Basic CPT/HCPCS Coding

2006 Edition

Gail I. Smith, MA, RHIA, CCS-P

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 CPT five-digit codes, nomenclature, and other data are the property of the American Medical
Association. Copyright ©2006 by the American Medical Association. All rights reserved.
No fee schedules, basic unit, relative values, or related listings are included in CPT. The
AMA assumes no liability for the data contained herein.
This workbook must be used with the current edition of Current Procedural Terminology
(code changes effective January 1, 2006), published by the American Medical Association
(AMA). Any five-digit numeric CPT codes, service descriptions, instructions, and/or
guidelines are copyright 2006 (or such other date of publication of CPT as defined in the
federal copyright laws) by the AMA.
CPT is a listing of descriptive terms and five-digit numeric identifying codes and modi-
fiers for reporting medical services performed by physicians. This presentation includes
only CPT descriptive terms, numeric identifying codes, and modifiers for reporting
medical services and procedures that were selected by the American Health Information
Management Association (AHIMA) for inclusion in this publication.
AHIMA has selected certain CPT codes and service/procedure descriptions and assigned
them to various specialty groups. The listing of a CPT service/procedure description and
its code number in this publication does not restrict its use to a particular specialty group.
Any procedure/service in this publication may be used to designate the services rendered
by any qualified physician.

Copyright ©2006 by the American Health Information Management Association. All rights
reserved. No part of this publication may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, photocopying, recording, or otherwise,
without the prior written permission of the publisher.
The Web sites listed in this book were current and valid as of the date of publication. However,
Web page addresses and the information on them may change or disappear at any time and for
any number of reasons. The user is encouraged to perform his or her own general Web searches
to locate any site addresses listed here that are no longer valid.
Portions of this volume were originally published in Clinical Coding Workout 2006, AHIMA
product number AC201506.
ISBN 1-58426-152-8
AHIMA Product Number AC200606
Claire Blondeau, Project Editor
Melanie Endicott, MBA/HCM, RHIA, CCS, Reviewer
Elizabeth Lund, Editorial Assistant
Melissa Ulbricht, Editorial/Production Coordinator
Ann Zeisset, RHIT, CCS, CCS-P, Technical Reviewer
Ken Zielske, Publications Director

American Health Information Management Association

233 North Michigan Avenue, Suite 2150
Chicago, Illinois 60601-5800

www.ahima.org

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 Contents

About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

Chapter 1 Introduction to Clinical Coding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Chapter 2 Application of the CPT System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Chapter 3 Modifiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Chapter 4 Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Chapter 5 Radiology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Chapter 6 Pathology and Laboratory Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Chapter 7 Evaluation and Management Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

Chapter 8 Medicine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197

Chapter 9 Anesthesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217

Chapter 10 HCPCS Level II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223

Chapter 11 Reimbursement in the Ambulatory Setting . . . . . . . . . . . . . . . . . . . . . . . 229

Appendix A References, Bibliography, and Web Resources . . . . . . . . . . . . . . . . . . . . 241

Appendix B Evaluation and Management Documentation Guidelines . . . . . . . . . . . . 245

Appendix C Additional Practice Exercises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249

Appendix D Answers to Chapter Review Exercises. . . . . . . . . . . . . . . . . . . . . . . . . . . 307

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339

iii

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 About the Author

Gail I. Smith, MA, RHIA, CCS-P, is an associate professor and director of the health informa-
tion management program at the University of Cincinnati in Cincinnati, Ohio. She has been
an HIM professional and educator for more than thirty years. Prior to joining the faculty at the
University of Cincinnati, she was director of a health information technology associate degree
program and was health information manager in a multihospital healthcare system.
Ms. Smith also is a coding consultant and a frequent presenter at conferences through-
out the United States. An active member of the American Health Information Management
Association (AHIMA), she has served on the board of directors and several of AHIMA’s com-
mittees and task forces.
Ms. Smith received a bachelor of science degree in health information management from
The Ohio State University in Columbus and a master of arts degree in education from The
College of Mt. St. Joseph in Cincinnati.

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 Preface

This workbook provides basic training and practice in the application of procedural codes from
the Current Procedural Terminology (CPT) and the Healthcare Procedural Coding System
(HCPCS). CPT is published by the American Medical Association (AMA). Updated annually
on January 1, CPT is a proprietary terminology created and maintained by the AMA. Its pur-
pose is to provide a uniform language for describing and reporting the professional services
provided by physicians. HCPCS is maintained by the Centers for Medicare and Medicaid
Services (CMS). Its purpose is to provide a system for reporting the medical services provided
to Medicare beneficiaries. HCPCS is made up of two parts: Level I is composed entirely of
the current version of CPT; HCPCS Level II provides codes to represent medical services that
are not covered by the CPT system, for example, medical supplies and services performed by
healthcare professionals who are not physicians.
Like previous editions, the 2006 edition of Basic CPT/HCPCS Coding is intended for
students who have limited knowledge of, or experience in, CPT/HCPCS coding, and also as a
resource and review guide for professionals. The instructional materials in this workbook are
not specific to any particular practice setting, and they apply to both hospital-based and office-
based coding. The exercises provide hands-on experience in coding some of the more common
procedures and services provided by physicians and other healthcare professionals.
Many healthcare facilities and providers develop their own systematic methods for assign-
ing CPT codes to frequently performed diagnostic procedures. For this reason, this workbook
provides only minimal practice in assigning CPT/HCPCS codes for diagnostic procedures.
The CPT/HCPCS coding process requires coders to apply analytic skills in combination
with a practical knowledge of medical science. To become effective coders, students must be
able to apply their knowledge of medical terminology, anatomy and physiology, pathophysiol-
ogy, pharmacology, and medical–surgical techniques. This workbook assumes that students
will already have a basic understanding of these subject areas.
The primary objectives of this workbook include the following:
• To provide a basic introduction to the format of CPT codes as well as CPT coding
conventions
• To demonstrate different ways to locate CPT codes through the use of the codebook’s
index
• To identify ways to ensure accurate code assignment through the application of coding
guidelines from the AMA and CMS
• To deliniate the documentation necessary for code assignment

