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Reporting Medical Necessity with Z codes

In this article we take a look at the importance of healthcare reimbursement for asymptomatic encounters. We will look at identifying primary diagnosis requirements that drive reimbursement, how to get paid for postoperative treatment visits and underutilized reporting when it comes to Social Determinants of Health.

Medical Practices care for patients for a variety of reasons, and not all of those reasons equate to an illness. A physician or other qualified healthcare professional will see a patient looking to prevent illness or to get that very important check-up after the initial stage of treatment is complete. Since a patient will be seen in the absence of symptoms or disease, how does a medical provider report these services to an insurance company and receive reimbursement?

The good news is that the ICD10-CM data set provides a way to get reimbursed and show medical necessity for these types of visits with a code set in Chapter 21 of the Official Guidelines “Factors influencing health status and contact with health services (Z00-Z99)”

According to the Official Guidelines for 2023 that went into effect on 10/1/2022, “Z codes are for use in any healthcare setting” and may be used as a primary code on a claim or as secondary additional codes, dictated by the circumstances of the encounter. There are specific instructions given to those responsible for submitting claims when only specific codes are allowed as a primary diagnosis. These instructions are vital as many of these services are only paid by following the correct order.

Insurance carriers have built into their payment systems specific criteria that will reject claims that do not follow the specific coverage criteria for a patient and that coverage criteria is represented by the primary diagnosis according to a given policy.

Primary Diagnosis Requirements

Since the primary diagnosis drives reimbursement, it is important to identify the code categories in ICD10-CM Chapter 21 that are to be primary and which ones can never be primary.

Primary Codes

Encounter For

  • Z00 Encounter for general examination without complaint,suspected or reported diagnosis
  • Z01 Encounter for other special examination without complaint,suspected or reported diagnosis
  • Z02 Encounter for administrative examination
  • Z04 Encounter for examination and observation for other reasons
  • Z33.2 Encounter for elective termination of pregnancy
  • Z31.81 Encounter for male factor infertility in female patient
  • Z31.83 Encounter for assisted reproductive fertility procedure cycle
  • Z31.84 Encounter for fertility preservation procedure
  • Z34 Encounter for supervision of normal pregnancy
  • Z39 Encounter for maternal postpartum care and examination
  • Z38 Liveborn infants according to place of birth and type of delivery
  • Z40 Encounter for prophylactic surgery
  • Z42 Encounter for plastic and reconstructive surgery following medical procedure or healed injury
  • Z51.0 Encounter for antineoplastic radiation therapy
  • Z51.1- Encounter for antineoplastic chemotherapy and immunotherapy
  • Z52 Donors of organs and tissues
  • Z76.1 Encounter for health supervision and care of foundling
  • Z76.2 Encounter for health supervision and care of other healthy infant and child
  • Z99.12 Encounter for respirator [ventilator] dependence during power failure


  • Z11 Encounter for screening for infectious and parasitic diseases
  • Z12 Encounter for screening for malignant neoplasms
  • Z13 Encounter for screening for other diseases and disorders

There are additional reasons or information needed after reporting the reason for the encounter such as reporting a status of a condition or history of a condition. According to the Official ICD10-CM Guidelines for 2023:

“The reason for the encounter (for example, screening or counseling) should be sequenced first and the appropriate personal and/or family history code(s) should be assigned as additional diagnos(es).”

Aftercare Encounters

According to the Official guidelines, Aftercare codes can be first listed in the instance where an encounter is initiated solely to follow up with a patient that has had a procedure or service. They can also be used as secondary codes to report aftercare at the same time as another encounter. Example: (closure of a colostomy during an encounter for treatment of another condition.) Common reasons for aftercare include fitting and adjustment of devices and attention to artificial openings.

Specific to Orthopedic encounters you will want to use caution with aftercare codes for fractures. The ICD10-CM code structure already utilizes aftercare of fractures within the code set of Chapter 19 for Injuries. You can see this in the tabular section directly below a fracture code indicating the 7th character used to report the subsequent aftercare:

The appropriate 7th character is to be added to all codes in subcategory S52.11

A = initial encounter for closed fracture

D = subsequent encounter for fracture with routine healing

G = subsequent encounter for fracture with delayed healing

K = subsequent encounter for fracture with nonunion

P = subsequent encounter for fracture with malunion

S = sequela

Status Codes

Status codes will do exactly that, they will tell the status of the patient’s condition or procedure. These will not be listed as a primary code but will continue the story for the patient at the current encounter. There will need to be a primary “Encounter For” code listed before a status code is listed. They are very important because their use may affect the treatment they will receive and how it will be carried out. Use caution with these codes as some codes from other chapters have the status built into the code and it would not be appropriate to code in that instance. As an example in the Official Guidelines:

“Z94.1, Heart transplant status, should not be used with a code from subcategory T86.2, Complications of a heart transplant. In this instance, the complication code tells us that the patient is a heart transplant patient.”

Increase Revenue with Social Determinants of Health

An area of concern that we still need improvement in reporting is the social factors that affect a patient’s health. These codes have been reportable for several years with Categories Z55-Z65 in the ICD-10-CM Code set.

As we move into Value Based Care, it will be more important to document these factors. For instance, when it comes to recovering from a major surgery, a patient may not heal as fast as another due to several factors such as living alone without someone to help them improve mobility or even financial factors that prevent them from getting to their post operative visits. Ultimately financial factors are the number one social determinant of health affecting the patient population.

From a reimbursement standpoint we may not see the direct relationship with reporting these codes since they do not map to an HCC. So then in effect it would not be tied to incentives for reporting them.

Since 2021 though, we saw a key area where these status codes start to affect the reimbursement. Evaluation and Management has identified Social Determinants of Health as a Moderate level of Risk. So if documentation supports chronic conditions that are being managed and they fall under the Moderate level 4 codes, we can see how documentation of social determinants of health along with these chronic conditions will affect reimbursement. Remember by accuracy of documentation and correct abstraction of ICD10-CM codes we will see the true cost and resources a patient will be expected to consume.

Let’s focus on telling the story. This will lead to better patient care, access to treatment and accurate payment.

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