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Chapter 1 (c D )20 R 1 AF 4 T AH C IM O PY A Introduction to Clinical Coding Several medical terminologies and classification systems are used to...

1. What kind of healthcare institutions uses the two forms? Be specific and
provide examples.
2. How do the two forms differ?
3. What types of patient information, codes, and insurance information are
entered on each of the billing forms?
4. What is the impact on reimbursement if the information entered on the
forms is incomplete or incorrect?

Chapter 1.pdf

Chapter 1 (c
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PY A Introduction to Clinical Coding Several medical terminologies and classification systems are used to document and report
information related to healthcare services in the United States. The International Classification
of Diseases, Clinical Modification, currently in its ninth revision (ICD-9-CM), transitioning
to tenth beginning October 1, 2014 (ICD-10-CM), is used to describe and report the illnesses,
conditions, and injuries of patients who require medical services. ICD-9-CM is made up of a
series of numerical and alphanumerical codes with code descriptions that represent very specific illnesses and injuries.
Similarly, the services provided by physicians and other healthcare professionals are described
and reported by using terminologies and classification systems. The International Classification
of Diseases, Clinical Modification, provides a system for coding medical procedures performed
in the inpatient departments of hospitals, but two other systems, the Current Procedural Terminology (CPT) and the Healthcare Common Procedure Coding System (HCPCS), apply to the
services provided by physicians and other medical providers in hospital-based outpatient departments, physicians’ offices, and other ambulatory settings. (Table 1.1 provides a summary).
Table 1.1.  Reporting codes by setting
Healthcare Setting
Physician Offices Report Diagnosis Codes Report Procedure Codes ICD-9-CM CM (ICD-10-CM,
beginning October 1, 2014) CPT and HCPCS Hospital Outpatient Services ICD-9-CM (ICD-10-CM,
beginning October 1, 2014) CPT and HCPCS Hospital Inpatient Services ICD-9-CM (ICD-10-CM,
beginning October 1, 2014) ICD-9-CM Procedure Codes (ICD10-PCS, beginning October 1, 2014) As an example for reporting codes, refer to figure 1.1, which is an excerpt from the paper
billing form for use by physician offices. In this illustration, assume a patient was seen for a
growth on the skin of the foot. The physician documented that the following procedure was
performed: shaving of a 0.5 centimeter epidermal lesion of the foot. For billing purposes, Field
21.1 would contain the ICD-9-CM diagnosis code 709.9, lesion of skin (ICD-10-CM code
L98.9), which explains the reason for the encounter. The services provided would be listed
in Field 24D, with CPT code 11305 (shaving). Payers could deny or question the bill if the
services do not coincide with the diagnosis. 1 Chapter 1 Figure 1.1.  Reporting codes for physician’s claim (c
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PY A Current Procedural Terminology CPT, published by the AMA, provides a system for describing and reporting the professional
services furnished to patients by physicians and hospital outpatient services.
CPT was initially developed in 1966 and was designed to meet the reporting and communication needs of physicians. The system was adopted for application to the Medicare
reimbursement system in 1983. Since that time, CPT has been widely used as the standard for
outpatient and ambulatory care procedural coding and reimbursement.
The information represented by CPT codes is also used for several purposes other than
reimbursement, including:
•• Trending and planning outpatient and ambulatory services •• Benchmarking activities that compare and contrast the services provided by similar
non-acute care programs
•• Assessing and improving the quality of patient services The CPT code book includes several additional appendices and an index of procedures.
CPT code books and codes are updated annually, with additions, revisions, and deletions
becoming effective on January 1 of each year. A new edition of the CPT code book is published annually, and the new edition should be purchased every year to ensure accurate
­ oding. Healthcare providers are expected to begin using the newest edition for encounters on
January 1 of each year. There is no longer a grace period during which claims based on outof-date codes will be accepted. CPT Category I
The CPT code book includes a general introduction followed by six main sections that together
make up the list of Category I CPT codes:
Evaluation and Management
Pathology and Laboratory
2 Introduction to Clinical Coding Specific coding guidelines are provided for each of the main sections.
The Category I codes in each of the main sections are further broken down into subsections
and subcategories according to the type of service provided and the body system or disorder
involved. For example, code 76645—Ultrasound, breast(s) (unilateral or bilateral) real time
with image documentation—appears in the radiology section under the subsection entitled
Diagnostic Ultrasound and the subcategory Chest.
