February 22, 2025

Healthcare Codes

John Dang M.D.

This is to a provide an overview of the different types of codes used by healthcare professionals.
‍

ICD codes originated from the WHO as a means classifying diseases but was subsequently adopted and updated by the U.S. as a means of assigning diagnosis codes to patients for procedures, hospitalizations, and office visits. Think of these codes as answering the question of “why” a procedure or visit was performed. 

In the context of healthcare insurance, healthcare insurances (Medicare included) will only pay for tests and procedures only if the right ICD 10 codes are applied. This applies to the smallest lab tests and up to the largest surgical procedures and hospital stays.

For example, for patients with commercial insurance, routine lab tests ordered for Preventive Healthcare (Z00.00) typically would be covered by insurance. Vitamin D levels ordered for Vitamin D Deficiency (E55.9) would similarly also be covered. By the same logic, an MRI of the abdomen, ordered for the aforementioned Z00.00 would therefore not be covered by insurance. 

CPT codes are used by the U.S. government, and subsequently adopted by commercial healthcare insurances, as a means of classifying and standardizing healthcare services. This is the “what” of a procedure or office visit. All services, from the smallest blood test, to office visits, to major hospitalizations and surgeries are assigned very specific CPT codes. This way, services rendered by different healthcare professions, across many healthcare organizations, and in different parts of the country can now be standardized. Payments for services are then based on the CPT code.

For example, 99385 is the CPT code for a new patient visit for an annual physical. 71046 is the CPT code for a chest Xray.

It should be noted that all CPT codes must be associated with one or more ICD 10 code. The “why” must follow the “what”.

In addition to the afore-mentioned ICD10 and CPT codes, Place of Service (POS) codes classify the location in which services are performed. For example, a POS code of 11 indicates office setting. A POS code of 22 indicates hospital setting. 

Why is this relevant? The same service, performed in different locations, would result in different costs. The U.S. government, through Medicare, has determined that the cost of running of a hospital is far higher that of a medical office, and thus authorizes more payment for services performed in outpatient hospital setting than office setting.

For example, an abdominal MRI (CPT 74181), may be only $500-600, in an outpatient based radiology center. The same study, performed in a hospital based radiology department, can cost 2-6 times as much.