This action might not be possible to undo. Are you sure you want to continue?
Note:If you’re taking the certificate version of this course, you won’t take a proctored
The material in Lesson 2 will be tested in your proctored final examination. To
help you prepare for the final, we’ve provided the following exercises. The proctored
examination will be presented in like format and you’ll use your coding resources:
ICD-9-CM Coding Book, CPTCoding Book, and Clinical Coding Workout: Practice
Exercises for Skill Developmentto find the answers during the proctored examination.
Part 1—Multiple Choice
1.The HCPCS Level I codes used by all specialties no matter the location are included in
code category ranges
2.A patient was seen due to continuing congestion and sniffling. She complained of
pressure when breathing through her nose. The physician documented a diagnosis of
edema of nasal mucosa likely due to allergic rhinitis and performed rhinoscopy. The
coder codes 478.25, 31231, 21.21. This patient was mostlikely seen in what setting?
B.Outpatient surgical unit
D.Need more information
3.In which of the following scenarios is it appropriate to assign a HCPCS Level II code in
addition to the CPT code?
A.Four extra surgical trays are used.
B.A surgery is repeated due to special circumstances.
C.A patient is transferred to a nursing home after surgery.
D.A physician performs an examination and realizes the patient needs IV antibiotics.
4.Code 27709 can be interpreted as
A.tibia and fibula.
C.osteotomy, tibia and fibula.
Medical Coding 2
5.A physician excised a 3.5 cm benign lesion from an outpatient’s scalp. Code:
6.Which of the following scenarios would require the assignment of both a HCPCS Level I
and Level II code?
A.Injection of Botulinum toxin type A, per unit
B.Appendectomy with anesthesia
C.Review of HIV test
D.Hernia repair with mesh
7.Which indicates Diagnostic Radiopharmaceutical Imaging Agent NOC?
8.Adenosine 3mg IV is drawn from a 6 mg ampule and administered to convert a
supraventricular arrhythmia. How should this be reported?
9.Which of the following is the correctmodifier to use when 97112 and 97116 are
10.HCPCS Level II codes are developed and maintained by
Proctored Examination Preparation
Note: Exercises for Part 2 are found in the Clinical Coding Workout textbook.
Coding Ambulatory Health Records
Complete the following exercises:
1.8.1 (p. 296)
2.8.11 (p. 304)
3.8.19 (p. 312)
4.8.20 (p. 312)
5.8.25 (p. 316)
6.8.35 (p. 326)
7.8.42 (p. 332)
8.8.48 (p. 339)
9.8.55 (p. 344)
Coding Physician-Based Health Records
Complete the following exercises:
10.9.3 (p. 349)
11.9.5 (p. 349)
12.9.14 (p. 355)
13.9.18 (p. 358)
14.9.19 (p. 358)
15.9.31 (p. 365)
16.9.39 (p. 370)
17.9.41 (p. 371)
18.9.54 (p. 387)
19.9.55 (p. 387)
20.9.62 (p. 391)
Check your answers with those on page 231 of this study guide.
Medical Coding 2
OVERVIEW OF CODING
Read pages ii–x in yourICD-9-CMcoding book.
As you learned in Medical Coding 1, accuracy and consistency
is the cornerstone to successful coding. To be accurate and
consistent, a coder must follow specific guidelines and rules.
In 2009, CMS reported that more than $24.1 billion was paid
in error by just federal government health care plans, which
was almost double the error rate from 2008. Some of these
errors are due to errors in coding and DRG assignments.
In the next few sections you’ll be reviewing basic coding
guidelines and building on what you’ve learned in Medical
Coding 1. You’ll also be exposed to additional guidelines that
may be new to you. In this course you’ll focus on more
advanced inpatient coding and also on some additional
aspects of outpatient and physician office coding.
Let’s get started!
As you know, coding is an assignment of numerals (and some-
times alpha letters) that correspond with a patient’s diagnoses
and procedures. You may be wondering who came up with
these numeric codes for the diagnoses and procedures. It isn’t
just a random assignment of numbers. It’s an organized
method and classification system.
There are several coding classification systems that include
International Classification of Diseases, 9th Revision,
This coding classification system is commonly known as
ICD-9-CM(often called ICD-9 or I-9 by those in the coding
business). ICD-9-CMis used to code diagnoses and procedures
for hospital patients report diagnoses and reasons for visits
in physician offices.
The ICD-9-CM codes contain two or three digits that may be
followed with a decimal point and then either one or two more
digits. Here are examples of what ICD-9-CMcodes look like:
ICD-9-CM diagnosis codes—250.00, 486, 315.4
ICD-9-CM procedure code—80.51
HCFA Common Procedure Coding System—This coding
classification system is commonly known as HCPCS (often
pronounced “hic-pics”). Several different levels exist within
the HCPCS classification system. The most commonly used
level is the Level I Current Procedural Terminology, or CPT,
level. The CPT level codes are published by the AMA. These
codes are five-digit numeric codes used to describe the
procedures and services from providers, especially from
physician offices and in outpatient settings.
Here are some examples of what CPTcodes look like: 49605,
61711, 89320, 93922. Notice that CPTcodes are written dif-
ferently than ICD-9-CMcodes. Remember, CPTcodes are five
digits with no decimal points. You may be wondering what
the difference is between ICD-9-CMcodes and CPTcodes.
Don’t they both assign numeric codes to diagnoses and pro-
cedures? The answer is yes and no.
It’s not important for
you to understand
what each of these
codes means at this
point. Right now you
should just know
codes look like.
Some important points to remember are
ICD-9-CMcodes are both diagnosis and procedure codes,
but the procedure codes are used only for inpatient hos-
CPT codesare procedure (or service) codes used mainly
in outpatient and physician settings.
