What is Medical Coding?

What is Medical Coding?

Medical coding is a process of assigning alphanumeric codes to medical diagnoses, symptoms, medical or surgical procedures, information, and other health-related services. These codes classify the medical information for billing, research purpose, communication among healthcare providers, and making insurance claims. This article provides a detailed overview of the importance of medical coding, the medical coding process, the types of medical coding systems, and the challenges faced during medical coding.

Scope of Medical Coding:

Medical coding is an integral part of the healthcare industry. It ensures the delivery of quality healthcare to patients and reimbursement for the services provided by healthcare providers.

Medical coding helps with the following:

1. Documentation of the data: Documenting data in a coded form effectively stores information precisely and concisely. Documentation is important to patient information, diagnosis, treatment plans, healthcare services, and medical billing.

2. Improving healthcare services: Patient care improves with accurate medical coding that helps providers treat patients with the help of comprehensive medical information.

3. Medical billing and reimbursement of the services: Medical bills and claims are documented with the help of medical coding. Accurate coding helps providers to get reimbursement for their services.

4. Medical Research: Medical coding helps generate data for medical research by storing information about diseases, various treatment plans, and their outcomes.

Process of Medical Coding:

Medical coding is a multi steps process that involves documenting information, assigning codes, and using them for various purposes. It involves the following steps:

1. Documentation:

Documentation is important to assign codes to the diagnosis, treatments, healthcare services, and reimbursement plans. Past medical history, medical records, lab results, imaging studies, and other important information are included in the documentation.

2. Codes assignment:

Course assignment is the next step after documenting the diagnosis, treatment, healthcare services, and other information. Several different coding systems, including the International Classification of Diseases (ICD), the Current Procedure Terminology (CPT), and the Healthcare Common Procedure Coding System (HCPCS), are used for assigning codes.

3. Sequencing the codes:

After assigning codes, sequencing them is important for billing. The sequence of codes determines which of them might be reimbursed at a higher rate.

4. Verifying the codes:

The final step is to double-check the coded data. It ensures the accuracy of the codes assigned according to the patient’s medical history, diagnosis, and treatments.

Types of medical codes

Following are the types of medical codes that are generally used in the healthcare industry:

What is Medical Coding

What is Medical Coding – Types of medical codes

1. Diagnosis codes:

These codes are used to classify the patient’s medical condition. ICD codes are assigned to the diagnosis of diseases.

2. Procedure codes:

These codes identify and classify medical procedures, medications, laboratory tests, and other medical services. CPT coding system includes these procedure codes.

Types of medical coding systems:

Several coding systems are used in the healthcare industry. The following are the most widely used coding systems worldwide:

1. ICD Coding System:

The International Classification of Diseases (ICD) coding system is a standardized coding system developed and maintained by World Health Organisation (WHO). As mentioned above, this coding system classifies medical conditions like diseases and injuries.

Two main categories of the ICD coding system are widely used these days. The first one is ICD 10, which is the tenth revision of the ICD coding system. It has 22 chapters and nearly over 70,000 codes covering a wide range of medical conditions. The second one is ICD 11, which is the 11th revision of the ICD coding system. It was released in 2018. It has 17 chapters and nearly over 55,000 codes.

Structure of ICD-10 codes:

ICD 10 codes consist of 3 to 7 characters. Each character represents specific information about the health condition:

  • The first character is a letter representing the particular chapter among 21 chapters from which the condition, disease, or injury belongs.
  • The second and third characters further categorize the condition and provide additional information. For example, if a neoplasm is identified, the second and third characters may represent the site and type of the tumor.
  • The fourth, fifth, and sixth characters further classify and specify the condition according to the severity, specific location, or cause of the condition.
  • The seventh character indicates the episode of care. For example, it tells whether the encounter is initial or a follow-up (subsequent encounter or sequela).


S72.002A- Fracture of unspecified part of neck of left femur, initial encounter for closed fracture

The ICD coding system is updated regularly with changes in medical knowledge, the latest technology, and practice. These updates ensure that the ICD coding system remains relevant and accurate.

These course help with billing and reimbursement as well as research and statistical reporting of disease trends and health issues.

See Also What is ICD 10?

2. The CPT Coding System:

The Current Procedural Terminology (CPT) coding system is also a standardized coding system developed and maintained by the American Medical Association (AMA). This coding system describes medical procedures and other services the healthcare professionals provide.

What does CPT stand for?

CPT stands for Current Procedural Terminology.

