Medical Billing

Medical Billing and RCM Experts

cpt codes in medical billing

CPT Codes In Medical Billing: Why And How It Is Used?

Medical billing has shown its huge implementation in the United States in previous years, for the same reason new methods and techniques have been integrated with the process. These methods make revenue generation easier for hospitals and improvise their cashflow procedures. To charge patients accurately, health practices use CPT codes in medical billing, which is too from one of the evolving techniques used.

CPT codes that are used in the bill classify every single service received and equipment items used by the patient. With the help of this, insurance payers identify each service taken by their patients, so they can pay for the medical treatments according to one’s insurance coverage. After which, the remaining bill amount is sent to the patient and hospitals mark their revenue generation process as complete.

But despite listing simple definitions of CPT codes in medical billing, some people are still confused about how these codes are created and how they are used in a bill. Our guide holds all your answers, let’s get into CPT codes.

Introduction To CPT Codes In Medical Billing

cpt code for consultation

You must have known some fundamentals about CPT codes, but here’s a detailed overview of the subject that will help you better understand the importance of using CPT codes in medical billing.

CPT stands for Current Procedural Terminology and CPT codes are specific code sets that are assigned to each health service used by hospitals. In a medical bill, when hospital staff lists the services of a specific patient, they utilize these codes to explain the details of a service to create a medical bill comprehensible for both the patient and the insurance payer.

CPT codes in medical billing are used by physicians, non-physician practitioners, outpatient facilities, laboratories, and other health professionals. These codes help report medical, diagnostic, and surgical procedures conducted by health practitioners.

These codes are comprised of 5 digits, most of the time numbers only. But there are some codes as well that contain a specific alphabet at the end of 4 numbers. A letter used in CPT codes classifies a specific group containing the same type of medical services.

Its History

In the 1990s, when there was a flood of emerging technology and inventions to make people’s lives better, researchers also considered health services for upgradation. This consideration was due to the fact that health practices have been facing issues in identifying services in a bill, which resulted in missed revenue opportunities. 

Don’t miss out on enlightening CPT knowledge—click the button and explore

This makes them create such a coding system that contains all health services under it and helps health facilities make their revenue generation process simpler. However, the American Medical Association (AMA) in 1966 created this coding system and till now they are in charge of handling CPT codes in medical billing. 

At that time, the system only catered to surgical health treatments, but later on with the rise of demand, in 1983 a group Health Care Financing Administration (HCFA) came into being. They transformed the coding system to be used by all health services. This organization has now been developed into the Center for Medicare and Medicaid Services (CMS).

After that other codes like ICD-10-CM were also introduced that further helped health facilities clarify their medical services in a bill. But many people resemble CPT codes with ICD-10. Here’s a visible difference: CPT codes in medical billing identify a health treatment while ICD-10-CM deals with medical diagnosis.

Categories Of CPT Codes

hospital billing

There are hundreds of CPT codes in medical billing, how do we know which one to use? AMA has overcome this problem by classifying CPT codes into 3 categories:

Category I: This is the widest and most much-used category than other ones. As this category contains contemporary codes of health services that are under operation on an extensive scale. Category I is divided into the following sub-sections: 

  • Evaluation and management
  • Pathology and laboratory
  • Medicine
  • Anesthesiology
  • Surgery
  • Radiology

All these codes define specific medical treatments and operations. 

Category II: Though these include many CPT codes in medical billing, this category can never be a substitute for Category I and III. Category II codes are used in a bill to define additional information about medical treatment. It is OK to not use these codes in a bill, as a medical bill may be complete without listing Category II codes.

Category III: These codes are temporary codes that are assigned to define those services that have newly emerged and don’t contain a specific code. 

Any new code that comes under this category may remain here for up to 5 years, after which the Food and Drug Administration (FDA) approves whether to keep the code or not. 

If health service associated with the code shows their huge application in the medical sector, they are moved to category I and if not, then they are deleted completely.

Creation And Maintenance

Ever wonder who creates CPT codes in medical billing? The editorial panel working under AMA is responsible for these operations. They decide the fate of a CPT code, whether to keep a code, create a new one or delete a code set. 

AMA Board of Trustees appoints an editorial panel to conduct CPT procedures. This panel contains 21 volunteers, with each representing a certain health department. They update CPT codes in medical billing on a regular basis, after reading the trends and demand for health services. In short, their work is to introduce updated codes to enhance health services in the country.

How Are CPT Codes Used In A Bill?

medical collection agency

CPT codes in medical bills decide whether reimbursement will be made or not, since any coding mistake may lead to revenue loss. For this, health practices hire professional medical coders and employ upgraded coding systems.

However, there is an entire process involved in medical billing regarding coding:

  1. Initial Coding

When a patient’s health treatment is completed, medical coding staff prepare reports with these codes either manually or electronically. 

    Subscribe our newsletter to see latest published content.

    1. Claims Process 

    After filling in the medical report, hospital staff creates a claim application to be sent to the insurance payer to get the reimbursement.

    1. Submission 

    When a patient leaves the hospital, staff re-checks the claim application and codes, just in case they have missed something. The billing office then submits the claim to the insurance payer, after which the payer identifies and verifies the bill. 

    This stage decides whether reimbursement will be made or not. As many times, the insurance payer identifies a problem and rejects the application as a whole.

    1. Research 

    When the hospital work is done and they have got the reimbursement, researchers working at insurance organizations and the federal government read coding data and related trends. This data help them predict future needs and changes in the medical industry. So they can prepare in advance to overcome sudden change.


    Now that you have seen all about CPT codes in medical billing, if these details make you excited, you can go ahead to make a career in the industry. Be a professional medical coder and earn your dream income.