Let’s take a closer look at some examples of code assignment
that will help you put the coding process into perspective.
Coding Example Using the
ICD-9-CM Coding Classification
System for an Inpatient
Patient Smith was discharged from the hospital with the
principal diagnosis of a bleeding duodenal ulcer and an addi-
tional diagnosis of anemia. The patient had a small-intestine
endoscopy procedure. The ICD-9-CMcode assignments are as
Duodenal ulcer with hemorrhage—principal diagnosis
Acute posthemorrhagic anemia—secondary diagnosis
Endoscopy of small intestine—principal ICD-9-CMprocedure
DRG Assignment (grouped based on all codes)—174:
Gastrointestinal Hemorrhage with CC
In this example, the hospital will be reimbursed based on the
predetermined payment formula amount for DRG 174.
You’ll learn a little more about DRGs and reimbursement
later in this course.
Coding Example Using the CPT
Coding Classification System
for an Outpatient Surgery
A patient received an outpatient laparoscopic cholecystec-
tomy for cholecystitis.
Cholecystitis—principal diagnosis ICD-9-CM code 575.0
Laparoscopic cholecystectomy—ICD-9-CM code 51.23, CPT
procedure code 47562
Assigning Codes to
Assigning codes to clinical documentation can be a tricky
process. The following two elements are needed to code
Sharp coding skills
Clear and concise clinical documentation
Coders can only apply a code to a diagnosis or procedure that’s
well documented in the patient’s medical record. CPTand
ICD-9-CMcodes reported on the health insurance claim form
or billing statement must be supported by the documentation
in the medical record. Clear and concise medical record
documentation is crucial to arrive at the correct code. Medical
record documentation includes notations from physicians,
nurses, and other health care practitioners as well as results
of ancillary diagnostic and therapeutic procedures.
As discussed previously, ICD-9-CMcodes are applied only to
those diagnoses and procedures that are shown to have
clinical significance as documented by the physician. It’s
imperative that physician documentation in the progress
notes address all pertinent diagnoses and procedures, includ-
ing any laboratory data and other diagnostic tests.
One of the biggest mistakes that new coders make is to code
everything that they see in the health record documentation.
There are precise coding guidelines that dictate what should
Notice that in the in-
patient example there
were only ICD-9-CM
codes assigned (and
HCPCS Level I) codes
are procedure codes
that are assigned to
both diagnosis and
procedure codes. For
the inpatient case
there was no need for
However, for the out-
performed at the
hospital, the coder
reported the ICD-9-CM
diagnosis code, the
code, and the CPT
and shouldn’t be coded and reported based on setting (hospital,
outpatient, or physician office). For example, diagnosis coding
is often difficult because of the complexity of assigning precise
codes to the many diagnoses that may be listed and the correct
sequencing of diagnoses. The principles governing the correct
code assignment and sequencing are based on the American
Hospital Association’s (AHA) Coding Clinic guidelines. In
addition, the CMS, AHA, and AHIMA serve to provide guide-
lines and assistance with coding principles.
What does all of this mean? In short it means that coders must
follow specific guidelines for coding of diagnoses and proce-
dures that must be sequenced, or ordered, a certain way in
order for the hospital or organization to be reimbursed fully.
You’ll learn more about the importance of sequencing later.
Requirements for Inpatient,
Outpatient, and Physician
Here are some simple guidelines that will help you remember
what coding classification system to use for which patient.
Memorizing these guidelines early will help you code clearly.
For hospital inpatients:
ICD-9-CMfor both diagnoses and procedures
Linked to codes and DRGs for reimbursement
For hospital outpatients:
ICD-9-CMfor diagnosis, HCPCS Level I (CPT)for proce-
dures (Some hospitals may report ICD-9-CMfor outpatient
Report at highest level of specificity in billing forms to
explain reason for encounter
Linked to procedures for billing
For physician offices/services:
Some hospitals may
choose to report
for internal tracking or
if required by a health
plan to report them
this way. Coders will
need to inquire with
the hospital for internal
coding guidelines that
may be supplemental
Remember, the Centers
for Medicare and
(CMS) requires the use
of HCPCS Level I (CPT)
for billing Medicare and
HIPAA and Coding
The Administrative Simplification Section of the Health
Insurance Portability and Accountability Act (HIPAA) of 1996
required the Department of Health and Human Services to
name national standards for electronic transmission of health
care information including transactions and code sets. The
rule named HCPCS Levels I and II (including modifiers) as
the procedure code set for
Physical and occupational therapy services
Clinical laboratory tests
Other medical diagnostic procedures
Hearing and vision services
Transportation services (including ambulance services)
The Final Rule also named ICD-9-CMvolume 1 and 2 as the
code set for diagnosis codes, ICD-9-CMvolume 3 for inpatient
hospital services (for example, procedures and treatments);
CDT for dental services; and NDC codes for drugs.
According to CMS (2005), “ICD-9-CMprocedure codes were
named as the HIPAA standard code set for inpatient hospital
procedures. The ICD-9-CMprocedure codes were not named
a HIPAA standard for procedures in other settings such as
hospital outpatient services or other types of ambulatory
services. Hospitals may capture the ICD-9-CMprocedure codes
for internally tracking or monitoring hospital outpatient services;
but when conducting standard transactions, hospitals must
use HCPCS codes to report outpatient services at the service line
level and the claim level . . .” (http://questions.cms.hhs.gov).
The Uniform Hospital Discharge Data Set (UHDDS) definitions
are used by acute care short-term hospitals to report inpa-
tient data elements in a standardized manner. The UHDDS
requires that common data on individual acute care, short-
term hospital discharges in Medicare and Medicaid programs
be reported. Part of the current UHDDS includes the following
specific items pertaining to patients and their episodes of care:
Personal identification: The unique number assigned to
each patient that distinguishes the patient, and his or her
health record, from all others.