Subcategory Chest
Ultrasound breast(s) (unilateral or bilateral), real time with
image documentation (c
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PY A Similar procedures are grouped to form ranges of codes. For example, the range of codes
from 19300 through 19307 represents the various types of mastectomy procedures in the subsection covering the integumentary system in the surgery section. The codes in each of the
six main sections (or Category I) of the CPT code book are composed of five digits and are
primarily arranged in numerical order within each section. Several coding sections are not in
numerical order (for example, 23071). This type of formatting is explained in chapter 2. CPT Supplementary Codes CPT also provides three types of supplementary codes: Category II codes, Category III codes,
and modifiers. Each of these code sets is listed and explained in a separate section. The Category II and III sections are located after the medicine codes in the code book. The list of
modifiers and the coding guidelines for modifiers are included in appendix A of CPT 2014.
CPT Categor y II Codes
Category II provides supplementary tracking codes that are designed for use in performance
assessment and quality improvement activities. CPT Category II codes are composed of five
characters: four numbers and an alphabetic fifth character, capital letter F. Code 1000F, for
example, describes a specific aspect of patient history: assessments of patient tobacco use.
The following is an example of a Category II code under the Physical Examination subsection:
Physical Examination Physical examination codes describe aspects of physical examination or
clinical assessment.
2000F  Blood pressure measured The assignment of Category II CPT codes is optional. Category II supplementary codes
are implemented and released as needed throughout the year (March, July, and November).
These updates can be obtained by accessing the AMA website and entering the term “category
II codes” into the site’s search engine.
CPT Categor y III Codes
CPT Category III includes temporary codes that represent emerging medical technologies, services,
and procedures that have not yet been approved for general use by the FDA and so are not otherwise covered by CPT codes. Category III codes give physicians and other healthcare providers and
3 Chapter 1 researchers a system for documenting the use of unconventional methods so that their efficacy and
outcomes can be tracked. Like CPT Category II codes, Category III codes are composed of five
characters: four numbers and an alphabetic fifth character, capital letter T.
Example: Code 0058T, Cryopreservation; reproductive tissue, ovarian 
This procedure describes a process where cells or whole tissues are preserved by cooling to low subzero temperatures. Updated Category III codes are released semiannually on January 1 and July 1 via the
AMA’s CPT website. The complete list of temporary codes is published annually in the CPT
code books. (c
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PY A CPT Modifiers
A third set of supplementary codes known as modifiers can be reported along with many of the
Category I CPT codes. The two-character modifier codes are appended to Category I five-digit
CPT codes to report additional information about any unusual circumstances under which a
procedure was performed. The reporting of modifiers is meant to support the medical necessity
of procedures that might not otherwise qualify for reimbursement.
Example:  uppose that a surgeon successfully performed a percutaneous transS
luminal balloon angioplasty to remove a blockage from a patient’s renal
artery, but later that day it became evident that the artery had become
occluded again. If the surgeon who performed the original procedure
is not available, another surgeon on call would repeat the procedure to
remove the blockage. Code 35471 would be reported by the first surgeon
to identify the original angioplasty, and the second surgeon would report
35471–77 to identify the repeat angioplasty. Most of the two-character modifiers for Category I codes are numerical. (Chapter 3 of this
workbook includes a list of the CPT modifiers in CPT 2014.) However, there also are some
alphanumeric modifiers to indicate the physical status of patients undergoing anesthesia. These
modifiers begin with a capital letter P, as follows:
Anesthesia Modifiers:
P1 A normal healthy patient
P2 A patient with mild systemic disease
P3 A patient with severe systemic disease
P4 A patient with severe systemic disease that is a constant threat to life
P5 A moribund patient who is not expected to survive without the operation
P6 A declared brain-dead patient whose organs are being removed for donor purposes
(Chapter 2 of this workbook provides additional guidelines for applying CPT codes, and
­ hapter 3 discusses modifiers in more detail.) Healthcare Common Procedure Coding System
The Health Care Financing Administration (HCFA) developed the original version of the
HCFA Common Procedure Coding System (HCPCS) in 1983. HCPCS was designed to represent the physician and nonphysician services provided to Social Security beneficiaries under
4 Introduction to Clinical Coding (c
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PY A the federal Medicare program. HCFA’s name was changed to the Centers for Medicare and
Medicaid Services (CMS) in 2001. The official name of the coding system was also changed,
and the system is now called the Healthcare Common Procedure Coding System. CMS is the
division of the US Department of Health and Human Services (HHS) that administers the
Medicare program and the federal portion of the Medicaid program.