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 Preface

Specifically, chapter 1, Introduction to Clinical Coding, discusses the purpose of CPT/HCPCS

codes. It also addresses diagnostic coding and the Medicare requirements for claims submission.
Chapter 2, Application of the CPT System, introduces the CPT coding conventions and
explains the application of CPT codes for healthcare reimbursement.
Chapter 3, Modifiers, provides an overview of the purpose and use of CPT and HCPCS
Level II modifiers.
Chapter 4, Surgery, reviews the coding guidelines associated with the surgical procedures
performed to treat illnesses and injuries of the various anatomical systems. It emphasizes the
surgical procedures that are performed most commonly in the ambulatory setting.
Chapter 5, Radiology, discusses the claims process for radiology services performed by
physicians and hospital-based outpatient providers. The chapter also discusses the principles
of radiology code reporting.
Chapter 6, Pathology and Laboratory Services, addresses the code assignment process for
common laboratory tests and procedures performed, supervised, or interpreted by pathologists
and other physicians.
Chapter 7, Evaluation and Management Services, provides a concise explanation of the
evaluation and management section of CPT. The chapter also provides practice exercises
designed to address the complexities of assigning evaluation and management codes.
Chapter 8, Medicine, provides a general overview of the procedures and services described
in the medicine chapter of the CPT codebook.
Chapter 9, Anesthesia, introduces the codes used by the physicians who provide or super-
vise anesthesia services.
Chapter 10, HCPCS Level II, reviews the format and usage of HCPCS National Codes
and modifiers.
Chapter 11, Reimbursement in the Ambulatory Setting, explains the claims process for
ambulatory services, which is based on correct CPT code assignment. A skills practice at the
end of this chapter asks students to review sections of a CMS-1500 form to determine the accu-
racy of code assignment. This practice reinforces the students’ understanding of the CPT/HCPCS
coding principles and guidelines discussed in the preceding chapters.
The 2006 edition of Basic CPT/HCPCS Coding has been expanded and updated in sev-
eral ways this year. As in previous editions, review exercises are interspersed in each chapter.
Appendix C of Basic CPT/HCPCS Coding has been expanded and updated to include new
exercises and operative reports. A new appendix D includes keys to these chapter review exer-
cises for student reference. Also included this year is a chapter test at the conclusion of each
chapter. Keys to the chapter tests and appendix C exercises and operative reports are available
in the supplementary materials for instructors.
This book must be used with the 2006 edition of Current Procedural Terminology (CPT 2006)
(code changes effective January 1, 2006), published by the AMA. The HCPCS Level II codes
included in this publication were current as of October 1, 2005. The most current version of
the HCPCS Level II codes can be found under the Utilities/Miscellaneous heading on the CMS
Web site: www.cms.gov/providers/pufdownload/.
Students beginning a CPT course of study should have several additional references to
help them assign codes. Suggested references and recommended readings that may be helpful
to students are listed in appendix A of this workbook.
Chapter 7 of this publication is based on the evaluation and management documentation
guidelines developed jointly by the AMA and CMS in 1997. For additional information on
these guidelines or to check for additional revisions, students and educators should visit the
CMS Web page at www.cms.gov.

viii

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 Preface

The Web sites listed in appendix A and elsewhere in this workbook were current and valid
as of November 1, 2005. However, Web addresses and the information on Web sites may
change or disappear at any time and for any number of reasons. Students and educators are
encouraged to perform their own Web searches to locate the current addresses of any sites that
can no longer be found under the addresses provided in this workbook.
AHIMA provides supplementary materials for educators who use this workbook in their
classes. Materials include lesson plans, keys to practice exercises in appendix C, PowerPoint
slides, and other educational resources. All answer keys are available to instructors in online
format from the individual book page in the AHIMA Bookstore (imis.ahima.org/orders), and
also are posted on the AHIMA Assembly on Education Community of Practice (AOE CoP)
Web site. Instructors who are AHIMA members can sign up for this private community by
clicking on the help icon within the CoP home page and requesting additional information on
becoming an AOE CoP member. An instructor who is not an AHIMA member or a member
who is not an instructor may contact the publisher at publications@ahima.org.

ix

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 Acknowledgments

AHIMA wishes to acknowledge

Rita A. Scichilone, MHSA, RHIA, CCS, CCS-P, CHC;
the late Rita Finnegan, RHIA, CCS;
and Toula Nicholas, RHIT, CCS, CCS-P,
who served as authors of previous editions of Basic CPT/HCPCS Coding,
the members of the AHIMA Professional Practice Resources team
who prepared Clinical Coding Workout 2006,
for generously agreeing to republish portions of their work in this book
(June Bronnert, RHIA, CCS;
Melanie Endicott, MBA/HCM, RHIA, CCS;
Susan Hull, MPH, RHIA, CCS, CCS-P;
Rita Scichilone, MHSA, RHIA, CCS, CCS-P;
Mary Stanfill, RHIA, CCS, CCS-P;
and Ann Zeisset, RHIT, CCS, CCS-P),
as well as the many internal and external reviewers who have contributed
throughout the years to this publication.

