Thursday, January 25, 2024

Fundamentals of Medical Billing and Coding

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Exploring the Fundamentals of Medical Billing and Coding

Understanding the fundamentals of medical billing and coding is worth it. Learning medical billing and coding is the backbone of the healthcare revenue cycle. Both of these ensure that patients and payers pay providers for services rendered. Medical billing and coding are the processes that convert a patient encounter into terminology utilized for claim submission and payment. Billing and coding are two distinct procedures, although both are necessary for collecting reimbursement for healthcare services.

Medical coding entails extracting relevant information from medical records and clinical documentation, whereas medical billing uses such codes to generate insurance claims and invoices for patients. The procedure begins with patient registration and concludes when the provider gets complete payment for all services provided to patients.



The medical billing and coding process can take several days to many months, based on the complexity of activities performed, claim rejection handling, and how the organization gathers a patient’s economic responsibilities. Therefore, ensuring that provider organizations understand the fundamentals of medical billing and coding may assist providers and other professionals in operating a smooth revenue cycle and recouping all permissible payments to deliver excellent care.

So today, we are going to discuss the fundamentals of medical billing and coding. So far, we have discussed several topics related to medical billing and coding. But without the fundamentals of medical billing and coding, you can not go deeply into this sector. Therefore I hope this article may help you to understand the fundamentals of medical billing and coding. So here we go!

Fundamentals of Medical Billing and Coding

In order to discuss the fundamentals of medical billing and coding, first, we identify the key differences of both sectors.

What exactly is medical coding?

The process of medical coding begins with a patient visit at a physician’s office, clinic, or other care delivery venue. When a patient interaction happens, clinicians document the visit or treatment in the patient’s medical record and explain why certain services, materials, or procedures were provided.

According to AHIMA, accurate and thorough clinical recording throughout the patient visit is crucial for medical billing and coding. “Do not code or bill for anything if it is not recorded in the medical record” is the golden rule of healthcare billing and coding departments.

When there is a disagreement with a claim, physicians use patient records to explain compensation to payers. If a service is not correctly recorded in the medical record by physicians or their personnel, the organization may risk a claim rejection and perhaps a write-off.

Providers may also face a healthcare theft or liability inquiry if they seek to bill payers and patients for services improperly reported in the medical record or missing entirely from the patient’s data.

Medical Codes of Various Types

The following codes are used in medical coding :

  • ICD Codes
  • CPT Codes 
  • HCPCS Codes 
  • DRG Codes 
  • Modifiers

1. Diagnosis codes in ICD-10

Diagnosis codes, social determinants of health, and other patient variables are critical in characterizing a patient’s illness or damage. The International Statistical Classification of Diseases and Related Health Problems, Tenth Revision (ICD-10) is used by the industry to collect diagnostic codes for billing reasons.

The ICD-10 code set is divided into, 

  • ICD-10-CM (clinical modification) codes for diagnostic coding 
  • ICD-10-PCS (procedure coding system) codes for hospital inpatient operations.

The ICD-10-CM code category just has about 70,000 unique IDs. The World Health Organization maintains the ICD coding system, which is used globally in various versions. In 2015, CMS began transitioning the industry to the ICD-10 system. The codes describe a patient’s condition or injury, the location of an injury or symptom, and whether the visit is connected to an original or later contact.

These codes assist medical billing by describing why a patient requested medical care and the degree of their ailment or damage.

2. Procedure codes in  CPT and HCPCS

Procedure codes are used to enhance diagnostic codes by specifying what providers performed during an interaction. The Current Procedural Terminology (CPT) codes and the Healthcare Common Procedure Coding System are the two primary procedure coding systems (HCPCS).

The American Medical Association (AMA) manages the CPT coding system, which identifies the services provided to a patient through a private payer contact. They use ICD-10 numbers to figure out what happened and why.

Every year, the AMA issues CPT coding standards to assist medical coders in categorizing specific procedures and services. Medical coders should always be aware that CPT codes contain modifiers that further characterize the services. CPT modifiers reflect if doctors conducted numerous operations, why service was medically required, and where the procedure happened to the patient.

The use of CPT modifiers ensures that providers are appropriately compensated for all services rendered. While private payers often use CPT codes, CMS but some third-party payers require providers to submit claims with HCPCS codes. In addition, HCPCS codes, which are based on the CPT coding system, are required by the Health Information Portability and Accountability Act (HIPAA).