Date of birth
Residence: The zip code or code for foreign residence
Hospital identification:The unique number assigned to
Physician identification:The unique number assigned to
each physician within the hospital (the attending physician
and the operating physician [if applicable] are to be identified)
Disposition of patient: The way in which the patient left the
hospital—discharged to home, left against medical advice,
discharged to another short-term hospital, discharged to a
long-term care institution, died, or other
Expected payer for most of the bill: The single major
source the patient expects will pay for this bill (for example,
Blue Cross/Blue Shield, Medicare, Medicaid, workers’
Updating the Coding System
You may be wondering if, when, and how the ICD-9-CMcoding
system gets updated. Because treatments change and new
diseases and procedures are discovered, codes must be changed
regularly to reflect the new updates in the medical field.
Coding changes occur, usually quarterly. An addendum may
be sent out to you if you’ve purchased a coding book. The
addendum will keep you updated on the new codes that you
should be using.
Payers can deny
payment (or reim-
bursement) based on
published lists of unap-
(ICD-9-CM). This may
be due to the wrong or
outdated code being
used or may simply
be codes (diagnoses
or procedures) for
which the payer
An Entirely New Classification System?
AHIMA is currently working on transitioning to the ICD-10
classification system.Yes, that’s right, an update of the entire
system and not just specific codes! Let’s learn a little more about
The Centers for Medicare and Medicaid (CMS, formerly known
as HCFA) is responsible for maintenance of the coding system
for reporting inpatient procedures for Medicare and Medicaid.
The current ICD-9-CMsystem was perceived as having limita-
tions. Because of those limitations, the CMS contracted with
the for-profit company 3M Health InformationSystems and
AHIMA to develop a new procedure coding system to be used
with the forthcoming disease coding system, the International
Classification of Diseases, 10th Revision, Clinical Modification
(ICD-10-CM), being developed by the United States National
Center for Health Statistics.
Things are moving forward for the ICD-10-CMat a very fast
pace. The ICD-10-CMwill be implemented in October 2013,
which means its use will be mandatory as of January 1, 2014.
Right now, 99 countries use the ICD-10-CM,and Europe and
Canada are preparing to move to the ICD-11-CM.Just a few
third-world countries and the United States aren’t yet using
it. We actually do use it to report morbidity and mortality,
but that’s all. The move to the system has been slow because
the other countries using it are under a single-payer system.
Moving one payer to using a new classification system is
easier than moving hundreds or thousands to using it at the
The format of the ICD-10-CM(or I-10) is similar to the ICD-9-
CM,but it’s hugely expanded. The ICD-9-CMis running out
of room, especially in Volume 3. The ICD-9-CMhas a limit
of 10,000 codes in Volumes 1 and 2, and it’s almost at capac-
ity. Volume 3 of the ICD-9-CMhas 13,500 codes. It contains
many duplicate codes and some outdated terminology. The
I-10 expands injury codes, E-codes, pregnancy codes, alcohol-
and substance-abuse codes, and postoperative complications.
The I-10 will contain greater specificity in these areas and
increase clinical language use. In addition, the I-10 will be
able to hold up to 120,000 codes, and it currently holds only
68,000. In the I-10, the rubrics (the three digit numbers) are
called “blocks.” There are more combination codes, but they
require better documentation. The codes consist of up to
seven characters, and the first characters are alpha charac-
ters, not numbers.
The United Kingdom and other countries have written a lot
about their experiences in transferring to this system, and
the United States is using those experiences to figure out
what to do. The United Kingdom obtained a minimum of 70
hours of training (per coder), and they felt this was inade-
quate. The national cost for training alone is estimated at
$100 million. In addition, productivity will be affected during
training, which will put a revenue crunch on offices and hos-
pitals temporarily during the transition. The U.S. Department
of Health and Human Services estimates that the implemen-
tation will cost an estimated $2.2 billion.
The ICD-10-PCS (Procedure Coding System)is being developed
by CMS as a replacement for the ICD-9-CMprocedure codes
in Volume III. TheICD-10-PCSis an expandable code system
allowing for incorporation of new technology and procedures.
Coding Reimbursement: How
Do Hospitals and Physician
Offices Get Paid?
As you can imagine, hospitals and physician offices are
reimbursed for the services that they provide to patients.
But how? Let’s take a closer look, first starting with the way
that hospitals are reimbursed for inpatients. Because many
payers based their reimbursement systems on the Medicare
systems, Medicare is the base point from which you’ll learn
about these systems.
Medicare pays for hospital inpatient operating costs using a
per-discharge rate based upon the diagnoses and procedures
that best represent the patient’s clinical status. The payment
rate is represented by diagnosis-related groups (DRGs) that
vary in payment depending upon the complexity of the case.
Because there’s an
entire course dedicated
specifically to reim-
receive only a brief
overview of reimburse-
ment in this course.
It’s important to
note that claims often
require the use of
codes from multiple
coding systems, and
will vary by payer.
For example, hospital
outpatient claims to
Medicare Part A for
nosis codes, revenue
codes for pharmacy,
and CPT or HCPCS
codes for the provider
services, whereas a
pharmacy claim to
Medicaid would only
require NDC codes
and, in some cases,
a diagnosis code.
For example, malignant breast disorders without complica-
tions are addressed by DRG 275, whereas malignant breast
disorders with complications and co-morbidities are addressed
by DRG 274.
Payments for hospital outpatient services are based on
Outpatient Prospective Payment System (OPPS) using
Ambulatory Payment Classifications (APCs). APCs are
clinically consistent groups that receive a defined payment.
Unlike DRGs, one visit can create multiple APCs.