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 Chapter 1
Introduction to Clinical Coding

Several medical terminologies and classification systems are used to document and report
information related to healthcare services in the United States. The International Classifica-
tion of Diseases, Clinical Modification, currently in its ninth revision (ICD-9-CM), is used
to describe and report the illnesses, conditions, and injuries of patients who require medical
services. ICD-9-CM is made up of a series of numerical and alphanumerical codes and code
descriptions that represent very specific illnesses and injuries.
Similarly, the services provided by physicians and other healthcare professionals are
described and reported by using terminologies and classification systems. The International
Classification of Diseases, Clinical Modification, provides a system for coding medical pro-
cedures performed in the inpatient departments of hospitals, but two other systems apply to
the services provided by physicians and other medical providers in hospital-based outpatient
departments, physicians’ offices, and other ambulatory settings: the Current Procedural Ter-
minology and the Healthcare Common Procedure Coding System.

Current Procedural Terminology

The Current Procedural Terminology (CPT), published by the American Medical Association
(AMA), provides a system for describing and reporting the professional services furnished to
patients by physicians. CPT generally applies to the services provided to patients who are not
covered by the federal Medicare program.
CPT was initially developed in 1966 and was designed to meet the reporting and com-
munication needs of physicians. The system was adopted for application to the Medicare
reimbursement system in 1983. Since that time, CPT has been widely used as the standard for
outpatient and ambulatory care procedural coding and reimbursement.
The information represented by CPT codes is also used for several purposes other than
reimbursement, including:

• Trending and planning outpatient and ambulatory services

• Benchmarking activities that compare and contrast the services provided by similar
non–acute care programs
• Assessing and improving the quality of patient services

The CPT codebooks include several additional appendixes and an index of procedures.
CPT codebooks and codes are updated annually, with additions, revisions, and deletions

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 Chapter 1

becoming effective on January 1 of each year. A new edition of the CPT codebook is pub-
lished annually, and the new edition should be purchased every year to ensure accurate coding.
Healthcare providers are expected to begin using the newest edition for encounters on January 1,
and there is no longer a grace period during which claims based on out-of-date codes will be
accepted.

CPT Category I
The CPT codebook includes a general introduction followed by six main sections that together
make up the list of Category I CPT codes:

Evaluation and Management

Anesthesia
Surgery
Radiology
Pathology and Laboratory
Medicine

Specific coding guidelines are provided for each of the main sections.
The Category I codes in each of the main sections are further broken down into subsec-
tions and subcategories according to the type of service provided and the body system or
disorder involved. For example, code 76645—Ultrasound, breast(s) (unilateral or bilateral),
B scan and/or real time with image documentation—appears in the radiology section under
the subsection entitled Diagnostic Ultrasound and the subcategory Chest. Similar procedures
are grouped to form ranges of codes. For example, the range of codes from 19140 through
19240 represents the various types of mastectomy in the subsection covering the integumen-
tary system in the surgery section. The codes in each of the six main sections (or Category I)
of the CPT codebook are composed of five digits and are arranged in numerical order within
each section.

CPT Supplementary Codes

CPT also provides three types of supplementary codes: Category II codes, Category III codes,
and modifiers. Each of these code sets is listed and explained in a separate section. The Cat-
egory II and III sections are placed after the medicine codes in the codebook. The list of modi-
fiers and the coding guidelines for modifiers are included in appendix A of CPT 2006.

CPT Category II Codes

Category II provides supplementary tracking codes that are designed for use in performance
assessment and quality improvement activities. CPT Category II codes are composed of five
characters: four numbers and an alphabetic fifth character, capital letter F. Codes 1000F and
1001F, for example, describe a specific aspect of patient history, specifically, assessments of
patient tobacco use. The assignment of Category II CPT codes is optional. Category II supple-
mentary codes are updated twice each year, on January 1 and July 1.

CPT Category III Codes

CPT Category III includes temporary codes that represent emerging medical technologies,
services, and procedures that have not yet been approved for general by the FDA and so are
not otherwise covered by CPT codes. Level III codes give physicians and other healthcare

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 Introduction to Clinical Coding

providers and researchers a system for documenting the use of unconventional methods so that
their efficacy and outcomes can be tracked. Like CPT Category II codes, Category III codes are
composed of five characters: four numbers and an alphabetic fifth character, capital letter T.

Example: Code 0017T represents a procedure for destroying macular drusen

by the application of photocoagulation.

Updated Category III codes are released semiannually via the AMA’s CPT Web site. The com-
plete list of temporary codes is published annually in the CPT codebooks.

CPT Modifiers
A third set of supplementary codes known as modifiers can be reported along with many of the
Category I CPT codes. The two-character modifier codes are appended to Category I five-digit
CPT codes to report additional information about any unusual circumstances under which a
procedure was performed. The reporting of modifiers is meant to support the medical necessity
of procedures that might not otherwise qualify for reimbursement.

