In the early 1900s, it was realized that in order to cope with maintaining medical records of patients and payments by insurance companies for medical expenses, a unified coding system was required to be developed. Medical insurance companies were finding it increasingly difficult to justify making different payments to two or more patients who had contacted the same illness and been through the same procedure.

The health industry realized that there was an urgent need to develop a standardized method of tracking patients' diagnosis, procedure or treatment. This would also provide uniform standards for billing insurance companies for health services. Asides from this medical coding could be used for a variety of applications in health care, medicine and medical information. These include:

– Statistical analysis of diseases

– Help in decision support systems

– Ability to access and monitor epidemic outbreaks.

There are two main classifications of medical coding, which are statistical and nomenclature. In statistical coding, similar clinical concepts are grouped together into categories. The reason for doing this is so as not to make them too voluminous. Statistical coding also has an 'others' or 'unspecified' category for conditions that cannot be classified in the specified categories. In nomenclature coding, which is the one most commonly used in medical coding, there is a separate code for every clinical concept. These medical codes are grouped into:

– Diagnostic codes

– Procedural codes

– Pharmaceutical codes

– Topographical codes

Diagnostic codes: In health care diagnostic codes are used to identify and group diseases, disorders, symptoms, human response patterns, and medical signs. There is no single purpose code and each code is assigned for a distinct purpose. The codes are revised when new knowledge is attained.

Procedural codes: these are numeric or alphanumeric codes that are used to identify specific medical procedures taken by medical professionals.

Pharmaceutical codes: These codes are assigned to uniquely identify medications. There are several coding systems used worldwide.

Topographical codes: In medicine, topographical codes are used to identify a specific location in the human body.

In the United States the American Medical Association have developed their own medical coding systems and patients can use these codes to determine their diagnosis and treatment and also to check their billing from the health service provider or payments received from the insurers. The World Health Organization maintains several sets of international classifications that help in facilitating comparing of health related data. Some countries have adapted and are using these systems for their own health care systems.

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