02 July, 2020

The impacts of medical coding on healthcare systems

By Cesilia Faustina

Medical coding is a crucial part of the healthcare billing system. It works to ensure that the whole billing process is accurate, and reimbursements are taken care of.

Thanks to the handy tool that is medical coding, hospitals and other healthcare institutions can easily exchange data and accurately create insurance claims and bills for patients. In fact, medical codes are extremely needed in order to successfully provide the right services.

It starts with taking a description of the disease, injury, etc. and then transforming them into numeric or alphanumeric codes to accurately describe the diagnosis. So, these symbols are very important to uphold, especially when it comes to digitalization.

As the healthcare sector is transforming into the digital age, and the rise of customers and better services are in stake, it is only natural we are witnessing a shift towards software management systems. Having everything done online is pushing greater productivity and efficiency in correlation to the rising demands; one of the main factors that pushes for this productivity is the use of medical coding, which is why medical codes play a big role for the success of healthcare management systems.

Before we get to that though, let’s start with the basics.

What is medical coding?

Medical coding, according to Verywell Health, is a system consisting of numbers and letters that are unique for each diagnosis and symptoms. These codes are especially important when it comes to billing and tracking statistics. It is also especially important when looking to obtain insurance reimbursements, on top of maintaining accurate patient records.

The way this typically works is that any information related to the billing process will be extracted through the medical code, where then insurance claims and bills can be generated. Starting with a patient’s registration process to the whole payment and service cycle, medical codes help guide this process from beginning to the end.

Accurate and complete clinical documentation during the patient encounter is critical for medical billing and coding, according to AHIMA, as stated in Revcycle Intelligence. These codes are used extensively to validate a patient’s medical records and any inaccuracies. If not done right, it can lead to a whole mess up in the billing department; which is why having clear and precise coding is important to ensure the right medical treatments, procedures and billing are taken care of.

Hospital billing/medical coding process

What are the types of medical coding?

So, we now know how important medical coding is, especially when it comes down to the billing process, but now time to get into the types of medical codes out there.

ICD Codes

Stands for International Statistical Classification of Diseases. These codes are used to classify diagnoses, symptoms and death in humans, so essentially it is a set of codes for conditions and disease, poisons, neoplasms, injuries, causes of injuries, and activities being performed when the injuries were incurred.

It is updated based on inputs from medical professionals and the three most notable ones, that are mandatory for all coders to know include ICD-9-CM, ICD-10-CM and ICD-11-DM.

CPT Codes 

Known as Common Procedural Codes; these codes cover a wide variety of services administered by physicians. They consist of five-character alphanumeric codes that describe medical, surgical, and diagnostic services.

DRG Codes

Known as diagnosis-related grouping codes, are only used to code inpatient claims. These codes are especially important for insurers, where most reimbursements are made based on DRG codes. Regardless of the cost of services, if they fall under the categories of insurance, then a reimbursement may be made.

Those are the more common medical codes used amongst healthcare institutions, there are others though. Here are some of the other popular medical coding schemas to watch out for:


The HCPCS (Healthcare Common Procedure Coding System) consists of two levels and generally used for ambulance services, durable medical equipment, prosthetics, supplies, outpatient hospital care, chemotherapy drugs and more. They are updated quarterly.

ICF Codes

The International Classification of Functioning, Disability and Health codes are used to describe the effect a disability has on a patient and how well he or she can function in an environment.

So why are these codes so important for healthcare management systems?

Well, first of all, these codes are an essential part of the work process of medical institutions, as well as insurers; on top of that, they are crucial for accurate diagnosis and treatments, so to have them in any type of work system, whether manual or digital is a must.

Healthcare management systems need to implement the same process as medical institutions, covering all aspects and parameters needed, including all medical coding. Most of these systems also involve dynamic integration with billing and insurance systems in order to fulfil the full needs of medical providers. This process would be useless without the right codes.

Here are some of the major points to think of in terms of the two correlating factors.

Comprehensive and clear documentation

Healthcare management systems come with comprehensive features that can help speed up the workflow of healthcare institutions. This is even more convenient by having everything digitally documented, which means it is easily accessible any time needed. Clear documentation, however, is not possible without the help of medical coding.

Through the system, users can easily implement all the necessary codes needed when looking to document and activity or service. This ensures that the system provides more accurate information, which will then be easier when it comes to proceeding to billing.

Flexible and customizable coding

Surely, each institution might have its own specific coding or some codes that may be more relevant for them than others. This means that when implementing codes, a healthcare system should have the flexibility for users to personalize any parameters based on specific business needs.

Having an array of medical codes, as well as the flexibility to pick and choose are main components within these systems to ensure all healthcare providers can do the best job they can.

Much simpler integration

Medical codes help ease the integration process of a healthcare software system. Most systems have integration capabilities with third parties so that it will be easier to complete the full medical service cycle. This is especially true when it comes to billing systems and insurance systems.

As we all know by now, the correlation between medical coding and billing is inseparable. It essentially means that the system will need to provide the codes that were used when handing it to the insurers. The system will not be able to calculate the right amount or process any reimbursement claims without the medical codes that were used as well.

This will help to define relationships between medical providers and insurers, as well as ensure all calculations are correct.

How medical coding affects healthcare software

Medical coding is mandatory to ensure a smooth healthcare workflow. It plays a crucial role in the way healthcare software works in order to digitalize the healthcare sector, so it is always important to remember the importance of keeping your codes updated and accurate.

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