An Introduction To Medical Coding & Basic Terminology

An Introduction To Medical Coding & Basic Terminology


Medical coding is the process of assigning numeric or alphanumeric codes to the diseases, injuries, treatments, and procedures that healthcare providers perform to record each encounter accurately and correctly bill the patient (Healthcare Business & Technology, 2019).

Medical coding directly ties into medical billing, which includes “preparing billing claims and submitting them to insurance providers,” as noted in our previous article, “What Is Medical Coding and Billing? How Does It Streamline a Hospital’s Financial Performance?” Ensuring the encounter was coded correctly is essential for correct payment and an accurate patient medical history. In addition, “medical codes also serve the purpose of comparing projects and planning for under-served healthcare area, aiding in administrative functions, as well as identifying symptoms that must be addressed and referenced by other physicians” (Healthcare Business & Technology, 2019).

Here are the different categories of medical codes that coders use:

Medical CodingCurrent Procedural Terminology (CPT): CPT codes encompass the wide range of services performed by physicians, such as surgeries, tests, and evaluations. The American Medical Association (AMA) maintains the CPT code set, and constantly updates it to reflect the changes in the medical and healthcare field (AMA, 2020). There are three categories of CPT codes, plus the Proprietary Laboratory Analyses (PLA) set.

International Classification of Diseases (ICD): ICD is the “international standard for defining and reporting diseases and health conditions,” according to the World Health Organization (WHO), which uses the code set to identify health trends and statistics worldwide (2020). Updated frequently with input from payers and physicians, ICD is on its 10th edition, with an 11th version being queued up for implementation around January 2022. Review our previous article, “Understanding ICD-10 Codes and Why They’re Important,” for a more in-depth explanation of ICD codes.

Healthcare Common Procedure Coding (HCPC): HCPC consists of two code set levels that cover “ambulance services, durable medical equipment, prosthetics, supplies, outpatient hospital care, chemotherapy drugs, and more” (Healthcare Business & Technology, 2019). The set undergoes quarterly changes that take into account public feedback on the codes.

International Classification of Functioning, Disability, and Health (ICF): ICF focuses on body functions and structure, disabilities, the effects on a patient’s activities and participation, and information on the severity and environmental factors (CDC, 2015).

Diagnosis Related Groups (DRG): DRG codes pertain to Medicare patients, whose information and ailments are segmented into categories. Based on the previously established classifications on these categories, Medicare assumes the same care is needed and issues a reimbursement based on that level of care.

Medical CodingMedical coding is an important necessity in every healthcare setting, but the type of practice can help determine the code set that will be more frequently used, as well as a coder who specializes in that code set. Smaller clinics have multiple options for their coding and billing responsibilities. In essence, they may use a health information management software for data entry, or go through a consultant, such as YES HIM Consulting, to outsource their coding needs. Larger hospital systems may have a dedicated coding department, or they may outsource this process due to the large volume of patient bills. But don’t let the outsourcing myths fool you into thinking that outside coders won’t be qualified – we debunk them here.

When outsourcing coding and billing to a consultant, it is imperative to review the consultant’s level of experience, communication, and performance to ensure they will be the right match for your organization. Read our previous article, “Selecting the Right Coding Auditing Company for Your Organization,” for more information.

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