Understanding the Current Medical Coding and Billing System

Last edited
May 13, 2022

While the consumption of healthcare services will likely continue to grow, it is unclear that industry profit pools will expand over the next three years given the impact of the COVID-19 pandemic. Healthcare players who develop new and innovative business models will create disproportionate value in this environment, even as they face long-term challenges.

Key Takeaways

  • AI is an umbrella term that covers a range of different technologies, each with different types of capabilities and levels of complexity
  • AI can enhance a wide range of objectives in health care by improving the cost, speed, accuracy, and consistency of various processes
  • AI in health care is not intended to replace human workers and will not always be perfect. Rather, having good data and appropriate human input can bring better results than humans working alone

Long considered the backbone of the healthcare revenue system, medical coding and billing has, for decades, allowed doctors and other medical professionals to provide specific condition and treatment codes as a way to efficiently bill for each patient visit, procedure, and surgery in a way to properly get paid by insurance companies in a timely manner.

The only issue? This archaic system is anything but efficient. Causing astronomical profit loss, insurmountable time constraints, and taxing requirements for medical professionals, traditional medical coding and billing should be a thing of the past, especially when there are more viable solutions to help us code faster and get paid sooner.

There is a lot to be known regarding exactly how the process of medical coding and billing work, why there are so many gray areas and loopholes in the current system, and what we can do as medical professionals to get paid sooner, reduce burnout, and spend more time with the people who matter most: our patients and loved ones.

What is medical coding and billing?

Standard medical coding and billing is the process in which medical coders take patient charts and term them into medical claims that are billable to an insurance company, third party, or in rare cases, direct-to-patient.

Medical coding and billing involve taking patient treatment and diagnosis information and turning it into specific numerical codes that payers utilize to make reimbursement decisions on behalf of their insurance company.

Although medical coding and billing software help streamline the process for certified medical coders, it is not free from error. It includes many variables that cause claims to be kicked back, denied, or processed incorrectly.

As a medical coder and biller, you must transcribe a number of the diagnoses, exams, procedures, and treatments in patients' charts and turn them into two types of codes. The first code is International Classification of Diseases, 10th Revision (ICD-10), which describes diagnoses. The second is Current Procedural Terminology (CPT), which denotes services rendered. Let’s explore both in more detail.

Common Code Types


The International Classification of Diseases, or ICD, is a globally-recognized diagnostic tool for epidemiology, health management, and clinical purposes. This classification system is maintained by the World Health Organization, and updates to the codes only come from them.

This classification system has over 71,000 procedure codes and nearly 70,000 diagnosis codes. Each code is 3-7 characters long and specifically ties a diagnosis and procedure to a patient’s unique experiences with their medical professional and visit.

According to WHO, ICD-10 codes use:

  • Certification and reporting of Causes of Death
  • Morbidity coding and reporting incl. Primary care
  • Casemix/DRG
  • Assessing and monitoring the safety, efficacy, and quality of care
  • Cancer Register
  • Antimicrobial Resistance (AMR)
  • Researching and performing clinical trials and epidemiological studies
  • Assessing Functioning
  • Coding Traditional Medicine conditions


Current Procedural Terminology, or CPT, is the second set of codes used to efficiently code and bill using a uniform language for healthcare professionals. All CPT codes are 5 digits and can be broken down into three categories. Designated by the U.S. Department of Health and Human Services under the Health Insurance Portability and Accountability Act (HIPAA, CPT is a national coding set for healthcare professional services and procedures, CPT’s evidence-based codes encompass a full range of healthcare services that may be rendered throughout the country. CPT is often referred to as the non-negotiable, exclusive language of healthcare.

The three categories of CPT include:

  • Category I : Descriptors that correspond to a procedure or service. Codes range from 00100–99499 and are ordered into sub-categories based on the type of procedure.
  • Category II: Alphanumeric tracking codes that are supplemental codes to category I and used for performance measurement. Category II codes are optional and not required for billing processes.
  • Category III: Temporary alphanumeric codes for new and developing procedures and services. It was created for data collection, assessment, payment of new services, and procedures that currently don’t meet the criteria to fall under a category I code.

Who performs a majority of standard medical billing and coding tasks?

Codes are input by certified medical coders and billers with involvement from physicians and other medical professionals.

What are the negative results of medical coding and billing?

Although a vital part of the medical procedure process, traditional medical coding and billing is causing detrimental effects to various areas of healthcare, including:

  • Upwards of $150B in lost revenue
  • Upwards of $150B in lost revenue
  • Millions in lost revenue in poor RCM
  • A higher staff turnover rate leading to more inconsistencies in overall processing
  • Inaccurate, inefficient, and variable codes
  • A poor work/life balance for medical coders, billers, and physicians involved in the creation and processing of direct billing

How can AI and NLP help?

With industry-leading artificial intelligence on the horizon for medical coding and billing, the old system can be a thing of the past. With AI and NLP, the healthcare system no longer has to feel stuck with unreasonable expectations that cost all of us time and money as physicians and healthcare professionals.

AI and NLP can improve overall medical coding and billing by:

  • Increasing revenue capture
  • Decreasing AR time
  • Improving the lives of healthcare professionals by reducing touch points in the coding and billing process
  • Improving efficiency, consistency, and lack of variability.

Now is the time to focus on the future of healthcare and tap into the resources that meet your medical coding and billing needs without the time and stress of an old system that no longer works. Contact us today to learn more about how the power of AI and NLP with GaleAI can help elevate your healthcare business for the long haul.

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This report is sponsored by lodine Software, an
Advisory Board member organization. Representatives of lodine Software helped select the topics and issues addressed. Advisory
Board experts wrote the report, maintained final
editorial approval, and conducted the underlying research independently and objectively. Advisory Board does not endorse any company, organization, product or brand mentioned herein.

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