With time, the government implemented specific regulations to improve the healthcare industry. The medical Coding and classifications system is also one regulation that providers and insurance companies follow for a smooth transfer of care service claims. Medical coding systems are a set of codes designated to diagnosis and resources required for it.   

In any care setting, billing and coding simplify the payment and reimbursement workflows. They help smoothly transition bills and money between healthcare providers, insurance companies, and patients. Besides, it’s no surprise that nearly 94% of today’s care providers are willing to invest in medical coding system software.

At OSP, we were approached by a U.S based client who wanted a digital trading platform for A/R. The client faced multiple challenges, including high claim denials and incompetent medical coding and verification. We understood their requirements and concerned areas. So, we devised our solutions to ensure that our clients get-

  • Higher ROI– Our software assured 95% accuracy in predicting claim approvals.  
  • Accurate validation of ICT and CPD codes– This software system improved the medical coding and verification to ensure process claims.   
  • Enhanced A/R flow– The client’s A/R purchasing power increased and even increased their savings.  

What is Medical Coding and its Purpose?

Medical coding is the process of assigning standardized codes to medical diagnoses, procedures, medical services provided, and equipment used. Insurance companies, healthcare providers, and government agencies use these codes to document and bill for medical services, reimbursement, and statistical analysis in healthcare settings.

The purpose of medical coding is to uniformly and accurately classify medical services and procedures to ensure appropriate reimbursement from patients, insurance companies, and government healthcare programs like Medicare and Medicaid.

Further, it offers several benefits:

  • Facilitating data exchange and better communication among health professionals like doctors, nurses, administrators, etc.
  • Enabling tracking and analysis of health outcomes, costs, trends, etc.
  • Assisting in accurate billing and reimbursement for medical services provided, reducing medical errors and fraud.
  • Supporting research and innovation in medicine, health policy, and public health.

What Types of Medical Coding are Used?

What Types of Medical Coding are Used

Different types of medical coding systems are used for different settings and purposes. These medical codes are used to assign charges for medical services provided. Usually, there are three common types of medical coding: ICD, CPT, and HCPCS.

International Classification of Diseases (ICD)

This is a global standard used for classifying diseases, symptoms, injuries, and causes of death. ICD-10 is the 10th version of the International Classification of Diseases that offers more codes and classifications for updated conditions and diagnoses. These codes are owned by the World Health Organization (WHO) and adopted by governments around the world.

Current Procedural Terminology (CPT)

CPT codes are used in most medical settings today. Most of the medical procedures performed in a provider’s office are coded using CPT. It is used to describe medical services and procedures executed by physicians and other health providers. These codes are maintained by the American Medical Association (AMA) and are annually updated.  

The CPT codes are further, divided into 3 categories: Category I, Category II, and Category III. These are 5-digit codes and can be numeric or alphanumeric and are used for reimbursement and billing purposes.

Healthcare Common Procedural Coding System (HCPCS)

HCPCS codes are based on CPT codes, and this system is maintained by the Centers for Medicare & Medicaid Services (CMS). CMS is responsible for making decisions related to additions, revisions, and deletions to the national alpha-numeric codes. It is used for billing Medicare and Medicaid programs. It consists of two levels:

  • Level I (CPT codes)
  • Level II (national alphanumeric codes)

HCPCS is a system used for coding medical supplies, equipment, drugs, and non-physician services.

What is the Process of Medical Coding?

Medical coding is a dynamic and complex process that requires specialized knowledge and skills. Medical coders are supposed to use specialized coding systems to convert medical information into codes that can be easily understood and processed. Hence, they must have knowledge of medical terminology, physiology, anatomy, pharmacology, and pathology. It is also important that they understand the rules and guidelines of various coding systems and how to apply them correctly.

Further, the process of medical coding typically involves the following steps:

  • Reviewing patient documentation and records from health providers
  • Identifying the diagnoses, procedures, medications, and supplies applicable to the patient’s condition and treatment
  • Assigning appropriate codes to each diagnosis, procedure, medication, and supply using standardized coding systems
  • Verifying the completeness and accuracy of the medical codes and try resolving any discrepancies
  • Entering the medical codes into a database or software program
  • Double-checking the codes and submitting the coded data to insurance companies or other entities for billing or reporting purposes

Types of Medical Coding

In healthcare software product development, medical coding software needs to follow a specific classification. Often medical coding and billing software vendors offer ready-made systems but opting for custom healthcare software solutions for medical coding is a smart choice. Moreover, the medical coding system is based on these types of coding-   

