8 Common ICD-10 Coding Errors to Avoid

Accurate ICD-10 coding is essential for healthcare practices to avoid revenue loss, claim denials, and compliance risks. Errors in coding can lead to rejected claims, slower payments, and increased administrative costs. Here are eight frequent mistakes and how to prevent them:

Using Unspecified Codes: Leads to denials due to incomplete documentation. Aim for detailed, specific codes.
Incorrect Code Specificity: Avoid truncated or generic codes; use the full character count for precision.
Improper Sequencing: The order of diagnosis codes impacts reimbursement. Follow "Code First" rules.
Too Many or Too Few Codes: Under-coding misses critical conditions; over-coding risks compliance issues.
Outdated Codes: Annual updates mean old codes are invalid. Regularly update systems and train staff.
Truncating Codes: Missing characters cause automatic rejections. Use tools to validate codes.
Laterality Errors: Incorrect or missing side-specific codes result in denials. Ensure alignment with procedural modifiers.
Coding Rule-Out Diagnoses: Code symptoms, not suspected conditions, in outpatient settings.

8 Common ICD-10 Coding Errors and Prevention Strategies

Top 10 ICD-10-CM Coding Mistakes

1. Using Unspecified Codes

Unspecified codes – those ending in .9 or marked as "not otherwise specified" (NOS) – often result in claim denials. Insurance companies see these codes as a sign of incomplete documentation or hasty assessments. Automated claim systems frequently flag them for manual review, especially when linked to chronic conditions.

"Unspecified codes (ending in .9) are viewed as representative of incomplete documentation by payers." – PacePlus

These unspecified diagnoses can cost practices between $2,000 and $4,000 each month. Beyond that, payers may downgrade Evaluation and Management (E/M) levels when an unspecified diagnosis is paired with a high-level service code, reducing reimbursement. For instance, using E11.9 (Type 2 diabetes without complications) instead of E11.42 (Type 2 diabetes with polyneuropathy) not only risks denial but also downplays the complexity of patient care, leading to smaller payments.

To avoid these pitfalls, aim for the highest level of specificity by documenting details such as laterality, disease stage, severity, and any underlying conditions. If the documentation is unclear, follow up with providers for clarification – for example, specifying the type of diabetes or the nature of the encounter. Use unspecified codes sparingly, such as during initial assessments, emergencies, or when awaiting specialist input. Once a definitive diagnosis is available, update the patient’s problem list promptly.

To improve accuracy, regularly review EHR reports to identify patterns of unspecified code usage among providers or staff. This can guide targeted training efforts and reduce errors. Up next, we’ll explore how incorrect code specificity can further impact claim accuracy.

2. Incorrect Code Specificity

ICD-10-CM coding requires precision, demanding the use of the full character count for each diagnosis (three to seven characters). Submitting a shortened or incomplete code when a more specific option exists often results in claim rejections. Automated payer systems are designed to flag these errors, frequently issuing denial code M81: "You are required to code to the highest level of specificity".

When documentation lacks detail, payers may downcode claims, leading to reduced reimbursement. Joy Woodke, COE, OCS, OCSR from the American Academy of Ophthalmology, stresses that accurate, detailed diagnoses are essential for proper reimbursement. Using generic or symptom-based codes often fails to meet these standards.

Here are some common examples where truncated codes create significant issues in payment processing:

Truncated/General Code	Specific Alternative	Why It Matters
H35.30 (Unspecified macular degeneration)	H35.3112 (Intermediate nonexudative macular degeneration, right eye)	Adds laterality, stage, and specific type
R53.1 (General weakness)	G83.1 (Monoplegia of lower limb)	Specifies anatomical location; practices using R53.1 see a 67% denial rate
J45.909 (Asthma, unspecified)	Specific asthma type (e.g., mild intermittent)	Supports medical necessity for advanced treatments

These examples highlight how specificity in coding directly impacts reimbursement and claim acceptance rates.

Beyond claim denials, vague coding also undermines risk adjustment in value-based care models. When chronic conditions aren’t fully documented, the patient population may appear healthier than it is, potentially reducing future reimbursement rates. For Medicare patients, enforcement starting in 2025 will require objective tools like Manual Muscle Testing or the Berg Balance Scale to support certain codes. Non-compliance could lead to penalties as high as $25,000 for inadequate documentation.