3. Modifiers

CPT modifiers (also known as Level I modifiers) are used to enhance or modify care descriptions in order to give more information about an operation or service provided by a professional. Code modifiers assist in further characterizing a procedure code without affecting its meaning. HCPCS codes are frequently used as modifiers as well. 

These codes, which consist of two-digit alphanumeric characters, give extra information on the medical treatment performed. They are often used to better characterize the part of the body where the operation was conducted, to assist identify several procedures done in the same session, or in circumstances where treatment was initiated but then stopped.

4. Codes for  professionals and facilities

According to the AAPC, previously known as the American Academy of Professional Coders, medical coders also transform the health record into professional and facility codes where relevant. Professional codes identify physicians and other healthcare services provided and link them to a billing code. These codes are derived from information in a patient’s medical record.

On the other hand, healthcare facilities utilize facility codes to account for the cost and overhead of delivering healthcare services. These codes represent the fees for using space, equipment, supplies, prescription medications, or other technical components of treatment.

When a provider engaged by the hospital offers clinical services, hospitals may also add professional codes on claims. However, if a provider is not under the agreement and utilizes the hospital’s resources and space, the institution cannot use a professional code.

Medical Coding  Uses

Medical code types can be used for a variety of purposes, including the following:

  • Medical codes serve as the common language of understanding among payers and providers and are thus utilized for communicating and billing. Due to the economic importance of both payers and providers, providers must be consistent and precise in their coding for medical services delivered.
  • Problems caused by incorrect coding

Up-coding: When a code is entered for a greater level of service or operation than what is documented in the patient’s documentation, this is known as up-coding. Up-coding is a serious offense. Hence proper and compliance coding is required.

Down-coding: Down-coding occurs when the code attributed is at a lesser level of complexity or expense than what is documented. Down-coding is frequently done accidentally, and both clinicians and coders must be educated on the costs the practice may incur as a result of down-coding.

  • Management of Population Health.

Diagnosis codes are used to examine illness patterns in populations and give data for national health trends. It allows the federal authorities to prepare the materials needed to address widespread health concerns and start campaigns to prevent and treat the afflicted population.

What is medical billing?

Under the fundamentals of medical billing and coding, now let’s discuss medical billing. The front-end billing process has already begun while coders are busily deciphering medical information. Earlier, we have discussed medical billing deeply. So I am not going to discuss all the stuff. Instead, I hope you are now familiar with medical billing. There are two main categories.

1. Front-end medical billing

Medical billing starts once a patient registers at the office or hospital and plans an appointment. Upon check-in, billers and patient financial services employees ensure that patients submit appropriate documents and validate patient information, such as home address and existing medical insurance.

Billers or other personnel should gather copayments during check-in and check-out, if appropriate. In addition, health care organizations should receive copayments while a patient is in the clinic or facility to guarantee prompt collection of patient financial obligations.

Verifying patient financial accountability is also included in the front-end medical billing procedure. Medical billers and patient financial services personnel confirm if proposed treatments are reimbursed by a patient’s health care plan and, if needed, obtain prior authorizations. When a patient is checked out, medical coders get the patient’s medical records and start the process of converting the information into chargeable codes.

2. Back-end medical billing

Back-end billing personnel and medical coders will create superbills using various codes and patient information. This superbill is an invoiced document that the provider uses to submit claims. This form will include the following items.

Details of Providers: This section will provide the name and location of the rendering provider and their signature. It will also include the NPI (National Provider Identification) and the physician’s name who will be present during the hospital’s outsourced services. 


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I am a medical biller, a blogger and have 20 years of experience in medical billing, medical billing management, and medical assistant. My background includes positions as a clinical medical assistant, medical records technician, medical office manager, biller, and coder. I am certified by the American Academy of Professional Coders (AAPC) as a Certified Professional Coder (CPC) and by the Practice Management Institute (PMI) as a Certified Medical Office Manager (CMOM). As an office manager/biller/coder, I was a member of the Michigan Medical Group Managers, Michigan Medical Billers Association. I also served as a committee member of the Michigan Osteopathic Association of Practice Managers Education Committee.

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