Medical billing codes explained: CPT, HCPCS, ICD-10 and denial codes

Four kinds of codes, four different jobs

A medical bill or explanation of benefits (EOB) can carry several sets of codes on the same line. Each answers a different question.

• What was done? Procedure codes: CPT and HCPCS.

• Why was it done? Diagnosis codes: ICD-10-CM.

• Why did the insurer pay less, or nothing? Claim adjustment reason codes and group codes.

• What else should you know? Remark codes, usually printed at the bottom of the EOB.

You don't need to learn the code sets. You need to know which kind of code you're looking at, so you can ask the right question.

Procedure codes: what was done

CPT codes

CPT stands for Current Procedural Terminology. According to CMS, CPT codes are maintained by the American Medical Association, updated every year, and consist of five numeric digits. They describe services and procedures, mostly by doctors and other health professionals: office visits, surgeries, imaging, lab tests.

On a sample bill you might see a line such as "99213 · Office visit, established patient." The code tells the insurer which service was billed; the description is the provider's short label for it.

HCPCS Level II codes

CMS maintains a second set, HCPCS Level II, for products, supplies and services that CPT codes don't describe. CMS gives ambulance services and durable medical equipment as examples, and the set also includes codes for some drugs. These codes are five characters long: one letter followed by four digits, such as a code starting with "A," "E" or "J."

Modifiers

Short add-ons to a procedure code, usually two characters. They tell the insurer something extra: which side of the body, whether two services were separate, whether a service was reduced. A missing or wrong modifier can cause a denial, so if a denial mentions a modifier, ask the provider's billing office to check it.

Diagnosis codes: why it was done

ICD-10-CM is the US diagnosis code set. The CDC's National Center for Health Statistics maintains it for use in the United States; the World Health Organization owns ICD-10, on which it is based. ICD-10-CM codes start with a letter, followed by numbers and sometimes more letters, such as a code beginning "J06" or "M54."

Why they matter on a bill: insurers check whether the diagnosis supports the service. The same test may be processed differently depending on the diagnosis it is billed with. If a claim was denied as not covered or not medically necessary, ask the provider which diagnosis code was submitted, and whether it reflects what happened at the visit.

Denial and adjustment codes: why it wasn't paid

When an insurer pays less than the bill, it explains why using standard codes. X12, the organization that maintains these code lists, describes claim adjustment reason codes as codes that explain why a claim or service line was paid differently than it was billed.

They usually come in two parts: a group code and a number.

Group codes: who is responsible

• CO: Contractual obligation. An adjustment covered by the provider's contract. For in-network care, this is generally an amount the provider writes off.

• PR: Patient responsibility. The amount the plan says is yours.

• OA: Other adjustment.

• PI: Payer-initiated reduction.

Common reason codes, in plain terms

These descriptions come from X12's published list.

• 1 Deductible amount. You haven't met your deductible yet.

• 2 Coinsurance amount. Your percentage share.

• 3 Co-payment amount.

• 16 Claim or service lacks information or has submission or billing errors. Often fixable by the provider.

• 18 Exact duplicate claim or service. The same claim was received twice.

• 29 The time limit for filing has expired. The provider filed too late.

• 45 Charge exceeds the fee schedule, maximum allowable or contracted fee. The charge is above the allowed amount.

• 50 Non-covered because the payer does not deem the service a medical necessity.

• 97 The benefit for this service is included in the payment for another service that has already been processed. Sometimes called bundling.

• 197 Precertification, authorization, notification or pre-treatment absent. Prior approval wasn't on file.

• 204 The service, equipment or drug is not covered under the patient's current benefit plan.

How group and reason combine

The pairing matters. "PR-1" means the amount went to your deductible and is yours to pay. "CO-45" means the charge exceeded the allowed amount and, under the provider's contract, the difference is not yours. "CO-29" means the claim was filed late; ask the provider whether that amount should be billed to you at all.

A sample line, decoded

Sample EOB line · Northgate Health Plan (synthetic)

07/09 · 73721 MRI, knee · ICD-10 M23.2 · Billed $1,950.00 · Allowed $0.00 · CO-197

Read it as: an MRI of the knee was billed for a knee condition. The plan paid nothing because prior authorization was not on file, and the group code CO puts the adjustment on the provider's side of the ledger. Before paying, ask the provider's office whether it requested authorization, and ask the insurer how to appeal or how the provider can request a review. The denial letter should give the appeal deadline.

Where to look up a code

• Your EOB. Many EOBs print the meaning of each remark code at the bottom.

• The provider's billing office. Ask them to explain any code you don't recognize. CMS suggests this directly.

• Search. CMS suggests searching a code with the words "medical billing code" and checking whether the description matches your care.

• Official lists. X12 publishes the reason codes; CDC publishes ICD-10-CM; CMS publishes HCPCS Level II.

Questions to ask about any code

• "What service does code [code] describe, and was it performed at my visit?"

• "Which diagnosis code was billed with it?"

• "Is the adjustment under CO my responsibility or a contractual write-off?"

• "Can this claim be corrected and resubmitted?"

Get your codes translated

When EasyToDecode opens, you'll be able to upload a bill or EOB and see each code explained in plain English next to the line it appears on, quoted from the page, with likely problems such as missing authorization or duplicate lines flagged and questions ready to send. See how it works or join the waitlist.