The purpose of HCPCS as implemented in 1985 was to fulfill the operational needs of
the Medicare reimbursement system. Originally, HCPCS codes applied only to the services
provided by physicians to Medicare patients. Since 1986, however, the federal government has
required that physicians use HCPCS codes to report services provided to Medicaid patients
as well. Moreover, with the passage of the Omnibus Reconciliation Act of 1986, hospitals are
also required to report HCPCS codes on reimbursement claims for ambulatory surgery services, as well as radiology and other diagnostic services provided to Medicare and Medicaid
HCPCS codes enable providers and suppliers to accurately communicate information about
the services they provide. Analysis of HCPCS data also helps Medicare carriers to establish
financial controls that prevent expense escalation. Finally, the information from coded claims
facilitates uniform application of Medicare and Medicaid coverage and reimbursement policies.
HCPCS includes two separate levels of codes. Level I is based on the current edition of
CPT. Level II is made up of the National Codes that represent the medical supplies and services not included in CPT. HCPCS Level I (CPT) Copyrighted and published by the American Medical Association (AMA), Level I of HCPCS
consists of five-digit Category I CPT codes. Level I HCPCS codes are used by physicians to
report services such as hospital visits, surgical procedures, radiological procedures, supervisory services, and other medical services. Hospitals also use Level I codes to report hospitalbased outpatient services, such as laboratory and radiological procedures and ambulatory
services, to Medicare and other third-party payers. Level I codes represent approximately 80
percent of the HCPCS codes submitted for reimbursement each year. HCPCS Level II Known as the National Codes, HCPCS Level II codes were developed by CMS for use in
reporting medical services not covered in CPT. Medicare, Medicaid, and private health insurers use HCPCS codes and modifiers for claims processing. Level II codes are provided for
injectable drugs, ambulance services, prosthetic devices, and selected provider services.
Level II codes are made up of five characters: The first character is a capital alphabetic
letter, and the following four characters are numbers. Examples of HCPCS Level II codes
include the following:
A4550 Surgical trays
E1625 Water softening system, for hemodialysis
J0475 Injection, Baclofen, 10 mg
Example:  f a patient required an intramuscular injection of an antibiotic, the correct
CPT code would be 96372 (Therapeutic; prophylactic, or diagnostic
injection). The CPT code identifies the service (injection) but does not
identify the substance (drug) in the injection. An additional HCPCS code
would identify the actual drug, such as: J0561-Penicillin g benzathine.
5 Chapter 1 Like Level I (CPT) codes, HCPCS Level II codes are updated for use January 1. CMS’s
website contains an update or errata for the code set. A list of current Level II codes can
be requested from the US Government Printing Office or any local Medicare carrier. Several commercial publishing companies distribute the National Codes in book form, adding
enhancements such as indexes and cross-references to make them more user-friendly than
the government-issued lists. In addition, an electronic file containing the most current version of the HCPCS Level II codes can be downloaded from the CMS website. (HCPCS
Level II codes are discussed in more detail in chapter 10.) Table 1.2 highlights the differences between Level I and Level II codes. An overview of the HCPCS system is provided
in figure 1.2.
For simplification purposes, this textbook will refer to Level I codes as CPT and Level II
codes as HCPCS codes. (c
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PY A Table 1.2.  HCPCS coding system
I II Development and
Maintained by Coding Set Common Uses CPT American Medical Association Identify surgical procedures,
office visits, laboratory
services HCPCS Centers for Medicare and
Medicaid Services (CMS) Injectable drugs, devices,
supplies, equipment Figure 1.2.  Overview of HCPCS coding system HCPCS (Healthcare Common Procedure Coding System) LEVEL II NATIONAL
CODES LEVEL I - CPT Maintained
by CMS
A2019) Maintained by AMA CATEGORY II
codes CATEGORY I – 6 sections of CPT
(e.g., 28103) (e.g., 1000F) Evaluation &
Management 6 Anesthesia Surgery Radiology Pathology/
Laboratory Medicine CATEGORY III
codes for
new and
(e.g., 3090T) Introduction to Clinical Coding International Classification of Diseases, Ninth Revision,
Clinical Modification (ICD-9-CM) (c
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PY A The International Classification of Diseases, Ninth Revision, Clinical Modification
(ICD-9-CM), is based on an international classification system originally developed and maintained by the World Health Organization (WHO). The purpose of the international version of
the ICD is the classification and reporting of morbidity data (illnesses and injuries) and mortality data (fatalities) from around the world. ICD-9 was modified for use in the United States
and was first released as ICD-9-CM in 1979.
