Medical Billing

# Comprehensive Guide to Understanding Medical Billing Codes

- March 6, 2023
- Posted by Kristen Edwards

06 Mar

Medical billing codes are a system of standardized codes used to represent medical procedures, diagnoses, and other medical services provided by healthcare providers. Healthcare providers use these codes to bill insurance companies and government programs for reimbursement.

While some codes are straightforward, others are more complex. For understanding medical billing codes and how they work, it is important to have a basic understanding of the different types of codes that are used. There are three main types of medical billing codes: CPT, ICD, and HCPCS.

These medical billing codes are used to describe the diagnosis and procedures associated with a patient’s medical care for which the providers are billed and reimbursed.

The process of medical and billing procedures can take up to weeks and a few months. This is why it is important for the providers and equally for the billers to bill the accurate coding against the procedures so the bill rejection rate can be minimized or eliminated.

Keep reading to learn more about medical billing codes and how they are used to bill for medical services.

## What is medical billing?

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Medical billing is the process of submitting and following up on claims with health insurance companies and other government programs, such as Medicare or Medicaid, to receive payment for healthcare services provided by healthcare providers.

Medical billing involves using standardized codes to represent medical procedures and diagnoses, submitting claims to insurance companies or government programs, and following up on any denials or rejections of the claims. This process requires knowledge of medical billing codes, insurance policies, and regulations.

Medical billing is an important aspect of healthcare administration, as it helps healthcare providers receive payment for their services and ensures that patients are not overcharged for medical treatments.

The process starts with the patient’s first encounter with the medical facility or practice and ends when the provider is compensated for the services provided.

For complete medical reimbursement, it is critical to have accurate and correct clinical documentation for the services provided, equipment used, prescriptions, and the staff included in the patient’s treatment, as the AHMA explains. According to the golden rule of medical billing, experts say, ‘ Do not bill the services that do not have the record in the medical history of the patient’. This is because it significantly impacts the rate of rejection of your medical bills.

Other consequence that a medical practice may face is the fraudulent or liability investigation case open against the services they bill for but are not actually provided. Situations can also include incorrect billing or the missing document of the services billed.

To avoid such situations, a biller should review all the services provided and the clinical documentation maintained during the treatment or the stay of the patient in the facility. They mainly use the information to take out the relevant codes for the disease and diagnosis provided by CMS. Insurance providers can also have precise codes for coding certain diagnoses.

Everything that surrounds a medical billing and coding process is divided into two basic billing processes;

### – Front-end medical billing

Front-end medical billing refers to the process of collecting and verifying patient and insurance information and submitting insurance claims for reimbursement at the beginning of the medical billing process. Front-office staff, such as receptionists or medical billing specialists, typically handle this process. The front-end medical billing process includes several key steps. Some of them include;

Patient registration: The first step in front-end medical billing is to collect patient information, such as name, address, date of birth, and insurance information. This information is used to verify the patient’s identity and insurance coverage.

Insurance verification: Once the patient’s insurance information is collected, front-office staff will verify the patient’s coverage, including their insurance plan type, deductible, co-insurance, and co-pay requirements. This information is used to ensure that claims are submitted correctly and that the patient is aware of any out-of-pocket costs.

Pre-certification or Authorization: Authorization and pre-certification are processes used by healthcare providers and insurance companies to determine if an insurance plan covers a medical procedure or service and if it meets certain medical criteria.

Authorization refers to the process of obtaining approval from an insurance company for a specific medical procedure or service. This process usually involves submitting a request to the insurance company, which then reviews the request and determines if the procedure is medically necessary and covered by the patient’s insurance plan.

During the process of front-end medical billing process, hospital staff takes the information about the copayments and the insurance plans and notifies the patient about their out-of-pocket expenses. Once the patient is discharged, a medical biller converts this medical information and the medical records during the patient’s stay and converts them to billable format to place claims.

