MEDICAL CODING MARKET ANALYSIS

Market Size and Trends

The global medical coding market is estimated to be valued at USD 21.66 Bn in 2024 and is expected to reach USD 41.19 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 9.6% from 2024 to 2031.

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The medical coding market is expected to witness significant growth over the forecast period. This can be attributed to rising incidences of diseases owing to increasing geriatric population globally and the subsequent need for accurate medical documentation and billing. Furthermore, various initiatives undertaken by governments and private organizations to reduce healthcare costs are also expected to boost the market growth. Initiatives such as the implementation of Medicare and Medicaid programs in the U.S. and increasing usage of electronic health records (EHR) for better management are other factors expected to drive the market growth during the forecast period.

Increasing Product Launches by Key Market Players

Increasing adoption of organic growth strategies such as product launches by key market players is expected to drive the market growth over the forecast period. For instance, in June 2021, Semantic Health Inc., a healthcare technology company, announced the launch of its premier coding & auditing platform, the Semantic Health Information Platform. Semantic Health Inc.'s platform empowers medical coders and auditors to conduct concurrent review of clinical documentation, reduce revenue cycle inefficiencies, and enable actionable use of unstructured data. The platform was developed in close collaboration with medical coding and auditing professionals across various health systems in North America.

Market Concentration and Competitive Landscape

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Increasing adoption of inorganic growth strategies such as investments and fundings is expected to drive the market growth over the forecast period. For instance, on March 12, 2024, CodaMetrix, the leading artificial intelligence (AI) solution for transforming healthcare and revenue cycle management, announced a funding of US$ 40 million to advance medical coding quality and clinically enrich claims data through artificial intelligence (AI).

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The shortage of skilled medical coders is posing a significant challenge for the growth of the global medical coding market. Medical coding is a specialized job that requires in-depth knowledge of medical terminology and intricacies of various coding systems. However, in recent years, most countries have faced an acute shortage of trained and certified medical coders. One of the major reasons for this is the increasing complexities in healthcare systems and medical practices. With new procedures, treatments and diseases emerging constantly, the coding manuals need frequent updates. This puts additional burden on the existing coders to reskill themselves on a regular basis. At the same time, due to growing medical costs and administrative issues, the job has become more target-driven with increased work pressure. This has deterred many potential candidates from opting for this career path. According to the 2021 data from the World Health Organization (WHO), over 50% of countries reported facing severe crunch of qualified medical coders.

Market Opportunities – Cloud-based Medical Coding Solutions

Cloud-based medical coding solutions have a huge potential in the global medical coding market. With the advancements in cloud computing and its benefits like scalability, flexibility, and cost-effectiveness, more and more healthcare organizations are adopting cloud-based medical coding solutions. Cloud-based solutions allow remote access to coding software from anywhere using an internet connection. This enables medical coders to work remotely and efficiently handle the large coding workload of healthcare facilities. It also empowers healthcare organizations to scale up or down their coding needs based on volume fluctuations easily. With the COVID-19 pandemic emphasizing the importance of remote and flexible working models, the demand for cloud-based medical coding is set to rise substantially in the coming years.

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The classification system segment includes international classification of diseases (ICD) and healthcare common procedure code system (HCPCS). The international classification of diseases (ICD) sub-segment is estimated to hold 63.4% of the market share in 2024 owing to its widespread global adoption for clinical documentation and medical billing purposes across both inpatient as well as outpatient healthcare settings. ICD coding standards set by the World Health Organization are regularly updated to align with advancements in medical science and changes in healthcare policies across nations. The ongoing transition towards value-based reimbursement models in major markets like the U.S. and parts of Europe has intensified the focus on using ICD codes for quality reporting, risk adjustment, and care coordination. This is driving hospitals and physician practices to bolster their on-site coding staff as well as outsource more complex coding workloads. Furthermore, the emergence of electronic health records has simplified the process of capturing ICD codes at the point of care, thereby supporting their broader usage. 

Insights, By Component: Outsourced Coding Gains Prominence Amid Labor Shortages

The component segment includes in-house and outsourced. The in-house sub-segment is estimated to hold 58.2% of the market share in 2024 owing to the scale of medical coding workload and global shortage of trained clinical coders. Healthcare organizations, especially hospitals, find it difficult to hire and retain coders due to intense competition and complex nature of job. This has prompted many providers to partially or fully outsource their coding functions to specialty firms offering scalable offshore and onshore solutions. Outsourced coding allows hospitals to focus on their core clinical operations while benefiting from outsourcers' economies of scale, advanced technologies, qualified workforce, and flexible staffing models. It has emerged as a cost-effective strategy for facilities located in rural or underserved areas with limited access to local coding talent. Moreover, outsourcing provides an avenue for on-going training and certification of coders.

