ICD-10-CM Official Coding Guidelines: Key Rules Every CPC Candidate Must Know

The ICD-10-CM Official Guidelines for Coding and Reporting are the rulebook that governs how every diagnosis code is selected, sequenced, and reported. These guidelines are not optional recommendations — they are mandatory standards that all coders must follow. The CPC exam tests these guidelines extensively, and candidates who have not studied them thoroughly will miss questions they could otherwise answer. If you are just getting started with ICD-10-CM, review What Is ICD-10-CM and How ICD-10-CM Codes Are Built before diving into the guidelines.

This guide covers the most heavily tested guideline rules organized by topic, with real examples showing how each rule applies on the exam.

Structure of the ICD-10-CM Guidelines

The Official Guidelines are published annually by CMS and NCHS and are organized into four sections:

For the CPC exam, Section I and Section IV are the most critical because CPCs primarily work in outpatient settings. However, you need to understand Sections II and III well enough to distinguish inpatient rules from outpatient rules — the exam tests this distinction regularly. For a detailed comparison, see Outpatient vs Inpatient Coding Guidelines.

Key Conventions

Conventions are the instructions built into the code set itself — the symbols, abbreviations, and formatting rules that tell you how to interpret and apply codes. These are found in Section I.A of the guidelines.

Code to the Highest Level of Specificity

This is the most fundamental coding convention: always assign a code to the highest number of characters available. If a code has a 4th, 5th, 6th, or 7th character, you must include every applicable character. A code is only valid at the level where no further specificity exists.

Example: Coding type 2 diabetes mellitus with diabetic chronic kidney disease as E11.22 is correct. Coding it as E11 alone is invalid because further characters are required and available. See Diabetes Coding in ICD-10-CM for more on diabetes-specific rules.

The Placeholder Character “X”

ICD-10-CM uses “X” as a placeholder in two situations. First, certain codes have an “X” embedded within the code to maintain the required character length. Second, and more commonly tested, some codes require a 7th character extension but have fewer than six characters before it — the placeholder “X” fills positions 5 and/or 6 so the 7th character falls in the correct position.

Example: The initial encounter code for a toxic effect of unspecified pesticide, accidental, is T60.91XA. The “X” fills the 6th position so that “A” (initial encounter) falls in the 7th position. Omitting the “X” and coding T60.91A would be invalid.

7th Character Extensions

Many ICD-10-CM codes, particularly in Chapters 19 (Injury) and 20 (External Causes), require a 7th character that indicates the encounter type. The three most common 7th characters are:

• A — Initial encounter: the active treatment phase, regardless of which provider sees the patient
• D — Subsequent encounter: routine care during the healing phase
• S — Sequela: complications or conditions arising as a direct result of the original condition

A common exam mistake is assuming “initial encounter” means the patient’s first visit to that specific provider. It does not — “initial” means the patient is receiving active treatment for the condition. A patient can have an initial encounter (A) at a second or third provider if active treatment is still ongoing. For a complete breakdown of 7th character rules, see Injury Coding and 7th Characters.

Excludes Notes

Excludes notes are among the most heavily tested guideline conventions on the CPC exam. There are two types, and they mean very different things. For a full guide with examples, see Excludes1 vs Excludes2 Notes.

Excludes1 — “NOT Coded Here”

An Excludes1 note means the two conditions cannot occur together. The excluded code should never be used at the same time as the code above the Excludes1 note. If the patient has the excluded condition, you code the excluded condition instead of the code where the Excludes1 note appears.

Example: Under category F10 (Alcohol related disorders), there is an Excludes1 note for F10.21 (alcohol dependence, in remission). You cannot code both active alcohol dependence and alcohol dependence in remission simultaneously — the patient is either one or the other.

Excludes2 — “Not Included Here”

An Excludes2 note means the excluded condition is not part of the code above it, but the patient can have both conditions simultaneously. If the patient has both conditions, you assign codes for each.

Example: Under J44 (Other chronic obstructive pulmonary disease), there is an Excludes2 note for asthma (J45.-). A patient can have both COPD and asthma, and both should be coded when documented.

Sequencing Instructions: Code First, Use Additional Code, Code Also

These instructions tell you the required order when reporting multiple codes together. Understanding these is essential for correct ICD-10-CM sequencing.

Code First / Use Additional Code

These instructions appear in pairs. “Code first” under a code tells you that another code should be sequenced before this one. “Use additional code” under a different code tells you to add a secondary code after it. They work together to enforce sequencing.

Example: Under E08 (Diabetes mellitus due to underlying condition), you see “Code first the underlying condition.” If a patient has hemochromatosis (E83.11-) causing diabetes, you code E83.11- first, then E08.-.