To minimize errors, structured EHR templates can be used to enforce mandatory details such as laterality, severity, and stage. When documentation is incomplete, implementing a formal query process allows coders to seek clarification before submitting claims. This approach ensures accuracy and avoids the costly consequences of vague or incomplete coding.

3. Sequencing Codes Improperly

Getting the sequence of diagnosis codes wrong can lead to major reimbursement issues. Why? Because the order of these codes directly impacts MS-DRG (Medicare Severity Diagnosis Related Group) assignment, which determines how much is reimbursed for inpatient stays. The principal diagnosis (PDX) is particularly important – it serves as the anchor for MS-DRG assignment. If this code doesn’t align with the complexity of care provided, payers may deny the claim or reduce it to a lower reimbursement level.

"The principal diagnosis along with contributing/secondary diagnoses reflect the risk or morbidity and mortality. They support resource utilization and reflect the complexity of the medical decision-making… the accuracy of your diagnoses may determine whether a claim is paid appropriately or not"

This highlights how critical it is to ensure the code order reflects the complexity of the case.

One common error is ignoring "Code First" instructions in the ICD-10-CM manual.

"If there is a ‘code first’ note in the tabular, the coder should follow this instruction and sequence the underlying etiology or chronic condition first followed by the manifestation as an additional diagnosis"

Take anemia in a patient with end-stage renal disease (ESRD) as an example. In this scenario, the ESRD code must come before the anemia code. Reversing the order can lead to claim denials. Similarly, manifestation codes – those labeled "in diseases classified elsewhere" or placed in brackets – should never be used as the primary diagnosis.

Another pitfall is omitting secondary codes for chronic conditions like diabetes or hypertension. This not only makes the patient population seem healthier than it actually is but can also reduce future risk-adjusted payments and negatively affect MIPS (Merit-based Incentive Payment System) performance.

To minimize these mistakes, follow these steps:

Always ensure the most serious condition is listed first.
Double-check tabular instructions in the ICD-10-CM manual before submitting claims.
Perform pre-billing audits on high-value claims to confirm that DRG-impacting codes are sequenced correctly.

Proper sequencing isn’t just about compliance – it’s about ensuring fair reimbursement and accurate representation of patient care.

4. Assigning Too Many or Too Few Codes

Getting the number of codes right is a balancing act, but it’s critical. Both under-coding and over-coding can lead to serious problems. Under-coding – using fewer codes than necessary – can result in lost revenue and fail to represent the complexity of a patient’s condition. For instance, if secondary diagnoses like COPD or hypertension are missed in a pneumonia case, not only does reimbursement take a hit, but the clinical profile of the patient is inaccurately portrayed. As eBridge RCM points out:

"A coding pattern that consistently underreports chronic conditions can make a practice look like it treats a healthier population, which leads to lower future reimbursements".

On the flip side, assigning more codes than the documentation supports – or unbundling related procedures to inflate payments – can create serious compliance issues. Ayeesha Siddiqua, Lead Coder at RapidClaims, emphasizes:

"Both practices – assigning higher-cost codes than what was performed (upcoding) or lower-cost codes than what was rendered (downcoding) – are considered fraudulent and carry significant penalties".

Payers also keep a close watch for errors like mutually exclusive codes (flagged by Excludes1 notes) or combinations that don’t align clinically.

To avoid these pitfalls, it’s crucial to thoroughly review the medical record to capture all conditions tied to the treatment. Pay attention to coding guidelines like "Use additional code" or "Code also" to ensure the clinical picture is fully represented. At the same time, report only the codes relevant to that specific visit. Tools like structured EHR templates can help by prompting providers to document active conditions. Adding pre-billing audits for high-value claims can also serve as a safeguard.

Next, we’ll look at how outdated ICD-10 codes can further compromise claim accuracy.

5. Using Outdated ICD-10 Codes

ICD-10 codes are updated every year by CMS, with changes taking effect on October 1. Using codes that are no longer valid can lead to automatic claim rejections before the claim even goes through manual review. For example, the 2026 update introduced 487 new diagnosis codes, revised 38 existing ones, and removed 28 entirely. Submitting claims with deleted codes results in instant denials.

The financial impact of outdated codes can be significant. Practices may lose between $1,500 and $3,000 each month due to coding errors. For a medium-sized practice handling 800 claims per month, even a small denial rate of 3% could result in $15,000 to $20,000 in lost revenue. On top of that, reworking denied claims adds another layer of expense, with administrative costs ranging from $25 to $50 per claim. As Pace Plus explains:

"A single out of date or expired code can lead to an instant claim rejection".

