Introduction
The medical coding process is a critical component of the healthcare industry, providing a standardized way of classifying and recording medical diagnoses and procedures for billing and reimbursement purposes. With the rise of complex medical procedures and treatments, accurate and efficient medical coding has become even more essential for healthcare providers and payers.
In this first blog of a three-part blog series, we’ll explore the different types of medical codes, overview the medical coding review process, highlight common pitfalls in medical coding, and provide tips for avoiding these errors. The next blog will take a deeper dive into the sources of medical coding variation. Finally, the last blog will go over how to best measure and document accuracy and consistency of coding within an organization.
What is medical coding?
Medical coding utilizes standardized codes for clinical diagnoses, medical procedures, and other services so that they can be efficiently captured and analyzed for insurance billing, medical records management, and public health reporting. In this section, we will discuss some of the most common types of medical codes used in the industry today.
Types of Medical Codes
International Classification of Diseases (ICD)
The International Classification of Diseases (ICD) is the coding system implemented for disease and health-related conditions, authorized by the World Health Organization (WHO). ICD codes are primarily used for mortality and morbidity statistics but are also used by the Center for Medicare & Medicaid Services (CMS) for reimbursement and medical record management. ICD codes get updated over time to reflect advances in medicine and improvements in accurate identification and specification of health conditions. The most common edition of ICD currently in use for medical coding in the United States is the tenth revision, known as ICD-10.
Current Procedural Terminology (CPT)
The Current Procedural Terminology (CPT) codes are published by the American Medical Association (AMA) and are primarily used to identify medical services and procedures. This contrasts with ICDs, which are used to identify disease status. These codes are used by doctors and healthcare professionals to bill and receive reimbursement for rendered services from individual consumers, as well as public and private health insurance programs.
CPT codes are divided into four categories, which include procedures/services, performance measurement, new/developing technologies, and proprietary clinical laboratory analyses. CPT codes are constantly reviewed and updated by a CPT Editorial Panel with insight from clinical and industry experts to reflect current clinical practice and the latest medical innovations.
Healthcare Common Procedural Coding System (HCPCS)
The last set of codes highlighted in this blog are Healthcare Common Procedure Coding System (HCPCS) codes, which are maintained by CMS and represent a collection of standardized codes used by physicians, healthcare professionals, and insurance programs to describe medical procedures, supplies, products, and services. HCPCS codes are divided into two subsystems, one of which includes CPT codes, while the other includes products, supplies, and services not included in CPT. As with CPT codes, HCPCS are updated over time to reflect current clinical practice and innovations.
In general, the codes above reflect those most utilized to document medical services and determine payment levels. By ensuring that codes are correctly assigned, healthcare providers (including managed care plans that administer medical benefits on behalf of federal and state health care programs) can improve their revenue cycle, while avoiding costly errors and compliance issues.
Applying Medical Codes for Reimbursement
HCPCS & CPTs for Billing & Reimbursements
For those treating patients covered by government-funded healthcare programs such as Medicare and Medicaid, CPT and HCPCS codes are essential in the reimbursement process. Consider a typical outpatient service, such as visiting a physician’s office. Once the service is rendered and the provider submits a claim to Medicare or Medicaid, it is reviewed to ensure that the services provided were medically necessary and appropriate. The payment amount for each code is often predetermined by the program and is based on the resource-based relative value scale (RBRVS) system.
RBRVS is used in determining the relative resource use associated with different health care services, considering factors like the cost of providing the service, the time involved, and the expertise required. Payers can use the RBRVS to create fee schedules for determining the reimbursement rate from HCPCS and CPT codes. Fee schedules are lists of codes paired with their corresponding payment amounts. These payments could be calculated using regional or national averages for the cost of providing the service. When RBRVS-based fee schedules are used, services anticipated to require more resources will be associated with higher reimbursement levels, and vice-versa.
