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Understanding Medical Billing and Coding

(What physicians need to know and relevant resources)

Understanding medical billing and coding is critical to understanding how you get paid as a physician.  Start here, and continue your learning by talking to your colleagues on the group and looking at your specialty society's resources.

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Billing and Coding Partners


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Billing and Coding 101

Medical Billing and Coding 101


What is billing and coding, and why is it important?

Put simply, coding is the process by which you tell the payer the services you provide and why you provide them through standardized code sets. Coding drives your revenue and compensation, and by extension, your ability to do what you love for your patients.  Physician compensation is determined by relative value units (RVUs) associated with a current procedural terminology (CPT) or Healthcare Common Procedure Coding System (HCPCS) code. 


Many physicians incorrectly assume that the coding is the responsibility of the billing company or the practice or hospital’s billing department, but they can’t do their job correctly unless you understand your job.  


You will either directly or indirectly be responsible for what is submitted on the claim form, either through your documentation of the visit or by submitting codes related to services rendered during the visit.  Both undercoding and overcoding are problems, as undercoding deprives you and your practice of potential revenue, and overcoding is unlawful and unethical.  You therefore need to make sure that your documentation or claim accurately reflects your time and involvement with the patient (compliant coding).


At that point, the person in charge of billing will review your documentation before submitting the claim to a payer, and will select codes accordingly.


The codes:

Every service and supply provided in a medical setting as well as the indications for those services is represented by specific codes.  You or your practice use a claim form to submit these codes to a third party payer in order to be paid.  There is also a diagnosis code, which justifies why the service was provided.


How much you get paid for each of these codes is determined by a contract set between you and the payer.  In most cases, how much you get paid for each code will vary with every different payer you have.

The claim form:

  • Who:

    • Who is the patient and what is their relationship to the person signed up for the insurance plan?

    • Which medical professional performed the service, and what practice/organization/association are they employed by?

    • Is there a referring physician?

  • Where:

    • Name and address of the facility where the service was performed

      • Standard set of codes for each type of healthcare facility (hospital, office, surgery center, patient’s home)

      • Key point: Payments usually differ based on setting.

      • Key point: Physicians usually paid more in an office setting than in an outpatient department.

  • What:

    • Described by CPT or HCPCS code (see below)

    • Medical services and supplies provided

    • May also be modifiers that delineate special circumstances related to the service performed, without changing the definition or meaning of the code used to report services

      • added to CPT or HCPCS codes

      • Be careful with these - using them incorrectly is taken very seriously (learn more about modifiers below)

  • How many:

    • Number of times this service was performed, drug was administered, or supply used 

  • Why:

    • Diagnosis code (use International Classification of Diseases, 10th edition, Clinical Modification, ICD-10-CM, code)

      • Often the reason claims are denied, as this is the code that establishes the medical necessity

      • Do not list suspected or possible diagnosis codes.  You should just code the symptoms or complaint until a diagnosis has actually been made.


Submitting a Claim and Denials: 

Possible responses:
1. Claim is paid with the correct amount.

2. Claim is denied completely (usually because of eligibility of the patient, enrollment of the provider with that payer, or preauthorization issue - less likely to be because of coding).

  • Send these to appropriate staff member (management for enrolment issues, front desk person for eligibility and preauth, coding reasons to the coding department)

3. Claim is partially paid.

  • Usually because one or more line items on the claim were denied or that the allowed amount was not accurate - you will need your staff to review what the issue is, who was right, and how to remedy it. 

  • Payment allowances should be cross checked against each payer’s fee schedule, which should be in their software and account for patient’s individual plan which may have different deductibles, etc.

4. No response (neither pays nor denies)

  • Have to stay on top of these.  Most payers have a short timeframe for when claims have to be filed, and if you don’t file within this time period, you could be out of luck.  Practices should monitor their insurance accounts receivables very closely.


Regardless of the outcome, you want to make sure everything is reviewed very closely, as this is how you run a successful practice.  You need to get paid. 

  • For all denials, the number, dollar value, and reasons should be tracked by payer and type of service.   

  • This will help improve operations/processes to prevent denials from happening again by checking before submission.

  • If there is a repeated problem that is not the practices fault, the practice manager should discuss it with their contact for that payer.

