The healthcare industry relies on a lot of moving parts to work as well as it does. One of these critical components is healthcare coding, which is the process of turning medical services, equipment used, diagnosis, procedures, and other information into alphanumeric codes. Medical coding is a critical part of billing because it is these codes that are used by paying patients or on records sent to medical insurance companies. These and the other reasons we will discuss below are why accurate medical coding is so important.

Medical Codes Are Crucial for Reimbursement

Many healthcare facilities earn most of their revenue through reimbursement via Medicare Advantage and health insurance companies. Coders translate all physician-patient interactions into codes that are sent to Medicare administrators and insurance companies. Both these parties then send reimbursements depending on the codes in the documentation.

Each code is tied to a monetary value that is equivalent to the value of services provided, diagnosis, equipment used, procedures performed and anything else a physician noted during a visit. Incomplete or inaccurate coding means that a healthcare facility or practice could end up being under or overpaid. This leads to issues not only for these facilities and practices but also for patients who rely on insurance providers.

Accurate, Consistent Coding Makes Risk Adjustment Calculations Easier

Risk adjustment is a methodology that assigns a number (risk score) to an individual’s health status to allow for the prediction of insurance costs. The risk to a health insurance plan is associated with insuring high-risk individuals and is adjusted by adding people with predicted lower healthcare costs to the group. This helps keep premiums at a reasonable level for everyone in that group.

In healthcare settings, risk adjustment calculations are used to help practices know how much change to expect in their risk pool funding and to calculate expected revenues. These calculations are done using an individual’s information including their diagnosis, patient data, and, more importantly, their diagnosis codes.

Accurate, consistent coding is critical for ensuring proper calculations as medical coders do not want ambiguity or duplication of codes. Armed with the right information and codes, medical coders can use available tools to complete risk adjustment coding, knowing that the results will be accurate because the codes and other information entered are also accurate.

It Helps Facilities and Practices Monitor Patient Progress and Diseases

Medical facilities can know the level of care provided to a patient by looking at relevant medical data. Because each code corresponds to a diagnosis, treatment, and so on, codes can provide a way for healthcare professionals to know what is going on, what the patient has been treated for, what medications they are receiving and so on without looking at their charts.

The same data can be used to monitor diseases. If many of the same codes are being recorded for many patients, that means the healthcare facility is dealing with the same problems. In this way, healthcare professionals can see which diseases are becoming prevalent and put measures in place to slow them down or eliminate them altogether.

Medical codes provide a lot of information, making it accessible without having to go through bulky records. They are also an important part of tracking what is going on with patients, communities and globally regarding disease progression. These reasons explain, albeit partially, why accurate medical coding is critical to the healthcare industry.