When can a Medical Code be a good Payment Code?

Product Manager, Health and Medical, FINEOS

Anyone looking at the business of paying medical claims very quickly hits a bewildering range of coding schemes. They all seem to overlap and none of them offer a complete solution for the insurer; there is no “one size fits all” solution and you inevitably end up using a combination of codes. The challenge is particularly acute if you are handling claims in an unregulated market or claims from multiple jurisdictions.

Here’s a brief guide to some of the major coding schemes and the how they can be used by those paying for medical services.

Scheme Overview Payment Utility
SNOMED-CT Leading global language for clinical terminology with comprehensive multi-layered concepts & taxonomies. Used as primary coding mechanism when recording an encounter.  Cross Limited use. Full EHR detail & highly sensitive data. Very high systems support required and high knowledge & skill requirement for claims team.
ICD-10 WHO standard for classification of diseases, described as the “diagnostic tool for epidemiology, health management and clinical purposes”. Multiple country specific derivatives.  Cross Limited use for payment as the code doesn’t describe the service you are paying for. Essential information to understand the claim.
(Procedure Coding System)
USA procedure coding – used as a secondary coding mechanism for inpatient services.  Question Mark Mixed – describes the services – but high complexity codes means high level of knowledge required to manage claims. Limited adoption outside of USA.
(Diagnostic Related Group)
Secondary coding mechanism – groups the diagnoses and procedures within an encounter. A single DRG describes the relative effort and complexity in each encounter.  Question Mark Mixed  – has intrinsic support for cost models and can be managed but does not describe actual services so low potential for active management of provider networks
(Healthcare Common Procedure Coding System)
Describes specific procedures and encounters including non-medical services. USA specific standard but with wider adoption base.  Tick Good – describes the service delivered including both primary and secondary care.Dependent on the coding of the claim and includes USA specific terms
(Clinical Coding & Schedule Development)
Insurer / Provider agreed schedule for diagnostic and therapeutic procedures. Explicitly designed to support insurer payments  Tick Good – describes services delivered and is designed to support payments.Manageable Code set size.Limited provider adoption outside of the UK


There are also many other coding systems in active use – some are jurisdiction specific and have associated payment models. For example;

However you choose to record your claims, the primary driver will be the locales in which you operate. Your providers, the hospitals, doctors and clinics, all work with existing systems and are subject to regulation; key to your success is understanding the strengths and weaknesses of the available medical coding.

The bottom line is that your claims system need to be able to understand and adjudicate medical and non-medical costs associated with both primary and secondary care AND allow you to make judgements on the medical appropriateness or suitability of specific services.


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