Example: Suppose that a surgeon successfully performed a percutaneous translu-

minal balloon angioplasty to remove a blockage from a patient’s renal
artery, but later that day it became evident that the artery had become
occluded again. If the surgeon who performed the original procedure
were not available, another surgeon on call would repeat the procedure to
remove the blockage. Code 35471 would be reported by the first surgeon
to identify the original angioplasty, and the second surgeon would report
35471–77 to identify the repeat angioplasty.

Most of the two-character modifiers for Category I codes are numerical. (Chapter 3 of this
workbook includes a list of the CPT modifiers in CPT 2006.) However, there also are some
alphanumeric modifiers to indicate the physical status of patients undergoing anesthesia. These
modifiers begin with a capital letter P, as follows:

P1 A normal healthy patient

P2 A patient with mild systemic disease
P3 A patient with severe systemic disease
P4 A patient with severe systemic disease that is a constant threat to life
P5 A moribund patient who is not expected to survive without the operation
P6 A declared brain-dead patient whose organs are being removed for donor purposes

(Chapter 2 of this workbook provides additional guidelines for applying CPT codes, and chap-
ter 3 discusses modifiers in more detail.)

Healthcare Common Procedure Coding System

The Health Care Financing Administration (HCFA) developed the original version of the
HCFA Common Procedure Coding System (HCPCS) in 1983. HCPCS was designed to repre-
sent the physician and nonphysician services provided to Social Security beneficiaries under
the federal Medicare program. HCFA’s name was changed to the Centers for Medicare and
Medicaid Services (CMS) in 2001. The official name of the coding system was also changed,
and the system is now called the Healthcare Common Procedure Coding System. CMS is the

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 Chapter 1

division of the U.S. Department of Health and Human Services that administers the Medicare
program and the federal portion of the Medicaid program.
The purpose of HCPCS as implemented in 1985 was to fulfill the operational needs of
the Medicare reimbursement system. Originally, HCPCS codes applied only to the services
provided by physicians to Medicare patients. Since 1986, however, the federal government has
required that physicians use HCPCS codes to report services provided to Medicaid patients as
well. Moreover, with the passage of the Omnibus Reconciliation Act of 1986, hospitals are also
required to report HCPCS codes on reimbursement claims for ambulatory surgery services as
well as radiology and other diagnostic services provided to Medicare and Medicaid patients.
HCPCS codes enable providers and suppliers to accurately communicate information about
the services they provide. Analysis of HCPCS data also helps Medicare carriers to establish
financial controls that prevent expense escalation. Finally, the information from coded claims
facilitates uniform application of Medicare and Medicaid coverage and reimbursement policies.
HCPCS includes two separate levels of codes. Level I is based on the current edition of
CPT. Level II is made up of the National Codes that represent the medical supplies and ser-
vices not included in CPT.

HCPCS Level I
Copyrighted and published by the AMA, Level I of HCPCS consists of five-digit Category I
CPT codes. Level I HCPCS codes are used by physicians to report services such as hospital
visits, surgical procedures, radiological procedures, supervisory services, and other medical
services. Hospitals also use Level I codes to report hospital-based outpatient services, such as
laboratory and radiological procedures and ambulatory surgeries, to Medicare and other third-
party payers. Level I codes represent approximately 80 percent of the HCPCS codes submitted
for reimbursement each year.

HCPCS Level II
Known as the National Codes, HCPCS Level II codes were developed by CMS for use in
reporting medical services not covered in CPT. Level II codes are provided for injectable
drugs, ambulance services, prosthetic devices, and selected provider services.
Level II codes are made up of five characters: The first character is a capital Arabic letter,
and the following four characters are numbers. Examples of HCPCS Level II codes include
the following:

A4550 Surgical trays

E1625 Water softening system, for hemodialysis
J0475 Injection, baclofen, 10 mg
L3260 Ambulatory surgical boot, each

Like Level I (CPT) codes, HCPCS Level II codes are updated annually on January 1. A
list of current Level II codes can be requested from the U.S. Government Printing Office or
any local Medicare carrier. Several commercial publishing companies distribute the National
Codes in book form, which is more user-friendly than the government-issued lists owing to
the addition of enhancements such as indexes and cross-references. In addition, an electronic
file containing the most current version of the HCPCS Level II codes can be downloaded from
the CMS Web site at Utilities/Miscellaneous, www.cms.gov/providers/pufdownload/. (HCPCS
Level II codes are discussed in more detail in chapter 10 of this workbook.)

