Medical Billing Codes Explained in Detail

Medical billing codes are codes used throughout the medical profession to describe various diagnosis and treatments, relate a disease or drug to another, and also to determine various costs and reimbursements. These codes are integral to the efficient running of all health care related institutions and the health care profession in general.


When you have a medical procedure done, or visit your physician, there is a process that needs to be followed in order for the doctor or medical facility to get paid, especially if you are insured. Medical billing codes are used to submit the claims for payment to the insurance company so that the physician or facility can receive payment for services rendered. The process of filing these claims and following up on payment is done by individuals called medical billers, and they can either be employed in the practice or the tasks can be outsourced.

Patients can also make use of the medical billing codes to garner more information about their diagnosis, check up on exactly what services they received from their provider and can even use them to double check that the bills they received from their providers or insurance companies are correctly calculated.

Medical Billing Codes Explained

Here are some medical billing codes that you may come across and want to know more about:

Current Procedural Terminology (CPT) Codes

CPT codes were developed and are maintained and copyrighted by the American Medical Association; they are used to describe every kind of health care service available to a patient. Health care providers use these codes to submit claims to Medicare, insurance companies or any other payer for reimbursement for services rendered. Since the same medical billing codes are used by all medical professionals in the United States, uniformity is insured and this makes it easier for payers to define what services they are paying for.

As the practice of health care is ever-changing, the AMA needs to constantly develop new codes for new services, revise some of the current codes and discard old unused codes which have become obsolete. There are thousands of Current Procedural Terminology medical billing codes in use at any given time, and they are updated annually.

Examples of CPT Codes:

  • 90658 indicates a flu shot was given
  • 90716 stands for the chicken pox (varicella) vaccine
  • 99214 may be used for a physical examination
  • 12002 denotes that a one-inch cut on a patient’s arm was stitched up

The AMA controls the publication of these codes, and they license certain groups to publish code lists for a fee. If you want to look up individual CPT codes in order to figure out what you were charged for on your doctor’s bill or Estimate of Benefits (EOB), however, you can access individual CPT codes on the AMA website.

Health care Common Procedure Coding System (HCPCS)

Medicare also uses CPT medical billing codes, but in a slightly different format; Medicare uses the Healthcare Common Procedure Coding System (HCPCS). HCPS codes are monitored by the Centers for Medicare and Medicaid Services (CMS).

There are two sets of codes that Medicaid uses:

  • HCPCS Level I codes are based on and are identical to the CPT codes developed by the American Medical Association
  • HCPCS Level II codes are used by medical service suppliers other than doctors, like ambulance services or medical equipment suppliers. These costs do not generally go through a physician’s office; they are handled by Medicaid or Medicare differently to how a health insurance company would deal with them.

A patient will generally receive a review of their appointment, which may include a list of medical billing codes, upon leaving the doctor’s office, hospital, testing center or other medical facility. Some of these codes may be circled, and that means that those are the services rendered by the supplier on that visit. These codes can be utilized to check on the billing and ensure that the services charged for are the correct ones.

Medical Billing Codes

International Classification of Diseases (ICD) Codes

ICD medical billing codes are maintained by the National Center for Health Statistics (NCHS) in the United States and by the World Health Organization (WHO) internationally and are used to describe diagnosis, description of symptoms and cause of death.

Because ICD codes change over time, they have alphanumeric designations so that one can ascertain which set of codes is being used. Most codes found in patient files are ICD-9 codes, although most physicians in the US are now migrating to ICD-10 codes.

The reason behind the ICD codes is that this system ensures that every medical professional in the US and in many other countries will understand the diagnosis the same way. In other words, if you are diagnosed with acid reflux (GERD), which has an ICD classification of 530.81 in Atlanta, the physician you need to visit when on vacation in Hawaii will know what the diagnosis was from the ICD code on your electronic medical records. This may not be as important when referring to an acute condition which goes away after a while, but could prove to be of vital importance when it refers to a chronic or lifelong condition such as diabetes or heart disease.

There are several ICD Code Sets:
Please note that the use of the # in these examples refers to a number.

  • ICD-##-CM codes are used for diagnosis purposes, with the CM standing for “clinical modification” and they describe health challenges a patient may experience, including diagnosis, symptoms, outcomes from treatment, and to code and classify morbidity data. The morbidity data is taken from physician offices, inpatient and outpatient hospital records, and also from most of the National Center for Health Statistics (NCHS) surveys.
  • ICD-# codes are used not only by doctors and those involved in coding and billing, but government health authorities also use these codes to track the spread of certain diseases, especially highly contagious ones or those that have public health interest like HIV or lung cancer.
  • ICD codes are also used on death certificates to denote cause of death, which is something else that is often tracked by health authorities.
  • Some codes may have additional letters added to denote the country, such as ICD-##-CA, which are the codes are used in Canada, or ICD-##-AM, which is used in Australia

Although the US is still busy migrating from the ICD-9 to the ICD-10 codes, most other countries globally have already done so and the next major update, ICD-11, is already in development although it does not have a designated implementation date yet.

