Three Factors that Highlight the Importance of Coding In Healthcare

In today’s tech-driven world, coding forms the backbone of seamless revenue cycle management in hospitals and medical offices. Simply put, medical billing involves preparing billing claims that are submitted to insurance providers. Receiving funds allows the hospital to stay open and operational. Not only that, it also ensures that the medical office or hospital is reimbursed for the services they provide patients.

An important process in the smooth functioning of any hospital or medical office is medical billing. The way it works is that professional medical coders assign alphanumeric codes for patients’ procedures, testing and diagnosis. These codes help establish the correct reimbursement for patients and insurance companies—evidence for the undeniable importance of coding in healthcare.

Currently, there are three major coding systems employed by the healthcare sector.

They include the International Classification of Diseases (ICD), the Current Procedural Terminology (CPT), and the Healthcare Common Procedure Coding System (HCPCS). ICD codes ensure that a patient receives proper medical treatment, is charged correctly based on the services they receive and determines global trends and statistics about different diseases and ailments

The most recent release from the World Health Organization (WHO) indicates the eleventh version of the International Classification of Disease, (IDC-11). This spans nearly 17,000 unique codes and roughly 120,000 codable terms. About 35 countries around the world are using IDC-11 for coding for certification of causes of death, cancer registries and clinical documentation, among other. Safe to say that this on its own bears testimony to the question, ‘why is medical coding important?’.

To take it a step further, you may wonder, why is accurate coding important? Assigning the correct code is a challenging task. It’s prone to human error and in the context of hospitals and medical offices, a leading reason for rejecting claims. Medical coding requires a high level of precision, skill and expertise making accuracy a critical component of medical billing and coding.

Now that we have established how coding systems function in hospitals and medical offices, let’s look at the importance of coding in healthcare:

Avoidance of overcharging for patients

Insurance companies have become more diligent about checking codes than ever before. Physicians and coding experts need to ensure to collect precise information about conditions, pre-conditions and diagnoses (to ensure timely and correct payment from insurance companies). Failure to send accurately coded information may have severe consequences for patients. Following the insurance provider’s approval for a specific payment, patients have to pay the remaining amount.

Impact of incorrect coding on patients

Why is accurate coding important, you ask? Some findings from a report published by the Office of the Inspector General (OIG) for the United States Department of Health and Human Service in July 2020 point out:

  • The inaccuracy in diagnosis codes for severe malnutrition led patients to overpay nearly $1 billion between 2016 and 2017
  • Findings indicate that many hospitals used the ICD-10 codes, E41 for nutritional marasmus and E43 for unspecified severe protein-calorie malnutrition
  • The OIG found out that nearly 250,000 claims for severe malnutrition contained one of these two codes

Every process is susceptible to mistakes and these mistakes form the basis for how how coding impacts reimbursement. The healthcare segment is one where even the smallest error has far reaching consequences for hospitals and patients.

Proper flow of a hospital’s revenue cycle management

Hospitals and medical offices must prioritize developing a proper flow for their revenue cycles given that insurance providers will verify eligibility and benefits based on coding information. If inaccurate information is provided, there will be discrepancies in benefits and coverage. Further, promptly claiming reimbursement from insurance providers and patients will become problematic and impact the hospital’s revenue streams. Hospitals and medical offices can avoid such situations by streamlining their entire revenue cycle management process.

Claim resubmissions with incorrect codes lead to legal repercussions

Research indicates that claim denial rates are steadily rising. A report published by the University of Minnesota in 2002 indicates that nearly 15% of total claims are found to be fraudulent and negligent. Based on the data provided by the National Health Care Anti-Fraud Association, fraudulent claims contributed to 3–10% of the total amount in 2011. If claims with incorrect codes are resubmitted repeatedly, they lead to federal penalties. The governing bodies, such as the False Claims Act (FCA), can impose legal actions and financial penalties. To avoid legal repercussions, hiring experienced and competent coders is a must. Coding undoubtedly impacts many aspects of healthcare, including reimbursement, clinical decision-making, financial decision-making, to name a few. This is why accurate coding is important in the healthcare sector.

HelioNext is here to help streamline and enhance your medical coding and billing processes. For over 15 years, we have been successfully providing customized coding services and revenue cycle management for US-based hospitals and establishments. Get in touch today.