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 Introduction to Clinical Coding

International Classification of Diseases,

Ninth Revision, Clinical Modification
The International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-
CM), is based on an international classification system originally developed and maintained
by the World Health Organization. The purpose of the international version of the ICD is
the classification and reporting of morbidity data (illnesses and injuries) and mortality data
(fatalities) from around the world. ICD-9 was modified for use in the United States and was
first released as ICD-9-CM in 1979. The World Health Organization generally publishes
revised editions of the ICD about every ten years, and the tenth revision of the international
system is currently in use worldwide. However, the United States continues to use ICD-9-CM
for diagnostic reporting, although U.S. providers currently use ICD-10 to code the content
of death certificates for public health reporting. A draft version of a clinical modification of
ICD-10 has been developed, but no dates for implementing ICD-10-CM in the United States
have been established.
When federal legislation called for modifications in the Medicare reimbursement system
in 1983, ICD-9-CM was adopted as part of the reporting requirements for the new Medicare
prospective payment systems (PPSs). These systems have been gradually implemented in
various healthcare settings over the past twenty years. Inpatient services were the first to be
affected, but Medicare prospective payment systems have now been implemented in almost
every setting. A PPS for inpatient psychiatric care was implemented in 2004. The difference
between PPSs and older, cost-based reimbursement systems is that PPS reimbursement is
based primarily on the patient’s diagnosis rather than on the actual cost of providing specific
services. For that reason, the accuracy of diagnostic coding has become extremely important
for healthcare providers and third-party payers alike. (Note that the PPS for inpatient psychi-
atric services is somewhat different from the PPSs implemented for other types of care and
treatment settings. The psychiatric PPS bases reimbursement on per diem rates, set rates paid
for each day of hospital inpatient care.)
Today, CMS and private third-party payers require physicians and other medical providers
to report ICD-9-CM diagnostic codes on virtually every reimbursement claim. The diagnostic
information is used to assign cases to Medicare payment groups (for example, diagnosis-related
groups for inpatient services) and to document the medical necessity and quality of the services
provided to all patients.
The official version of ICD-9-CM is published in three volumes. Volume 1 contains the
main list of diagnostic codes in tabular format. The codes are organized into chapters accord-
ing to body system. For example, chapter 1 covers the codes for infectious and parasitic dis-
eases. Volume 2 provides an alphabetic index of diseases and injuries that helps coders locate
the appropriate code listings in the tabular list. Volume 3 includes procedural codes and an
alphabetic index for procedures. Only inpatient acute care hospitals use ICD-9-CM volume
3 to report procedures for reimbursement. Therefore, hospital-based outpatient departments,
physicians’ offices, and other ambulatory facilities never use volume 3.
Like CPT and HCPCS, ICD-9-CM codes are reevaluated and appropriate revisions are
implemented on a regular basis. ICD-9-CM code updates are now released by the federal gov-
ernment twice each year, on April 1 and October 1. The official version of ICD-9-CM is issued
only in CD-ROM format by the Government Printing Office. Updated ICD-9-CM codes are
also available electronically from the National Center for Health Statistics Web site. Several
commercial publishers, however, offer enhanced print versions of the classification. The yearly
editions of these codebooks are usually released during the summer and incorporate the official
ICD-9-CM changes that will become effective on October 1 of the same year.

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 Chapter 1

To ensure complete and accurate coding, healthcare providers must update or replace
their ICD-9-CM codebooks as new codes are implemented and existing codes are amended or
deleted. In addition, encoders and other coding software must also be updated at least yearly.

ICD-9-CM Diagnostic Codes

ICD-9-CM diagnostic codes represent the reasons why patients require and/or seek medical care.
Each numerical code represents a specific symptom, condition, injury, or disease. ICD-9-CM
diagnostic codes in the main classification (codes 001 through 999) consist of three, four, or
five digits. The first three numbers represent a specific diagnosis, and one or two additional
numbers may follow a decimal point after the three-number code to provide information that
is more specific.

Example: Code 562.13 represents a diagnosis of diverticulitis of the colon with

intestinal hemorrhaging. The first three numbers (562) indicate a
diagnosis of diverticula of the intestine; the number 1 after the decimal
point represents the location of the diverticula, the colon; and the fifth
digit represents the most specific diagnosis: diverticulitis of colon with
hemorrhage.

Supplementary ICD-9-CM Codes

ICD-9-CM includes two supplementary classifications. Alphanumeric codes from the sup-
plementary classifications provide additional information about the patient and/or the cir-
cumstances surrounding the patient’s illness or injury. V codes (V01 through V85) represent
the various factors that may influence the patient’s health status and contact with health
services. E codes (E800 through E999) represent the external factors that cause injuries and
poisonings.

Diagnostic Coding
The Central Office on ICD-9-CM maintains the official coding guidelines for diagnostic cod-
ing. The guidelines require ICD-9-CM code assignments to be as specific as possible and to be
supported by health record documentation. The guidelines also require the reporting of as many
codes as necessary to completely describe the patient’s condition. Guidelines also establish the
order in which multiple codes are to be reported. The ICD-9-CM codebook also provides detailed
advice on assigning codes correctly.
Every claim for outpatient services must contain at least one ICD-9-CM code, but care
must be taken to report every applicable code in the sequence specified in the official coding
guidelines. Medicare and most other third-party payers reject claims that report incomplete
ICD-9-CM codes.
A set of Official ICD-9-CM Coding Guidelines for Outpatient Services was developed
in 1990 and revised subsequently in 1995 and 2002. Coders must thoroughly understand and
carefully follow these guidelines. Official ICD-9-CM coding advice is also published by the
American Hospital Association (AHA) in its quarterly publication, Coding Clinic. The official
coding guidelines for ICD-9-CM are available from the Central Office on ICD-9-CM of the
American Hospital Association as well as from the CMS Web site.
The following examples illustrate correct and incorrect code assignments for a patient with
a diagnosis of type II diabetes.

