Medical Necessity

Coding is an abbreviated way to tell the insurance company a story about the patient in order to request reimbursement or payment for services rendered. The story that you tell to the insurance is VERY important. Like any story you ever read, the story we tell to the insurance has to make logical sense.  Accordingly, it needs a beginning or  ‘why it was done’ and an ending or ‘what was done’. The ‘what was done’ has to be a logical solution for the why it was done.

For example, here is a plain language story that makes sense: I have a headache, so I took Advil. The ‘why’ is my headache. The ‘what was done’ is that I took Advil.

Now, let’s look at the same example that doesn’t make sense. I have a headache, so purple unicorns flew me to never-never land. That’s foolish, right? Exactly. That is the basis for one on the most important parts of medical billing and coding. I fancy terms, we call this medical necessity.

ICD-9 codes (diagnosis) are used to explain why a patient sought treatment by a physician and CPT detail the treatment provided. The diagnosis (ICD-9) or the reason for the visit must justify the procedure (CPT) performed. This is called medical necessity. Think of it this way: a doctor wouldn’t cut off a patient’s finger if their toe was infected (at least we hope not!). From a billing stand point a toe infection wouldn’t justify medical necessity of a finger amputation. Unfortunately, it is not always that easy. Many times the differences are not obvious to a non-physician.

Insurance companies have guidelines (rules) in place for CPT and ICD-9 linkage and many offer references on their web sites for selecting the best coding combination. If the specific carriers do not have guidelines readily available the best reference site is your local Medicare or CMS (Centers for Medicare and Medicaid Services). Once on the web site, look for a coding link or one that says LCD (local coverage determinations) or NCD (National Coverage Determinations). The LCD policies spell out code usage, documentation guidelines and very often list the applicable diagnosis codes for each procedure.

As an example, check out the following Medicare web site at (NGS Medicare). The Medicare web sites also offer a link to the NCD (national coverage determinations) which are the coding guidelines created and maintained by CMS on a national level. NCD is also a good resource containing valuable coding information, but often they do not have the ICD-9 codes listed.  Although coding help is available, it is fraudulent to assign a diagnosis on this basis alone. The physician must be the one to choose the patient’s diagnosis based on their findings and use the LCD for correct linkage when you are not sure or to follow up on a medical necessity denial. If you have received a medical necessity denial show the doctor the LCD and ask for clarification.

Several times I have referred to ICD-9 and CPT linkage and code order and I feel that this needs a little something more. So we will begin now to slowly introduce the form used in paper medical billing. Today, most billing is done electronically; however, learning the CMS 1500 form, is the best way to get a tangible understanding of medical billing. 

Look at the example below, the picture is a portion of a CMS 1500 form. The locations for ICD-9 are circled in red. The CPT area is circled in green.

First note the ICD-9 code section (box 21). The first location (location #1) is important. It must always be the “primary diagnosis code”. You should not have supporting diagnosis in the first field. For example, a patient sees the doctor for pneumonia, as a result of the pneumonia the patient is suffering from congestion. The primary diagnosis is always going to be the overall reason for the visit, in this case pneumonia. Congestion is a supporting diagnosis. The diagnosis codes are listed box 21 first and then there is a linkage index (box 24E) next to each of the 6 available service lines (box 24D).

In box 24E, the linkage index, you would list the location  of the ICD-9 to be linked to the service indicated on each service line. To better understand that look again at box 21. See how each of the spaces are numbered 1,2,3,4 – those numbers (1,2,3,4) are the ‘location’.

Now, let’s look at how it looks completed with CPT, ICD-9, and the linkage index or pointer:

HCPCS, just like CPT, require a valid ICD-9 linkage. The ICD-9 states the reason for needing the supply or service and the CPT or HCPCS state the service performed or the supply used/given. CPT and HCPCS are sometimes used at the same time to tell the whole story. CPT and HCPCS can share diagnosis codes and be billed on this same claim form. A good example of a CPT, HCPCS and ICD-9 claim would be for an injection. When a patient has an injection there is the CPT service of administration (sticking the needle in to the patient) and the HCPCS to describe the actual medication or vaccination what was administered.  

Here is something from Medicare that may help you to get a good understanding of the CMS 1500 form: 1500 form at a Glance

To review the while 1500 form follow this link: CMS 1500 Form

Lastly, you can learn more about medical necessity from this Medicare site: Medical Necessity

ICD-9 Coding Overview

ICD-9 (International Classification of Diseases 9^th Revision) codes are diagnosis and status codes. These tell why the patient went to the doctor’s office. There are three main types of diagnosis codes. They are:

Numeric codes (000-999.99) which are used for problems, illnesses or injuries

V codes are used to indicate a status such as pregnancy, exposure to an illness (that the patient has no symptoms of contracting but needs checking), high-risk behavior, or a significant medical history or family history. You can see that these are not sicknesses but need to be checked on by a doctor

E codes are external causes. An external cause is the reason behind an illness or injury. An example would be a diagnosis (numeric code) indicating a cut (laceration) on the forehead, the E code would tell us how it happened for example a car accident. Since E codes are used to explain another diagnosis they cannot be the first diagnosis and they cannot be used alone.

