Medical Billing Codes

Medical billing codes are used to classify a patient’s treatment, diagnosis, and related medical supplies. These billing codes aren’t just the typical ICD diagnosis codes and CPT codes. There are also codes related to drugs, hospital revenue codes, dental codes, and codes unique to Medicare.

When you’re searching for codes, most people are typically looking for one of two things – an explanation of the different CPT codes, ICD-9 or ICD-10, or the many other billing codes and where you can find them.

These codes are necessary for a provider to be reimbursed for their services and consist of but are not limited to:

  • ICD 9 Codes and ICD 10 Codes
  • CPT Codes
  • CPT Modifiers
  • Medicare Billing Codes
  • CDT Codes (Dental)
  • NDC Drug Codes
  • DRG Medicare Codes
  • Taxonomy Codes

We’ll describe these in greater detail below. For more comprehensive info on medical coding and billing related terms, checkout the Medical Billing Terms page.

Most Commonly Used Codes

The ICD-9 or ICD-10 and CPT medical billing codes are used by insurers to determine the amount to reimburse a provider for the services they performed on the patient. Since use of these codes is universal, every provider uses the same codes for the same services.

Below is a typical superbill you would likely see for a family practice with the most commonly used ICD-9 diagnosis and CPT codes listed. You’ve probably seen something similar for your own doctor visit.

ICD stands for International Statistical Classification of Diseases and Related Health Problems and CPT is an abbreviation for Current Procedural Terminology. The ICD 9 or 10 Codes are published by the World Health Organization and available publicly. ICD medical billing codes are alphanumeric codes assigned to the diagnosis based on the symptoms and causes determined by the provider based on assessing the patient.

CPT medical billing codes are assigned by the American Medical Association (AMA). These codes are copyrighted by the AMA and must be purchase through one of their licensed sources. CPT codes are also alphanumerical medical billing codes assigned to every procedure or service a medical provider performs on a patient. These codes are updated annually by the AMA.

Resources for Medical Billing Codes

Here’s a collection of all the coding terms that are applicable to medical billing and coding. The importance of correct coding and being current on the latest trends in coding is very important to billing and reimbursement.

CPT Medical Coding
A more in depth description of CPT medical codes and their relationship to ICD-9 codes as well as other helpful resources for the medical billing and coding specialist.

ICD-9 Codes
Find out what ICD 9 codes are and their relationship to CPT codes. What are the best ICD-9 codes reference for the medical billing and coding specialist.

ICD 10 Code
Learn what ICD 10 is all about. Why the transition from ICD 9 to ICD 10 Codes concerns this Medical Billing Business owner.

CPT Modifiers
Medical billing information on CPT Modifiers. These provide additional information to payers to make sure your provider gets paid correctly for services rendered.

Medical Diagnostic Codes
A description of what medical diagnostic codes are and how they are used. Explanation of the ICD 9 medical insurance code system and a comparison to the ICD 10 medical insurance codes classification system.

Medical Coding Software
What are the options for Medical Coding Software. Learn the major online resources. Is there a viable combined medical billing and coding software solution?

A History of Medical Coding
How we ended up with the medical coding systems we currently use in healthcare. Includes the ICD Diagnosis and CPT Treatment systems of coding.

Medicare Billing Codes
Medicare Billing Codes explained for Provider services and Hospital insurance as reported on the UB-04.

Free Online Coding References
Where to find free if somewhat limited references for CPT medical coding and ICD 9 codes. These are some online medical coding resources from reputable sites.

Medical Billing Terms
For a more comprehensive listing of medical coding and billing related terms and abbreviations, checkout the Medical Billing Terms page.

Medical Terminology Abbreviations
Here are two good comprehensive references for medical terminology abbreviations frequently encountered when coding:

Medical Coding From Home
How realistic are medical coding jobs at home? Here’s a discussion on the feasibility of medical coding from home and the considerations of employers.

A site called is a great interactive Anatomy and Physiology reference of the human body. It helps you visualize what all these medical billing codes represent. Has animations and 100’s of anatomy graphics and descriptive links.


HCPCS is the Healthcare Common Procedure Coding System. HCPCS was established in 1978 to provide standard coding system health care services.

HCPCS medical billing codes are used and monitored by Medicare and the Centers for Medicare and Medicaid Services – CMS.

HCPCS medical billing codes consist of three levels:

  • Level I is the American Medical Association’s Current Procedural Terminology (CPT) numeric codes.
  • Level II codes are alphanumeric and used mostly for non-physician type services and items and supplies such as medical equipment/supplies and ambulance services and prosthetic devices not included in the Level I. These are typically services provides outside of physicians offices.
  • Level III codes are referred to as local codes. These are established for use by state Medicaid agencies, Medicare contractors, and private insurers for use in specific programs and jurisdictions. The use of Level III codes was discontinued on December 31, 2003.

NDC Medical Billing Codes
NDC medical billing codes stand for National Drug Codes. These are found in the National Drug Code Directory. The FDA (Food and Drug Administration) requires prescription drug manufacturers to assign unique identifiers for each drug. The National Drug Code is a unique 10-digit, 3-segment numeric identifier assigned to each medication:

  • The first segment referred to as the labeler code is 4 or 5 digit number assigned by the FDA when the manufacturer, packager, or distributor submits a Labeler Code Request.
  • The second segment is the product segment. It is a 3 or 4 digit long number that identifies the strength, dosage form, and formulation for a particular firm.
  • The package segment is the third segment. This is 1 or 2 digits long and identifies the package form and size.

The Centers for Medicare and Medicaid Services created an 11-digit NDC varient that adds a leading zero and has a 5-4-2 format.