Physician payments are based on the Resource Based
Relative Value Scale (RBRVS) fee schedule. In the RBRVS
system, payments for services are determined by the resource
costs needed to provide them. The cost of providing each
service is divided into three components: physician work,
practice expense and professional liability insurance. Payments
are then calculated by multiplying the combined costs of a
service by a conversion factor (a monetary amount that’s
determined by CMS). Payments are also adjusted for geo-
graphical differences in resource costs.
Inpatient Prospective Payment System
In response to the rising costs of health care services, the
federal government instituted a new reimbursement system
in 1984. The federal government introduced a Medicare
prospective payment system (PPS) based on a classification
system called diagnoses related groups (or DRGs).
The main goal of the program is to encourage hospitals under
the Medicare program to reduce hospital costs. The prospective
payment system is set up to reimburse the provider (for
example, hospital) based on a fixed reimbursement amount
determined before the services are rendered.
You may be wondering how a reimbursement amount can be
determined before a patient receives services. Reimbursement
amounts under this prospective payment system are based
on a set formula for the number of days a patient is in the
hospital and the amount of resources that should be used to
treat a patient with a particular illness or injury. The amount
from this formula is then paid to the hospital regardless of the
actual costs of the services. This means that if the hospital
uses more resources than is anticipated then they’ll lose
money. It also means that if the hospital uses fewer resources,
then the hospital will make money. The reimbursement
amount is fixed and the provider will receive that amount
and nothing more or less.
The prospective payment system was a key factor in changing
the way hospitals and physicians provide services. This new
reimbursement system brought about changes in not only
hospitals, but also the medical and health care industry as
a whole. Health care facilities began to operate much more
efficiently. Many other insurance providers (other than
Medicare) have instituted a reimbursement model based on
the Medicare prospective payment system.
Outpatient Prospective Payment System
The Hospital Outpatient Prospective Payment System (PPS)
was created by HCFA (CMS) in 1998 to identify services
provided to Medicare patients in an outpatient setting.
The primary reason for this system is to bundle hospital
outpatient services into payment groups, called Ambulatory
Payment Classification (APC) Groups. These groups vary from
those used for payment of inpatient services (DRG) as they’re
identified by CPT codes rather than ICD-9-CMprocedure codes.
Examples of APCs
APC 0028—Level I Breast Surgery
APC 0611—Mid Level Emergency Visits
Outpatient Code Editor (OCE)
The outpatient code editor (OCE) is a software package
that edits hospital outpatient claims. This software reviews
CPT/HCPCS codes and ICD-9-CMcodes for validity. With the
implementation of the outpatient prospective payment system
(OPPS), OCE has a key role in the processing of outpatient
claims.The two main functions of the OCE under OPPS are
(1) to identify errors, and (2) assign ambulatory payment
Physician Office Reimbursement
Physicians receive reimbursement based on something called
usual, customary, and reasonable (UCR)charges. These are
charges for health care services that are based on the physi-
cian’s usual charge for the service (“usual”), the amount that
other physician in the area charge (“customary”), and whether
the amount charged is reasonable for the service (“reasonable”).
Physicians may also be reimbursed based on fee-for-service.
This is a method by which a physician or provider bills for
each service or visit instead of on a prepaid or all-inclusive
basis. The services are usually reimbursed according to a fee
schedule (at a set amount) or at a discount from the physi-
RBRVS stands for Resource-Based Relative Value Scale. This
system assigns three values to each procedure code based on
The amount of work
Malpractice insurance associated with that particular
The system is designed as a resource-based system which is
supposed to pay more for services that are more time intensive,
costly and risky, and pay less for services that are routine, safe
and don’t require the use of as many staff and supplies.
Private insurers still pay many on a fee-for-service basis.
Private payers often have a set fee schedule that lists the
services that will be reimbursed, similar to Medicare. Many
private insurers now use the Medicare RBRVS (fee schedule)
methodology as the basis for their fee schedules.
You may be wondering how hospitals or physicians actually
report the codes in order to receive reimbursement. Many
institutes now have an electronic means of reporting codes
to payers. Coders code directly into a computerized system,
referred to as an encoder. The encoder software system helps
to assign diagnosis and procedure codes and the appropriate
reimbursement value. For example, if the patient is an inpa-
tient, it may assign a Diagnosis Related Group (DRG) for
payment. The information is later transmitted to the insurance
company or payer. Even if the information is transmitted elec-
tronically,it still must be in a particular format. To ensure
this format, institutes are required to report information
using special forms known as claim forms.
According to the CMS, in 1975, the National Uniform Billing
Committee (NUBC) was established with the goal of develop-
ing an acceptable, uniform bill that would consolidate the
numerous billing forms hospitals were required to use.
In 1982, the Uniform Bill-82 (UB-82), also known as the
HCFA-1450 form, was implemented for use in billing services
to Medicare fiscal intermediaries and other third-party payers.
In 1998, the NUBC began preparations for a revised uniform
bill. The resulting Uniform Bill-92 (UB-92) was implemented
in October 1993 and provided for the collection of additional
statistical data, including clinical information.
The newest revision, UB-04, is currently in use and allows
hospitals to report ten diagnosis codes (nine diagnosis fields
and one E code field) and six procedure codes. Although the
billing office collects data for the billing form, the health
information department supplies the clinical data placed on
the form and thus must ensure the data’s accuracy. An alter-
nate name for the UB-04 is CMS-1450.
The claim form used by physicians in their offices.
Read the Coding Guidelines, pages 1–5 (stop at C: Chapter-
specific Coding Guidelines on page 5) at the front of your
Read xiv–xv in your CPTcoding book.
You’ve learned most of this information in the Medical Coding 1
course. Because these are important concepts for coding, you
should spend time in this Appendix reviewing both ICD-9-CM
and HCPCS coding and conventions.
