Medical procedure codes provide straight-cut billing methods for doctors and insurance companies. If not for these codes, every practice would have its own billing "lingo" and it would make it next to impossible for insurance companies to adequately reimburse the physicians for services provided to patients. Different codes and billing guidelines may be used for different insurance companies such as Medicaid or Medicare, but each diagnosis has its own alphanumerical code used uniformly by all physicians.
Medical procedure codes are used by all doctors and updated annually to insure that every possible condition has a code to be used in the billing process. New codes are created and the old unused codes are discarded. The American Medical Association (AMA), which is responsible for developing and maintaining the codes, develops the software, guides and other materials needed to inform physicians of changes in the codes. The AMA makes a profit of £45 million yearly.
Hospitals and doctors' offices may have different coding systems for their own personal uses, but it is important to have a clear system to use for insurance billing purposes.
When a patient goes to the a physician, she is given an initial examination to determine a diagnosis. Once a diagnosis is formed, a treatment plan is created. All of this information is put into a chart that is used specifically for the patient. The chart is given to a billing technician who decides which code to use during the billing process. The code is decided by the extent of the patient's medical needs, difficulty of the exam and the treatment plan, along with any other deciding factors. Once the technician assigns a code, a claim is submitted to the insurance company. The insurance company does not always pay the same rates for every condition; the amount paid will be based on the extent of the condition and what procedures or tests are performed.
Insurance companies use three main standardised types of medical procedure codes to state treatments and charges. The CPT code (current procedural terminology) is used to describe medical, surgical and diagnostic services. It is a five-digit number published by the AM. The ICD-9 code (international classification of diseases) is used to code things such a symptoms, signs, injuries, diseases and conditions. The DRG code (diagnosis related group) is used to classify inpatient services in the hospital.
Most claims are done electronically using an electronic data interchange. Only about 30 per cent of claims are submitted to insurance companies using traditional paper billing. The medical billing codes used by insurance companies are universal, which cuts out any confusion about what a cretin charge or diagnosis may be. The insurance company pays a percentage of the fee filed by the physician; the money paid is not negotiable. Because of the mass income the codes bring to the AMA, lists are not made public. Each medical company must register with the AMA in order to purchase the list.