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 Introduction to Clinical Coding

Example:
250.00 Diabetes mellitus without mention Correct
of complication, Type II or unspecified
type, not stated as uncontrolled
250.0 Diabetes mellitus without mention Incorrect
of complication, Type II or unspecified
type, not stated as uncontrolled
250 Diabetes mellitus without mention Incorrect
of complication, Type II or unspecified
type, not stated as uncontrolled

(Basic ICD-9-CM Coding, by Lou Ann Schraffenberger, MBA, RHIA, CCS, CCS-P, pro-
vides a more detailed discussion of the basics of ICD-9-CM coding. The workbook also provides
numerous practice exercises. A new edition of the workbook with updated codes is released by
the American Health Information Management Association every summer.)

Documentation for Reimbursement

Health record documentation continues to play a pivotal role in the accurate and complete col-
lection of health services data. The documentation records pertinent facts, findings, and obser-
vations about an individual’s health history, including past and current illnesses, examinations,
tests, treatments, and outcomes. By chronologically documenting the patient’s care, the health
record becomes an important element in the provision of high-quality healthcare and serves as
the source document for code assignment.
The following general principles of health record documentation, developed jointly by
the AMA and CMS, apply to the records maintained for all types of medical and surgical
services:

• The health record should be complete and legible.

• The documentation of each patient encounter should include:
—The reason for the encounter and the patient’s relevant history, physical examination
findings, and prior diagnostic test results
—A patient assessment, clinical impression, or diagnosis
—A plan for care
—The date of the encounter and the identity of observer
• The rationale for ordering diagnostic and other ancillary services should be docu-
mented or easily inferred.
• Past and present diagnoses should be accessible to the treating and/or consulting
physician.
• Appropriate health risk factors should be identified.
• The patient’s progress and response to treatment and any revision in the treatment plan
and diagnoses should be documented.
• The CPT and ICD-9-CM codes reported on health insurance claim forms or billing
statements should be supported by documentation in the health record.

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 Chapter 1

Additional documentation guidelines pertinent to evaluation and management (E/M) services

are discussed in chapter 7 of this book. (Various links pertinent to the information discussed in
this chapter are listed in the Web resources in appendix A of this workbook.)

Medicare Regulations
The Social Security Act of 1965 and its subsequent amendments establish the federal regula-
tions that govern Medicare. Medicare regulations require the collection of several types of
coded information on reimbursement claims for services provided to Medicare beneficiaries:

• ICD-9-CM diagnostic and procedural codes for inpatient hospital services

• ICD-9-CM diagnostic codes and HCPCS procedural codes for hospital outpatient ser-
vices including laboratory and radiology procedures
• ICD-9-CM diagnostic codes and HCPCS procedural codes (regardless of the service
location) for medical services provided by physicians and allied health professionals
(psychologists, nurse practitioners, social workers, licensed therapists, and dietitians)

Health Insurance Portability and Accountability Act (HIPAA)

Administrative Simplification
The intent of the federal government’s simplification mandate is to streamline and standardize
the electronic filing and processing of health insurance claims; to save money; and to provide
better service to providers, insurers, and patients.

HIPAA Transaction and Code Set Standards

Before the implementation of HIPAA transaction and code set standards, healthcare providers
and health plans used various formats when performing daily electronic transactions, which
led to confusion. HIPAA requirements specify that all electronic data interchange formats be
standardized. These standards apply to any health plan, clearinghouse, and any healthcare
providers that transmit health information in electronic form in connection with defined trans-
actions. HIPAA also required the standardization of the reporting of medical procedures with
industry-established and -maintained codes. These are codes used by healthcare providers to
identify what procedures, services, and diagnoses pertain to that encounter. The following code
sets have been approved for use by HIPAA:

• International Classification of Diseases, 9th Edition, Clinical Modification (ICD-9-CM)

• Current Procedure Terminology (CPT)
• Healthcare Common Procedure Coding System (HCPCS)
• Current Dental Terminology (CDT)
• National Drug Codes (NDC)

Claims Submission
Reimbursement claims for medical services provided to beneficiaries of commercial and
government-sponsored health insurance programs may be submitted in electronic or paper

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 Introduction to Clinical Coding

form. Electronic claims, however, must follow the standards developed by the Accredited Stan-
dards Committee (ASC) and mandated by the Health Insurance Portability and Accountability
Act (HIPAA). ASC Standard X12 applies exclusively to electronic claims.
The CMS-1500 form shown in figure 1.1 is the standard billing document used for physi-
cian claims submitted on paper for Medicare Part B reimbursement. Providers also use this
form for paper claims submitted to many private health insurance companies and Medicaid
agencies. (CMS forms may be accessed on the Web by following the links and instructions at
cms.hhs.gov/providers/edi/edi5.asp.)
Up to four diagnostic codes may be reported in field location 21 of this form; information
on the service or procedure provided is reported in field location 24. Up to six HCPCS codes
may be reported in column D of field location 24; in column E, the diagnostic codes are linked
with the related HCPCS codes by placing a number (1, 2, 3, or 4) to show which diagnostic
code is related to the procedure. Coders must be sure that any association of ICD-9-CM diag-
nostic codes with HCPCS procedure codes is logical and appropriate.

Example: Patient’s chief complaint is lower leg pain. The physician orders a lower
leg x-ray and an EKG. The lower leg pain is linked with the x-ray, but
there is no logical symptom or diagnosis to link with the EKG. Review
of the health record may reveal an existing condition, such as premature
ventricular contractions, or a symptom, such as tachycardia. Documenta-
tion must support the procedure or service provided; otherwise, the claim
will be denied.

