ICD-10-CM Coding Modes
The automated coding engine operates in one of three configurable modes when assigning ICD-10-CM diagnosis codes from clinical documentation to the CMS-1500 claim form. This document defines each mode, the regulatory basis for its behavior, and the specific guidance it adheres to.
1.Regulatory Foundation
All three coding modes operate within the requirements established by the official federal coding standards and recognized industry practice briefs. The behavior of each mode is anchored to specific sections of these documents, with full citations and links provided in the References section.
Three sources govern the engine's behavior: the FY 2026 ICD-10-CM Official Guidelines for Coding and Reporting jointly issued by CMS, NCHS, and CDC (1); the AHIMA/ACDIS Guidelines for Achieving a Compliant Query Practice (2); and the CMS-1500 (02/12) claim form instructions (3). Adherence to the ICD-10-CM Official Guidelines is required under HIPAA for all healthcare settings (1).
2.Coding Mode Definitions
Each mode produces a valid, billable code set for outpatient and professional services. Modes differ in how the engine handles clinical content that supports a diagnosis but does not explicitly state one as a code, and in what supplemental output is generated alongside the claim.
Mode
01
Strict literal extraction. Most conservative. Lowest audit exposure.
Literal ICD-10 Codes Only
The engine assigns only ICD-10-CM codes that appear in the documentation as a literal code string — for example, M47.16, E11.9, or I10 written in the problem list, assessment, or attached as discrete codes in the EHR. The engine does not translate diagnostic prose ("lumbar spondylosis without myelopathy") into the corresponding code, even when the mapping is unambiguous. If no codes are present in the documentation, the engine returns "insufficient documentation" and routes the encounter to a human coder.
Regulatory Anchor
"Adherence to these guidelines when assigning ICD-10-CM diagnosis codes is required under HIPAA… A joint effort between the healthcare provider and the coder is essential to achieve complete and accurate documentation, code assignment, and reporting of diagnoses."
See reference (1), §I.A — Conventions for the ICD-10-CM
Mode
02
Guideline-aligned. Standard outpatient coding practice.
Documented Diagnoses, Signs & Symptoms
The engine assigns codes for diagnoses explicitly named in the documentation — whether written as code strings or as diagnostic language — and resolves them to the highest specificity supported by the chart. When a definitive diagnosis has not been established, the engine codes the documented signs, symptoms, abnormal findings, or reason for visit, the approach explicitly sanctioned by Section IV.D for outpatient and professional fee claims. This is the standard practice followed by certified human coders.
Regulatory Anchor
"Codes that describe symptoms and signs, as opposed to diagnoses, are acceptable for reporting purposes when a diagnosis has not been established (confirmed) by the provider… Do not code diagnoses documented as 'probable,' 'suspected,' 'questionable,' 'rule out,' or 'working diagnosis' or other similar terms indicating uncertainty. Rather, code the condition(s) to the highest degree of certainty for that encounter/visit."
See reference (1), §IV.D & §IV.H — Outpatient Services
Mode
03
Exploratory. Generates compliant physician queries for provider review.
Candidate Diagnoses with Provider Queries
The engine produces the same claim as Mode 02. Separately, it identifies clinical indicators — lab values, imaging findings, medications, symptom patterns — that may support a diagnosis not explicitly documented, and surfaces these as candidate diagnoses formatted as compliant, non-leading physician queries per the AHIMA/ACDIS practice brief. Candidate codes never appear on the claim without an answered query and corresponding amended documentation by the provider.
Regulatory Anchor
"It is noncompliant to lead the provider to a desired response… For a multiple-choice query to be compliant, 'other' must be included as an option, allowing the provider to write in their own response if the other response options do not offer diagnoses that align with the provider's professional judgment."
See reference (2), AHIMA/ACDIS Compliant Query Practice, 2022 Update
3.Worked Example: Same Chart, Three Modes
The following illustrates how each mode handles an identical clinical encounter. The chart documents clear clinical findings but the provider has not written ICD-10 codes in the note, and has not yet established a definitive diagnosis.