To avoid these costly mistakes, consider automating software updates to ensure your EHR and billing systems are always aligned with the latest CMS code libraries. Schedule annual training sessions every October to review the newest updates, including additions and deletions. Using pre-submission claim scrubbers can help catch outdated codes before claims are sent, and conducting monthly audits of denial trends can highlight recurring issues. These actions can be woven into your overall coding practices to help maintain compliance and protect your revenue.

Insurance payers are increasingly relying on risk-based reviews and prepayment audits to identify coding errors. Keeping up with these annual changes is about more than just avoiding denials – it’s also a way to reduce compliance risks. By implementing these strategies, your practice can minimize denials, reduce administrative burdens, and maintain smooth operations.

6. Truncating Codes

Truncation happens when required characters are left out of an ICD-10 code. These codes are alphanumeric, and every character is essential for the code to be valid. If even one character is missing, the claim can be automatically rejected. As PacePlus explains:

"Apparently, small errors in data entry are one of the quickest methods to cause automatic claims rejection. ICD-10 codes are also alpha numeric and thus a single wrong character can nullify a claim that is otherwise correct".

This type of error directly affects claim approvals and, ultimately, revenue.

The root of the issue often lies in simple data entry mistakes. Coders might accidentally switch digits or confuse similar-looking characters, such as "O" and "0" or "I" and "1". Additionally, incomplete documentation – missing details about laterality, disease stage, or severity – can prevent coders from including all the required characters.

Seventh-character requirements are a common stumbling block. Many codes for injuries, poisonings, and external causes demand a seventh character to specify the encounter type. Omitting this character can lead to claim denials. For ICD-10-PCS codes, every code must have exactly seven characters, and some, like biopsy codes, require a seventh-character "X" to ensure diagnostic accuracy. The financial impact can be significant: a single incorrect or truncated code may result in a $150 denial. When this happens repeatedly across hundreds of claims, the losses can quickly climb into the thousands each month.

To reduce these errors, consider the following steps:

Use automated claim scrubbers to flag incomplete codes before submission.
Implement EHR validation rules to ensure all necessary characters, such as laterality and seventh-character qualifiers, are included.
Pay extra attention to similar-looking characters during data entry.
Conduct monthly internal audits on at least 10% of claims to identify recurring truncation issues.

7. Errors with Laterality Codes

Laterality codes are used to specify which side of the body is affected – left, right, or both. These codes are essential when dealing with paired organs or limbs, such as the eyes, ears, kidneys, shoulders, or knees. Typically, the 5th or 6th character in the code provides this detail: 1 for Right, 2 for Left, 3 for Bilateral, and 0 or 9 for Unspecified. Missing or incorrect laterality codes are a common reason for claim denials.

Joy Woodke, Coding and Practice Management Executive at the American Academy of Ophthalmology, highlights the importance of accuracy:

"When reporting ICD-10-CM codes on a claim, code to the highest level of specificity. When applicable, report laterality… Some payers will deny claims due to lack of specificity".

Payers are increasingly strict about ensuring laterality codes align with the billed CPT/HCPCS modifiers. For instance, in May 2024, Anthem Blue Cross and Blue Shield (Georgia) introduced a policy to automatically deny claims when the laterality in the diagnosis does not match the procedural modifier. Examples include a claim denied for reporting E11.3593 (Type 2 diabetes with proliferative retinopathy, bilateral) while billing CPT code 67228 with an RT (Right) modifier. Another example involved S91.011A (right ankle laceration) paired with a left modifier (27786-LT), which also led to a denial. These scenarios highlight the critical need for precise laterality coding as part of broader ICD-10 accuracy practices.

Laterality errors are particularly frequent in fields like orthopedics and ophthalmology, where paired structures are often the focus of treatment. Even if provider notes clearly document the affected side, claims systems will reject codes that fail to reflect this specificity. Payers often interpret unspecified codes as signs of incomplete documentation or less complex clinical scenarios, which can result in downcoding or outright denial.

To avoid these issues, focus on meticulous attention to laterality details. Here are some practical steps:

Use EHR prompts that require selecting left, right, or bilateral before finalizing claims.
Ensure the anatomical modifier (RT or LT) on the CPT code matches the laterality in the ICD-10 diagnosis.
If no bilateral code is available, assign separate left and right codes.
When documentation is unclear, always query the provider rather than making assumptions.