  • You need someone to actively monitor claims status and make sure you’re not outside the window of the length of time specified by the payer within which a claim can be appealed or resubmitted.  So many practices lose significant revenue when they don’t pursue or stay on top of outstanding balances and corrections/resubmissions of denied claims within the specified time frame

Billing and Coding 201

Medical Billing and Coding 201

*please ensure this is up to date, as it changes frequently, and cross reference the AMA CPT book and HCPCS guidelines*

CPT Codes

Current Procedural Terminology (CPT) codes

Most physicians have heard of CPT codes, which are the 5 character numeric codes that specify what was done. These, and associated rules, were developed by the American Medical Association, and every medical practice should have an up to date version of this book because while your EMR may assign or allow you to pick codes, the rules associated with each code are in the book.  Your specialty society may have accompanying resources that give you further specific guidelines for how to apply them to your field.  In order of chapters, the book covers: 


Evaluation and Management Codes (E/M Codes)

  • Used for bread and butter services such as office visits and consults, hospital and nursing home services, management of chronic conditions and critical care and preventive medicine services, and managing care transitions

  • Also includes things that may not be reimbursed like team conferences or phone calls

  • Important to understand how to select the correct code and level of service

  • Selected by level of history, exam, and medical decision making performed and documented, taking into account the nature of the presenting problem

    • Have different levels (up to 5)

    • “E/M” profile is how frequently physicians use each level; can compare to other physicians in the same specialty with society or commercial frequency data

      • If varies a lot from the norm, a payer may request notes for prepayment review - lots of physicians undercode for fear of this

  • If counseling is most of the encounter, can also report by time.  

    • Counseling: discussion of diagnosis, prognosis, treatment, diagnostic evaluation, compliance, prevention, and patient/family education

    • Office and outpatient services: based on total time of the face-to-face visit when more than 50% is spent in counseling

    • Inpatient services: based on the unit time when more than 50% of the unit time is spent in counseling/coordination of care

    • Can be used for both new and established patient visits (but in practice usually used for follow up)

Surgical Services

  • Paid with a single payment (“global”) that includes most typical preoperative, intraoperative, and post operative services

  • CMS and CPT rules are different with regards to complications/care beyond the typical expected course.

    • CPT rules - if you readmit a patient you can bill

    • Medicare includes all related complications in the global payment unless a return trip to the operating room is required (in which case, surgical modifiers are appended to the procedure)

  • Procedures assigned “global days” in the Medicare Fee Schedule

    • Minor procedure 0 or 10 global days

    • Major procedure 90 global days

  • Physicians in the same practice/specialty have to bill as though they were a single physician

  • CMS instructions on the global surgical package, including the use of modifiers, are found in Publication 100-04, Chapter 12, Section 40.



  • Two components: 

    • Professional (interpretation by radiologist)

    • Technical (work of staff to perform the test, equipment needed, and overhead) component

    • If practice does both, CPT code is reported w/o modifier

    • If only professional, modifier 26; if only technical, modifier TC

  • Need separate signed report with clinical indication, technique, and interpretation. 

  • If a procedure requires imaging during performance or surgical access, these can count as supervision and interpretation services.  However, if the description of the surgical procedure includes imaging guidance, it often can’t be billed in addition to the procedure. You have to look in the CPT book and see if the definition of the procedure code says it “includes imaging guidance when performed,” in which case you can’t bill for imaging guidance separately.  If it says, “If ___ guidance is performed, use” then you can bill for imaging guidance with a permanent image acquired for documentation.


  • Separate codes for how the specimen is collected

  • Organ system or disease oriented panels include defined list of tests

  • CMS pays based on Clinical Laboratory Fee Schedule

  • No values in the Physician Fee Schedule for lab tests

  • Practice or lab must have a Clinical Laboratory Improvement Amendments (CLIA) certificate to perform clinical lab tests

  • Certain common codes performed in many practices are considered CLIA waived tests. The practice needs a certificate to perform these.

Medicine Services

  • Covers medicine services offered by many different types of practices, not just physicians in medicine subspecialties; includes thighs like vaccines, faxing admin, psychiatry services, dialysis, PT, nutrition, moderate sedation, hydration, injections, and more

  • Two subsections, procedure oriented and specialty

Healthcare Common Procedure Coding System (HCPCS)

This set of codes was developed by Medicare. They begin with a letter and then have four numbers. They include supplies or services provided in a physician office, medications (codes start with J), durable medical equipment (codes start with A), and some preventive medicine services and temporary codes (start with G).  They also include many services medical practices don’t perform, like ambulance services and dental care.  There are also codes for facilities to describe outpatient services using the Hospital Outpatient Prospective Payment System.  It’s important to know which services in your specialty/practice can qualify for these codes/payments that aren’t covered by CPT codes.

  • The group needs a provider number to bill Medicare for DME.

  • Many practices use these codes for medications or injections/infusions

    • These codes should be reviewed annually to ensure the correct units are documented, as the codes specify a certain dosage and the service should be reported as a unit of that dose, so everyone on the team has to know what dosage equals one unit


This allows you to report that a service or procedure has been altered by a specific circumstance, without changing its definition or code.  This is one of the most important things to get right, as using them correctly can expedite payments, not using one can result in denials or slower payments, and using it incorrectly can get you payments you’re not entitled to (and land you in jail).  In most practices, the coder has to select the appropriate modifiers, but physicians need to know which modifiers are allowed so that they document accordingly to justify its use.  