There are also different provider reimbursement models other than RBRVS that consider groups of services provided (i.e., groups of CPTs and HCPCS), as well as the diagnosis of patients. For example, many hospitals and other inpatient healthcare settings are reimbursed using Diagnosis Related Groups (DRGs). Each DRG grouping is identified with a certain mix of ICD and CPT/HCPCS codes. Like RBRVS, DRGs that are anticipated to consume more resources for treatment have higher associated reimbursements (and vice-versa).
ICD Codes for Risk-Adjusted Payments via Hierarchical Condition Categories (HCC)
A provider can also be reimbursed based on the health status of the population they are serving using a risk adjustment model based on codes such as Hierarchical Condition Categories (HCCs). HCCs group patients with similar health conditions (using ICD codes) to predict their expected cost of care. As with the RBRVS and DRG systems described above, HCCs associated with more healthcare needs are generally associated with higher payments. For more details on how HCCs are used to “risk adjust” payments, please see our prior blogs.
HCCs are also updated over time, usually on an annual basis to reflect changing medical conventions. There are many other types of standard code sets used for risk adjustment, but HCCs remain the most prevalent, particularly as it is the exclusive risk adjustment coding system used for the Medicare Advantage program and plans sold in state and federal health insurance marketplaces authorized by the Affordable Care Act. Given its importance in determining payment levels, HCCs and other risk adjustment coding sets are also subject to medical coding review processes.
Common Pitfalls in Medical Coding
Medical coding is a complex process that requires precise attention to detail to ensure accuracy and compliance with regulatory requirements. These requirements are outlined by HIPAA, ICD-10 and CPT Coding Guidelines, and the National Correct Coding Initiative.
However, despite its importance, there are several common pitfalls that can arise during the medical coding process. In this section, we will discuss five common pitfalls healthcare providers should be aware of when performing medical coding.
Insufficient Documentation
A medical coder must extract relevant information about a patient with their medical record, such as demographics information, medical history, diagnoses, treatment plan, and other clinically relevant data. Inadequate documentation can lead to denied claims and delayed reimbursements.
Inaccurate Code Selection
Selecting the wrong codes can lead to denied claims and inaccurate billing. Providers must ensure that medical coders are properly trained, understand current coding guidelines and regulations, and have access to up-to-date coding resources.
Unbundling
Unbundling occurs when a provider bills for multiple procedures or services separately instead of under a single comprehensive code. This practice is considered fraudulent and can result in penalties, fines, and legal action.
Upcoding & Undercoding
Upcoding occurs when a provider bills for more expensive services or procedures than were actually provided, while undercoding is where a provider bills for a less expensive service or procedure. Both can result in lost revenue for the healthcare provider and/or compliance issues.
Inconsistent Coding Practices
Inconsistent coding practices can lead to errors, denied claims, and compliance issues. CMS provides guidelines and regulations for medical coding and billing practices, which are designed to ensure that medical coding practices are accurate, consistent, and compliant with regulatory requirements.
Mitigating Pitfalls in Medical Coding
To mitigate these pitfalls, healthcare providers should ensure that medical coders are properly trained, regularly audit their coding practices, and keep up-to-date with changes in coding guidelines and regulations. Additionally, complying with best practices such as those provided by HIPAA, the False Claims Act, the Affordable Care Act, and the Office of Inspector General Compliance Program Guidance can help ensure accurate and compliant medical coding practices.
Summary
Medical coding is an essential process for healthcare providers to receive funding in a timely manner for the services they deliver to patients. By adhering to best practices and staying up-to-date with regulatory requirements, healthcare providers can ensure accurate billing, maximize reimbursements, and avoid costly errors and compliance issues.
Stay tuned for Part II on the importance of accurate medical coding, when we will delve deeper into the sources of variation in codes used by coders, and reasons why such variation is problematic.
Looking to improve your medical coding practices and avoid costly errors? Our team at RaLytics can offer expert data analysis and consulting services to ensure that your coding processes are accurate, compliant, and efficient. Contact us today at info@ralytics.com to learn more about how we can help you optimize your medical coding practices and maximize reimbursements.