Insights, By End User: HCPCS Professional Billing Boosts Demand from Clinics

The end user segment includes hospitals, diagnostic centers, and others. The hospitals sub-segment is estimated to hold 35.6% of the market share in 2024 driven by the Healthcare Common Procedure Coding System (HCPCS). HCPCS codes are essential for professional billing and the reimbursement of diagnostic and minor procedures performed in physician clinics and diagnostic centers. They enable the efficient processing of insurance claims and compliance with changing regulations. The rising volume of outpatient visits and shift towards specialized ambulatory care are compelling such facilities to focus more on documentation, billing, and revenue cycle management. This is positively impacting investments in medical coding infrastructure and outsourced support. Furthermore, HCPCS coding improves consistency in coding practices and helps generate actionable analytics for the management of ambulatory care operations.

Regional Insights

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North America remains the dominant region in the global medical coding market and is estimated to hold 38.3% of the market share in 2024. Stringent regulations surrounding healthcare reimbursement and documentation in the U.S. drive substantial demand for coding services. Most leading medical coding outsourcing firms have established their headquarters and primary operations catering to the U.S. in this region. The presence of sophisticated healthcare IT infrastructure and widespread adoption of electronic health records in the U.S. and Canada are other factors contributing to North America's prominence. Automated coding tools integrating emerging technologies such as artificial intelligence are finding higher traction in this market. However, human expertise continues to play a critical role, given the complexity associated with Medicaid reimbursement guidelines. This ensures ongoing employment opportunities for medical coders.

Asia Pacific is witnessing the fastest growth and emerging as the new hotspot for the medical coding market. Countries like India, China, the Philippines, and Malaysia offer lucrative cost advantages that are attracting leading global firms to establish offshore coding centers. These nations are experiencing high economic expansion and see healthcare spending rising rapidly in line with GDP growth. The availability of educated English-speaking workforces has powered Asia Pacific's ascension. However, Asia Pacific also faces certain challenges in this market. Healthcare systems and reimbursement mechanisms across nations vary greatly compared to developed markets. Coding standards and guidelines still lack uniformity. Yet ongoing reforms, rising medical tourism, and the region's huge patient pools signal promising future potential. Outsourcing to Asia Pacific allows firms to achieve significant cost reductions while tapping growing international demand. If standards can be further harmonized, Asia Pacific is set to increasingly dominate the global supply of medical coding services.

Market Report Scope

Key Developments

• On April 10, 2024, XpertDox, a leader in AI-driven medical coding, has formed a strategic alliance with Positive Results Billing, a leading medical billing service provider. This partnership heralds the integration of XpertCoding, XpertDox's advanced AI medical coding software, into the workflow of Positive Results Billing, heralding a new era of efficiency in medical coding.
• On February 29, 2024, KAID Health, the leader in clinical analytics and patient chart summarization, announced the launch of its Patient Risk Identification & Data Extraction (PRIDE™) application, along with the formation of its new Coding Services Group. This new technology and the medical coding services organization help providers code more accurately and completely while improving care
• In December 2023, Professional Medical Billers Association, a leading provider of professional development and certification programs, announced the launch of their latest offering - Certified AI Medical Coder (CAIMC). This program is designed to equip medical coders with the necessary skills and knowledge to thrive in the ever-evolving healthcare industry, where AI is becoming increasingly prevalent.
• In May 2023, CodaMetrix, an AI technology platform transforming healthcare revenue cycles, announced the expansion of its multi-specialty autonomous medical coding platform to include bedside professional coding

*Definition: Medical coding is the process of applying universal alphanumeric codes to healthcare services, i.e., medical diagnosis, medical services, medical procedures, and medical equipment provided. Currently, medical coding is being increasingly used to create a proper of patient care, identify healthcare areas that require focus, streamline billing process, and accelerate payments to physicians. Medical coders are individuals responsible for translating physicians reports into useful medical codes, which may include a patient’s condition, doctor’s diagnosis prescription, and procedures performed on the patient, ensuring all vital information is coded appropriately to ensure consistency and accuracy. Medical coding helps to improve efficiency, reduce degree of errors, and simplify the tedious work of administrative staff.

Market Segmentation

• Classification System Insights (Revenue, USD Bn, 2019 - 2031)
  • International Classification of Diseases (ICD)
  • Healthcare Common Procedure Code System (HCPCS)
•  Component Insights (Revenue, USD Bn, 2019 - 2031)
  • In-House
  • Outsourced
•  End User Insights (Revenue, USD Bn, 2019 - 2031)
  • Hospitals
  • Diagnostic Centers
  • Others
• Regional Insights (Revenue, USD Bn, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East
    • GCC Countries
    • Israel
    • Rest of Middle East
  • Africa
    • South Africa
    • North Africa
    • Central Africa
• Key Players Insights
  • Oracle Corporation
  • Optum, Inc.
  • 3M
  • Athenahealth
  • Nuance Communications Inc.
  • The Coding Network
  • Optum, Inc.
  • Parexel International Corporation
  • Aviacode Inc.
  • Verisk Analytics, Inc.
  • Medical Record Associates, LLC.
  • STARTEK
  • Maxim Healthcare Services