi­vidual tests, panels, or assays. A panel is a group of labora­tory tests, usually ordered together for diagnosis or screening, such as a cardiac panel (a group of tests ordered for a patient


with cardiac symptoms). To use a panel code, each test in the panel must have been done. Additional or other tests are coded separately.

Different codes are used for laboratory tests performed by automated equipment and tests performed manually. When coding for a medical office, the medical assistant must be sure that patients are charged only for tests actu­ally performed in the office (e.g., a dipstick urinalysis). If the medical assistant draws blood to be sent to an outside laboratory, the medical office charges the patient for the venipuncture (using the code 36415), but the laboratory bills separately for the diagnostic tests. The office does not charge separately for collecting urine and throat specimens if they are sent to an outside laboratory for processing.

Pathology testing, such as Pap tests and biopsies, is usually done by a special laboratory. The medical office charges for the visit or surgery during which the specimen is collected, but the laboratory usually bills for the actual specimen testing.

PROCEDURE 45-1 Performing CPT Coding


The medicine section of the CPT manual gives the proper codes for noninvasive diagnostic and treatment services, many of which are performed in the offices of primary care physicians and specialists. (Invasive services, those that enter a body cavity, generally fall in the surgical section.) The medicine section is organized according to body system.

A number of highly specialized types of testing and treat­ment, ranging from electrocardiograms (ECGs) to ophthal­mologic tests, are found in the medicine section. In addition, the medicine section contains the codes for immunizations and infusion therapies, including chemotherapy. Codes for procedures from this section that are performed frequently (e.g., ECGs in the office of an internist or cardiologist) are usually found on the charge slip and in the medical billing software. When a medical procedure is performed infre­quently, the physician usually writes the name of the pro­cedure on the charge slip, and the medical assistant may need to look up the code and enter it into the computer system for billing.

Outcome Perform CPT coding for procedures.
• Patient’s medical record• CPT manual
• Charge slip 

         Procedural Step. Find the name of the procedure to look up and information about the procedure (if neces­sary) using the patient’s charge slip and/or medical record.

Principle. The charge slip usually identifies the procedure(s) performed, but the medical record may be necessary to identify the appropriate level of service.

         Procedural Step. For E/M services, identify if the patient is a new patient or an established patient. Principle. Different codes are used for new patients and established patients.

         Procedural Step. For E/M services, identify if the patient was seen in the medical office or at another location, such as the hospital, emergency department, or nursing home.

Principle. Different E/M codes are used depending on the location where the patient was seen. The coding and billing for visits provided by a physician to a hos­pitalized patient, nursing home resident, or patient in the emergency department are often done by staff at the physician’s medical office.

         Procedural Step. Using the index at the back of the manual, locate the section in which the category of codes will be found. You may need to look for the name of the procedure, the diagnosis, the type of patient, the location of service, or the location of the lesion.


                   To locate an initial office visit for a new patient, look in the index under New Patient, Initial Office Visit (99201-99205) or under Evaluation and Management, Office and Other Outpatient (99201-99215).

                   To locate the code for a rapid strep test, look under Streptococcus, Group A, Direct Optical Observation (87880).

         Procedural Step. Look in the manual at the code or range of codes to read the description and determine the correct code. Do not code from the index. Principle. You cannot be sure that you have identified the correct code without reading the description of the code. You may also find additional information in the section to help you code properly.

         Procedural Step. If the service is unusual or does not seem to fit the description of the code completely, check the list of modifiers for the section of the manual to see if a modifier is necessary.


A patient has an abscess of the left upper arm, which required incision and drainage again today.

1: In the index, you look up Abscess, Arm, Upper, Incision and Drainage. It refers you to codes 23930-23035.