Medicare and many commercial third-party payers often establish coverage limits for
certain services. Reimbursement claims for services with coverage limits (for example, inpa-
tient psychiatric care) must include sufficient diagnostic information to support the medical
necessity of the services provided. This diagnostic information is communicated in the form
of ICD-9-CM codes.
Medicare policies include two types of coverage limits: national coverage decisions and
local coverage determinations (LCD). CMS establishes contractual arrangements with the
private insurance companies (referred to as carriers), intermediaries, and Program Safeguard
Contractors who process Medicare claims in local geographic regions. These contractors are
responsible for making coverage decisions for Medicare beneficiaries, and the contractors base
their decisions on established national coverage requirements for specific medical supplies and
services. For cases that are not covered by existing national policies, contractors may make
local coverage determinations at their own discretion. A list of the Medicare coverage policies
can be found on the CMS Web site. The following policy is an example of a LCD. (It was
accessed on the Web site for the Ohio fiscal intermediary AdminaStar Federal.)

Example: CPT codes 20974 and 20975 for electrical stimulation to aid bone healing
are covered by Medicare only when one of the following ICD-9-CM diag-
nosis codes appears on the claim form:
733.82 Nonunion of Fracture
909.3 Late Effect of Complications of Surgical & Medical Care
V45.4 Postsurgical Arthrodesis Status

The CMS-1450 form, better known as UB-92 (figure 1.2), is used primarily by hospitals
for both outpatient and inpatient services. This form is used to submit claims for Medicare
Part A services. It is also used by other third-party payers to report claims for outpatient and
inpatient services provided by hospitals and ambulatory surgery centers (ASCs).

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 Chapter 1

Figure 1.1. Sample CMS-1500 form

PLEASE
DO NOT

CARRIER
STAPLE
IN THIS
AREA

PICA HEALTH INSURANCE CLAIM FORM PICA

1. MEDICARE MEDICAID CHAMPUS CHAMPVA GROUP FECA OTHER 1a. INSURED’S I.D. NUMBER (FOR PROGRAM IN ITEM 1)
HEALTH PLAN BLK LUNG
(Medicare #) (Medicaid #) (Sponsor’s SSN) (VA File #) (SSN or ID) (SSN) (ID)
2. PATIENT’S NAME (Last Name, First Name, Middle Initial) 3. PATIENT’S BIRTH DATE 4. INSURED’S NAME (Last Name, First Name, Middle Initial)
MM DD YY SEX
M F
5. PATIENT’S ADDRESS (No., Street) 6. PATIENT RELATIONSHIP TO INSURED 7. INSURED’S ADDRESS (No., Street)
Self Spouse Child Other
CITY STATE 8. PATIENT STATUS CITY STATE

PATIENT AND INSURED INFORMATION

Single Married Other
ZIP CODE TELEPHONE (Include Area Code) ZIP CODE TELEPHONE (INCLUDE AREA CODE)

( ) Employed Full-Time
Student
Part-Time
Student ( )
9. OTHER INSURED’S NAME (Last Name, First Name, Middle Initial) 10. IS PATIENT’S CONDITION RELATED TO: 11. INSURED’S POLICY GROUP OR FECA NUMBER

a. OTHER INSURED’S POLICY OR GROUP NUMBER a. EMPLOYMENT? (CURRENT OR PREVIOUS) a. INSURED’S DATE OF BIRTH SEX
MM DD YY
YES NO M F

b. OTHER INSURED’S DATE OF BIRTH SEX b. AUTO ACCIDENT? PLACE (State) b. EMPLOYER’S NAME OR SCHOOL NAME
MM DD YY
M F YES NO
c. EMPLOYER’S NAME OR SCHOOL NAME c. OTHER ACCIDENT? c. INSURANCE PLAN NAME OR PROGRAM NAME
YES NO
d. INSURANCE PLAN NAME OR PROGRAM NAME 10d. RESERVED FOR LOCAL USE d. IS THERE ANOTHER HEALTH BENEFIT PLAN?

YES NO If yes, return to and complete item 9 a-d.

READ BACK OF FORM BEFORE COMPLETING & SIGNING THIS FORM. 13. INSURED’S OR AUTHORIZED PERSON’S SIGNATURE I authorize
12. PATIENT’S OR AUTHORIZED PERSON’S SIGNATURE I authorize the release of any medical or other information necessary payment of medical benefits to the undersigned physician or supplier for
to process this claim. I also request payment of government benefits either to myself or to the party who accepts assignment services described below.
below.

SIGNED DATE SIGNED

14. DATE OF CURRENT: ILLNESS (First symptom) OR 15. IF PATIENT HAS HAD SAME OR SIMILAR ILLNESS. 16. DATES PATIENT UNABLE TO WORK IN CURRENT OCCUPATION
MM DD YY INJURY (Accident) OR GIVE FIRST DATE MM DD YY MM DD YY MM DD YY
PREGNANCY(LMP) FROM TO
17. NAME OF REFERRING PHYSICIAN OR OTHER SOURCE 17a. I.D. NUMBER OF REFERRING PHYSICIAN 18. HOSPITALIZATION DATES RELATED TO CURRENT SERVICES
MM DD YY MM DD YY
FROM TO
19. RESERVED FOR LOCAL USE 20. OUTSIDE LAB? $ CHARGES

YES NO
21. DIAGNOSIS OR NATURE OF ILLNESS OR INJURY. (RELATE ITEMS 1,2,3 OR 4 TO ITEM 24E BY LINE) 22. MEDICAID RESUBMISSION
CODE ORIGINAL REF. NO.

