Chapter 1-Lesson 1, 2, 3, 4

Lesson 4 covers pre-authorization requirements on handling insurance claims – Diagnostic Coding and Procedure Coding.

Pre-authorization Requirements

Jill has to go to the hospital for surgery. Everyone knows except his insurance company. According to his policy he must notify his insurance carrier prior to the surgery or his benefits will be reduced. Therefore she must get pre-authorization from her insurance carrier in order to attain maximum benefits.

Also, many insurance companies require prior notification before hospitalization and certain tests and procedures are performed.

The pre-authorization requirement helps reduce fraud by enabling the insurance company to review a patient's case history before major costs occur. Usually the insurance company approves procedures, but the company might call the doctor handling the case to discuss the procedures.

Although the insurance company sometimes denies a claim just because pre-authorization was not received, usually the company reduces the amount it will pay for that claim.

After a hospital stay, tests and other procedures, the medical claims specialist needs to fill out a claim form. These forms, which you will fill out later in this course, require special codes. These codes are based on the diagnosis made and procedures performed. They are called "diagnostic codes" and "procedure codes". When you write a code on an insurance form (or bill or patient's chart), you are coding that entry.

Diagnostic Codes

On the HCFA-1500 there are many fields. One of the important fields is box 21 (diagnosis or nature of illness or injury). In this field, you must enter some information. But what information? Do you write in the doctor's diagnosis. No. You must use a code.

Diagnostic codes are numbers that identify the physician's opinion about what's wrong with the patient. These codes are not random numbers. There is a system to them. That system is called the "International Classification of Diseases". The ICD appears in reference manuals used by doctor's offices and medical claims specialists (along with hospitals and clinics). The ICD lists a code for virtually every single possible diagnosis a doctor could make. Whether the patient has a broken leg, viral infection, food poisoning or any other illness or injury, when you refer to ICD, you can properly code the condition.

Insurance companies require a proper ICD code to determine the doctor's diagnosis.

Often a patient is suffering from more than one symptom. In this case, multiple diagnoses may apply. The doctor will determine a "primary diagnosis" -- usually the main cause of symptoms or the main health problem. When you code, you always enter the primary diagnosis code first.

When there is more than one diagnosis made, the ones that aren't the primary diagnosis are called "concurrent conditions". That means these conditions happen at the same time as the primary diagnosis and might affect how the patient recovers. For example, if Larry comes to the doctor suffering from a broken leg -- both the lower leg bones in his left leg are fractured -- and a sprained ankle, the diagnosis coding would look like this:

Primary Diagnosis: 823.82 --- Fractured fibula with tibia

Concurrent condition: 845.00 -- Sprained Ankle

We will cover ICD, the ICD-9 CM book/software and other diagnostic coding concepts later in the course. Now, let's look at the procedure coding.

Like ICD, procedures have their own numerical language. The language of procedure codes is either the "current procedural terminology" (CPT) or the "Health Care Financing Administration Common Procedure Coding System" (HCPCS -- pronounced "hick-picks"). HCPCS is used exclusively by Medicare.

CPT coding is the most commonly used set of procedure codes. The CPT Codes, produced annually by the American Medical Association, is divided into six sections and divisions of numbers.

CPT Procedure Code Divisions 

Most procedures the doctor performs will have a code. You will enter the correct code in the correct column of the HCFA-1500 form. We'll show you exactly how to enter this code later on.

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