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The Importance of Medical Coding in Healthcare

April 27, 2023
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The Affordable Care Act continues to reform healthcare, and one key component of its success is medical coding. Medical coders are vital to the future of healthcare. They are responsible for turning patient information into the data needed by insurance companies and medical professionals. This information is then used to generate billing and track payments.

Medical coding enables healthcare providers to accurately bill insurance companies by using patient data for timely processing and payment. The importance of accurate medical coding is only rising in the next decade, making it crucial for a provider’s success.

What is Medical Coding?

Medical coding allows healthcare providers to accurately bill insurance companies. This in turn collects valuable data on treatments, procedures, prescriptions, and trends in patient conditions.

Medical coders must use a doctor’s notes to assign a code to the right health condition. This information is used in research to study trends in diseases and patient treatment.

From the patient’s appointment to collecting their health information to receiving a diagnosis, medical coding creates a uniform way to bill for services. While billing and coding are two separate processes in healthcare revenue management, both ensure payment is rendered for services provided. More importantly, both help provide the analytics needed to identify healthcare trends. This data can help healthcare organizations track various conditions, diseases, and outcomes.

Why Medical Coding is Used

With all the complexities of a doctor’s visit, it seems like adding a coding system entails a whole extra layer. Wouldn’t it be enough to just list the symptoms, diagnoses, and prescribed medications? 

If only it were that straightforward. But all the notes recorded after a doctor’s visit include so many varying details, it would take an insurance company twice the amount of time to decipher what took place during the appointment that needs to be billed. 

Thus, medical coding was created to simplify the process, at least to a more uniform standardization for insurance companies and physicians alike. This allows the same documentation to take place in every doctor’s office, no matter what they treat, in every state in the country. This generates more accurate data, more quickly.

The Importance of Medical Coding

In addition to accurate billing and information-gathering, medical coding provides the data needed to determine where to allocate resources. There are several factors that make medical coding critical to the healthcare industry.

Coding Updates

Codes are continually changing and the healthcare landscape is continually evolving. The rise of telehealth during the COVID-19 pandemic is one example of a new way to code medical visits. Coding must also maintain a value-based system, and medical coding assists facilities in obtaining incentives from federal programs.

Aging Population

The Baby Boomer generation is living longer than previous generations and requires more medical care. In turn, this increases the demand for healthcare facilities, providers, and coding specialists. Now more than ever, there is a need for professionals who can accurately code and keep up with the medical demand of more patients. 

Fewer Claim Reimbursements Yet More Rejections

Reimbursements have been reduced by medical insurers over the last decade. This often happens when they deny claims that do not have the right medical code. Medical coders who avoid these errors enable a more efficient system with faster claims processing and revenue cycle management.

Everchanging Delivery Models

Surgeries, procedures, and testing are always changing and updating. Ambulatory surgery centers and outpatient settings are also becoming increasingly common. Medical coders must know the codes and bylines for these in order to efficiently code for these scenarios and help achieve efficiency in reimbursement.

The Challenges of Medical Coding

Medical coders are responsible for correctly entering the codes for a patient, and human error does occur. This can be costly, so it’s crucial that they pay attention and use caution when entering this information into the system. Codes change regularly, so they must stay up-to-date on code accuracy. 

Medical coders should be able to communicate with physicians and staff in the event the patient’s records are incomplete. They help ensure patients get the correct diagnosis and treatment, improving the overall quality of healthcare for patients.

Common challenges include:

Incorrect Coding

When the provider doesn’t code to the highest level of specificity, or codes under it, this can lead to a claim being denied. Using out-of-date coding information is another common issue, which unfortunately happens often due to codes being frequently updated. 

Incorrect Documentation

Sometimes, not coding correctly is not due to an error by the coder, but the provider not giving enough information. There are also instances where information is missing. Coders do not always have direct access to physicians to get clarification and will use their best judgment in these situations, which may result in claim denial. 


In some cases, procedures are coded separately. But sometimes multiple, related procedures can be bundled together. Unbundling is when procedures that could be bundled together aren’t, and are coded separately, and therefore billed separately. This is a form of upcoding and is a fraudulent practice of falsely reporting in order to receive a higher payout from the insurance provider and the patient. 

The Future of Medical Coding

Quality of care is continually improving, and with more specialized conditions out there, the need for medical coding specialists is only going to increase. Medical coding may become automated in some ways due to an increase in electronic health records, but there will always be a need for a human to ensure records are completely filled out and accurate.

Medical Coding and Healthcare Analytics

The clinical documentation involved in medical coding provides healthcare analytics that can identify trends for the future. Physicians can analyze the data to learn a variety of things about maintaining compliance standards, in addition to learning about patient trends. Compliance is important in the medical industry, with every aspect needing to follow some type of protocol, including medical coding. 

Healthcare analytics is often used to achieve improvements in healthcare, as they identify patterns in a patient or condition-based behaviors. 

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