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What Is Medical Billing and Coding?

Leah Zitter
Leah Zitter
business.com Contributing Writer
Updated Dec 08, 2022

Medical billing and medical coding are essential elements of the medical revenue landscape. Learn more about these processes.

Medical billing and medical coding are crucial aspects of the medical revenue landscape. Both jobs ensure health care providers get paid for their services. Medical coders read the providers’ operative or procedural notes and code them so providers receive proper payment for their services. Medical billers submit these notes and follow up on health insurance claims for timely payment. Medical billers also appeal claim denials. 

Both billers and coders work in almost every type of clinical location, including hospitals, healthcare provider offices and outpatient care centers. Sometimes – particularly in smaller offices – one individual handles both codes and bills. Jobs in medical coding and billing are expected to grow 9% by 2030, according to the Bureau of Labor Statistics.

What is medical coding?

Healthcare providers send medical coders their unbilled reports, and coders translate these notes into code to create a succinct record of the patient’s visit. These operative or procedural notes include surgical records, office notes, laboratory notes, pathology findings and more, spanning the full spectrum of healthcare departments. Once finished, medical coders send their coded claims to medical billers for processing. 

Medical coders use three main types of coding:

  • ICD-10 diagnosis codes
  • Treatment codes
  • Treatment code modifiers

ICD-10 diagnosis codes 

“ICD” stands for the International Classification of Diseases, and “10” refers to the 10th revision. Each ICD code is seven characters. 

ICD-10 diagnosis codes describe the patient’s condition. A coder may assign more than one diagnosis code on a patient visit. 

ICD-10 diagnostic codes fall under two systems:

  • ICD-10-CM stands for International Classification of Diseases, 10th Revision, Clinical Modification. These codes are used for outpatient services. 
  • ICD-10-PCS stands for International Classification of Diseases, 10th Revision, Procedure Coding System. These codes are used for hospital billing. 

Treatment codes 

Treatment codes describe the treatment or services performed on the patient to address their condition. 

There are two treatment code levels defined by the Healthcare Common Procedure Coding System (HCPCS): 

  • Level I uses CPT-4 codes and deals with CMS-1500 claims for physician services. (“CMS” stands for the Centers for Medicaid & Medicare Services; CMS-1500 claims are standard claims.) CPT-4 codes have five digits.
  • Level II codes are used for non-physician services and supplies not covered by CPT-4 Level I codes. Level II codes also have five digits. They comprise a single letter between A and V, followed by four digits.

Treatment code modifiers

Medical coders use modifiers when a procedure has been performed differently than described in the standard five-digit code. Modifiers usually indicate one of the following variations:

  • The procedure has been performed by more than one doctor.
  • The treatment had a professional component (PC) or technical component (TC).
  • The procedure was provided more than once.
  • A bilateral procedure was performed.
  • Only part of the procedure was performed.
  • The procedure was increased or reduced.

If one of these situations occurs, coders add a two-digit alphanumeric modifier to the code. For example, the code might be 99203 for an initial office visit, while 99203-57 describes an initial office visit with a decision for surgery.

Did you know?Did you know? The process for telemedicine billing is the same as billing for in-office patients.

Example of medical coding

Let’s say a medical coder, Jim, received the following information:

A patient is seen in the office for a chief complaint of shortness of breath and fatigue. The physician performs a detailed history, detailed examination, and medical decision-making of moderate complexity. Final diagnosis – pneumonia. In the office, the physician provided and interpreted a two-view chest X-ray.

Jim would encode that report using the following process:

  1. Circle keywords. Jim would circle the keywords in the information received, including the patient’s medical diagnosis, treatment, and equipment or medication provided, if any.
  2. Find the condition codes. For each of the patient’s conditions, he’d consult the ICD-10-CM Health Care Code Sets for Outpatient Billing. In this case, for generic pneumonia, the code is J18.9.
  3. Find the procedure and service codes. Jim would then consult the Current Procedural Terminology (CPT-2022) manual for the CMS-1500 codes for the procedures and services the doctor provided. In this example, a two-view chest X-ray code would be 71045-71048.
  4. Find the office code. The procedure was of “moderate complexity.” Jim would capture the code for the office visit, which he’d find in the CPT-2022 manual. The code for an office visit with an established patient is 99211-99215.
  5. Add modifier codes. If the provider altered part of the treatment with medication or something else, Jim would add a modifier from HCPCS Level II code books or from the CMS’ Alpha-Numeric HCPCS website.
  6. Submit to billing. Jim would submit the encoded documentation to medical billing.

Did you know?Did you know? any healthcare organizations use one of the best medical transcription services to reduce the burden of coding claims and chasing collections.

What is medical billing?

Medical billers use patient, provider, and health care organization information and treatment details to fill out two medical claim forms: the CMS-1500 and UB-04 (the uniform billing form for institutional providers). Billers then submit these forms to the relevant insurance companies, bill them for the healthcare or doctor’s services, and follow up if the healthcare organization or doctor hasn’t been paid. 

If insurance denies a claim, the medical biller would file an appeal and do all they could to ensure the healthcare organizations and providers receive all the proper reimbursements. Billers work with insurance portals and make calls, and sometimes mediate between insurer and client, explaining to clients why their insurance claim was rejected.

TipTip: Some of the best medical billing tips are to explicitly ask the patient to verify their contact and insurance information, and to set clear payment terms with the patient.

How to become a medical biller or coder

Medical coders must be familiar with medical terminology and anatomy to understand what they read. They must also become familiar with frequently used procedures and codes for their specialties and keep up with coding changes. Medical coders handle medical records, documentation requirements and compliance. 

Medical billers use a different skill set. These professionals must know various insurance providers, their policies and filing details, how to appeal, and much more.

Medical billers and coders work across healthcare facilities, including hospitals, dentists, doctors’ offices and outpatient centers. Some practices limit medical billers to specific insurance companies or specialties. Sometimes one person does both jobs, depending on case complexity and organization size. Other times, billers and coders interact, working together to adjust rejected claims for insurer review. 

FYIFYI: If you’re interested in becoming a medical coder or biller, a certificate program in medical billing or coding is the quickest route to working in the field. Most programs take less than a year.

Medical billing services

If you want to outsource your medical billing needs, the best medical billing services can handle coding, billing, submissions, denial management and more. Investigate any potential partner for its transparency, technology, experience in your specialty and compliance reputation. 

Check out our in-depth reviews of top medical billing services to find one that fits your needs and budget: 

Image Credit: Andrey_Popov / Shutterstock
Leah Zitter
Leah Zitter
business.com Contributing Writer
Leah Zitter PhD is a trained journalist who covers emerging technology across more than 60 industries. Her PhD is in Behavioral Neuroscience which beautifully intersects with the AI/ ML topography. Clients include Google, AWS and Microsoft.