Medical Codes

Medical System

Now that we have looked at the three main players of the healthcare system and into insurance, let’s look at how the system actually works. There are numerous things that need to be taken into account to understand how the system works. 

So, once a patient visits a medical facility like a hospital or clinic, they give their insurance information and meet with the providers. The patient encounter is then recorded electronically with  the patient details, diagnosis, disease, prescription and labs and appointments.  That data is not just sent with the patient and kept in hospital records but is also sent for medical data processing. 

The initial step is to transcribe the medical records of the individual into globally known codes known as Medical Codes. We will look into them in the next slide.

Introduction to Medical Codes

Medical coding is the translation of medical reports into a short code used within the healthcare industry. This helps summarize otherwise cumbersome medical reports into efficient, data-friendly codes. While complex and detail-driven, medical coding really comes down to knowing how to navigate the two main code sets: International Classification of Diseases (ICD) and Current Procedure Terminology(CPT). These code sets help coders document the condition of a patient and describe the medical procedure performed on that patient in response to their condition.

Medical codes translate the document from healthcare provider about your visit into standardized codes that tell payers the following:

  • Patient's diagnosis
  • Medical necessity for treatments, services, or supplies the patient received
  • Treatments, services, and supplies provided to the patient
  • Any unusual circumstances or medical condition that affected those treatments and services

This common language, mandated by the Health Insurance Portability and Accountability Act (HIPAA), allows hospitals, providers, and payers to communicate easily and consistently. Nearly all private health information is kept digitally and rests on the codes being assigned.

Types of Medical Codes

Medical coding is performed all over the world, with most countries using the International Classification of Diseases (ICD). In the United States, there are six official HIPAA-mandated code sets serving different needs. They are as follows: 

  • ICD-10
    1. ICD-10-CM (International Classification of Diseases, 10th edition, Clinically Modified)
    2. ICD-10-PCS (International Classification of Diseases, 10th edition, Procedural Coding System)
  • CPT (Current Procedure Terminology)
  • HCPCS Level II (Health Care Procedural Coding System, Level II)
  • CDT (Code on Dental Procedures and Nomenclature)
  • NDC ( National Drug Codes)
  • MS-DRG ( Medical Severity Diagnosis Related Groups) & APC (Ambulatory Payment Categories)

    We will only look at the ICD and CPT codes here as they are the major codes that are used for coding.


    International Classification of Disease( ICD) is a set of medical diagnostic codes that is maintained by the World Health Organization(WHO). It is a universal language for reporting disease and injury. In ICD, the first three characters of the code describe the basic manifestation of the injury or sickness and characters after “.” describe where the injury/sickness is. Eg: 

    123.01:  Here, 123 describes injury or disease while 01 gives the information about manifestation and/or location

    International Classification of Diseases, 10th edition, Clinically Modified (ICD-10-CM) includes codes for anything that can make you sick, hurt you, or kill you. The 69,000-code set is made up of codes for conditions and disease, poisons, neoplasms, injuries, causes of injuries, and activities being performed when the injuries were incurred. Codes are “smart codes” of up to seven alphanumeric characters that specifically describe the patient’s complaint.E.g.

    I25.110: Arteriosclerotic heart disease of native coronary artery with unstable angina pectoris

    T39.012: Poisoning by aspirin, intentional self harm


    International Classification of Diseases, 10th edition, Procedural Coding System (ICD-10-PCS) is also one of the three main medical code set containing 130,000 alphanumeric code set used by hospitals to describe surgical procedures performed in operating, emergency department, and other settings. Any inpatient procedures are reported using this code. It is more specific and provides multiple codes for a given procedure. ICD-10-PCS codes are organized into tables and are further organized into rows that specify a valid combination of characters to comprise a complete code.

    ICD-10-PCS Example

    Code 02703DZ specifies the procedure for dilation of one coronary artery using an intraluminal device via percutaneous approach (i.e., percutaneous transluminal coronary angioplasty with stent)

    CPT Codes

    Current Procedure Terminology (CPT) is one of the three main medical code sets that is owned and maintained by American Medical Association (AMA). The CPT descriptive terminology and associated code numbers provide the most widely accepted medical nomenclature used to report medical procedures and services for processing claims, conducting research, evaluating healthcare utilization, and developing medical guidelines and other forms of healthcare documentation. CPT coding system is the preferred system for coding and describing healthcare services and procedures in federal programs (Medicare and Medicaid) and throughout the United States by private insurers and providers of healthcare services.

    CPT codes are five characters long and may be numeric or alphanumeric. It can be identified by one of the following three categories :

    1. Category I CPT: Eg: Anesthesia (00100–01999), Radiology Procedures (70010–79999), etc
    2. Category II CPT: E.g. 2029F: complete physical skin exam performed,
      Patient Management (0500F–0584F), Physical Examination (2000F–2060F 
    3. Category III CPT: E.g. 0307T: near - infrared spectroscopy study for lower extremity wounds