Medical Necessity: Where ICD-10 and CPT Codes Converge

by  Find-A-Code™
Feb 19th, 2023

Claims submitted by healthcare providers to payers include medical codes that ultimately determine reimbursement rates. As a medical coder or billing specialist, you know that a typical bill includes multiple codes. But were you aware that ICD-10 codes are often used in conjunction with CPT codes to ensure proper payment? The two code sets converge in something the insurance industry refers to as medical necessity.

Insurance carriers are well known for their unwillingness to pay for unnecessary procedures or experimental treatments. Before they pay any claim, they will insist that medical necessity be established. This is done through a combination of ICD-10 and CPT codes.

Current Procedural Terminology (CPT)

CPT is an acronym that stands for current procedural terminology. It was developed by the American Medical Association (AMA) as a means of standardizing how clinicians and hospitals reported diagnostic procedures and treatments. Through standardization, the AMA made medical billing more accurate and efficient.

As a medical coder or biller, you already know that CPT codes relate to treatments, procedures, tests, etc. These are the things an insurance carrier pays for. As such, they want to make sure that clinicians are justified in billing for the procedures and tests they order. This is where medical necessity comes into play.

International Classification of Diseases (ICD-10)

International Classification of Diseases (ICD-10) codes relate to actual diseases, injuries, and medical conditions. A typical medical bill will include an ICD-10 code along with a CPT code. The former establishes medical necessity for the latter. In other words, whatever the ICD-10 code represents demonstrates the medical necessity of whatever the CPT code represents.

Let's say a patient arrives at the hospital emergency room with a possible broken bone. All the patient's symptoms point to a fracture. In order to confirm, the doctor orders an x-ray. The patient's condition and symptoms justify the need for diagnostic testing. Thus, medical necessity is established to the payer's satisfaction.

When Medical Necessity Isn't Established

When healthcare providers fail to establish medical necessity, they run into problems with payers. This can happen due to an innocent mistake made by either a clinician or medical coder. If the mistake is not caught and corrected by a biller, a denial of payment could ensue. Then the bill goes back to the healthcare provider for examination and modification.

The system works well when everything is straightforward. But there are occasions when claims are denied because medical codes have not kept up with the times. For example, there are situations in which existing ICD-10 codes cannot establish medical necessity to a carrier's liking even though both the diagnosis and treatment were appropriate.

There are other occasions when new procedures are not covered under current CPT codes despite insurance carrier willingness to pay for them. Even with proper ICD-10 codes establishing medical necessity, the claim is still denied because an appropriate CPT code cannot be found.

Accuracy Is So Important

The lesson in all of this is that accuracy in coding is important at every level. Clinicians need to be accurate when they complete electronic health records during visits with patients. Office staff need to be accurate when entering their information. Medical coders need to apply the correct codes to establish medical necessity. Finally, medical billers need to reconcile everything in order to ensure that bills will be paid without issue.

ICD-10 and CPT codes are used together to secure payment for medical services. They converge at the point of medical necessity. A clinician's diagnosis needs to justify the procedures and treatments ordered. Otherwise, payment may be denied.