Remember, ICD-9-CMis the current standard used for coding
inpatient and outpatient diagnoses and inpatient procedures.
Diagnoses (abbreviated DX) are the patient’s illnesses or
diseases. ICD-9-CMdiagnosis codes are three-digit codes, some-
times followed by a decimal point, and then either one or two
digits. The more digits after the decimal point, generally the
higher the specificity of an illness or a disease. Volumes 1
and 2 in the ICD-9-CMcoding book cover diagnoses.
Procedures (abbreviated PX) refer to the treatment or surgery
that’s given to a patient. ICD-9-CMprocedure codes are two-
digit codes followed by a decimal point and then either one
or two digits after the decimal point. Just as for diagnosis
codes, the more digits after a decimal point, the higher the
specificity of the procedure. Volume 3 in the ICD-9-CMcoding
book covers procedures.
Even if you don’t know the exact meaning of a code, it’s very
easy to determine if an ICD-9-CMcode is a diagnosis or pro-
cedure code just by looking at it. Look at the following codes
and see if you can determine if they’re diagnosis or procedure
Do you know which are diagnosis and which are procedure
codes? Remember, ICD-9-CMdiagnosis codes always havethree
digits (and then possibly a decimal point followed by one or
two more digits), whereas ICD-9-CMprocedure codes have
two digits before the decimal point (followed by either one or
two digits after the decimal point). Check your answers:
486 is a diagnosis code. It has three digits (and no
32.11 is a procedure code. It has two digits before the
404.10 is a diagnosis code. It has three digits before the
Each chapter in the ICD-9-CMcoding book is structured
into subdivisions the same way. They’re categorized in the
Sections—groups of three-digit categories
Categories—three-digit code numbers
Subcategories—four-digit code numbers
Let’s take a look at an example of the different categorizations.
Diseases of the Circulatory
System (390–459) (Section)
402 Hypertensive heart disease (Category)
402.0 Hypertensive heart disease, malignant (Subcategory)
402.00 Hypertensive heart disease, malignant, without
heart failure (Fifth-digit subclassification)
Inpatient Code Sequencing: Which Comes First?
Read Sections II and III, p. 27–28, in the “Coding Guidelines”
section of your ICD-9-CM coding book.
Diagnosis and procedure codes were discussed in the previous
sections. One important area is the sequencing of diagnosis
codes. The way you list your codes when you’re reporting them
is very important and could mean the difference in thousands
of dollars in payment for the hospital or other health care
organization. A patient’s diagnoses may be assigned a special
category such as principal, secondary, or admitting diagnosis.
How a diagnosis is categorized will depend on how you
sequence, or the order in which you record them, for report-
Let’s take a closer look at each of the diagnostic categories.
Principal diagnosis(abbreviated as PDX) refers to the condi-
tion established after study to be chiefly responsible for the
patient’s admission to the hospital. You may be wondering
what “after study” means in this description. This phrase
means that you must review the record documentation
thoroughly (“study”) to determine the principal diagnosis.
Here’s an example that may help you understand better.
Example of determining principal diagnosis. A patient
was admitted to the hospital with cough, chest pains, fever,
and chills. After further work-up, it was determined that the
patient had left lower lobar pneumonia. The pneumonia is
coded as the principal diagnosis because it’s the reason after
study that the patient was admitted. Even though the cough,
chest pain, and other symptoms prompted the patient to
come to the hospital, it was determined after work-up that
the cause of the symptoms was pneumonia. The selection of
principal diagnosis is determined by the circumstances of
admission, diagnostic workup, and/or the therapy provided.
The condition that best satisfies these three criteria is listed
as the principal diagnosis.
Documentation and the Principal Diagnosis
Documentation in the patient’s medical record should clearly
support and reflect the coded principal diagnosis. The reason
for the patient’s admission has to be clearly identified. The
principal diagnosis is the definitive diagnosis that was
established and should relate to the chief complaint on
admission. If it’s unclear, the physician should be queried
and the outcome should be corroborated with supporting
documentation in the medical record.
Sometimes when there are several (or many) codes, it may
be difficult to determine which code should be listed as the
principal diagnosis. When two or more diagnoses equally
meet the criteria for principal diagnosis as determined by the
circumstances of admission, diagnostic work-up, and/or
therapy provided, any one of the diagnoses may be sequenced
first. For example, a patient presents with multiple problems:
shortness of breath, fever, and chest pain. Chest x-ray
demonstrates an exacerbated CHF, examination reveals acute
bronchitis, and prior history and current EKG findings are
consistent with unstable angina. The three conditions were
treated with medications. All three diagnoses—CHF, acute
bronchitis, unstable angina—equally meet the criteria for the
definition of principal diagnosis and the hospital can sequence
any one as the principal diagnosis. In this case, the hospital
will generally choose to list the code that reimburses the
most as the principal diagnosis.
Other Diagnoses (ODX),also known as secondary diagnoses
or additional diagnoses,are conditions that either coexist at
the time of admission or develop subsequently and affect
patient care for the current hospital episode. Affecting patient
care signifies conditions requiring any of the following:
Extended the length of hospital stay
Increased nursing care and/or monitoring
Any diagnosed condition requiring significant additional hos-
pital resources (for example, additional testing, procedures,
increased length of stay, increased level of care) is considered
a valid secondary diagnosis.
As a coder, you must
be careful and precise
in sequencing of codes.
A hospital can’t
sequence a code first
(or as principal) just
because it reimburses
more money. This is
and may be punishable
under penalties of law.
A hospital or institute
will look to the coding
expert to ensure that
diagnoses and proce-
dures are accurately
coded and sequenced
based on coding
Diagnoses that relate to a previous hospital stay and have
no bearing on the current treatment shouldn’t be coded.
Let’s take a look at a case example that includes secondary
diagnoses to help you understand better.