ICD-9 coding is very simple, but requires accuracy. Assigning an incorrect diagnosis to a patient can label the patient with a disease that they don’t really have. Mislabeling can result in problems for the patient getting life insurance or health insurance coverage.

Although this report’s purpose is not to prepare you for a coding certification, a brief description on reading the ICD-9 book is in order. I highly recommend that the reader study coding prior to trying to do any coding.

The ICD-9 book is divided in to two. The first section at the front of the book is an alphabetical listing of diagnosis words. The second section is the numeric listing of the diagnosis ordered by their assigned code. In order to select the correct code you must first look up the words in the alphabetical listing then reference the numeric listing for the actual, full code description and additional code details.

If you have an ICD-9, open it up and look in the alphabetical index for the word diabetes. You should find a reference to the 250 section of the numeric section. Now refer to the numeric listing for the 250 codes. There are a lot of diabetes codes for one single disease! Look at the codes you will see most of them have two digits after a period making the diabetes codes 5 numbers (250.XX). The additional digits after the period explain the condition further. Read the descriptions to get an idea of what I mean. 

Now look at the code 250 (no additional digits), notice that there is a little (4) next to the code, this indicates that a 4^th digit is required. Notice next that the code 250.0 has a little (5) next to it, this means that it needs a 5^th digit. The code 250 is a disease classification for diabetes, the 4^th digit is the sub-classification indicating the type of diabetes (juvenile or adult onset a.k.a. type 1 or type II) and the 5^th digit tells you of any manifestations or problems resulting from the disease.

In billing it is imperative to complete the diagnosis code to the highest level of specificity meaning use all possible digits as indicated by the presents of the little 4 or 5 if applicable. Now look up the code 496 in the numeric listing, note that there is no little 4 or 5. Code 496 is fully specific without any more digits. The example of code 496 is to show you that not all codes need additional digits but if there is a little 4 or 5 you must code using those digits.

Q. So what happens if you do not use the additional digits?

A. The medical bill (claim) will not pay and the insurance rejection will say something about the code not being specific enough or truncated. Truncated means shortened or reduced.

Q. But what if you don’t know the additional details about the condition that are required to choose a more specific code?

A. You have two options. First you can ask the provider to be more specific, show the provider the ICD-9 book and ask them to clarify based on your options. Second option is NOS or NEC. NOS means not otherwise specified by the doctor and NEC means not elsewhere classified within ICD-9. These can be used to indicate that missing information. It is often indicated by the presents of a 0 or a 9 as the final digit after the period in a code. Be careful though, because NOS codes are not always acceptable for an insurance to consider payment on a claim.

Q. What if the options for the extended digits don’t have the sub-classification or manifestation that I need to report the condition?

A. After you have double checked that the correct digit does not exist and verified it with the provider you may opt to use an NEC code. NEC means not elsewhere classified.

ICD-9 coding hints

• Most importantly in ICD-9 coding, you must read. There are very important notes and rules associated with codes that must be followed. Some codes cannot be used alone, or without another code and some code descriptions will appear similar on initial review. Take careful note of the sub-classifications, manifestations and conditions that are included and excluded from a particular code.
• Never code or bill using diagnosis that the provider describes as “possible”, “probable” or “rule out”. Only use the conditions, diseases or symptoms that are confirmed.
• Do not use an “E” code as a primary diagnosis (the first one)
•  Be sure that the diagnosis justifies the procedure performed (this is called medical necessity and we will talk more on this later). 

Medical and Surgical Coding Introduction

Ok, here is where it gets more challenging (not really, coding is easy once you learn how)... We are entering the wonderful world of coding.


After a patient is seen by the doctor a coder must translate the office visit in to codes. The codes used are called ICD9, CPT and HCPCS. The codes are a different language used to tell a story about the patient’s doctor's office visit. The codes are all maintained by different agencies  and updated periodically. Here is a list of which agency is responsible for which code set.

• The National Center for Health Statistics (division of the Centers for Disease Control) maintains ICD-9-CM (diagnosis codes), http://www.cdc.gov/nchs/
• The Centers for Medicare and Medicaid Services maintains HCPCS codes (supply and service codes), www.cms.hhs.gov
• American Medical Association owns and maintains CPT-4^® codes (medical service codes), http://www.ama-assn.org/

(It should be noted that the United States is planning to begin using ICD-10 (10th revision) in 2013. Since we are still using ICD-9 as of the time of this post, I will only discuss ICD-9 at this time. I will talk more on ICD-10 in later posts.)

Before beginning a coding overview, I want to clarify one common misconception about coders (BTW, I am a Certified Coder). This misconception, I find, scares a LOT of people away from coding. So, here is what you need to understand. Coders do not memorize every code. We do not know everything about every disease or procedure in existence. Given, we know a lot of codes. After using them enough, you would too. So, you ask, what makes a coder so special if we do not memorize 25,000+ codes? 

Here is the truth about coders (that some don't want you to know because, in general, we like that you think we are brilliant)... All we coders really know are coding rules, how to use the coding books, where to find the best resources, and anatomy. THAT'S IT! 

In the next few posts, I will share most of this with you in a summary form. It won't be enough to run out and take the CPC or CCS exams, but hopefully, this will remove some of the fears associated with coding. 

So, now we will begin with ICD-9...