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CMS Guidance: Diagnosis, Procedure Codes

Guidance History

Date Description of Change
07/17/2019 Original guidance issued
10/23/2020 Revised guidance:
  • Outpatient procedure codes in the OT file are to be reported in the PROCEDURE-CODE field rather than the HCPCS-RATE field. 
  • Included guidance regarding dental claims.

Brief Issue Description

This document outlines the specifications for reporting diagnosis and procedure codes in T-MSIS claims files. The specifications in the guidance provide an explanation on how the data elements should be populated to ensure that diagnoses and procedures covered by Medicaid are accurately reported in the state’s T-MSIS file submission.


Fee-for-service and encounter claims should include pertinent diagnostic and procedure information appropriate for the claim file and relevant services. This information is important for CMS to identify, measure and evaluate Medicaid participants’ health and associated health care services delivery. Diagnosis codes are used in conjunction with procedure information from claims to support the medical necessity determination for the service rendered and, sometimes, to determine appropriate reimbursement. This information is critical and is associated with the T-MSIS priority item (TPI) Completeness of Key Claims Service Data Elements – TPI-20.


CMS expects to find diagnosis codes and procedure codes populated for most claims and encounter records in inpatient (IP), long-term care (LT) and other (OT) files. However, not all claims and encounters require, or should be populated with diagnosis and procedure codes. This can lead to confusion in how states should submit data to T-MSIS. This guidance is intended to address that confusion.

CMS Guidance  

Diagnosis Codes

Excluding denied claims, void claims, and types of claims typically used to report financial transactions (supplemental payments, capitation payments, and service tracking payments), all IP and LT claims should contain an ADMITTING-DIAGNOSIS-CODE (provided at the time of admission by the physician), as well as a primary, or principal, diagnosis code reported in DIAGNOSIS-CODE-1. States should report all diagnoses relevant for the claim to CMS - up to twelve on an IP claim and up to five on an LT claim. The primary diagnosis should always be populated in DIAGNOSIS-CODE-1, with subsequent diagnoses being coded in fields DIAGNOSIS-CODE-2 through 12 for IP claims and in field DIAGNOSIS-CODE-2 through 5 for LT claims. Diagnoses are to be coded using valid international classification of diseases (ICD)-9/10 CM codes. States should report the diagnosis in T-MSIS as coded and identified by the medical service provider and should be full valid ICD 9/10 CM codes without a decimal point. For example, 210.5 should be coded as “2105” with no decimal point. The respective diagnosis code flag should be appropriately populated to indicate if the ICD-9 or ICD-10 code set is being used.

When diagnosis codes are included on OT claims, diagnosis codes should be reported in T-MSIS as coded and identified by the medical service provider and should be full valid ICD 9/10 CM codes without a decimal point. Several types of services on OT claims, such as transportation services, DME, and lab work, are not expected to have diagnosis codes. However, OT claim records for medical services, such as outpatient hospital services, physicians’ services, or clinic services are generally expected to have at least one diagnosis code. States can submit up to 2 diagnosis codes per claim on the OT file. DIAGNOSIS-CODE-1 and DIAGNOSIS-CODE-FLAG-1 should be populated prior to populating DIAGNOSIS-CODE-2 and DIAGNOSIS-CODE-FLAG-2.

Across the three claims files states should not duplicate diagnoses within a claim for reporting purposes. Any unused diagnosis code or flag field should be left blank. If the diagnosis code is blank, the corresponding diagnosis code flag should also be blank. If the diagnosis code is not blank, the corresponding diagnosis code flag should be populated with a valid value.

Procedure Codes

IP claims are expected to have procedure codes reported in T-MSIS as coded and identified by the medical service provider when procedures are performed during an inpatient stay. The principal procedure should be reported in T-MSIS using the PROCEDURE-CODE-1 field with secondary and other procedures reported in fields PROCEDURE-CODE-2 through 6. The fields PROCEDURE-CODE-FLAG-1 through PROCEDURE-CODE-FLAG-6 are used to indicate the type of procedure code reported by the provider and should be coded either “02” (ICD-9 CM) or “07” (ICD-10 CM PCS)[1].

On the OT file, financial transactions, denied and voided claims, and atypical services such as taxi services, home and vehicle modifications and respite services are not expected to have procedure codes. Procedure codes on professional and institutional claims in the OT file are expected to be current procedural terminology (CPT) or healthcare common procedure coding system (HCPCS) codes and should be maintained in the PROCEDURE-CODE field. PROCEDURE-CODE-FLAG on the OT file should be coded “01” (CPT 4) or “06” (HCPCS) to indicate the code set used. Dental claims will have Dental Procedures and Nomenclature codes, generally referred to as CDT codes, instead of CPT codes.  These codes should also be maintained in the PROCEDURE-CODE field and should be given a PROCEDURE-CODE-FLAG of "06” (HCPCS). Any modifiers used to improve coding accuracy should be reported in fields PROCEDURE-CODE-MOD-1 through PROCEDURE-CODE-MOD-4.

While the Data Dictionary directs that procedure codes on outpatient facility claims in the OT file are expected to be reported in the HCPCS-RATE field, effective January 1, 2021 states that are currently populating the OT HCPCS-RATE should cease doing so. This data element will no longer be required, the Data Dictionary will be updated to reflect this change, and states will be notified in advance. CMS has confirmed that nearly all states report the procedure code on outpatient facility claims in the OT file in the PROCEDURE-CODE field.

State-specific procedure codes (PROCEDURE-CODE-FLAG coded “10” through “87”) can be used to report atypical services billed through Medicaid. The list of valid values for state-specific procedure codes must be provided to CMS.

[1] While the T-MSIS data dictionary lists “ICD-10 CM PCS” the relevant set of procedure codes are referred to as “ICD-10 PCS.”

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