8. Coding Rule-Out or Suspected Diagnoses

Outpatient coders should never assign ICD-10 codes for diagnoses that are suspected, probable, or ruled out. When a definitive diagnosis hasn’t been established, they must code based on symptoms, signs, or abnormal test results instead. Coding unconfirmed conditions can misrepresent medical records and skew surveillance data, making it essential to code only what is certain.

However, there’s a key exception for inpatient hospital settings. The ICD-10-CM Official Guidelines state:

"If the diagnosis documented at the time of discharge is qualified as ‘probable,’ ‘suspected,’ ‘likely,’ ‘questionable,’ ‘possible,’ or ‘still to be ruled out,’ ‘compatible with,’ ‘consistent with,’ or other similar terms indicating uncertainty, code the condition as if it existed or was established".

This exception is justified because the diagnostic workup and treatment during an inpatient stay are typically aligned with the suspected condition, reflecting the resources used. Yet, for certain high-risk conditions like HIV, Zika, and COVID-19, confirmation is mandatory before assigning codes, even in inpatient settings. This distinction highlights the importance of precise and cautious coding in outpatient scenarios.

Using rule-out diagnoses can lead to inaccurate claims and reimbursement issues. To prevent this, coders should document symptoms when a diagnosis is unclear. For instance, if a provider notes "abdominal pain, likely appendicitis", the abdominal pain should be coded for billing. Once the diagnosis is confirmed, the code should be updated to reflect the definitive condition. If a suspected condition is ruled out entirely with no lingering symptoms, category Z03 (Medical observation and evaluation for suspected diseases and conditions, ruled out) should be used. Additionally, workflows should encourage coders to promptly update symptom codes to confirmed diagnoses as soon as evaluations are completed.

Conclusion

Getting ICD-10 coding right is crucial for maintaining financial health and staying compliant. Mistakes in coding don’t just slow down reimbursements – they pile on administrative headaches and increase the likelihood of audits. Hospitals, for instance, lose about $5 million annually from unresolved claim denials, which can account for up to 5% of their net patient revenue.

But the impact of coding errors reaches far beyond short-term cash flow. In value-based care systems, coding accuracy plays a key role in MIPS performance and risk-adjusted payments. Failing to document chronic conditions thoroughly can lower future reimbursement rates and threaten the financial health of your practice. Safwan Azeem sums it up perfectly:

"Accurate coding is no longer ‘nice to have’ – it’s the difference between a stable revenue cycle and constant audit risk".

By addressing the most common coding mistakes, your practice can safeguard its revenue, maintain compliance, and thrive in value-based care models. Preventing these errors starts with steps like:

Regular staff training on the latest ICD-10 updates
Using automated claim scrubbers to catch errors before submission
Implementing standardized documentation templates for better specificity
Conducting routine internal audits to spot recurring issues

It’s worth noting that roughly 77% of claim denials are tied to paperwork and coding errors – not medical decisions. The good news? Many of these errors are entirely avoidable.

If coding complexity or high denial rates are holding your practice back, teaming up with Medical Clinic Solutions can simplify your billing process. They offer specialized medical billing services that keep up with regulatory changes and use advanced technology to improve first-pass acceptance rates, easing your administrative load.

As eBridge RCM wisely puts it:

"A well-coded claim is a paid claim. Make every code count, and your revenue cycle will reward you for it".

FAQs

When is it acceptable to use an unspecified ICD-10 code?

When the general category of a condition is identified but lacks enough detail for a precise code, an unspecified ICD-10 code can be used. This is common when a diagnosis hasn’t been fully established at the time of coding. However, it’s always best to use the most specific code possible to help prevent claim complications.

How do I choose the correct principal diagnosis and sequence codes?

To choose the right principal diagnosis and properly sequence codes, it’s crucial to stick to official coding guidelines. The principal diagnosis refers to the main condition that prompted the patient’s admission and must be backed by clinical documentation.

When sequencing codes, start with the principal diagnosis and then list additional codes in order of relevance based on the procedures performed. To minimize errors and reduce the risk of claim denials, make it a habit to conduct regular training sessions and documentation reviews.

What’s the fastest way to prevent outdated, truncated, and laterality ICD-10 errors?

To steer clear of outdated, truncated, or laterality ICD-10 errors, it’s essential to stay updated with the official ICD-10-CM guidelines. Regular training for your coding team on the most recent standards is key. Additionally, using tools that automatically flag potential errors and performing regular audits can help improve both accuracy and compliance.