Currently, ICD-9-CM diagnosis codes are required for Medicare and private third-party
payers to support medical necessity of procedures and services. By definition, medical necessity is the determination that a service or procedure rendered is reasonable and necessary for
the diagnosis or treatment of an illness or injury.
The official version of ICD-9-CM is published in three volumes. Volume 1 contains the
main list of diagnostic codes in tabular format. The codes are organized into chapters according
to body system. For example, chapter 1 covers the codes for Infectious and Parasitic Diseases.
Volume 2 provides an alphabetic index of diseases and injuries that help coding professionals
locate the appropriate code listings in the tabular list. Volume 3 includes procedural codes in
tabular format and an alphabetic index for procedures. Only inpatient acute-care hospitals use
ICD-9-CM volume 3 to report procedures for reimbursement.
Like CPT and HCPCS, ICD-9-CM codes are reevaluated and appropriate revisions are
implemented on a regular basis. October 1, 2011 was the last major update of ICD-9-CM
because of the transition to ICD-10-CM/PCS, which is scheduled to take place on October 1,
2014. Refer to Table 1.3 for an outline for updates to ICD-9-CM and ICD-10-CM. ICD-9-CM
Volume 3 will be replaced by ICD-10-PCS on October 1, 2014. ICD-9-CM Diagnostic Codes ICD-9-CM diagnostic codes represent the reasons why patients require and seek medical care.
Each numerical code represents a specific symptom, condition, injury, or disease. ICD-9-CM
diagnostic codes in the main classification (codes 001 through 999) consist of three, four, or
five digits. The first three numbers represent a specific diagnosis, and one or two additional Table 1.3.  Updates to ICD-9-CM and ICD-10-CM/PCS code sets
Key Dates Updates October 1, 2011 Last regular annual update to both ICD-9-CM and ICD10-CM/PCS October 1, 2012 Only limited code updates to both ICD-9-CM and ICD10-CM/PCS October 1, 2013 Limited updates to both ICD-9-CM and ICD-10-CM/PCS
code sets to capture new technology and new diseases October 1, 2014 Implementation of ICD-10-CM/PCS; ICD-9-CM will no longer be updated October 1, 2015 Regular updates to ICD-10-CM/PCS
7 Chapter 1 numbers may follow a decimal point after the three-number code to provide information that
is more specific.
Example:  ode 562.13 represents a diagnosis of diverticulitis of the colon with
intestinal hemorrhaging. The first three numbers (562) indicate a diagnosis
of diverticula of the intestine; the number 1 after the decimal point represents
the location of the diverticula, the colon; and the fifth digit represents the
most specific diagnosis: diverticulitis of colon with hemorrhage. Supplementary ICD-9-CM Codes (c
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PY A ICD-9-CM includes two supplementary classifications consisting of alphanumeric codes
that provide additional information about the patient and the circumstances surrounding the
patient’s illness or injury. V codes represent the various factors that may influence the patient’s
health status and contact with health services. E codes represent the external factors that cause
injuries and poisonings. Diagnostic Coding The Central Office on ICD-9-CM maintains the official coding guidelines for diagnostic coding. The guidelines require ICD-9-CM code assignments to be as specific as possible and to
be supported by health record documentation. The guidelines also require the reporting of
as many codes as necessary to completely describe the patient’s condition. Guidelines also
establish the order in which multiple codes are to be reported. The ICD-9-CM code book also
provides detailed advice on assigning codes correctly.
Every claim for outpatient services must contain at least one ICD-9-CM code, but care
must be taken to report every applicable code in the sequence specified in the official coding
guidelines. Medicare and most other third-party payers reject claims that report incomplete
ICD-9-CM codes.
Coding professionals must thoroughly understand and carefully follow the Official ICD9-CM Coding Guidelines for Outpatient Services (reference the CDC website) published by
the National Center for Health Statistics (NCHS). Official ICD-9-CM coding advice is also
published by the American Hospital Association (AHA) in its quarterly publication, Coding
Clinic. The official coding guidelines for ICD-9-CM are available from the Central Office on
ICD-9-CM of the AHA as well as from the CMS website.
