How to Use and Report ICD Codes

Over the years, many of our lab clients have asked us questions about reporting International Classification of Diseases (ICD) codes while billing lab services. Here’s an overview and general briefing on some of the most common ICD codes concerns for labs.

ICD Coding Guidelines for Outpatient Services

When coding for diagnostic tests, Centers for Medicare & Medicaid Services (CMS) requires providers to follow the ICD-10-CM Coding Guidelines for Outpatient Services (hospital-based, independent laboratory, and physician office). These guidelines instruct physicians to report diagnoses based on test results, if available. Note the following sequence or steps for code selection:

1. Confirmed Diagnosis Based on Results of Test

2. Signs or Symptoms (when no definitive diagnosis is made): “Codes that describe symptoms and signs, as opposed to diagnoses, are acceptable for reporting purposes when a related definitive diagnosis has not been established (confirmed) by the provider. Chapter 18 of ICD-10-CM, Symptoms, Signs, and Abnormal Clinical and Laboratory Findings, Not Elsewhere Classified (codes R00.0 – R99) contains many, but not all, codes for symptoms.”

3. Diagnosis Preceded by Words that Indicate Uncertainty: If a “diagnosis is preceded by words that indicate uncertainty (e.g., probable, suspected, questionable, rule out, or working, etc.), then the interpreting physician should not code the referring diagnosis. Rather, the interpreting physician should report the sign(s) or symptom(s) that prompted the study. Diagnoses labeled as uncertain are considered by the ICD-10-CM Coding Guidelines as unconfirmed and should not be reported. This is consistent with the requirement to code the diagnosis to the highest degree of certainty.”

(Refer to the above guidelines (2023 version is 118 pages; posted June 10, 2022) on the CMS website for additional guidelines and detailed information.)

Diagnostic Information Required with Order

An ICD-10 code should be forwarded with all orders. Narrative descriptions represent the minimum diagnostic information that should accompany orders. Chapter 16, Section 120, of the Medicare Claims Processing Manual includes the following:

Physicians Reporting Diagnosis Codes When a Diagnostic Test Is Ordered: Section 4317 of the Balanced Budget Act of 1997 provides, with respect to diagnostic laboratory and certain other services, that “if the Secretary (or fiscal agent of the Secretary) requires the entity furnishing the services to provide diagnostic or other medical information to the entity, the physician or practitioner ordering the service shall provide that information to the entity at the time the service is ordered by the physician or practitioner.”

According to the guidance, a lab or other healthcare provider must report the diagnostic code(s) “furnished by the ordering physician” on a claim for Medicare payment. If that coding information is missing, the lab or other provider “may determine the appropriate diagnostic code based on the ordering physician’s narrative diagnostic statement or seek diagnostic information from the ordering physician/practitioner. However, a lab or other provider may not report on a claim for Medicare payment a diagnosis code in the absence of physician-supplied diagnostic information supporting such code,” the guidance adds.

In addition, documentation must exist for laboratory or hospital personnel to convert a narrative diagnostic description to an ICD-10 code. Documentation for clinical laboratory services may be different from that for physician or anatomic pathology services.

ICD Utilization

An old CMS transmittal that referred to lab outcomes from the Negotiated Rulemaking process, Transmittal AB-02-030, is a great source for guidance on ICD utilization. While the transmittal is no longer accessible on the CMS transmittal website, it stated the following:

“If the ordering physician submits an ICD-9-CM code on the requisition, the laboratory must use that code unless there is a reason to question the ordering physician to change the code. The laboratory must receive and maintain the documentation to alter the claim.”

Another helpful source is Transmittal AB-01-144, which can still be referenced on the transmittal website regarding coding for diagnostic tests. The information it contains is essentially identical to that in Chapter 23 of the Medicare Claims Processing Manual, the latter of which states:

“For outpatient claims, providers report the full diagnosis code for the diagnosis shown to be chiefly responsible for the outpatient services. For instance, if a patient is seen on an outpatient basis for an evaluation of a symptom (e.g., cough) for which a definitive diagnosis is not made, the symptom is reported. If, during the course of the outpatient evaluation and treatment, a definitive diagnosis is made (e.g., acute bronchitis), the definitive diagnosis is reported. If the patient arrives at the hospital for examination or testing without a referring diagnosis and cannot provide a complaint, symptom, or diagnosis, the hospital reports the encounter code that most accurately reflects the reason for the encounter.”

Use of Z Codes

Z codes (other reasons for healthcare encounters) may be assigned as appropriate to further explain the reasons for presenting for healthcare services, including transfers between healthcare facilities, or to provide additional information relevant to a patient encounter. The ICD-10-CM Official Guidelines for Coding and Reporting identify which codes may be assigned as principal or first-listed diagnosis only, secondary diagnosis only, or principal/first-listed or secondary (depending on the circumstances). Possible applicable Z codes include:

Z59.0   Homelessness

Z59.1  Inadequate housing

Z59.5   Extreme poverty

Z75.1   Person awaiting admission to adequate facility elsewhere

Z75.3   Unavailability and inaccessibility of health-care facilities

Z75.4   Unavailability and inaccessibility of other helping agencies

Z76.2   Encounter for health supervision and care of other healthy infant and child

Z99.12 Encounter for respirator [ventilator] dependence during power failure

The external cause of morbidity codes and the Z codes listed above aren’t all-inclusive. Other codes may be applicable to the encounter based upon the documentation. Assign as many codes as necessary to fully explain each healthcare encounter. Since patient history information may be very limited, use any available documentation to assign the appropriate external cause of morbidity and Z codes.

Z codes are for use in any healthcare setting. Z codes may be used as either a first-listed (principal diagnosis code in the inpatient setting) or secondary code, depending on the circumstances of the encounter. Certain Z codes may only be used as first-listed or principal diagnosis.

Keep in mind that Z codes are not procedure codes. A corresponding procedure code must accompany a Z code to describe any procedure performed.

Final Word of Advice on Assigning ICD Codes

Some of my clients tell me that their software vendors require that an ICD code be assigned for each procedure performed. The Negotiated Rulemaking component of HIPAA determines that an ICD code may relate to multiple procedures. The ICD codes reported should be scrutinized and utilized where appropriate for coverage determinations. We’ve seen instances where software assigned inappropriate ICD codes to procedural codes which led to denials for coverage. If ICD code(s) were assigned more than once, these denials would have reverted to coverage and payment.

To reiterate, an ICD-10 code should be forwarded with all orders. Narrative descriptions represent the minimum diagnostic information that should accompany orders. Inadequate diagnostic information may impede reimbursement when a coverage policy exists.

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Diana W. Voorhees, M.A., CLS, MT, SH, CLCP, CPCO, is principal in DV & Associates, Inc., Salt Lake City, UT, which makes no representation, guarantee or warranty, expressed or implied, that the information provided is free of error, and will bear no responsibility or liability for results or consequences of its use.