Development of Diagnosis Coding

The basis of our current diagnostic coding system originates from a method of tracking mortality devised by John Graunt in 17th century England. Although others subsequently attempted to classify diseases systematically during the following century, William Farr, the first medical statistician of the General Register Office of England and Wales, is credited with the creation of a uniform classification system that permitted changes associated with advances in medicine.

The Farr classification system was evaluated annually until the first International Statistical Congress asked Farr and colleague Marc d’Espine to develop an international classification in 1853. Although the compromise method adopted by the Congress was never universally accepted, the system proposed by Farr served as the basis for the International List of Causes of Death. Subsequently, the International Statistical Institute (ISI) asked a committee chaired by Jacques Bertillon to develop a classification system that represented a combination of English, German, and Swiss classification schemes, based on the organization recommended previously by Farr. The system, entitled the Bertillon Classification of Causes of Death, was adopted by the ISI, along with a plan to revise the classification each decade.

However, it was not until the sixth revision during the International Health Conference in 1946 that a classification of causes of morbidity was also included. This conference is credited with the development of international cooperation in health statistics, linking national statistical institutions with the World Health Organization (WHO). The current classification, entitled the International Classification of Diseases-ninth revision-Clinical Modification (ICD-9-CM), represents the efforts of the WHO in 1975.¹ Modifications included the creation of fourth and fifth digits to allow two additional levels of subclassification to the previous three-digit system, as well as an independent four-digit system to classify the histopathology of neoplasms. This internationally used classification scheme provides a uniform method for tracking morbidity data and preparing claims for reimbursement.

Although primarily used for diagnostic coding, ICD-9-CM also contains codes assigned to procedures and complications.² More than 8000 diagnostic codes, covering the entire scope of clinical diseases, represent the most commonly used subset by physicians. The first section, including codes from 001.0 to 999.9, is divided into 17 classifications of diseases and injuries, including infectious and parasitic diseases; neoplasms; diseases defined by body systems; congenital anomalies; symptoms, signs, and ill-defined conditions; and injuries and poisonings. The second section, consisting of codes from V01.0 to V82.9, describes the reasons for a patient visit other than disease or injury. V codes may be used when reporting preventive medical treatments, physical examination, postoperative follow-up examinations, physical therapy, radiographs, and laboratory tests.

Guidelines implemented by the Centers for Medicare and Medicaid Services (CMS) require association of each service provided with an ICD-9-CM code, starting with the primary diagnosis.² The chosen diagnostic code should be of the highest degree of specificity, utilizing fourth and fifth digits when applicable. Additional secondary and tertiary diagnoses should also be included if relevant to the service provided. Although coexisting conditions affecting the patient’s treatment should also be included, diagnoses that are no longer applicable (as the patient’s circumstances change) should be eliminated. Services provided for reasons other than disease or injury, such as well-baby office visits, should be identified with the appropriate V code.

Because the diagnostic codes are linked to the physician service, a system exists to track the costs of managing illnesses. Third-party insurance companies, particularly managed care organizations, have utilized this association to monitor the costs attributable to individual physicians in treating patients for specific diseases. To maintain control of expenditures, some insurance companies have utilized this information to determine whether or not to renew contracts with physicians whose costs exceed those of the average practitioner. Consequently, the accurate and careful use of diagnostic coding has become essential to the successful physician’s practice.

Diagnostic codes have also been critical in the CMS physician quality reporting initiative (PQRI). Also known as pay for performance, the PQRI and its various iterations stem from Congressional pressure to focus on value-based purchasing and rewarding quality. This initiative has included a number of activities that a physician should perform under certain circumstances. Participation in the CMS program offers the opportunity for the physician to receive a bonus payment based on a percentage of the total payments received from CMS for all patients over the reporting period. For spinal surgeons, administration of preoperative intravenous antibiotics and the method of providing deep vein thrombosis prophylaxis in the postoperative period are two measures that can be reported for participation in the program.

However, limitations are associated with the application of ICD-9-CM. Although used to form databases for research and to guide public policy, diagnostic coding was never designed for billing purposes. In addition, ICD-9-CM offers no capacity to designate sidedness (e.g., is the intervertebral disc displacement left-sided or right-sided?) and no manner to designate acuity or severity (e.g., life-threatening vs. minimally symptomatic spinal cord compression). Despite its many deficiencies, ICD-9-CM is in use because it was available at a crucial time in the organization of health care, and its acceptance is sufficiently universal to guarantee its perpetuation. In fact, ICD-9-CM diagnostic coding has become increasingly important because it signifies the reason a service was rendered, a test was ordered, or a procedure was performed.

The WHO planned to replace ICD-9-CM with ICD-10-CM by 1998.³ However, although ICD-10-CM has been drafted and implemented in many regions, application in the United States has been delayed. Unlike ICD-9-CM, ICD-10-CM contains only diagnosis and no procedural codes. Some of the differences include a vastly increased number of categories of codes (2033 as compared to 855 in ICD-9-CM); a different format (a six-digit alphanumeric system with the letter at the beginning and the decimal point in the middle [e.g., C50.333]); and more specificity of some codes, sometimes including severity rating and/or sidedness. Costs associated with the retooling of computers and educating staff about this new system have been the main reasons cited for the delayed implementation. The potential for a greater degree of specificity places an additional burden on documentation, which must be examined to ensure that it is comprehensive enough to assign a code. CMS has published an ICD-10-CM implementation date of October 1, 2013. However, there is an earlier mandate for electronic health-care transaction software to be updated to Version 5010, which will accommodate the alphanumeric reporting in ICD-10-CM, beginning on January 1, 2012. In fact, CMS began accepting transactions submitted with either the older Version 4010 or Version 5010 software on January 1, 2011. Failure to update electronic systems by January 1, 2012, may significantly delay reimbursement claims and require customer service inquiries for resolution, since Version 4010 submissions will no longer be accepted after that date.

