Coding and documentation — Your best defense

By Faith C. M. McNicholas, RHIT, CPC, CPCD, PCS, CDC, Senior Manager, Coding and Reimbursement, October 1, 2025

Academy coding staff address important coding topics each month in DermWorld Coding Consult. Read more Derm Coding Consult articles.

Accurate and thorough documentation in the medical record is essential for proper coding, as it ensures that all aspects of the patient’s condition and the care provided are captured. Comprehensive documentation supports accurate code selection and reporting of services rendered. At its core, documenting the services and procedures performed by dermatologists and non-physician clinicians (NPCs) serves to optimize clinical care while creating an informative record that supports continuity and coordination of care.

Inadequate or incomplete medical record documentation can inadvertently lead to claim denials, delays in reimbursement, and potential audits. Accurate and comprehensive documentation is essential to establish the medical necessity of services rendered and helps demonstrate compliance with payer coverage criteria.

Importantly, the medical record serves as the legal document of record and must be able to withstand scrutiny during any claim review or audit process. Dermatologists are responsible for ensuring that the documentation reflects the medical necessity for each encounter, including all procedures and/or services performed. When applicable, incorporate language from the payer’s payment policy to help substantiate medical necessity and align documentation with coverage requirements.

Medicare and other payers require that every code reported on a claim form be fully supported by the documentation in the medical record. Capturing specific diagnostic elements and thoroughly documenting the details of procedures and/or services provided during the encounter is essential for accurate coding, appropriate reimbursement, and audit preparedness.

The importance of consistent, complete, and specific documentation cannot be overstated — without it, accurate and compliant coding is not possible. All AMA CPT and ICD-10-CM codes reported on a health insurance claim form must be fully supported by the documentation in the medical record. Incomplete documentation that lacks the necessary detail may result in:

• Use of unspecified diagnosis codes that may not be reimbursable by an insurer

• Use of specified codes that are not supported by the documentation

For example, a medical record with the documentation stating, “the lesion in the patient’s left flank area has now developed some central blistering, and there are some satellite lesions in a dermatome distribution that are consistent with herpes zoster,” would be reported with L98.9 Disorder of the skin and subcutaneous tissue, unspecified because the code selection would be based on the clinical findings documented in the patient’s medical record.

In many cases, unspecified codes are not included on CMS’s Local Coverage Determinations (LCDs) or National Coverage Determinations (NCDs) as supporting medical necessity. As a result, claims may be denied or subject to post-payment recoupment if the documentation does not meet payer policy requirements for medical necessity.

Avoid ambiguous documentation terms, as they may lead to uncertainty in coding and medical necessity determination. Terms to steer clear of can include:

• Consistent with

• Compatible with

• Indicative of

• Suggestive of

• History of (e.g., diabetes, hypertension – unless clearly relevant to current care)

• Suspect

• Probable

• Versus

When possible, use definitive language that reflects the diagnosis and supports the services provided.

The ICD-10-CM clinical concepts state that documenting medical necessity means capturing critical details to support accurate coding and medical necessity. Be sure to document the following key elements to ensure accurate ICD-10-CM code selection and alignment with payer requirements, when applicable:

• Type and subtype of the condition being treated

• Site, laterality, and/or specific location being treated

• Severity of condition being treated

• Temporal factors (e.g., acute, chronic, recurrent)

• Etiology and manifestation of the condition being treated

• Associated complications

• Causal factors (e.g., trauma, infection, underlying condition)

• Adverse effects (e.g., medication reactions)

• Episode of care (e.g., initial, subsequent, sequela)

Review payer coverage policies

Most payers — if not all — provide specific guidance on the documentation requirements for procedures and/or services commonly performed in the dermatology practice. This information is readily accessible through Medicare National and Local Coverage Determinations (NCDs/LCDs) and private payer coverage and benefit policies. Reviewing these resources ensures that medical records meet payer expectations and support coverage for the services rendered.

In many cases, documentation that satisfies Medicare’s requirements will meet — or even exceed — the standards set by private payers. As such, aligning documentation with Medicare guidelines can serve as a strong foundation for overall compliance. Understanding these policies and applying their standards to the medical record documentation can help ensure both accurate coding and payer compliance.

Currently, Medicare has three National Coverage Determinations (NCDs) directly relevant to dermatology:

• Hair Analysis (NCD 190.6): Not covered as a diagnostic procedure under Medicare.

• Treatment for Psoriasis (NCD 250.1): Medicare covers conventional treatment methods.

• Treatment for Actinic Keratosis (NCD 250.4): Medicare covers destruction of AKs without restrictions based on lesion type or patient characteristics.

Although dermatologists perform numerous surgeries and services, not all the services rendered have an LCD defining the coverage criteria. Outside of the NCDs, multiple LCDs are pertinent to dermatology. It is important that you identify who your local Medicare Administrative Contractor (MAC) is and routinely review the local coverage determination (LCD), coding, and billing articles to ensure your claim submission meets the documentation and billing requirements specified therein. These documents are frequently updated and can be viewed by visiting the CMS Medicare Coverage Database.

A few of the most common LCDs, as published by the MACs, include:

• Mohs Micrographic Surgery

• Removal of Benign Lesions

• Removal of Malignant Skin Lesions

• Debridement/Wound Care

• Special Stains & Immunohistochemistry

• Skin Substitutes

• Incision and Drainage of Abscess of Skin

• Allergy Testing

Private payers also have coverage benefit policies that can be viewed on their individual payer websites.

Documentation examples with recommended improvements:

1. Skin biopsy

2. Patch testing

3. Shave removal

Further, do not forget to include the reason you are recommending that the lesion requires treatment and why the treatment methodology was chosen (e.g., shave removal versus destruction or excision — whichever will yield the most effective outcome).

Other documentation requirements should include:

• the type and amount of local anesthesia administered when the procedure is performed

• the width and the final excised diameter

• the depth of excision, whether full-thickness, epidermal, or dermal

  • The number and type of specimens(s) removed come in handy when there is a need to bill for a biopsy and/or pathology

It is important to succinctly describe that the lesion was removed using the shave technique to indicate the therapeutic intent of the procedure. Otherwise, payers may misinterpret the shave procedure as a tangential (shave) biopsy.

If the lesion is treated for cosmetic reasons, indicate that the patient was informed of the lack of medical necessity prior to the procedure being performed and that there is no coverage for cosmetic procedures. Where applicable (Medicare), the patient should have an ABN completed and a copy saved on file.

4. Excision of malignant lesion

Further, document why the physician believes the lesion requires treatment and the treatment methodology (e.g., shave removal, destruction, or excision) or when the lesion is treated with destruction methodology (laser-/electro-/cryo-/chemosurgery, or curettement), whichever will yield the most effective outcome.

Other documentation requirements include the type and amount of local anesthesia administered when performed. Further, document the width and the final excised diameter as well as the depth of excision, whether full-thickness, epidermal, or dermal. The number and type of specimens removed come in handy when there is a need to bill for a biopsy and/or pathology.

If the lesion is treated for cosmetic reasons, indicate that the patient was informed of the lack of medical necessity prior to the procedure being performed and that there is no coverage for cosmetic procedures. Where applicable, the patient should have an advance beneficiary notice or financial consent completed and a copy saved on file.

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