Medical Coding: An Overview

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Written by: Patricia Lincoln, Instructor, Medical Billing Department

What is Medical Coding, exactly?

Medical coding is the process of reading medical reports to determine what services were performed, as well as why those services were medically necessary, then translating those services and the medical reason for the services into codes.

For every service a doctor performs, whether in the doctor’s office or in the hospital, and for every medical supply item or piece of durable medical equipment, there is a “code” that represents that service or supply.

Additionally, there are other codes that are used to describe the reason a patient requires medical care. These codes are assigned to represent the diagnosis (the illness, disease, or injury) – the reason a patient went to a doctor. In the absence of a definitive diagnosis, this code set also includes codes to represent signs and symptoms that may be the reason the patient saw the doctor.


The codes that represent the services provided by the doctor for the patient are Current Procedural Terminology (CPT) and Healthcare Common Procedure Coding System (HCPCS) codes. It is from these two code volumes that the coder chooses the codes that correctly describe what the doctor did for the patient. Codes are assigned for reimbursement as well as for statistical data gathering.

The codes that represent the reasons patients require medical care are International Classification of Diseases (ICD codes), currently ICD-10-CM (10th Revision, Clinical Modification).

Coders refer to these code sets as CPT, HCPCS (pronounced HICKPICKS), and ICD codes.

The medical reports a coder reads are either electronic or paper medical records, and may specifically be the office notes from a patient’s office visit, the operative report from a surgery, the record of an emergency department visit, laboratory reports, x-ray reports, procedure notes, pathology reports, or other medical documentation of patient care, supplies, or services. 

The coder looks up the services in their CPT and/or HCPCS books and locates the code or codes that represent those services. Once the correct CPT or HCPCS codes are found, the coder assigns those codes. Next, the coder refers to their ICD-10 book, looking up the diagnosis the doctor documented, or the reason(s) the patient saw the doctor, and locates the ICD code or codes to represent the reason(s) the patient needed healthcare. The ICD (diagnosis) codes explain the medical necessity for the services provided to the patient on that date.

Coding for reimbursement is when assigned codes are to be submitted to an insurance company for payment for medical services. The codes that represent the services, as well as the codes that represent the reason for the services, are entered on an insurance claim. Insurance claims are transmitted electronically to the insurance companies; however, sometimes a paper claim form must be generated, printed, and mailed as a hard copy to the insurance company. Either way, the insurance company receives and processes the claim and will review it to determine what they will pay based on the benefits of that patient’s policy.

When we talk about codes being used for statistical data, we are talking about agencies, including the Centers for Disease Control and The World Health Organization who gather redacted healthcare data from medical insurance claims. 

Anyone or any organization can purchase redacted claims data from The Centers for Medicare and Medicaid Services (CMS) Basic Stand Alone Medicare Claims Public Use Files, so even private research organizations can apply to access these files. HIPAA forbids the release of protected health information that can identify the patient, so these data are only available with all personally identifiable information redacted. But the important content, the healthcare data are gathered. 

Codes ARE healthcare data, and these data provide information about infectious diseases, chronic diseases (such as Hypertension and Diabetes), injuries and accidents, surgeries, and more! Because codes are the data, and claims are submitted electronically in a standardized format, databases can be built and searched. For example, when you hear in the news that 600 people in your county have the flu, this fact comes from tracking the use of the ICD (diagnosis) codes for flu (influenza).

Trends in disease and disease management, prediction models, geographic areas of infectious disease outbreaks, research on the causes of accidents, how tobacco and alcohol impact health, the effectiveness of treatments, tracking the reemergence of previously eradicated disease such as Measles – so much is and can be learned by searching accurate healthcare data. Even in a single-doctor practice, internal electronic data can be searched from the past to predict when local flu season will begin, so they can get enough flu vaccine ordered at the right time.


Imagine how impossible it would be to determine, for example, how many hysterectomies are done each year in the U.S. if words were used instead of codes. One doctor may call an abdominal hysterectomy an abdominal hysterectomy. Another doctor says Abd Hyst, and a third doctor may abbreviate total abdominal hysterectomy as TAH. And what about spelling errors? It would be impossible to develop reliable statistics without uniformity in reporting. Every provider would always have to use the same, exact, correctly spelled words.

By assigning accurate codes, coders provide quality healthcare data that have a positive impact on correct reimbursement of healthcare insurance claims and are essential contributions to better patient outcomes, quality healthcare, publicly reported statistics, and important research.


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