Because ICD-10-CM contains no procedural codes, CMS contracted with Minnesota Mining and Manufacturing (3M) to develop a system of procedural coding to be titled International Classification of Diseases—tenth revision—Procedure Coding System (ICD-10-PCS). This seven-character alphanumeric code system bears no resemblance to the Current Procedural Terminology (CPT) system used by the American Medical Association (AMA) (and described in the next section). In addition, the two are distinctly different, and the software used to run ICD-10-CM will not interface with ICD-10-PCS. A specific date for the implementation of this system, if any, has not been determined. However, the existence of this system worries some physicians because of the potential for CMS to implement the system without physician involvement. Nonetheless, CMS currently maintains that procedural coding systems are not being changed alongside the institution of ICD-10-CM diagnostic coding.

Development of Procedure and Supply Coding

To standardize the description of physician services as well as develop a method for compiling actuarial data, the AMA developed a list of descriptive terms and associated numerical codes for reporting medical services, which was published in 1966 as Current Procedural Terminology. This first edition predominantly described surgical procedures, with only limited reference to medical or radiologic procedures. The second edition, published 4 years later, included an expanded description of medical services, as well as a five-digit coding system.

Two additional revisions to CPT were compiled later that decade. The fourth edition was completed in 1977 and contained substantial revisions to include improvements in medical technology. Although one of the intended applications of CPT was to facilitate communication between physicians and insurance agencies, CMS did not adopt CPT as part of their Common Procedure Coding System (HCPCS Level I) until 1983. Subsequently, CMS has mandated the use of this system to report services for payment under Part B of the Medicare program. Three years later, CMS also required Medicaid agencies to use the method. Given the growing interest in greater specificity of both diagnostic and procedural coding, the AMA has been working extensively on developing a significant revision to the current edition,⁴ whose framework has been in place for 25 years. Efforts have included improving granularity by eliminating codes that include “and/or” and “with/without” language so that physicians can more precisely code the work that was done. The fifth edition is currently in use and is updated annually.

The CPT system undergoes annual revision under the direction of the CPT Editorial Panel. A 16-member physician panel meets quarterly and is made up predominantly of 11 physicians appointed by the AMA. The 11 AMA panelists serve 4-year terms. Four of the seats rotate among specialists to allow a multidisciplinary influence. The other members of the panel include the co-chair of the Health Care Professionals Advisory Committee (HCPAC), a representative from CMS, and appointees from the Blue Cross and Blue Shield Association, the Health Insurance Association of America, and the American Hospital Association. AMA staff assists the CPT Editorial Panel with input from the CPT Advisory Committee, which is made up predominantly of physicians selected by national medical specialty societies. The HCPAC was created by the Editorial Panel to facilitate participation of allied health professionals and limited license practitioners to participate in the process.

Currently, three main categories of codes are contained within CPT. For inclusion as a Category I code, the CPT Editorial Panel requires that the service or procedure be performed in multiple locations by many health care providers, that there are publications describing the safety and efficacy of the procedure, and that implanted devices, if integral to the procedure, have approval of the Food and Drug Administration. Two main groupings are found within Category I codes. The first group is the Evaluation and Management (E&M) codes, which describe services performed in broad subcategories, which are then further divided into two or more types of E&M service. For example, there are two types of office visits—new patient and established patient visits—and two types of hospital visits—initial patient and subsequent patient visits. The second group is Surgical Procedures, which is subclassified according to organ system so that, generally, the five-digit codes associated with a given organ system are in the same numbering sequences. With regard to spine surgery, the majority of the arthrodesis, bone graft harvest, and instrumentation codes are in the 20000 series of codes, and the decompressive procedures, such as laminectomy and discectomy, are in the 63000 series. Category II codes include descriptors for reporting performance in the PQRI. Finally, the listing of Category III codes contains temporary codes for emerging technologies that do not satisfy the CPT Editorial Panel requirements for Category I designation.

Although codes contained in CPT describe the procedures and services provided by physicians to patients, another national coding system was developed to describe nonphysician services, as well as supplies.⁵ For example, ambulance transportation and dental services, as well as various durable medical equipment and prosthetic devices, are described by this system. These represent Level II HCPCS codes and are published and maintained by CMS. In contrast to the five-digit numeric codes of CPT, these are alphanumeric codes containing an initial letter (between A and V but excluding S) followed by four numbers. Moreover, modifiers can also append these codes, but are comprised of either two letters (-AA to -VP) or alphanumeric symbols.

Finally, a third level of codes exists and is maintained by local Medicare carriers. These Level III codes describe new procedures and supplies not accounted for by the other two sets of national codes. Similar to the Level II codes, these are also alphanumeric codes containing an initial letter (from W to Z as well as S) followed by four numbers. Although local Medicare carriers create these codes, prior approval by CMS is required before implementation is permitted. Occasionally, one may encounter service or supply descriptions in two or all three coding levels.

Although these diagnostic and procedural coding systems provide a method for describing the encounter between the patient and the physician, this information must be communicated to the insurer for the physician to receive payment for the services provided. An understanding of information flow is necessary before applying coding rules to reimbursement. The process of describing physician work involves a continuous flow of information, beginning with the patient-physician encounter and ending with the submission of a bill to the patient or insurance carrier.