How To Implement Medical Coding Systems?
  • ICD-10- ICD-10 refers to the International Classification of Diseases, tenth edition. This medical coding system started in 2015 and is an upgraded version of the ninth edition, as it includes more codes and classified categories. It ensures more inclusivity of different health conditions. Even advanced telehealth solutions and services are included in this coding system. Besides, ICD-10 operates under two systems- ICD-10-Clinical Modification and ICD-10-PCS. While ICD-10-CM codes are related to diagnosis, the ICD-10-PCS is for hospital procedures. So, under ICD-10-PCS, hospital inpatient procedures in patient engagement systems or integrated health solutions are also designated codes. Further, this widely accepted ICD-10 automated coding system is also the most popularly used medical coding software.   
  • SNOMED- Unlike ICD-10, SNOMED helps medical experts compare and contrast different health issues across the world. ICD-10 is for tracking medicines and hospital procedures. But SNOMED or Systemized Nomenclature of Medicine is the reference terminology with over 31,000 active concepts. So, healthcare providers and leaders find this coding system effective in predicting abnormalities in the patient population. Besides, if you have an affiliate for SNOMED, you can use it for charity projects too.   
  • CPT- CPT, or Current Procedural Terminology, is quite similar to ICD-10. CPT is a set of standard codes commonly used in a medical setting. It also has three categories: five-digit codes for describing a procedure or service, Alphanumeric tracking codes for implementation quality, and provisional codes for any new procedures, services, or solutions. So, new services under remote patient monitoring, for example, are well-suited for this coding system.
  • HCPCS Level II- HCPCS, or Healthcare Common Procedural Coding System, is based on CPT. This medical coding system includes physician care services as well as non-clinical services like pharmacy, ambulance calls, and more.

How To Implement Medical Coding Systems?

How To Implement Medical Coding Systems

Implementing custom medical coding solutions in your practice requires careful planning, resource allocation, and ongoing monitoring. Below mentioned are a few steps that can help in successful implementation.

Step 1: Evaluate Your Practice Needs

Before implementing, you need to assess the unique needs and requirements of your practice. You can consider factors like practice size, specialties, patient volume, etc. This evaluation can help determine the most suitable approach (outsourced coding, in-house coding, or a combination of both) for your practice.

Step 2: Identify Coding Resources

Whether you choose in-house or outsourced services, it is crucial to identify the essential coding resources. This may include certified coders, coding books and software, coding guidelines, electronic health records (EHR) systems, and any additional resources that can help in accurate and efficient coding.

Step 3: Implement an EHR System

Converting from hard copy documents to an electronic health records (EHR) system can drastically streamline the coding process. Implementation of EHR systems will ensure better accuracy and efficient coding as it provides seamless access to standardized code sets, patient records, and integrated coding software. It reduces potential errors, improves patient care coordination, and enables smooth communication and data exchange.

Step 4: Establish Coding Workflows

It is important to develop precise coding workflows to ensure efficiency and consistency in the medical coding process. Establish clear guidelines for code assignment, claim submission, documentation review, and follow-up on denied claims. Assigning roles and responsibilities to your staff members will streamline the workflow. Further, creating a system for ongoing quality assurance and auditing to recognize and address any compliance issues or coding errors will be beneficial.

Step 5: Assess Coding Compliance and Performance

Ensure compliance with regulatory requirements, such as HIPAA. Encourage continuous monitoring and evaluation of your coding team’s performance and compliance with coding guidelines. Conduct internal audits to detect any coding errors, potential compliance risks, or patterns of inaccuracies. This evaluation will help you in taking corrective actions, ensuring better compliance.

Step 6: Stay Updated

Stay informed about changes and updates to coding guidelines, regulations, and software updates, as medical coding guidelines are subject to frequent changes that necessitate continuous awareness and education. Participating in coding webinars and workshops, subscribing to coding newsletters, and networking with coding professionals will help stay informed and easily adopt the changes.

Step 7: Regular Staff Training 

Medical coding is a specialized skill that requires ongoing training and education to help staff members keep up with the frequent changes. Your coding team, including physicians, coders, billers, and other related healthcare personnel, must receive regular training to stay updated with the latest coding guidelines and regulations. This will decrease the risk of coding errors and subsequent claim denials.

Key Features of Medical Coding Systems

Medical billing and coding are complicated processes. But with medical coding and billing software, the processes turn simple and claims approval rates increase over time. If you’re planning to invest in clinical coding systems in healthcare, you need to ensure that the software includes some key features:

Key Features of Medical Coding Systems

Code Selection- You’ll find a myriad of Medical coding system software options. There are customized medical coding software as well-however, the criticality of the software is to ensure correct codes. Entering an incorrect code can cost the provider hundreds of dollars. So, medical coding system software assures seamless code selection options from CPT, ICD, or HCPCS systems. Moreover, streamlining codes in the software is more effective with automated healthcare solutions.   

Editing- A recent report highlights that 16% of rejections occur due to unsubmitted query reverts. Coding errors, lack of rechecking, and missing details are potential reasons for claim denials. So, it’s best to proofread the details and recheck the codes and compliance checks. However, with medical coding software solutions, this manual checking and rechecking burden is removed. Medical coding software must have an editing feature to help coders reduce errors.

User-Friendly Interface- Automated medical coding software should provide user-friendly interfaces. It should be designed to offer intuitive navigation, helping coding professionals to easily locate relevant functions, features, and tools within the CPT coding software. Further, logical workflows, proper menu structures, and organized layouts contribute to a positive user experience.

