HomeIndustry ResearchWhat is Medical Coding?

What is Medical Coding?

Medical Coding is the process of assigning universally recognised codes to medical conditions, diseases and treatment provided. A trained professional who performs this task is called a medical coder.

When a patient visits a clinician’s office, he/she explains the symptoms and reason for visiting the doctor. The patient also conveys his medical history for better assessment. Then the doctor documents all details and provides treatment by prescribing medications or injecting medicines. The encounter ends for the patient here. But the process of billing continues when the doctor submits patient records to the insurance provider to claim the fee.

To better understand the medical conditions and disease, all types of illness occurring within the human body, discovered till now, are named, classified and grouped under various categories. A set of unique codes are assigned to each condition. The process of medical coding needs basic understanding of human anatomy, physiology and ability to assign accurate codes to the diagnosed conditions.

From here on, it gets easier for the insurance providers to assign a particular fee to the code obtained from the medical coder. Hence, medical coding acts as a bridge connecting healthcare providers with insurance providers. It translates medical terminologies into numeric codes which are better understood by the insurance companies. 

The coded data gets transferred and shared via softwares, which could be easily processed to billing. Medical billing is another process by which the billed amount is settled to the healthcare provider. 

Understanding ICD

ICD stands for international classification of diseases. It is administered by WHO (World Health Organisation) which updates and revises data to reflect new diseases and medical advances. The process of classifying diseases and medical conditions started in the early 20th century when all known diseases were written in a book with an alphabetical index.

As years progressed, now we are in the digital era where ICD data is available in a click. ICD contains the names of all diseases and medical symptoms discovered until now. It groups similar conditions together. Unique codes with upto 6 digits are assigned to each condition that could be diagnosed. Same disease with different causes or symptoms could have almost the same code differing only by last one or two digits. The ICD version in current usage is ICD – 10 and the next version ICD – 11 is expected to release in 2022.

When diseases are classified and coded this way, it also helps in data analysis on the health status of a particular population in a country. It helps in risk management, planning in control of contagious diseases, devising better treatment options for most common diseases, foreseeing and preventing future occurrence of a disease etc.

Coding treatment procedures with CPT

CPT stands for Current Procedural Terminology. It contains a set of codes to denote the exact method of treatment and service rendered by a physician. It is devised and managed by AMA (American Medical Association). CPT codes mostly contain five characters, numeric or alpha-numeric. 

HIPAA and data protection

One of the main challenges in dealing with sensitive medical records is data protection. A patient’s medical file may contain his/her personal information along with the medical history and treatments that are ongoing. The patient has rights to protect his medical details and reveal them to data processors only when absolutely necessary. Anyway the files must be transmitted digitally from the physician’s office to process them further towards medical coding and medical billing. 

To protect medical records from misuse and data theft, the US introduced HIPAA in 1996. HIPAA stands for Health Insurance Portability and Accountability Act. One of its main goals is to enable medical data access only to the people involved in the process. Medical coding companies educate and train their employees to safeguard all records and design the workstations accordingly. Data sharing devices and networks are not allowed within the workspaces. 

Medical Coding as a KPO industry

KPO stands for Knowledge Process Outsourcing. When the process of medical coding and medical billing are performed outside the physician’s office, it is called outsourcing. As the volume of medical records processed per day is relatively huge, several KPO companies are employed to work on this process. This provides a lot of opportunities to the graduates under healthcare discipline. 

Medical Billing

Medical Billing is the process which translates medical codes into payment bills. This means that the codes obtained from a medical coder are analysed and a billing sheet is prepared in accordance with the service provided by the physician. The payment is claimed from the insurance provider and a follow-up is done to ensure the physician gets paid on time. 

A medical billing staff must also be familiar with ICD and CPT codes just like the medical coder to better understand the medical records. In certain cases, both the process of medical coding and medical billing can be performed by the same staff or by two different teams working in correlation. 

Medical Transcription

Medical Transcription is the process of transcribing a physician’s voice note into digital text. A physician may record a patient’s health status as voice notes and stream it across any channel for further processing. The audio record is converted into text by a trained medical transcriptionist. It is then transferred to medical coding and medical billing departments. 

Machine transcription, in this case, does not provide accurate results as the patient’s records need highly accurate transcription with better understanding of medical terminologies. Hence a medical transcription process can only be performed by a qualified medical transcriptionist. 


AAPC stands for American Association for Professional Coders. It was formed in 1988 to provide guidance and training to various professionals working under healthcare. AAPC conducts exams and issues certificates to eligible medical coders and medical billers. 

CPC stands for Certified Medical Coder and CPB stands for Certified Medical Biller. With these certificates, a certified coder or biller could either work in a physician’s office or an outsource company.

The field of medical coding has a promising future for healthcare graduates as the profession requires a lot of cognitive and interpreting skills.

Disclaimer: All information in the site is provided for informational and educational purposes only. We are not a financial advisor. The information in this article is not intended to imply any recommendation or opinion about a financial product and is not a financial product advice. You should obtain independent advice before making any investment decisions.

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