Why Medical Coding Must Be Accurate

Why Medical Coding Must Be Accurate

In the healthcare industry, medical coding is used for medical insurance reimbursement and also for maintaining patient records. For insurance agencies to know that there is no cheating or fraud happening, medical codes should be done accurately. This way they can find out the correct illness or injury and the treatment undergone for the patient.

Once the medical claims are adjudicated by the insurers, they will decide whether or not a claim will be reimbursed, denied, or reduced. In case there is any error in the medical coding, the claim can be denied. Any coding mistake may lead to the claim be denied entirely, or entirely covered by the insurance, or partly covered, even though it was pre-authorized which leads to the patient ending up paying out of his pocket.

Diagnosis and Procedure Codes

Diagnosis codes are basically the codes that are used to report any condition, diagnosis, or symptom in relation to the treatment of a patient. For any claim to be processed, certain basic information is required. This information is known as ICD (International Classification of Diseases) codes or diagnosis codes. They must be coded to the most accurate point so that no error is made. Ensuring all codes are error-free and accurate, ICD and HCPCS (Healthcare Common Procedure Coding System) codes are used.

HCPCS codes are defined in 3 levels:

Level I CPT (Current Procedural Terminology) consists of 5 digit numbers and are managed by the American Medical Association (AMA) and are used to find out the services and procedures ordered by doctors or other licensed professionals.

Level II HCPCS are alphanumeric codes made up of one alphabetical letter followed by four numbers and are managed by The Centers for Medicare and Medicaid Services (CMS). These HCPCS codes are used to identify non-physician services like pharmacy, ambulance services etc.

Level III codes, known as local codes, are alphanumeric codes consisting of W,X,Y, or Z followed by a four digit number. Used as miscellaneous codes, they are used in any circumstance where there is no level I or level II codes to identify the information.

Problems of Overcoding and Undercoding

Inaccurate medical coding not only leads to denial of the claim, but also some legal and financial consequences. When a claim is overcoded, it will be considered as fraud as it results in a higher payment by the insurer which will lead to prosecution, with legal and financial penalties. Likewise, there are consequences when a code is undercoded. Undercoding means, not including codes for all procedures done. Even coding them as procedures which are usually reimbursed at a lower rate is considered as undercoding as it results in a loss of revenue for the provider.

Among all the codes, the most complex of them are DRGs (Diagnosis Related Groups). They are a combination of:

  • Diagnosis
  • Symptoms
  • Pre-existing Conditions
  • Procedures
  • Complications
  • Age and Gender

DRGs are mostly used to code inpatient claims. The accuracy of all the sections is very important and an essential one as insurers pay according to the DRG. Hence, for proper claim reimbursements, the DRG code is vital.

For a claim to be processed properly, it is dependent on many components which have to be accurate. Being on top of the coding game by staying up-to-date with annual coding changes, keeping detail patient records and following standard coding guidelines are a few easy ways to ensure accurate medical coding.

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