Example of secondary diagnoses.A patient is admitted
with a cough, fever, and chills for the past four days. After
work-up, the patient is found to have pneumonia with under-
lying chronic obstructive pulmonary disease (COPD). The
patient is also on medication for chronic diabetes and suffered
a fractured femur five years ago. The patient is treated with
intravenous (IV) antibiotics, respiratory therapy, and continues
his medication for diabetes. On the third day, the patient
complains of chest pain. Tests confirm that the patient has
suffered a left anterior myocardial infarction. The secondary
diagnoses in this case are COPD, diabetes, and myocardial
infarction. Pneumonia is the principal diagnosis and is
sequenced (or listed) first when reporting the codes. The
fracture isn’t coded because it was an injury that occurred
previously and has no bearing on the current treatment.
The admitting diagnosisis simply the diagnosis that brought
the patient into the hospital. Using the same example as
above, the patient’s admitting diagnosis may have been cough.
When tests were completed that confirmed the cough was due
to pneumonia, pneumonia then became the principal diagnosis;
however, cough still remains as the admitting diagnosis.
The primary diagnosisis used by the physician to describe
the diagnosis most often determined to be the most clinically
intense and isn’t often a term used by coding professionals.
Many times the primary diagnosis isn’t the same as the prin-
cipal diagnosis; however, many physicians and clinicians will
often (incorrectly) interchange the terms primary diagnosis
and principal diagnosis. For the purpose of coding, you need
to be concerned only with the principal diagnosis (and not
the primary diagnosis).
Some physicians may
include these previous
diagnoses on the
summary. Even then,
those previous diag-
noses not affecting the
shouldn’t be coded
unless hospital policy
In an outpatient
setting, the primary
diagnosis, or what
brought the patient
to the encounter,
is sequenced first.
There’s often more
information in the
tabular list that
doesn’t appear in the
Alphabetic Index. This
information will help
you assign the most
A principal procedureis a procedure that’s performed for
treatment of a disease/condition rather than performed for
diagnostic or exploratory purposes. If there are two or more
procedures performed on a patient then the one most closely
related to the principal diagnosis should be sequenced first.
Now that the categories have been described, look at an
example of how codes are sequenced—or listed—when reporting.
Example.A patient is admitted to the hospital due to severe
chest pain that ends up being an acute myocardial infarction.
The patient is also treated for uncontrolled Type 1 diabetes.
410.90—Acute myocardial infarction
250.03—Type 1 diabetes, uncontrolled
Even though the patient was admitted with chest pain,
after workup it was found to be a myocardial infarction
which is sequenced first as the principal diagnosis with
the uncontrolled diabetes listed second as a complication/
co-morbidity that increases the DRG payment. If a coder
had incorrectly sequenced the chest pain as first, it may
have cost the hospital hundreds (or sometimes thousands)
of dollars in reimbursement payment.
The guidelines discussed in this section will be used whenever
you’re coding ICD-9-CMcodes (inpatients, hospital outpatients,
and so forth). By following these guidelines, you’ll ensure that
you’re assigning valid codes and sequencing properly.
1.Use both the alphabetic index and tabular list.
As discussed previously, you should nevercode from just
the Alphabetic Index in which you first look up the code.
To ensure correct coding assigning, look up the code in the
alphabetic index and verify the code in the tabular list.
Coding books will use
the section symbol for
codes that require a
fifth digit. The section
symbol looks like
2.Code to highest level of specificity.
A coder must record the most accurate diagnosis and
procedure codes. To do this, you’ll need to code to the
highest level of specificity. This simply means that when
assigning diagnosis codes, assign a three-digit code only
when there’s no four-digit codes for that category, assign
a four-digit code only when there’s no five-digit code for
that category, and assign a fifth digit any time it’s available
as a subclassification.
The same principles apply for procedure codes (using
two-, three-, and four-digit codes).
3.Ensure that the use of residual codes is appropriate
Residual efffects are conditions that are produced after
the acute phase of an injury or illness. Residual codes
are codes that are classified as
NOS—Not Otherwise Specified
NEC—Not Elsewhere Classified
If documentation in the patient’s medical record doesn’t
document specifics, the coder should still review the
code category in the tabular list to determine if there’s a
better code (other than NOS or NEC categories). The NOS
code shouldn’t be assigned when a more specific code
exists. In some cases the coder will need to query the
physician for an addendum to documentation for the
more specific code.
4.Code unconfirmed or uncertain diagnoses as if confirmed.
There are some cases in which physicians are unsure of
the patient’s diagnoses, even at the time of discharge.
The physician may document these cases as
? (that is, using a question mark before a condition,
like “? pneumonia”)
When the physician documents the case in this manner,
the coder should code the diagnosis as if it exists. You
may be wondering how this is accomplished. Is it consid-
ered legal coding? The answer is yes. This guideline is
based on the fact that the physician (and hospital) used
the same amount of resources (diagnostic work-up, tests,
and so forth) that would have been used if the patient
had the condition. Therefore, the hospital is eligible for
the same amount of reimbursement.
5.Understand the difference between rule outand ruled out.
Believe it or not, there’s a significant difference between
rule out and ruled out that could result in completely
different codes with different reimbursement levels.
“Rule out” means that a diagnosis is still considered a
possibility. In this case the condition should be coded as
if it exists.
“Ruled out” means that the condition doesn’t exist and
no code should be assigned. If another condition wasn’t
identified, then the symptom that brought the patient to
the hospital should be coded.
This guideline applies
only to inpatients. If
an outpatient record
contains any of the
above qualifiers then
the sign, symptom, or
abnormal finding that
brought the patient to
the hospital is coded.
If a condition lists both
acute and chronic at
the same indentation
in the coding book
then both are coded
with the acute condi-
tion sequenced first.