### – Back-end medical billing

Back-end medical billing refers to the process of reviewing and submitting insurance claims for reimbursement after medical services have been provided. Medical billing specialists or a medical billing company typically handles this process.

The back-end medical billing process includes several key steps:

Coding: The first step in back-end medical billing is to assign the appropriate medical codes to each procedure and diagnosis. This includes using ICD-10 diagnosis codes for diagnoses and CPT or HCPCS procedure codes for procedures and services.

Claims submission: Once the codes have been assigned, the medical billing specialist submits the insurance claims electronically or by mail to the patient’s insurance company or government program, such as Medicare or Medicaid.

Claim processing: The insurance company reviews the claim and determines if the patient’s insurance plan covers the medical services provided. The company also verifies that the medical codes used are accurate and match the services provided.

Payment and denial: If the claim is approved, the insurance company will issue payment to the healthcare provider for the covered services. If the claim is denied, the healthcare provider may need to submit an appeal or make corrections and resubmit the claim.

Patient billing: After the insurance company has processed the claim, the healthcare provider bills the patient for any remaining balance due based on their insurance coverage, such as co-payments, co-insurance, and deductibles.

Back-end medical billing is a crucial part of the medical billing process as it ensures that healthcare providers receive payment for their services and that patients are billed accurately and promptly. However, they all are classified into the following codes.

## ICD-10 Diagnosis codes

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ICD-10 diagnosis codes are a set of alphanumeric codes used to represent medical diagnoses in medical billing and coding. ICD-10 stands for International Classification of Diseases, Tenth Revision.

Healthcare providers use ICD-10 diagnosis codes to document and communicate patient diagnoses to insurance companies, government programs, and other healthcare providers. These codes provide a standardized way to document and track patient health conditions, which helps with accurate billing, medical research, and healthcare planning.

Each ICD-10 diagnosis code comprises three to seven characters, and the first three characters represent the diagnosis category. The remaining characters provide further specificity about the diagnosis.

ICD-10 diagnosis codes are regularly updated to reflect changes in medical practice and knowledge, and healthcare providers need to stay up-to-date with these changes to ensure accurate coding and billing.

ICD-10-CM (clinical modification) defines the healthcare facilities provided in hospital settings, whereas ICD-10-PCS (procedural coding system) defines the medical facilities that provide hospital inpatient services. In addition, there are modifiers used with the ICD-10 clinical modification coding system that specifically define the severity, location, and condition of the disease found at the subsequent encounter.

## CPT and HCPCS procedure codes

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CPT and HCPCS procedure codes are sets of alphanumeric codes used to represent medical procedures, treatments, and services in medical billing and coding.

CPT stands for Current Procedural Terminology, which is a set of codes developed and maintained by the American Medical Association (AMA). CPT codes are used to represent medical procedures and services provided by physicians, nurses, and other healthcare professionals.

HCPCS stands for Healthcare Common Procedure Coding System, which is a set of codes developed by the Centers for Medicare and Medicaid Services (CMS). HCPCS codes represent medical procedures and services reimbursed by Medicare and Medicaid, as well as some private insurance plans.

Both CPT and HCPCS codes are used to report medical procedures and services on insurance claims and bills. These codes provide a standardized way to document and track medical procedures, which helps with accurate billing, medical research, and healthcare planning.

CPT codes are typically five digits long and organized into categories based on the type of medical service or procedure being performed. HCPCS codes are also organized into categories and include two levels of codes: Level I codes, which are identical to CPT codes, and Level II codes, which are used for procedures and services not covered by CPT codes.

Healthcare providers need to use the correct CPT and HCPCS codes for each medical procedure and service provided to ensure accurate billing and reimbursement.

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## Conclusion

It is important for medical providers and patients to understand how the medical billing codes work and how they are processed for billing and compensation. A simple information error can result in a claim denial, and a missing record can bring consequences to your practice. Be vigilant and audit your bills before submitting them to insurance providers for reimbursement.

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