Who maintains and assign CPT codes?

The Current procedural terminology CPT) coding system is also a standardized coding system developed and maintained by the American Medical Association (AMA). This coding system describes medical procedures and other services the healthcare professionals provide.

Structure of the CPT coding system:

The CPT codes are divided into three main categories:

Category I: these codes are divided into six sub-parts:

1. Evaluation and Management

2. Anesthesia

3. Surgery

4. Radiology

5. Pathology and laboratory

6. Medicine

The codes are assigned to the medical procedures and services according to these specific sections.

Category II:

Category II codes represent the quality and performance of medical procedures and services.

Category III:

Category III codes represent those emerging technologies, procedures, and services that have not been assigned an established category I code.

Numbering a CPT code:

CPT codes are numbered systematically. The first digit of the code is always a numeric digit between 1 and 9. It represents one of the six sections of Category I of the CPT coding system, as mentioned above.

The second digit represents a subsection of one of the above six sections. It is also a numeric digit between 0 and 9.

The third digit (also a numeric one) identifies the procedure within the subsection. It can be any digit between 0 and 9.

The fourth and 5th digits of the codes indicate additional information about the service provided. For example, the method of delivery of any procedure. These digits are only sometimes used.

Example of a CPT code:

CPT Code 99385

  • The first digit (9) represents the medicines section of category 1 of the CPT codebook.
  • The second digit (9) represents preventive medicine as a subsection of medicine.
  • The third digit (3) represents an initial comprehensive preventive medicine evaluation and management of an individual, including age and gender, history, examination, counseling, risk factors, interventions, and diagnostic procedures.

As ICD, the CPT coding system is also updated regularly with changes in medical technology and procedures to ensure accuracy. Policyholders and insurance providers also use these codes to determine reimbursement rates.

3. The HCPCS Coding System:

The Healthcare Common Procedure Coding System (HCPCS) is used primarily by Medicare, Medicaid, and other government healthcare programs to describe and bill for medical services. With the help of HCPCS codes, healthcare providers can accurately describe and bill their services, helping insurance companies ensure they are paying for the right and necessary services.

Structure of the HCPCS coding system:

The HCPCS coding system is classified into two levels:

  • Level I codes are the CPT codes developed by American Medical Association. They have already been described in this article.
  • Level II codes are alphanumerical codes not described in the CPT codes. The Centres for Medicare and Medicaid Services (CMS) develop and maintain these codes. These codes consist of 17 sections. They describe the medical services such as ambulances, medical equipment, nursing homes, durable medical equipment, and orthotic and prosthetic devices provided by healthcare professionals other than physicians. These codes comprise a single letter followed by four digits each.

The first letter represents the section of the codebook according to the services being provided. For example, the letter A represents the transportation services section, and E represents the durable medical equipment section. The digits provide additional information about the item or the service being provided.

Other Coding Systems:

Some other coding systems are used for specific purposes. The following are some of the other coding systems:

National Drug Code(NDC) is a coding system that identifies drugs and pharmaceutical products.

Logical Observation Identifiers Names and Codes (LOINC) is a coding system that identifies laboratory results and clinical observations.

Systematized Nomenclature of Medicine Clinical Terms (SNOMED CT) represents clinical observations, procedures, and outcomes.

In conclusion, medical coding serves a critical function in the healthcare industry. It makes the documentation, billing, and reimbursement process effective and efficient. It ensures that the patients get quality treatment while the healthcare providers get reimbursements for their services. It is an ever-evolving and very progressive field related to the healthcare industry.

See Also

Medical Billing and Coding Salary

4 Week Online Course for Medical Billing and Coding

AAPC Medical Coding

Free Medical Billing and Coding Course

Current Version
May 7, 2023
Written By
Asher Ashfaq, OMPT, PT, CPC, CMP

Centers for Medicare & Medicaid Services. (n.d.). Healthcare Common Procedure Coding System (HCPCS) Level II Coding Procedures.

Centers for Medicare & Medicaid Services. (n.d.). ICD-10-CM Official Guidelines for Coding and Reporting.

Centers for Disease Control and Prevention. (n.d.). ICD-10-CM Official Guidelines for Coding and Reporting FY 2022.

Centers for Disease Control and Prevention. (n.d.). ICD-10-CM.

American Medical Association. (n.d.). About CPT.

Centers for Medicare & Medicaid Services. (n.d.). Importance of Accurate Medical Coding.

American Academy of Professional Coders. (n.d.). Medical Coding Systems.

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