Challenges in Implementing Medical Coding Systems  

While the demand for quality software is quite high, some healthcare organizations have limited resources. The development and implementation of medical coding systems often encounter some real-time challenges. Some of these challenges are-  

Challenges in Implementing Medical Coding Systems

1. Lack of Suitable Vendor support- It’s great to go for off-the-shelf coding solutions. But it can cost you more. However, several providers fail to implement hospital coding systems due to a lack of suitable vendors. Without the right software development support, building advanced medical coding software is impossible. So, providers need to do intensive research to find a suitable vendor for automated clinical coding as per your requirements.   

2. UX/UI-Medical billing and coding require ample medical information. Even coders have to stay updated about new codes and billing criteria. However, this is a challenge for coders and healthcare organizations, as often, coding professionals are exhausted using complex coding solutions. So, today’s medical coding software strives to create a balance to improve users’ UX/UI when streamlining the entire process. Moreover, using medical informatics to gather actionable information can help extract data for coding systems.    

3. Compliance Issues-The most critical challenge in implementing medical coding systems is a failure in compliance. Healthcare information is prone to hackers. And lack of compliance leads to security threats of the medical coding software. So, the medical coding software solutions must ensure adherence to HIPAA compliance.   

4. Failure in integrating EMR and EHR- Many health leaders have spoken about the significance of integrating EMR and EHR in medical billing coding systems. However, the lack of adequate resources affects the integration of EMR and EHR in medical coding software systems. The medical coding software integrated with EMR and EHR benefits providers in different ways. It improves electronic data interchange that results in faster claim approvals and even enhances practice management solutions.    

Key Trends To Follow in Medical Coding

With recent developments in software for medical coding solutions, leaders pointed out some of the key trends-

Key Trends to Follow in Medical Coding

1. Ready to Adapt- The frequently changing U.S. medical coding system requires software that is flexible and adaptable to new changes. Such medical coding software systems incur minimal losses and update as per new codes. 

2. Cloud-based systems- If you want a medical coding system and outsource the software, you can go for a cloud-based solution. Healthcare cloud computing ensures faster data extraction, migration, and storage.   

3. Mitigate security challenges- One of the significant trends that medical coding systems need to focus on in the future is eliminating new security challenges. Medical coders must check patient information related to telemedicine and RPM. So, ensuring security under these situations is essential to developing advanced medical coding software.  

4. Artificial Intelligence (AI)- Morgan Stanley estimates that around 94% of healthcare companies have already adopted artificial intelligence’s transformative power. In 2024, an additional 11% investment in technology is expected. The traditional method of code capturing, which was time-consuming and prone to errors, is being replaced by natural language processing (NLP) techniques. 

5. Blockchain Technology- Blockchain technology is slowly gaining momentum in the healthcare industry. It has the potential to revolutionize healthcare data management, including medical coding. Blockchain will digitize the workflow and organize data, allowing verified transactions with the consensus of all the involved parties. By providing a secure platform to store and share medical records, it can further ensure interoperability, data integrity, and patient privacy.

Role of Medical Coding in Healthcare

The healthcare industry is constantly transforming. Gone are the days when the fee-for-service model was used. Now is the time for a value-based care model. There is no doubt that medical coding plays a vital role in the health industry. It helps ensure accurate medical billing solutions and reimbursement for the rendered medical services, and thanks to medical billers and coders who help with the complex reimbursement processes.

These experienced medical coders work closely with the providers to ensure the accuracy of the recorded medical codes and the proper submission of claims. The implementation of the Affordable Care Act (ACA) has triggered the significance of medical coding in the past few years. Hence, it is obvious that medical coders will play a pivotal role in the future of the healthcare industry.

With this, let’s discuss what future medical coding holds.

What is the Future of Medical Coding?

The future of medical coding is projected to grow. The U.S. Bureau of Labor Statistics (BLS) stat suggests 8% (faster than average) growth in job opportunities surrounding this field from 2022 to 2032. The jobs can be medical records and health information specialists, including medical coding and billing.

Technology will play a vital role in transforming the future of medical coding. The introduction of new technology tools will help increase the efficiency of medical coders and accuracy in medical reports. All data gleaned for physician reports will be securely stored in the medical facility’s patient database for existing and future use.

Further, the use of medical encoding software will be another component of the future of medical coding technology. It can improve coding accuracy, reducing human errors. This software eliminates the need to invest in a new codebook every year, as medical codes are annually updated with current data. However, the health industry cannot solely depend on encoding software for getting the job done. Coding professionals need to use their knowledge and reasoning skills to precisely document each medical transaction.


Now that you have this guide on Medical Coding Systems, you can better understand your healthcare coding and billing requirements. Further, you can draw insights from market analysis to know more about medical coding and billing. However, it’s best to go for custom medical coding systems. Such solutions understand your organization’s operations and functions accordingly.

OSP is a trusted healthcare software development company that delivers bespoke solutions as per your business needs. Connect with us to hire the best talents in the industry to build enterprise-grade software.


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