Code Also

“Code also” means you should assign an additional code when appropriate, but unlike “Code first” / “Use additional code,” there is no required sequencing. Either code may be listed first depending on the circumstances and the reason for the encounter.

And / With

“And” in ICD-10-CM should be interpreted as “and/or” — it means the code applies when either or both conditions are present. “With” means the two conditions have an assumed causal relationship when documented in the same patient — you do not need the physician to explicitly state causality. This “with” convention is particularly important in diabetes coding and hypertension coding.

Outpatient Coding Guidelines (Section IV)

Section IV contains the rules specific to outpatient encounters — the setting most relevant to CPC coders. The most critical outpatient rules are:

Uncertain Diagnoses Are Never Coded

In the outpatient setting, do not code diagnoses documented as “probable,” “suspected,” “questionable,” “rule out,” or “working diagnosis.” Instead, code the signs and symptoms that are known and documented. This is the opposite of the inpatient rule and is tested on virtually every CPC exam.

First-Listed Diagnosis Selection

The first-listed diagnosis is the condition chiefly responsible for the services provided. This differs from the inpatient principal diagnosis, which is determined after study. In outpatient coding, the reason for the encounter drives the first-listed diagnosis.

For encounters where a patient presents for a test ordered by another provider, and no signs, symptoms, or diagnosis is known at the time, code the reason for the test if known, or Z01.89 (Encounter for other specified special examinations) if not.

Chronic Conditions

Chronic conditions managed or monitored during the visit should be coded. Code all conditions that coexist and affect patient care or management. Do not code chronic conditions that are documented but not addressed during the visit.

Encounters for Circumstances Other Than Disease or Injury

When a patient presents for a service other than treating an active disease — such as a screening, a vaccination, or aftercare — a Z-code is typically the first-listed diagnosis.

Commonly Tested Chapter-Specific Guidelines

Certain chapters of ICD-10-CM have their own guideline rules that override or supplement the general conventions. These are tested heavily on the CPC exam.

Chapter 4: Endocrine — Diabetes Mellitus (E08–E13)

Diabetes requires as many codes as necessary to describe all associated conditions. The “with” convention applies — if a diabetic patient has a condition listed under the diabetes code’s “with” subterms, the causal link is assumed. You do not need the physician to state “due to diabetes.” Type 2 is the default when the type is not documented. See the full guide at Diabetes Coding in ICD-10-CM.

Chapter 9: Circulatory — Hypertension

Hypertension with heart disease has an assumed causal relationship under the “with” convention — code I11 (Hypertensive heart disease) rather than coding hypertension and heart disease separately. Similarly, hypertension with chronic kidney disease uses category I12 or I13. Full details in Hypertension Coding in ICD-10-CM.

Chapter 2: Neoplasms (C00–D49)

Neoplasm coding requires determining whether the neoplasm is malignant (primary or secondary), benign, uncertain behavior, or unspecified. The Table of Neoplasms in the Alphabetic Index is the primary lookup tool. When a patient is admitted for treatment of a malignancy, the malignancy is the principal/first-listed diagnosis. See Neoplasm Coding in ICD-10-CM.

Chapter 1: Infectious Diseases — Sepsis

Sepsis coding follows strict sequencing rules. Sepsis (A41.-) is coded first, with R65.20 or R65.21 as an additional code for severe sepsis. If sepsis leads to organ dysfunction, the organ dysfunction code follows. The sequencing is mandatory regardless of the encounter setting. Full breakdown at Sepsis Coding Guidelines.

Chapter 19: Injury and External Causes

Injury codes require 7th character extensions (A, D, S). External cause codes (categories V00–Y99) are required as additional codes to identify how the injury occurred. For multiple injuries, sequence the most severe injury first unless the guidelines or circumstances dictate otherwise.

How to Study the Guidelines for the CPC Exam

The guidelines document is over 100 pages, but you do not need to memorize every line. Focus your study on:

1. Section IV (Outpatient) — Know every rule in this section. It directly governs the coding scenarios on the CPC exam.
2. The uncertain diagnosis rule — Understand the outpatient vs inpatient difference cold. This is tested every exam.
3. Excludes1 vs Excludes2 — Know the difference and be able to apply it.
4. Sequencing instructions — Code First, Use Additional Code, Code Also.
5. Chapter-specific rules for diabetes, hypertension, neoplasms, sepsis, and injuries — these chapters generate the most exam questions.
6. The “with” convention — Especially for diabetes and hypertension.

Tab your ICD-10-CM manual at the guideline sections you reference most often. Write quick notes in the margins next to the most tested rules. For a printable summary, see the CPC Exam Cheat Sheet, and for full exam preparation strategy, see the CPC Exam Study Guide.

Frequently Asked Questions