What is Medical Billing and Coding? Codes & Fundamentals

Medical billing and coding are behind-the-scenes operations that keep healthcare services running smoothly. This guide will explain the duties of each position, what the difference is between the two, and some of the specifics of the jobs. 

What is Medical Billing and Coding? 

Medical billing and coding are parts of the process by which healthcare information is deciphered and transferred into a universal language and format.

Coders apply their knowledge of medical procedures, anatomy, physiology, and the disease process to correctly link information to a numerical identifier. Meanwhile, billers use coded information to prepare medical billing for patients, insurance companies, and government agencies to secure payment for services rendered. 

The accurate and efficient processing of this information is essential to healthcare service reimbursement and it facilitates the delivery of high-quality care. 

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What is Medical Billing? 

Medical billing is the process by which claims for medical procedures and services are invoiced and collected. It’s also known as Revenue Cycle Management (RCM). 

The process begins when patients first schedule an appointment and ends when payment has been received. Medical billing functions are often divided into front-end or back-end processes. 

Front-end medical billing 

Front-end billing involves communicating with patients and ascertaining how payments are to be made. This process begins as soon as a patient schedules an appointment, as providers need to be certain that they are going to be paid for services rendered. 

Patients are asked to provide their insurance information to confirm eligibility for services. If necessary, they also need to provide authorization for physician-ordered tests, clinical procedures, medications, and medical devices. 

Details including maximum allowable visits and patient cost responsibility are determined at this stage so that any portion of services for which patients are responsible can be explained and collected at the time of their appointment. 

Back-end medical billing 

Back-end billing consists of creating, issuing, and managing claims until they are complete. 

Following the documentation and coding of medical services, the revenue cycle shifts to the back-end of the medical billing process. This includes the transfer of coded procedures into their proper format for billing and claims submission, as well as the collections process. 

Medical providers are responsible for applying appropriate pricing to the medical codes that have been assigned, submitting insurance claims to payers, managing the denial and rejection of claims, and reconciling insurance and other third-party payments with patient bills. 

What is Medical Coding? 

Medical coding is a process through which standardized codes are applied to the information contained in medical documents including physician’s notes, laboratory and other diagnostic results, and hospital records. 

Uniform codes allow diagnoses and treatment information to be more easily understood by practitioners, insurers, third-party payers, agencies that track health data, and researchers analyzing medical trends. 

Types of Medical Codes

There are many services and resources that go into providing patient care. Each one needs to be translated into code so that medical providers can be compensated for the services, supplies, and resources. 

A billable item such as X-ray film is a straightforward expense. However, the fee for the expertise of a radiologist and the electricity and maintenance that keeps an X-ray machine operating are also calculated and represented by their own type of code. 

There are several types of code used to process healthcare services.

International Classification of Diseases (ICD) codes

International Classification of Diseases (ICD) codes are specific to diagnoses. After a healthcare practitioner makes a diagnosis, a medical coder translates the diagnosis into a specific code that will be used for billing, future treatment, and statistical analysis.

ICD code is a universal language shared across the globe. By clearly communicating a patient’s disease or injury, ICD codes both facilitate the payment process and standardize treatment. 

For example, medical staff treating a new patient with an ICD code for cardiovascular disease will automatically be alerted to appropriate treatments and contraindications. At the same time, the insurance company receiving a claim coded for cardiovascular disease will be prepared to compensate for care associated with heart-related testing and treatment. 

CPT and HCPCS codes

Current Procedural Terminology (CPT) and Healthcare Common Procedure Coding System (HCPCS) are used for billing procedures, tasks, and services provided by medical practitioners. 

The difference between the two is that HCPCS codes are specifically applied by the Centers for Medicare and Medicaid Services to bill Medicare, Medicaid, and other third-party payers. While the HCPCS codes used by Medicare are proprietary, the purpose of both CPT and HCPCS is to communicate the medical, surgical, or diagnostic service that has been provided. 

Though the percentage of reimbursement that an insurer will pay will vary based on contracts, the use of the CPT and HCPCS code clarifies exactly which actions are being billed. 

There are multiple categories of procedure codes, including: 

• Those for basic procedures, services, devices, and drugs 
• Those that bill for the use of emerging technology
• Those that indicate performance management and other data
• Those that bill for testing

Charge capture codes

Charge capture codes are found within each facilities’ Charge Description Master (CDM), also known as their Procedure Code Dictionary. This is a list of all the billable items that appear on patient billing. 

In addition to standardized CPT and HCPCS codes, the charge capture codes may contain: 

• Procedure descriptions
• Time reference codes (i.e. for recovery or observation) 
• Departments providing medical service
• Items and supplies being billed

Depending upon the facility, charge capture codes may provide descriptions that patients see and clinical descriptions used for internal purposes. Charge capture codes often account for supplies and resources that are not separately billable, such as floor stock that is used as part of routine care. 

Professional and facility codes

Professional codes are used to quantify reimbursement for the service and knowledge of highly-trained healthcare professionals. Meanwhile, facility codes measure the use of a facility’s resources. 

What Do Medical Billers and Coders Do? 

Medical billers and coders are the professionals that administer the revenue cycle of the healthcare system. Medical coders review patient data and translate it into billable information using ICD-10-CM, CPT, HCPCS, and other codes. 

On the other hand, medical billers oversee the payment process from when patients first schedule service until the time payment is received. This role includes verifying insurance coverage, securing authorizations, collecting copays, and transmitting assigned codes for insurance claims.

How to Become a Medical Biller or Coder 

Becoming a medical biller or coder opens the door to a career with many advantages. 

Both professions require learning federal coding standards in ICD 10-CM, CPT, and HCPCS. Since there are so many overlapping areas of knowledge within the two job titles, many choose to attend dual certification programs. 

The fastest way to become certified in this field is by attending a  4-week online course for medical coding and billing. However, most certification courses to become a medical biller or coder often take less than a year and are available in person and online.

If You Choose to Become a Medical Coder 

Your coursework will include classes in anatomy, pharmacology, medical records, and medical office procedures. Upon completion of an accredited program and prescribed levels of experience, you may become eligible for certifications including: 

• Certified Professional Coder
• Certified Coding Associate
• Certified Coding Specialist
• Certified Coding Specialist: Physician-based 

If You Choose to Become a Medical Biller

Your coursework will include classes in medical terminology, medical reception, medical billing technology, and medical insurance principles. Upon completion of an accredited program and prescribed levels of experience, you may become eligible for certifications, including: 

• Certified Professional Biller
• Certified Medical Reimbursement Specialist
• Certified Medical Billing Specialist 

Resources

For additional Medical Billing and Coding information, check out: 

• This is How to Get Started in Medical Coding and Billing
• Free Online Medical Billing and Coding Certification Programs
• This is Why Starting a Medical Billing and Coding Business Was the Best Decision for Me
• Medical Coding and Billing Careers Guide 
• Top Medical Billing and Coding Schools