Provider Documentation — Office Visit, Established Patient
| Mode | Codes Submitted on CMS-1500 | Engine Reasoning |
|---|---|---|
01 Literal Only | INSUFFICIENT DOCUMENTATION | No ICD-10-CM codes are written in the documentation. The engine produces no claim and routes the encounter to a human coder. Mode 01 does not translate "Increased thirst" into R63.1, or "obesity" into E66.9, even though the mappings are unambiguous. |
02 Standard | R73.03 — PrediabetesR63.1 — PolydipsiaR35.0 — Frequency of micturitionE66.9 — Obesity, unspecifiedZ71.3 — Dietary counseling | The engine codes the documented signs, symptoms, abnormal findings, and reason for visit. It does not code diabetes — the provider has not stated it. Every CMS-1500 service line has a supporting diagnosis pointer to establish medical necessity. |
03 Exploratory | R73.03 — PrediabetesR63.1 — PolydipsiaR35.0 — Frequency of micturitionE66.9 — Obesity, unspecifiedZ71.3 — Dietary counseling QUERY:E11.9 — Type 2 DM, unsp.QUERY:E11.65 — Type 2 DM w/ hyperglycemia | Submitted claim is identical to Mode 02. Additionally, the engine generates a query: "Lab findings (HbA1c 8.4%, random glucose 247 mg/dL) and clinical presentation are documented. Please clarify the diagnosis: (a) Type 2 diabetes mellitus, (b) Prediabetes, (c) Other — please specify, (d) Unable to determine." Candidate codes appear on the claim only if the provider answers and amends the chart. |
4.Compliance Commitments Across All Modes
The following safeguards apply regardless of which mode is in effect.
No uncertain diagnoses on outpatient claims
Across all three modes, the engine never codes "probable," "suspected," "rule out," or "working diagnosis" as confirmed on a CMS-1500. This adheres to §IV.H (1). The uncertain-diagnosis coding permitted under §II.H applies only to inpatient discharges and is outside the scope of CMS-1500 professional claims.
Non-leading query format
Every Mode 03 query is structured per the AHIMA/ACDIS brief (2): clinical indicators presented without interpretation; multiple-choice format with all clinically supportable options; "Other — please specify" and "Unable to determine" always included; no educational or leading content embedded in the query body.
Auditable provenance
Every code assignment is logged with the source text span in the documentation, the rule or guideline citation that authorized the assignment, and a timestamp. Mode 03 candidates and their queries are logged as a separate artifact tied to the encounter, with the provider's response (or non-response) recorded.
Medical necessity linkage
On every CMS-1500, each service line in Box 24E points to a diagnosis code in Box 21 that establishes medical necessity per the applicable LCD/NCD (3). Unspecified codes are used only when the documentation does not support a more specific code; the engine flags such cases for coder review.
5.References
The following authoritative sources govern the behavior of all three coding modes. Direct links to the official publications are provided.
(1)
ICD-10-CM Official Guidelines for Coding and Reporting, FY 2026
Centers for Medicare & Medicaid Services (CMS); National Center for Health Statistics (NCHS); Centers for Disease Control and Prevention (CDC). Approved by the four Cooperating Parties: AHA, AHIMA, CMS, and NCHS.
Sections cited: §I.A Conventions for the ICD-10-CM; §I.B.4 Signs and symptoms; §IV.D Codes that describe symptoms and signs; §IV.H Uncertain diagnosis; §IV.I Chronic diseases.
https://www.cms.gov/files/document/fy-2026-icd-10-cm-coding-guidelines.pdf(2)
Guidelines for Achieving a Compliant Query Practice — 2022 Update (with 2023 Addendum)
American Health Information Management Association (AHIMA) and Association of Clinical Documentation Integrity Specialists (ACDIS). Joint practice brief. Represents the recommended industry standard for provider queries in all healthcare settings.
Sections cited: General query guidelines (non-leading communication); query format and response options (multiple choice with "Other" and "Unable to determine" required); educational content prohibition within queries; query retention and audit requirements.
https://acdis.org/system/files/resources/ACDIS%20AHIMA%20Guidelines%20for%20a%20Compliant%20Query%202022_addendum2023.pdf(3)
CMS-1500 (02/12) Claim Form and Instructions
Centers for Medicare & Medicaid Services (CMS). Standard professional claim form used by non-institutional providers and suppliers to bill Medicare Part B and other payers. Maintained by the National Uniform Claim Committee (NUCC) on behalf of CMS.
Sections cited: Item 21 ICD-10-CM diagnosis codes (up to 12 supported); Item 24E Diagnosis pointer linking each service line to a diagnosis in Item 21 to establish medical necessity; applicable Local and National Coverage Determinations (LCD/NCD).
https://www.cms.gov/medicare/cms-forms/cms-forms/cms-forms-items/cms1188854