PROCEDURE 45-1 Performing CPT Coding—cont’d


(lines deleted)

Arm, Lower……………………………………………………………. 25028

Excision………………………………………………………………… 25145

Incision and Drainage……………………………………………… 25035

Arm, Upper

Incision and Drainage…………………………………… 23930-23935

Auditory Canal, External………………………………………….. 69020


(For incision and drainage procedures, superficial, see 10040-10160)

23030 Incision and drainage, upper arm or elbow area; deep abscess or hematoma 23931 bursa


Incision and Drainage

(For excision, see 11400, et seq)

10040 Acne surgery (leg, marsupialization, opening or removal of multiple milia, comedones, cysts, pustules)

                        Incision and drainage of abscess (eg, carbuncle, suppurative hidradenitis, cutaneous or subcutaneous abscess, cyst, furuncle, or paronychial); simple or single

                                         complicated or multiple


2: When you look at those codes, you see that these codes refer to deep abscesses.


3: You review the medical record and determine that the physician called the lesion a subcutaneous abscess.

4: For superficial abscesses, you are referred to codes 10040-10160. The code 10060 (incision and drain­age of abscess: simple or single) appears to describe the procedure most accurately. Because the patient came for an office visit specifically for treatment of

the abscess and no other E/M services were pro­vided, you do not charge for a separate office visit.

7. Procedural Step. Enter the correct code(s) on the charge slip, on the encounter form, and if applicable in the patient’s record in the computer so that it can be used for insurance billing.

Principle. Reimbursement is made by insurance com­panies based on the codes submitted. They must be accurate and reflect the service or procedure performed. In the example given earlier, the insurance company might refuse to pay for the service (as already provided) without the modifier, which indicates that it is in fact a repeat service of a procedure performed by another physician.


Putting It All into Practice

My name is John Grant, and I am a certified medical assistant. I work for a group of family practice physicians, and we have two offices. I am responsible for entering almost all of the infor­mation from the charge slips into the computer.

We have found that there is more consistency if one person is responsible for this task. Our physicians usually see patients in the office, but all of our physicians also visit their patients if they are hospitalized, visit patients in nursing homes, and sometimes see patients in the hospital emergency department in the evenings and on weekends. Each time a patient is seen in the office, a charge slip is filled out, and the physician checks beside the correct box for the type of visit. Our charge slips have the E/M codes on the slip so that we can distinguish between new and established patients, as well as levels of care provided. We also have all the codes for well visits and Medicare preventative services on the charge slip. When the physicians see patients in the hospital or in nursing homes, they fill out a log sheet we developed in the office so that we can be sure that we bill patients for all services and use the correct code for each service provided.

If the physician performs a procedure that is not on the charge slip, I look up the correct code and enter it into the computer system. In addition, I have to be sure that the correct place of service code is entered because insurance companies will reject a claim if the place of service does not match the service provided. For example, if I use the code 99281 for an emergency department visit, I have to be sure to use the place of service code 23 (emer­gency room—hospital).

I also look up diagnosis codes and enter them into the computer if necessary. The most common diagnosis codes are found in our computer system, but the physician often writes in a diagnosis that is not in the computer. The diagnosis has to correspond to the service, and sometimes the physician forgets to enter all of a patient’s conditions on the charge slip. In those cases, I have to review the medical record to find the specific diagnosis that justi­fies a procedure. Coding is complicated, but in the long run it saves time to spend time making sure that the codes are entered cor­rectly when the charges are entered. Otherwise, our insurance claims are rejected, and we spend a lot of time fixing mistakes and resubmitting claims. ■


What Would You Do? What Would You Not Do?

