Why Coding Is so Important: What Does a Claim Do?

Betsy Nicoletti, MS


January 01, 2017

The Necessity for Correct Coding

Physicians don't apply to medical school with the goal of being the best coder in the country. Coding is the last thing on your mind when you contemplate a career in medicine. But once in practice, whether you are employed by a healthcare system or in a large or small group practice, it becomes clear that coding drives physician revenue and compensation.

The resources that a medical group has to carry out its mission depends on the revenue produced through coding. Physician compensation is tied to the relative value units associated with a Current Procedural Terminology (CPT) code. Payers use coding data submitted on claims to measure population health and quality measures.

Coding drives physician revenue and compensation.

There's a common misconception about coding and income. Many employed physicians, or physicians in a large group, may believe that their coding will be done by the practice's or the hospital's professional coders, and therefore the doctors don't need to pay keen attention to coding or keep up with all of its ins and outs.

It's important for you to realize that correct coding is of the utmost importance for physicians.

There are two important reasons for physicians to take responsibility for coding. The first is that the physician—not the coder—is responsible for what is submitted on the claim form. The Centers for Medicare & Medicaid Services (CMS) billing guide on evaluation and management (E/M) services is clear about responsibility[1]:

When billing for a patient's visit, select codes that best represent the services furnished during the visit. A billing specialist or alternate source may review the provider's documented services before submitting the claim to a payer. These reviewers may help select codes that best reflect the provider's furnished services. However, the provider must ensure that the submitted claim accurately reflects the services provided.

The second reason is that the success of the practice and the physician's compensation depend on coding. Your goal is to have accurate coding that represents the services that the physician performed. Undercoding in the hope of flying under the radar robs the practice of revenue and doesn't inform the payer about the intensity of the services provided. Accurate coding that follows CPT and payer rules is compliant coding.

Physicians can accurately code for the majority of the services that they perform and preserve their revenue while submitting correct and compliant claims. The first step is to understand the rules related to the code sets used on claim forms.

Coding is the process by which a medical service and the reason for this service are translated into standard code sets. There are codes that describe all of the services and supplies that are provided in a medical practice and the indications for those services. Medical practices submit these codes on a claim form to a third-party payer in order to be paid for the services. Reimbursement rules are developed by payers and may vary from payer to payer.

In a fee-for-service world, physician claims are paid on the basis of fees associated with the CPT or Healthcare Common Procedure Coding System (HCPCS) code submitted on the claim form. The diagnosis code establishes the medical necessity for the service.

Every Claim Tells a Story

The claim form submitted to the insurance company tells a story. First, it answers the question who: Who was the patient, and who is the patient in relation to the subscriber? It also tells who performed the service and the name of the group to which the professional belongs. If there is a referring physician, the name of that physician is on the claim form.

The second component is where the service was performed. If this service was performed in the facility, the name and address of the facility are included on the claim form. There is a standard set of place of service codes that describe healthcare facility and nonfacility locations.

The physician is paid more if the services are provided in an office setting than in the outpatient department.

This is especially important, because payment may differ depending where the service was performed. Some services may be provided only at a single location—for example, home visits, which are provided in the patient's home. Many major surgical procedures can only be provided in the hospital or surgery center. Other services, however, may be provided in either a facility, such as an outpatient department, or a nonfacility location, such as a physician office. In those cases, there is often a site-of-service differential payment: The physician is paid more if the services are provided in an office setting than in the outpatient department.

What was done is described by the CPT or HCPCS code reported on the claim form. These two code sets are described in more detail in chapter 2. They define medical services and supplies provided in medical practices. In addition to the procedure code reported, there may be modifiers that tell a payer about any special circumstances related to the service that was performed.

How many services were performed? There is a field on the claim form to describe the number of units of service that were performed as well. This is most applicable to procedure codes or medications.

Finally, the diagnosis code on the claim form answers why this service was performed. The International Classification of Diseases, 10th edition, Clinical Modification (ICD-10-CM) code establishes the medical necessity for the service. If a claim is denied, it is often because of the diagnosis code. Diagnosis coding and medical necessity are discussed in Chapter 4, and denials and claims edits are discussed in Chapter 5.

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