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Differentiating Between Inpatient and Outpatient Coding October 28, 2021

Inpatient and Outpatient Coding

Medical coding is essential in medical practice. In this area, accuracy is crucial, as it will impact patient care, clinic operations, and revenue for your practice. The American Academy of Professional Coders (AAPC) describes healthcare coding as translating diagnoses, treatments, and even equipment into universal alphanumeric codes. In simple terms, it is the process of translating crucial medical information into codes to maintain accurate medical records and billing. The coding process assigns numerical or alphanumeric codes to every healthcare data element—outpatient and inpatient. It is essential to identify whether a patient is an outpatient or an inpatient as part of the hospital coding and billing process.

Let’s first understand the definition of Outpatient and Inpatient Coding:

What is Inpatient Coding?

Inpatient coding refers to the formal admission of a patient to a medical facility for a prolonged stay. It specifies the diagnosis of the patient and the services provided to them during their extended stay.

Inpatient coding allows accounting departments to determine the correct billing and reimbursement from insurers by providing a detailed overview of patients’ treatments during their extended stay. It has two standard coding guidelines: ICD-9/ICD-10-CM and ICD-10-PCS. But inpatient coders prefer to utilize ICD-10-PCS as the basis for procedural Coding. Furthermore, inpatient coding requires an admission status indicator (POA), distinguishing between a patient’s health status upon admission and new symptoms that develop throughout their stay.

What is Outpatient Coding?

In contrast, outpatient Coding is for patients who receive treatment but do not remain in a facility for an extended period. Outpatient Coding refers to a patient’s stay lasting less than 24 hours. Patients can still be classified as outpatients even after staying for 24 hours.

The outpatient coding system uses ICD-9/10-CM diagnostic codes but utilizes CPT or HCPCS for procedural Coding. Outpatient services and supplies fall under the latter category. CPT and HCPCS codes for services rely on documentation as well.

Outpatient settings do not allow the use of words such as “likely” or “probable” to describe a patient’s diagnosis. Instead, they must code conditions with certainty for signs, symptoms, or abnormal test results. In a single outpatient visit, the physician has limited time to observe the patient. A physician’s job is not to search for a comprehensive explanation of a patient’s health condition; instead, it is to form an educated conclusion based on the medical evidence at hand.

The Difference Between Inpatient and Outpatient Coding

  • Outpatient Coding differs from inpatient Coding by the length of the patient’s stay. The outpatient Coding is done for patients who do not stay for long and can leave within 24 hours of admission, while under the doctor’s prescription, the inpatient coders handle patients admitted for several days with a thorough diagnostic report.
  • The Medicare Part B program covers outpatient services, while Medicare Severity-Diagnosis Related Groups (MS-DRGs) cover inpatient services. Both types of services are eligible for Medicare reimbursement, but they use different plans.
  • The Outpatient Prospective Payment System (OPPS) manages reimbursements for outpatients. For inpatients, the Inpatient Prospective Payment System (IPPS) seeks reimbursement. 
  • The inpatient coding process stays longer and has greater complexity of care. For instance, patients who remain in the hospital for several days may receive medical care from an ER physician, nurses, a surgeon, an anesthesiologist, and others, which should be recorded in their medical records.
  • Outpatient Coding requires the coders to know codes and guidelines of ICD-10-CM and HCPCS Level II, whereas an inpatient coder should be proficient in ICD-10-PCS and ICD-10-CM.
  • The coders should have enough knowledge of the outpatient coding guidelines, including ICD-10-CM and HCPCS Level II. On the other hand, the inpatient coders should be an expert in ICD-10-PCS and ICD-10-CM.

The inpatient and outpatient coding guidelines for treatment also differ in numerous ways. Both settings use different codes and guidelines for reporting services. Refer to the table below:


Facility/ Inpatient Coding Guidelines for Treatment 

Physician/ Outpatient Coding Guidelines for Treatment
ICD-10-CM for diagnosesICD-10-CM for diagnoses
Coding for “probable,” “suspected,” or “rule-out” conditions are allowedCoding for “probable,” “suspected,” or “rule-out” conditions are NOT allowed
Medical/Surgical procedures: ICD-10-PCSMedical/Surgical procedures: CPTⓇ and HCPCS Level II
The basis of reimbursement is on the diagnosis-related group (DRG)The reimbursement basis is on physician fees, insurance contracted rates, ambulatory surgical center rates, etc.
Require a hospital stay (usually with a two-day minimum)It does not require a hospital stay.
The basis of code assignment is on the entire admission (length of stay)The basis of code assignment is on the encounter/visit
Services are billed on the UB-04 formServices are billed on the CMS-1500 form

According to the American Academy of Professional Coders (AAPC), the American Medical Association maintains the Current Procedural Terminology (CPT) code range for Office or Other Outpatient Services 99202-99215. These can also be the guide for outpatient hospital CPT codes. In contrast, the initial hospital care codes (99221-99223) report “the first inpatient visit by the admitting physician with the patient.” 

By understanding the differences between inpatient and outpatient coding, health care providers can reduce overhead costs. These medical codes are both essential for billing and for outpatient billing services. Coders must therefore have an in-depth understanding of medical coding to perform their duties efficiently. 

Tap Into Our Expertise

It may take some time for your medical practice to adjust. So, you can also hire a medical coding company with mastery of the official coding guidelines!

At 5 Star Billing Services Inc, we offer the highest level of performance for high-quality medical billing and coding. Save your money by outsourcing to a professional billing service.

Schedule a call with our experts today!


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