Coding Methodologies

✅ Reviewed for accuracy and relevance by Deanna Cooper Gillingham, RN, CCM, FCM on June 26, 2025.

Coding transforms client care services, procedures, and diagnoses into universal, alphanumeric medical codes, guided by coding manuals. Coding is typically performed in preparation for reimbursement of services provided, but it is also used to track health conditions and infectious diseases. 

International Classification of Diseases (ICD)

The International Classification of Diseases (ICD) coding system assigns a number or alphanumeric code to diseases, traumas, and environmental circumstances that lead to bodily harm. The ICD code is the diagnosis or reason for the encounter with the healthcare system (e.g., chest pain, preoperative evaluation, diabetes). ICD coding is used to report medical diagnoses and procedures on claims and for public health surveillance data. The code set, updated to ICD-10 in 2015, consists of two parts:

  • ICD-10-CM (Clinical Modification) is the diagnosis classification system used by healthcare providers.
  • ICD-10-PCS (Procedure Coding System) is the procedure classification system used for reporting inpatient procedures in hospitals.

Current Procedural Terminology (CPT)

Current Procedural Terminology (CPT) codes are developed, maintained, and copyrighted by the American Medical Association (AMA). CPT codes are a standardized form of identifying services provided, including medical, surgical, radiology, laboratory, anesthesiology, and evaluation and management services. Providers use CPT codes to report services performed to payers for reimbursement purposes, assigning a code for each procedure done during a visit.

To differentiate, an ICD-10 code identifies the reason for the visit (e.g., chest pain), and a CPT code identifies procedures performed (e.g., evaluation and management, venipuncture, ECG). In other words, ICD-10 provides clinical rationale (why a procedure was performed), while CPT focuses on what was done.

Diagnosis related group (DRG)

A diagnosis-related group (DRG) is a patient classification system used by CMS and some private insurers to determine hospital payment for inpatient services. Instead of paying for each individual service or hospital day, the hospital receives a fixed payment based on the patient’s DRG. This system assumes that patients with similar diagnoses will have similar resource needs and lengths of stay.

The DRG is determined by combining:

  • Primary and secondary diagnosis codes (ICD-10)
  • Patient demographics
  • Severity of illness
  • Discharge status
  • Presence of complications or comorbidities

Simplified, the hospital assigns ICD-10 codes based on a patient’s diagnoses. These codes and other factors determine the DRG, which determines the hospital’s reimbursement for that admission.

Diagnostic and Statistical Manual of Mental Disorders (DSM)

The Diagnostic and Statistical Manual of Mental Disorders (DSM), published by the American Psychiatric Association (APA), is a comprehensive reference for classifying and diagnosing mental health disorders. It provides clinicians with a standardized framework for identifying mental health conditions and promotes consistent and reliable diagnoses.

The most recent edition is the DSM-5-TR, where TR stands for Text Revision. It includes detailed descriptions, symptoms, and diagnostic criteria for mental health disorders, providing a common language for healthcare providers to communicate regarding patient care. The DSM-5-TR also incorporates ICD-10-CM codes alongside its diagnostic criteria. The ICD codes [AM1] are used for billing, insurance claims, and data collection.

Content adapted from CCM Certification Made Easy, 4th Edition by Deanna Cooper Gillingham, RN, CCM, FCM (2025) and used with permission from the Case Management Institute. Purchase your copy at CCMCertificationMadeEasy.com.