1. 3.
23. PRIOR AUTHORIZATION NUMBER

2. 4.
24. A B C D E F G H I J K

PHYSICIAN OR SUPPLIER INFORMATION

DATE(S) OF SERVICE Place Type PROCEDURES, SERVICES, OR SUPPLIES DAYS EPSDT RESERVED FOR
From To DIAGNOSIS OR Family
of of (Explain Unusual Circumstances) CODE $ CHARGES EMG COB LOCAL USE
MM DD YY MM DD YY Service Service CPT/HCPCS MODIFIER UNITS Plan

6
25. FEDERAL TAX I.D. NUMBER SSN EIN 26. PATIENT’S ACCOUNT NO. 27. ACCEPT ASSIGNMENT? 28. TOTAL CHARGE 29. AMOUNT PAID 30. BALANCE DUE
(For govt. claims, see back)
YES NO $ $ $
31. SIGNATURE OF PHYSICIAN OR SUPPLIER 32. NAME AND ADDRESS OF FACILITY WHERE SERVICES WERE 33. PHYSICIAN’S, SUPPLIER’S BILLING NAME, ADDRESS, ZIP CODE
INCLUDING DEGREES OR CREDENTIALS RENDERED (If other than home or office) & PHONE #
(I certify that the statements on the reverse
apply to this bill and are made a part thereof.)

SIGNED DATE PIN# GRP#

(APPROVED BY AMA COUNCIL ON MEDICAL SERVICE 8/88) PLEASE PRINT OR TYPE APPROVED OMB-0938-0008 FORM CMS-1500 (12-90), FORM RRB-1500,
APPROVED OMB-1215-0055 FORM OWCP-1500, APPROVED OMB-0720-0001 (CHAMPUS)

10

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 Introduction to Clinical Coding

Figure 1.2. Sample UB-92 (CMS-1450) form

11

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 Chapter 1

Up to nine diagnostic codes can be reported in field locations 67 through 75 and six ICD-
9-CM procedure codes in field locations 80 and 81. HCPCS codes (for outpatient services
including surgery) are reported in field location 44. Required modifiers are appended to the
HCPCS code in this field location. Up to two modifiers may be used to provide additional
information about the HCPCS codes on the claim form for Medicare patients. Field locator 76
is for admitting diagnosis and 77 is for E-code reporting.

Exercise 1.1 Introduction

Review each of the following questions, and write the appropriate answers in the spaces provided.

1. What organizations are responsible for updating CPT codes and HCPCS Level II codes?

2. How many diagnostic codes may be submitted on the CMS-1500 form?

3. Which coding system(s) is (are) used for claims submitted by physicians?

4. Dr. Smith saw a Medicare patient with a diagnosis of rectal abscess in Central Hospital.
She per formed an incision and drainage in the outpatient surgery department.

a. Which coding system(s) would Dr. Smith use to bill for her services?

Diagnosis: ____________________________________________________________________

Procedure: ____________________________________________________________________

b. Which coding system(s) would Central Hospital use to bill for its services?

Diagnosis: ____________________________________________________________________

Procedure: ____________________________________________________________________

c. Which form would Central Hospital use to submit a paper-based claim to Medicare for
payment?

5. Which coding system describes the reason for the patient visit or encounter?

6. A patient was seen in a physician’s office for excision of a 0.5-cm facial nevus (HCPCS Level
I code 11440). The ICD-9-CM diagnostic code for the benign lesion is 216.3. During this
encounter, the physician also evaluated the patient’s hyperglycemia (ICD-9-CM code 790.6)
and chronic simple anemia (ICD-9-CM code 281.9). A three-specimen glucose tolerance test
(HCPCS Level I code 82951) was performed. Using the CMS-1500 form provided in figure 1.3,
link the appropriate ICD-9-CM codes found in block 21 with HCPCS Level I codes found in
block 24D. In column 24E, select the appropriate number (1, 2, or 3) to indicate which diag-
nostic code is related to the procedure.

12

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 Introduction to Clinical Coding

Figure 1.3. Information for question 6 of exercise 1.1

21. DIAGNOSIS OR NATURE OF ILLNESS OR INJURY, (RELATE ITEMS 1,2,3 OR 4 TO ITEM 24E BY LINE)

216.3 790.6

281.9

01-19 11440

01-19 82951

Chapter 1 Test
Choose or write the appropriate answers.

1. Which of the following statements is (are) true of CPT codes?

a. They are numeric.
b. They describe nonphysician services.
c. They are updated annually by CMS.
d. All of the above

2. CPT was developed and is maintained by:

a. CMS
b. AMA
c. The Cooperating Parties
d. WHO

3. CPT is updated:
a. Annually for the main body of codes and every 6 months for category III codes
b. Annually
c. Every 6 months
d. As often as required by new technology

4. There are six sections to CPT: evaluation and management, anesthesia, surgery, radiology,
laboratory/pathology, and ________________________________________________________.

13

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ch.01.Smith.indd 14 12/14/05 1:49:24 AM