Revenue Codes
Revenue codes are 3 digit medical billing codes used by hospitals to identify for insurers the area of the hospital where the patient was when receiving the procedure – or the type of procedure performed. The revenue code is found in the UB-04 manual for billing hospital claims. This manual explains the revenue codes and when to use depending on circumstances.

CDT Codes – Code on Dental Procedures
CDT stands for Code on Dental Procedures. These are dental procedure codes and nomenclature established by the American Dental Association for reporting dental procedures and services and procedures for dental benefits plans. These codes are necessary for submission of dental claims to dental insurance carriers.

DRG’s (Diagnosis-Related Group) – Is a system of medical billing codes developed by Medicare to group patients based on their diagnosis, treatment, age, and other criteria. This is used to identify the “products” that a hospital provides. The reimbursement from Medicare for a hospital patient is based on the patient’s DRG. This is regardless of the actual cost of the hospital stay, or the what the hospital bills Medicare for. The reasoning for this is that patients that fit the same profile require approximately the same services and care. There are about 500 different DRGs.

As of October 1, 2007 with version 25, the CMS DRG system re-sequenced the groups, so that for instance “Ungroupable” is no longer assigned 470 but is now 999. To differentiate it, the newly re-sequenced DRG’s are now known as MS-DRG.

Ambulatory Payment Classifications
Ambulatory Payment Classifications (APC) is a way of reimbursing outpatient services for Medicare. This is similar to the hospital inpatient DRG’s – but it applies to outpatient services. APC’s only apply to hospitals and not individual providers or physicians. When a Medicare outpatient is discharged from the emergency room or clinic to be transferred to another unaffiliated facility, an APC payment is made to the hospital. When the patient is admitted to the hospital from the same facility emergency room or clinic, APC payments do not apply because Medicare reimbursement is made under the DRG (Diagnosis Related Group) medical billing codes.

Taxonomy Codes
Taxonomy medical billing codes are used to categorize a provider or group specialty. They are unique 10 character alphanumeric codes organized into three levels – provider type, classification, and specialty. A provider may have more than one Taxonomy code assigned.

Taxonomy codes are a HIPAA standard code set described in the implementation specifications for some of the standard HIPAA transactions. If the Taxonomy code is required in order to reimburse a claim then it must be reported. However the reporting requirements vary from one health insurance carrier to another.

The provider selects a taxonomy code that best describes their education, license, or certification credentials. Maintenance of Taxonomy codes is by the National Uniform Claim Committee. (NUCC). Taxonomy Codes can be found at the Washington Publishing Company’s website

Evaluation & Management Codes
Evaluation & Management (E/M) medical billng codes are the CPT medical billing codes 99201 thru 99499. These are the most common procedure codes billed in healthcare. The E/M codes are designated for patient visit or encounter with the provider. It is important to understand E/M codes because these are commonly challenged by the insurance carriers who want to down-code the claim.

Documentation necessary for E/M medical billing codes are set by E/M guidelines. These guidelines are established by the Center for Medicare and Medicaid Services (CMS) in cooperation with the American Medical Association (AMA). Typially the higher reimbursed E/M codes such as initial office visit require more documentation than lower paying E/M codes like visits with an existing patient.

National Correct Coding Initiative
The National Correct Coding Initiative (NCCI) was initiated by the Centers for Medicare and Medicaid Services (CMS) to promote correct practices for medical billing codes for Part B claims. The purpose of the NCCI edits is to prevent improper payment when incorrect code combinations are reported.

The NCCI was brought about due to improper coding and associated payments. Policies adopted by CMS are based on the American Medical Associations CPT manual and coding practices developed by coding professional organizations as well as past study of medical and surgical practices. Insurance carriers began implementing the NCCI conventions for claims processed beginning in 1996.

Bundling of Medical Billing Codes
The process of bundling in reference to CPT medical codes describes the action of insurance payers of substituting one code for two or more codes. This adversely affects the providers payment since the insurer only pays whats allowed for the one code their system feels is applicable per the fee schedule.

Good coding practices and use of appropriate modifiers to describe the services performed by the provider. When codes are bundled, an appeal can filed for the insurance company to reprocess the claim. A good straight forward appeal letter stands a good chance of successfully reprocessing the claim. Some insurers will bundle the claims knowing many providers or their staff will not won’t file an appeal.

Unbundling of medical billing codes is obviously the process of separating codes in order to be reimbursed for each individual code. CMS has focused a lot on unbundling practices as fraudulent in circumstances where the claim is deliberately unbundled to increase reimbursement. There are situations where unbundling is unintentional due to a misunderstanding of the medical billing codes.

ICF Codes
International Classification of Functioning (ICF) compliment the ICD-9 (and ICD-10) diagnosis codes. These codes characterize the effect of a disability and a patients ability to function in their surroundings. These codes described in more detail on the CDC website.

DSM-IV Codes
The DSM-IV )also known as DSM-IV-TR) is the forth edition of the American Psychiatric Associations Diagnostic and Statistical Manual of Mental Disorders. These medical billing codes are for the diagnosis of mental illnesses. The latest edition of the DSM codes are intended to correspond with ICD codes.

Importance of Coding
Correct coding is the key to a provider being properly reimbursed. To process insurance claims correctly, the patients diagnosis and treatment has to be coded properly. Coding involves taking the physicians notes from the visit and translating into the proper diagnosis codes for diagnosis and treatment codes for processing by the insurance carrier.

The art in medical billing coding is understanding how to correctly determine and assign the proper codes, and insuring the ICD-9 or ICD-10 diagnosis and CPT treatment codes match correctly for a provider. Otherwise the claim will be rejected by the insurance payer resulting in a time and labor intensive process of follow-up and claim re-submission.