Case Study 1

When John is entering patient charges from the charge slips, he finds one charge slip on which the physician has checked the code for an expanded problem-focused office visit (99202) for a new patient named Peter Miller. John notices that the patient for whom he has a charge slip has other transactions in the computer from a previous visit about 12 months before the current visit. ■


HCPCS Level II codes use a five-digit alphanumeric coding system and designate specific services and equipment. Level II codes are used primarily for items and services that do not have Level I (CPT) codes. Examples of items with Level II codes include supplies, materials, specific medications, ambulance services, and some procedures. For example, if a patient is given a pair of metal underarm crutches after a cast is applied, the HCPCS code E0114 would be used to bill Medicare for the crutches. Note that the code begins with a letter that corresponds to the section of the Level II code manual. All codes are in the format of one letter fol­lowed by four digits, and they are arranged alphabetically by the first character and then numerically by the subse­quent digits. Like CPT codes, they also have modifiers that should be used if necessary to clarify an individual code.

Level II codes are updated annually by the CMS. Most commercial insurance companies also accept Level II codes for covered items or services.

Looking up HCPCS Level II Codes

The process for locating accurate HCPCS Level II codes is almost the same as that for looking up CPT codes (Proce­dure 45-2). The medical assistant should first locate the item or service in the index at the back of the HCPCS manual. The index is in the form of main term followed by subterm(s). A single code or code range may be found in the index, but the medical assistant should always find the complete description in the list of codes before making a final selection. The codes consist of one letter followed by four numbers, and they are arranged alphabetically by the initial letter and then numerically by the four digits. Codes marked ♦ are not valid for Medicare. They are used for other insurance carriers.

What Would You Do? What Would You Not Do?

Case Study 2

While entering charges for Joan Drysdale, a 72-year-old patient with Medicare insurance, John sees that the patient was charged for an intramuscular injection (90772) of methylprednisolone in addition to the office visit (99213). No other charges are listed on the charge slip. John needs to enter the charges and codes for this patient so that Medicare can be billed. ■

PROCEDURE 45-2 Performing HCPCS Coding

Outcome Perform HCPCS coding for services or equipment.


              Patient’s medical record                                                                        • HCPCS manual

              Charge slip

         Procedural Step. Refer to the charge slip or the patient’s medical record to locate the service, supplies, or equip­ment requiring a HCPCS code.

Principle. The charge slip usually identifies the procedure(s) performed, but the medical record may be necessary to identify more detail about the service, supplies, and so on.

         Procedural Step. Using the index at the back of the manual, locate the code or range of codes. Look up medications in the Table of Drugs.

         Procedural Step. Find the code or code range by locat­ing first the initial letter (arranged alphabetically) and then the four-digit number (arranged numerically). Read the description and determine the correct code. Do not code from the index.

Principle. You cannot be sure that you have identified the correct code without reading the description of the code. You may also find additional information in the section to help you code properly.

         Procedural Step. Check to be sure that the code is valid for the patient’s insurance.

Principle. Some HCPCS codes are valid for Medicaid or other insurance but not Medicare.

5. Procedural Step. Enter the correct code(s) on the charge slip, on the encounter form, and if applicable in the patient’s record in the computer so that it can be used for insurance billing.

Principle. Reimbursement is made by insurance com­panies on the basis of the codes submitted. They must be accurate and reflect the service or procedure performed.


1: To locate the code for an injection of diphenhy­dramine hydrochloride 25 mg, look up the drug in the index. (This medication may be given intramus­cularly to treat an allergic reaction.) The code given for diphenhydramine hydrochloride is J1200.

2: Look for the code in the list of codes first under J, then under 1200. The entry J1200 states that this code covers injections up to 50 mg. It would there­fore be the correct code for this example.


History of Diagnosis Coding

In addition to coding procedures, it is also necessary to code a patient’s diagnosis or diagnoses. Diagnostic coding was originally developed to fulfill four purposes: track disease processes, classify the causes of death, collect data for medical research, and evaluate hospital service utilization.

In 1948 the World Health Organization (WHO) pub­lished the first edition of the International Classification of Diseases, which assigned numbers to specific diseases. This system was developed so that more accurate statistics could be collected about how often diseases and accidents occurred and were treated. The system proved to be useful for health care review and insurance claims processing.