  • Many practice management tools have claims edits in place for the most common modifiers.

  • Some are very specific to specialty and used only in specific circumstances, while others are used broadly.  Surgical subspecialties tend to use more modifiers.  Some popular modifiers

    • Modifier 25: when an E/M service is performed on the same day as another service by the same physician.  Used to indicate that there was a separate, significant, and identifiable service performed on the same day as another procedure.

    • Modifier 57 (Decision for surgery): used when the decision for surgery was made at that visit and the patient will go to surgery that day or the next calendar day.  Otherwise the preop visit would normally be included in global; however in this case the E/M visit was a separate, significant visit

    • CMS instructions on the global surgical package, including the use of modifiers, are found in Publication 100-04, Chapter 12, Section 40 (please view for details of each).  Some common ones are:

      • Modifier 22: Increased Procedural Service - indicates the work performed was significantly more than typical for that code, make sure that’s documented in the op note.  Note this will delay payment as they will review the op note.  Typically increases compensation, but not always

      • Modifier 50: Bilateral Procedure - use on services not already defined by CPT or CMS in the Medicare Fee Schedule as bilateral services; increases reimbursement by 50% 

      • Modifier 51: Multiple Procedures - used on second/subsequent procedures that aren’t bundled because it’s not a component of the primary procedure.  The second/subsequent procedures are paid at 50% of the primary procedure.

      • Modifier 52: Reduced Service - used when the physician elects to reduce or eliminate part of the service involved in that procedure (usually majority of procedure done)

      • Modifier 53: Discontinued Procedure - decision is made early secondary to a complicating factor that precludes completion of planned procedure

      • Modifiers 54, 55, and 56 - Used when physicians of different groups perform different parts of the service - break up the components of the global surgical procedure into surgical care only (54), postoperative management only (55), and preoperative management only (56).  A formal transfer of care is required.

      • Additional separate modifiers for staged or related second procedure during the postoperative global period (58), repeat procedures with same CPT code by the same physician/group (76) or another physician (77), unplanned return to the operating room for complications in the global period (78), assistant in surgery (80 or for nonphysicians AS)

  • Two sets of modifiers, one for CPT (most of which affect payment), and one in the HCPCS book (some informational or relating to compliance, like sidedness).  Each set can be used on CPT or HCPCS codes.

  • If two modifiers are required, sequence the modifier that affects payment first.

  • Common modifier mistakes:

    • Missing modifiers: usually in E/M services (ex forgetting to put modifier when both E/M service and procedure are being performed), can result in no payment

    • Misplaced modifiers: using E/m modifier on a surgical code (or the other way around) will usually result in a claim not being paid

Diagnosis Codes

Third set of codes to know.  Currently, we are using the International Classification of Diseases, 10th edition, Clinical Modification (ICD-10-CM). The version of these codes used in the United States were developed by the Centers for Disease Control and Prevention and the American Hospital Association from the code set developed by the World Health Organization.  ICD11 has been released by the WHO but it will take some time to adapt (currently estimated at 2025-2027 in the US).

You should use the code that 

  • Describes the patient’s diagnosis, symptom, condition, complaint, or problem

  • Is chiefly responsible for the service provide

  • Is as specific as possible.


Do not list suspected or possible diagnosis codes.  You should just code the symptoms or complaint until a diagnosis has actually been made.  Code a chronic condition whenever applicable to the patient's treatment.  Code all documented conditions which coexist at the time of the visit that require or affect patient care or treatment. Do not code conditions that no longer exist.


In fee-for-service, the diagnosis coding for diagnostic tests or procedures is essential to establish medical necessity.  If it is not congruent, it will result in a denial.  In other payment models such as risk-based contracts or shared-savings contracts, payers will use this to assess a panel of patients’ acuity and use it along with other factors such as age, gender, cost, quality, and outcomes in order to provide incentive payments or decrease payments at the end of the contract year.  


  • Medical Necessity determination:

    • Guidelines developed by Medicare, Medicare Adminstrative contractors, and commercial insurers.  Commercial insurers policies may be different than Medicare.

  • Medical practices should review their diagnosis code frequency report regularly, as well as limit the use of unspecified codes for chronic conditions.  It’s better to use a code that specifies a complication or manifestation.  For signs and symptoms you will more often use unspecified codes.

  • Primary care: some of the most frequently used codes are examination and immunization codes, followed by codes for chronic conditions.  In specialties with lots of sick visits, you’ll also see signs or symptom codes often.

Diagnosis Codes
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