The following example illustrates correct and incorrect ICD-9-CM code assignments for a
patient with a diagnosis of Type II diabetes:
250.00 Diabetes mellitus without mention of complication, Type II or unspecified type, not stated as uncontrolled
250.0 Diabetes mellitus without mention of complication, Type II or unspecified type, not stated as uncontrolled 250 Diabetes mellitus without mention of complication, Type II or unspecified type, not stated as uncontrolled Correct
Incorrect Basic ICD-10-CM/PCS Coding, 2014 Edition, by Lou Ann Schraffenberger, MBA,
RHIA, CCS, CCS-P, provides a more detailed discussion of the basics of ICD-10-CM/PCS
8 Introduction to Clinical Coding International Classification of Diseases, Tenth Revision,
Clinical Modification (ICD-10-CM) and Procedure
Classification System (ICD-10-PCS) (c
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PY A On January 16, 2009, the HHS published a Final Rule for the adoption of ICD-10-CM/PCS
code sets to replace the 30-year-old ICD-9-CM code sets. The compliance date for the two
classification sets was established as October 1, 2014. The adoption of ICD-10-CM (diagnoses) will affect all components of the healthcare industry. However, the adoption of ICD-10PCS will affect only those components of the healthcare industry that currently utilize Volume
3 of ICD-9-CM to report inpatient procedures.
The use of ICD-10-CM will offer greater detail and granularity and will greatly enhance
HHS’s capability to measure quality outcomes, such as the quality performance measures used
in the hospital pay-for-reporting programs. The following tables provide a brief example of the
difference between ICD-9-CM and ICD-10-CM/PCS codes.
ICD-9-CM Code ICD-10-CM Code 682.6 Cellulitis, leg L03.115 Cellulitis, lower limb, right ICD-9-CM (procedure code) ICD-10-PCS Code 51.23 Laparoscopic cholecystectomy 0FT44ZZ Resection of gallbladder, percutaneous endoscopic approach Documentation for Reimbursement Health record documentation continues to play a pivotal role in the accurate and complete collection of health services data. The documentation records pertinent facts, findings, and observations about an individual’s health history, including past and current illnesses, examinations,
tests, treatments, and outcomes. By chronologically documenting the patient’s care, the health
record becomes an important element in the provision of high-quality healthcare and serves as
the source document for code assignment.
The following general principles of health record documentation, developed jointly by the
AMA and CMS, apply to the records maintained for all types of medical and surgical services:
•• The health record should be complete and legible.
•• The documentation of each patient encounter should include:
The reason for the encounter and the patient’s relevant history, physical ­ xamination
findings, and prior diagnostic test results
°  patient assessment, clinical impression, or diagnosis
°  A plan for care
°  The date of the encounter and the identity of the observer
•• The rationale for ordering diagnostic and other ancillary services should be documented or easily inferred.
9 Chapter 1 •• Past and present diagnoses should be accessible to the treating and consulting physicians.
•• Appropriate health risk factors should be identified.
•• The patient’s progress and response to treatment and any revision in the treatment plan
and diagnoses should be documented.
•• The CPT and ICD-9-CM codes reported on health insurance claim forms or billing
statements should be supported by documentation in the health record.
Additional documentation guidelines pertinent to evaluation and management (E/M) services
are discussed in chapter 7. The Medicare Program (c
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PY A The Social Security Act of 1965 and its subsequent amendments established the federal regulations that govern Medicare. The Medicare program is organized into two separate sections:
Part A, which pays for the cost of hospital and facility care, and Part B, which covers the physician services and durable medical equipment that are not paid for under Part A. Medicare
regulations require the collection of several types of coded information on reimbursement
claims for services provided to Medicare beneficiaries:
•• ICD-9-CM diagnostic and ICD-9-CM procedural codes for inpatient hospital services
•• ICD-9-CM diagnostic codes and CPT/HCPCS procedural codes for hospital outpatient
services, including laboratory and radiology procedures
•• ICD-9-CM diagnostic codes and CPT/HCPCS procedural codes (regardless of the
service location) for medical services provided by physicians and allied health professionals (psychologists, nurse practitioners, social workers, licensed therapists, and
Figure 1.3 illustrates the impact of ICD-10-CM/PCS for reporting codes starting Oct...

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