WHO has revised the International Classification of Dis­eases several times since then. For insurance coding and review of medical records, a clinical modification tool was developed to better collect and compile data about specific diseases, conditions, and medical services for healthy indi­viduals. The acronym for this coding system was ICD- 9-CM, which stands for International Classification of Diseases, Ninth Revision, Clinical Modification. The ICD- 9-CM became the system of choice for diagnostic coding after 1989. At that time Medicare began to require ICD-9 codes on all outpatient insurance claims forms. This soon became a requirement of all insurance companies.

The tenth edition (ICD-10) was published in 1993 by WHO. It has been used extensively in other parts of the world, but its acceptance in the United States has been delayed to October 1, 2014. This book will present both coding systems with greater emphasis on the ICD-10. For those who are accustomed to coding using the ICD-9-CM, it is important to note that there are five times more codes in the ICD-10. This allows for more precise coding of body part and patient encounter information. The ICD-9 coding system uses five alphanumeric characters with a decimal point after the third character. The only character that can be a letter is the first one. Compared with the ICD-9-CM, the ICD-10-CM includes several new features, such as the following:

    More extensive information related to ambulatory care and managed care encounters

    An expansion of injury codes

    New combination diagnosis and symptom codes to decrease the need for two codes

    An added sixth and seventh digit for some conditions

    Increased ability to locate and choose specific codes

In the ICD-10, for example, it is required for both dia­betes mellitus and its complications to use a code that identifies the specific type or cause of the diabetes (type 1, type 2, due to drug or chemical, gestational, other, and so on).

It is necessary to use one or more diagnosis codes to have an insurance claim approved for reimbursement. If the proper ICD code(s) and coding format are not used, many insurance companies will reject a claim because the patient’s diagnosis does not justify the procedures done for the patient. ICD coding is required by government-financed programs, such as Medicare and Medicaid, as well as most private insurance companies.

Selecting the Code with the Correct Level of Detail

Codes vary in length depending on the subdivisions in the tabular list. Three-digit codes are category codes and are rarely valid codes. Codes with four digits designate a sub­classification. They usually also require additional charac­ters. Some four-digit codes are valid codes for a condition whose location, cause, or other details are unspecified. The fifth character indicates a subclassification. This may be a body part. The sixth character often indicates a specific location or a specific type of condition. (See Table 45-3 to review an example of the meaning of characters in specific locations.)

Most codes are complete with five or six characters, but some require a seventh character (letter), usually to indicate whether it is an initial encounter, subsequent encounter, or an encounter for a sequela. A sequela (pl. sequelae) is any condition that results from a disease, injury, or treatment for a disease or injury. The choices for the seventh character are specific for the category and will be listed in the tabular list. They apply to all subclassifications of the category. For example, in the code S32.009A (initial encounter for a wedge compression fracture of an unspecified lumbar ver­tebra), the A indicates that it is the initial encounter. The letter D would indicate a subsequent encounter for a frac­ture that is healing routinely, and the letter S would be used for a complication (sequela) such as persistent back pain (see Procedure 45-3).


When medical codes are misused in order to obtain a higher level of reimbursement than is allowed, the process is called upcoding. Under Section 231 of the Health Insurance Portability and Account­ability Act, nearly all federal health care programs can levy fines and penalties for failure to adhere to compliance with regulations for using correct codes on claims for reimbursements. A pattern or practice of upcoding can result in large fines, and ignorance of correct procedure is not considered a defense. Medicare analyzes claims to identify atypical billing and may follow up with a more detailed analysis when a pattern has been identified for a specific provider.

Some physician offices have contracted for independent review in order to identify coding and billing errors. After such a review, it may be found that in some cases codes do not reflect a high enough level of service, resulting in lower levels of reim­bursement than are justified. An independent review can also discover cases in which the codes used on claims would result in charges that are higher than the level of service provided. Based on this information, the medical office can improve its coding procedures to maximize income without risking fines or other legal proceedings. ■

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