The code for the acute
phase of an illness or
injury that led to the
late effect is never
used with a code for
the cause of the late
6.Code acute and chronic conditions as determined in the
alphabetic index/tabular list.
In some cases, the same condition may be described as
both acute and chronic. Refer to the alphabetic index/
tabular list in your coding book for guidelines on the
7.Code late effects only if an injury or illness has been resolved.
Late effectsare residual conditions that remain after an
acute injury or illness has been resolved. Late effects
may be described as late, old, due to (previous injury/
illness), or traumatic (with no evidence of current injury).
Accurate reporting of late effects requires two codes:
(1) the residual condition (regular code, sequenced first)
and (2) the cause of the late effect (E code).
Let’s take a look at an example that will help you
Example. A patient was badly burned during a house
fire one year ago. She’s admitted for surgery to her face
and neck for the scarring.
Conditions to Code
Facial scarring (PDX)
Previous burn (secondary)
The scarring of the face and neck is the current condi-
tion for which the patient is admitted and therefore is
listed as the principal diagnosis. Late effect of burn is
coded as the secondary diagnosis.
8.When coding procedures, “Code Also” should be used
only if the additional procedure was performed.
“Code Also” is used in the ICD-9-CMprocedure coding
section of the coding book to ensure that individual com-
ponents of procedures are coded. An additional code is
assigned when certain procedures or equipment are used.
33.6 Combined heart-lung transplantation
Code also cardiopulmonary bypass [extracorporeal
circulation][heart-lung machine] (39.61)
Refer to page 105 in Volume 3 of your ICD-9-CMcoding
book to see this example.
9.Code canceled procedures with the appropriate V64 code.
If a procedure has been canceled (after patient was
admitted), then assign the appropriate V64 code to
indicate the reason for cancellation. No procedure code
should be assigned.
10.Code incomplete procedures to the extent the procedure
When a procedure has begun, but wasn’t completed (for
whatever reason), use the following guidelines:
Incision only, code to incision site
Endoscopy was unable to reach site, code endoscopy
Cavity/space was entered, code to exploration of that site
HCPCS Coding Review
For this course, both HCPCS Levels I and II are covered. In
the Medical Coding 1 course you received a thorough study
of Level I (CPT). In this course, you’ll build on what you’ve
learned in Medical Coding 1 and also learn further about
HCPCS Level II.
Reporting of HCPCS codes is required of acute-care hospitals
including those paid under alternate payment system. HCPCS
codes are also required in rehabilitation and psychiatric
hospitals.HCPCS codes are required for all outpatient hospital
services (unless specifically excepted). This means that codes
are required on surgery, radiology, other diagnostic procedures,
clinical diagnostic laboratory, durable medical equipment,
orthotic-prosthetic devices, take-home surgical dressings,
therapies, preventative services, immunosuppressive drugs,
other covered drugs, and most other services.
In your coding book,
the additional proce-
dure to be coded is
enclosed in brackets
like in this example.
Code V64 can’t be
assigned as principal
diagnosis. Instead, list
the illness/injury for
which the surgery was
planned as principal
and then V64.X as the
If the procedure doesn’t
involve incisions (for
example, the proce-
dure was a reduction
of a fracture),then
no procedure code is
assigned. Instead, use
the appropriate V64
code as the secondary
As you probably remember from Medical Coding 1, the rules
for coding HCPCS are a little different than coding ICD-9-CM.
The HCPCS index is a little more free form than the ICD-9-CM
index. The HCPCS index codes are tentative and need to be
explored beyond the index. The tabular codes rule the coding
process inHCPCS,therefore a coder should never code straight
from the index in the HCPCS book. Instead, after looking up
the code choice(s) in the index, the coder should then locate
the code in the tabular and use process of elimination (based
on coding guidelines) to assign the correct code.
According to the CMS, in 1996 under OBRA, or the Omnibus
Budget Reconciliation Act of 1986, the federal government
required reporting of outpatient visits using the system called
HCPCS when billing for outpatient services for federally
funded patients. HCPCS was developed to support the need
to bill for all services (not just those that fall within CPT
HCFA (now CMS) developed a three-part system to standard-
ize coding used to process Medicare claims. It’s used for all
services: surgical, medical, supplies, materials, injections,
and so forth. The most commonly used level is the CPT, or
Current Procedural Terminology, level. According to the CMS,
approximately 80% of HCPCS can be coded using the CPT
level. CPT is the most known and used level of HCPCS codes.
Level I versus Level II—
Which Takes Precedence?
While coding, you may find that the same procedure can be
coded to different levels (HCPCS Level I and Level II). When a
HCPCS Level I (CPT) and HCPCS Level II code have the same
explanation (code narrative) for a procedure or service, use
the CPT (Level I) code. If the narratives aren’t identical, use
the level code with the more specific narrative. For example,
the CPT (Level I) code narrative may be generic and the
HCPCS Level II code narrative may be more specific. In this
case, use the Level II code.
Now let’s take a closer look at each of the HCPCS levels.
Coding directly from
the CPTindex or the
result in the assignment
of incorrect codes
and denial in
What’s the Difference?
Level I codes are
usually referred to
simply as CPTcodes
and Level II codes
are usually referred
to simply as HCPCS
codes or national codes.
HCPCS Level I: CPT Codes
The Physicians’ Current Procedural Terminology (CPT), pub-
lished (and updated) annually by the AMA, is a systematic
listing and coding of procedures and services performed by
physicians. The purpose is to provide a uniform language
that will accurately describe medical, surgical, and diagnostic
services. It also provides a reliable nationwide reporting and
communication method among physicians, patients, and
Each CPT procedure or service is identified with a five-digit
code. The use of CPT codes simplifies the reporting of medical
service. Using this coding provides the physician or health
care professional a means of accurately recording the service.
