Proper Coding of Diagnoses and New Payment Models

ICD-10 diagnosis codes inform risk adjustment, an increasingly important determinant of payment under the CMS Quality Payment Program.

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Billing for radiology services requires two main billing codes: Current Prodedural Terminology (CPT®) codes and ICD-10 diagnosis codes. CPT codes describe which service was done, and ICD-10 codes describe why it was done. For example, a brain MRI claim may include the CPT code for the MRI itself and the ICD-10 code for acute stroke. Historically, greater focus has been placed on accurate CPT codes to ensure maximal, but still compliant, payment. Diagnosis codes have been necessary, but the complexity and number of diagnosis codes associated with claims have not directly affected payment amounts. This circumstance is changing. Under new payment models, payment amounts can vary with the level of illness of patients, informed by ICD-10 diagnosis coding. This shift is relevant to radiology, since making diagnoses is at the core of what we do.

Risk adjustment uses ICD-10 diagnosis codes as part of a statistical process that considers the underlying health status of enrolled and treated patients. Risk adjustment is important to both payment pathways under the MACRA-directed Quality Payment Program (QPP): the Merit-Based Incentive Payment System (MIPS) and Alternative Payment Models (APMs). Under both pathways, considerable incentive is created to lower cost. But incentives to reduce cost must adjust for the complexity of patients. If it does not, health plans and providers could be motivated to enroll and treat only healthier patients to save cost.

MIPS began scoring radiologists on cost this year. Last month, I wrote about our experience with cost under the ACA-mandated value modifier, focusing on one cost measure: Medicare Spending per Beneficiary (MSPB).1 MSPB assigns the costs for index hospital admissions to one provider, sometimes a radiologist or radiology practice. For the overall cost score to be representative of the patient population treated by the practice, risk adjustment must take place. If it does not, the system could penalize those who care for more complex patients with higher costs.

Accountable care organizations (ACOs) are rewarded under the QPP as either APMs or MIPS-APMs. ACOs have global budget targets that depend on their patient population’s spending from the prior year. An ACO’s patient population may change, with new enrollees or changes in the health conditions of already enrolled patients. For these reasons, risk adjustment is necessary.

Other risk-based global payment arrangements are affected by risk adjustment. Medicare Advantage (MA) is a capitated system in which payments are made per enrollee, rather than based on the individual services provided. Payments are dependent upon the risk of the patients enrolled in the plan each year. For plans that enroll patients with more chronic disease, higher risk scores follow, earning higher payments to compensate for the expected higher costs.2

With both MA and ACOs, there is incentive to improve our coding of diagnoses. However, we must be mindful that we improve diagnosis coding in a responsible manner and for the right reasons. Some plans and providers may dedicate resources to maximizing their diagnosis coding. While this may increase payments, it could divert focus away from the core directives of new payment models: improving efficiency, increasing quality, and elevating patient experience. There is also the risk that providers with greater investment in EHR and other technology solutions could gain a competitive advantage over providers with fewer resources.

Radiology is well-positioned to favorably influence proper diagnosis coding. The completeness and readability of our reports influence the ICD-10 diagnosis codes captured by coding professionals. Applying informatics tools, such as structured clinical guidance at the point of dictation (via ACR Assist®) could play a positive role. Risk adjustment is becoming more important to payment policy and the ACR Commission on Economics is following this trend closely. 

1. Silva E. Cost — Rarely Understood but Highly Relevant. ACR Bulletin, February 2018. Available at
2. Landon B, Mechanic R. The Paradox of Coding — Policy Concerns Raised by Risk-Based Provider Contracts. N Engl J Med. 2017; 377(13):1211-1213. Accessed Dec. 15, 2017. Available at
EzequielSilva By Ezequiel Silva III, MD, FACR, Chair

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