International Classification of Functioning, Disability and Health (ICF) Codes

The ICF medical billing codes are a relatively new set of codes, and they describe the outcomes of disability, or how functional a patient is in their own environment. These codes are also internationally the same.

There are two associated classifications of diseases with analogous titles, and a third classification on functioning and disability.

The National Center for Health Statistics acts as the World Health Organization (WHO) Collaborating Center for the Family of International Classifications for North America. In this capacity, the NCHS is responsible for the coordination of all official disease classification activities in the United States that relate to the ICD, its use, interpretation and any necessary periodic revision.

The Collaborating Center also is responsible in North America for the World Health Organization Family of International Classifications, including the ICF.

Diagnosis Related Groups (DRGs)

These medical billing codes were developed by Medicare and are used to group the services one receives in a hospital, based on diagnosis, type of treatment, and other criteria, for billing purposes. This means that reimbursement from Medicare is made according to the patient’s DRG, irrespective of what the hospital bill states, on the assumption that patients fitting the same profile, as in their DRG, should require approximately the same services and care.

There are approximately 500 DRGs, which are updated annually to take into consideration any new diagnoses or circumstances, such as an outbreak of swine flu (H1N1) or infectious pathogens which are hospital-acquired conditions.

National Drug (NDC) Codes

The Food and Drug Administration (FDA) has, since 1972, required that all prescription or insulin drug manufacturers distinguish and report a specific, three-segment number for each of their products.

An updated list of all these products, together with their medical billing codes, is maintained and updated on the FDA website. Although some products may have codes assigned to them, this does not necessarily mean that they have been approved by the FDA.

Information regarding the NDC for a drug which has been prescribed for you can be sound by going to the FDA website and looking it up.

Code on Dental Procedures and Nomenclature (CDT) Codes

The Code on Dental Procedures and Nomenclature medical billing codes are designed to allow the dentists to make use of the same type of coding that physicians do. This allows there to be consistency, uniformity, and specificity in accurate reporting of various dental treatments. It also provides for efficient processing of dental claims.

The CDT Code was designated a HIPAA standard code set on 17 August, 2000. The CDT Code is currently in use for both paper and electronic dental claims. The data content reflected in the ADA’s paper claim form reflects the HIPAA electronic standard. Any claim that is submitted on a HIPAA standard electronic dental claim must make use of the correct specific dental procedure codes from the current version of the CDT Code.

The Council on Dental Benefit Programs (CDBP) carries ADA Bylaws responsibility for the maintenance of CDT Codes. The CDBP established a Code Advisory Committee (CAC) which includes representatives from various spheres of the dental community, including dental specialty organizations, third-party payers, and the ADA. Dental codes are accepted, amended and changed via ballots cast by the CAC members.

Codes for Psychiatric Illnesses (DSM-IV-TR)

DSM-IV-TR stands for Diagnostic and Statistical Manual of Mental Disorders, 4th Edition, Text Revision. The DSM-IV-TR medical billing codes are published and maintained by the American Psychiatric Association and used to diagnose psychiatric illnesses.

These codes work according to what is known as a multiaxial system. This involves assessment on several axes; each axis speaks to a different knowledge base of information that may help the clinician to plan the treatment for their patient and predict the outcome of that treatment regime.

There are five axes included in the DSM-IV multi-axial classification:

  • Axis I: Clinical Disorders; Other Conditions That May Be a Focus of Clinical Attention
  • Axis II: Personality Disorders; Mental Retardation
  • Axis III: General Medical Conditions
  • Axis IV: Psychosocial and Environmental Problems
  • Axis V: Global Assessment of Functioning

Mental Disorders include Adjustment Disorders; Anxiety Disorders; Delirium, Dementia, and Amnestic and Other Cognitive Disorders; Dissociative Disorders; Disorders Usually First Diagnosed in Infancy, Childhood, or Adolescence; Eating Disorders; Factitious Disorders; Impulse-Control Disorders Not Elsewhere Classified; Mental Disorders Due to a General Medical Condition; Mood Disorders; Other Conditions That May Be a Focus of Clinical Attention; Personality Disorders; Sexual and Gender Identity Disorders; Sleep Disorders; Somatoform Disorders; Schizophrenia and Other Psychotic Disorders; Substance-Related Disorders

Medical billers and coders perform a vital function in the medical profession, as it is up to them to ensure that the medical billing codes are correctly allocated according to the treatment that was given to the patient and that the claims are filed with Medicaid, the relevant insurance companies or other third-party payers. It is important that the coder ensures that they are using the current codes.

Medical billing codes make it possible for various conditions, illnesses and procedures to be coded uniformly throughout the whole of the United States and also in some other parts of the world. These uniform codes make it much easier for a doctor other than your regular doctor to check up on what your physician diagnosed you with, or what medications you were prescribed. This uniformity in medical codes saves a lot of time, thanks to most of it now being done electronically which means that even if you are on vacation and are in need of medical assistance, the physician or hospital can just look up the medical billing codes previously used and can assist you correctly and quickly.

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