Each section of the CPT book has introductory material that
contains important coding guidelines and information. Be
sure to read the introduction before coding from that section.
Specific guidelines are presented at the beginning of each of
the six sections. These guidelines define items that are neces-
sary to appropriately interpret and report the procedures and
service contained in that section. They also provide explana-
tions regarding terms that apply only to that particular section.
Within each section are headings and subheadings followed
by additional distinctive instructions and in some cases, a
unique narrative description of the technical process of
providing these procedures.
Although you’ll learn about some commonly coded—or
miscoded—guidelines in this lesson, it isn’t possible to cover
each and every guideline. Be sure to read the introductory
material at the beginning of each CPT code section.
HCPCS Level I (CPT) codes are numeric codes that represent
services provided by physicians and health care providers.
Level I codes are used to report hospital outpatient procedures
and physician office codes.
The layout and design of CPT is intended to provide quick
and easy location of services and procedure codes. The main
body of the manual is listed in six sections. Within each
CPT doesn’t provide
codes for nonphysician
and specific supplies.
section are subsections with anatomic, procedural, condition
or description subheadings. The manual itself lists services
and procedures in numeric order with one exception—the
entire evaluation and management (E/M) section has been
placed at the beginning of the book for easy access.
Conventions and Formatting in CPT
(HCPCS Level I)
There are certain formatting, conventions, characteristics,
and symbols that you should understand in order to code
The semicolon is a normal semicolon that looks like this:
This is one of the most confusing format concepts. If a code
description contains a semicolon and there are one or more
code descriptions indented underneath then the description
before the semicolon is a home description and the indented
code needs the home description to fully complete the code
Let’s take a look at a coding excerpt using a semicolon.
If the physician documented that the patient had a total
rhinectomy, the correct code would be 30160. You would
never code 30150 and 30160 together because the rhinec-
tomy must be either partial or total, but couldn’t be both.
The bullet symbol looks like this:
When it’s next to a code it means that the code is a new code.
You’ll learn more about
E/M codes in the CPT
Refer back to pages
x–xiii in your CPT cod-
ing book if you need
more information on
how to use your CPT
The triangle looks like this:
It means that the code is a revised code.
Facing triangles look like this:
Facing triangles indicate that the text is either new
The plus sign looks like this:
The plus sign indicates that this is an add-on code and
should be used in conjunction with another code. For
example, 75968—transluminal balloon angioplasty, each
additional artery—must be used in conjunction with 75966—
transluminal balloon angioplasty.
Modifiers emphasize the difference between modifiers used
for hospital outpatients versus modifiers for physicians. CPT
coding books have a quick reference on the reverse of the
front page, and the full descriptions of modifiers are in
The circle symbol looks like this:
It means that these codes are exempt from modifier -51.
HCPCS Level II: National Codes
HCPCS Level II codes, or national codes, are alphanumeric
codes developed by HCFA (CMS) to identify other services
(those not provided by a physician) that aren’t covered under
the CPT level. These were developed by HCFA as a second
level of codes, as CPT doesn’t contain all the codes needed to
report medical services and supplies. These codes are consid-
ered a permanent level, are maintained by the HCPCS
National Panel, and are updated by the CMS quarterly. This
panel is made up of representatives from the Blue Cross Blue
Shield Association (BCBSA), the Health Insurance Association
of America (HIAA) and CMS. This Panel is responsible for
making decisions about additions, revisions and deletions to
the national alphanumeric code system.
In contrast to the five-digit codes found in Level I (CPT) these
codes consist of one alphabetic character (a letter from A–V)
followed by four digits. (All D codes are copyrighted by the
American Dental Association.) HCPCS is grouped by the type
of service or supply they represent and are updated annually.
This coding system is also required for reporting most medical
services and supplies provided to Medicare and Medicaid
patients and by most third-party payers.
One of the most important elements of this coding system for
clinicians is the Level II modifiers.
These modifiers, which are either alphanumeric or two-letter
in the range from A1–VP, should be applied to the appropriate
CPT code to identify additional situations or circumstance.
The listing of one of these codes doesn’t assure coverage of
the specific item or service in a given case. To be eligible for
payment from Medicare, the item must be considered reasonable
and necessary. Examples include Supplies (durable medical
equipment such as wheelchairs, hearing aid batteries, crutches);
Injection codes (identifies actual substances); Dispensing of
medication; and Other (dental, chiropractic, vision, orthotics).
Frequent Coding and Billing Errors
Here are some of the frequent errors that you can look out
for when coding health records:
No documentation for services billed
No signature or authentication of documentation
Always assigning the same level of service
Billing of consult versus outpatient office visit
Invalid codes billed due to old resources
Unbundling of procedure codes
No chief complaint listed for each visit
Billing of service(s) included in global fee as a separate
Inappropriate or no modifier used for accurate payment
Now that we’ve reviewed both ICD-9-CM and HCPCS informa-
tion and conventions, let’s get started! You’ll first learn about
ICD-9-CMcoding and then will move on to HCPCS later. Go
back to the beginning of this study guide and start with
Lesson 1. Good luck!
HELPFUL ONLINE RESOURCES
AMA CPT Code Lookup
National Center for Health Statistics—ICD-9-CM
Diagnosis and Procedure Coding Information
Human Anatomy Online
National Correct Coding Initiative Edits
Online Medical Terminology
CMS HCPCS Level II Information
CMS Question Search
CMS Hospital Outpatient Prospective
Payment System (HOPPS)
ICD-9 Coding Guidelines
Online Coding Software
Free Online Coding Newsletter
Free and Paid Resources Including
Coder’s Club (Free Coding Updates)
This action might not be possible to undo. Are you sure you want to continue?