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Why CMS Just Changed an Excludes1 Note: The ICD-10-CM Guideline Trap

CPC Pathway Editorial Team · Coding · 2026-10-15


In the official ICD-10-CM tabular list, an Excludes1 note is defined as a pure instructional prohibition: “NOT CODED HERE!” indicating that the code excluded should never be used at the same time as the code above the note. However, for both AAPC CPC® exam test-takers and healthcare billing departments, rigid adherence to this definition without understanding the official CMS Excludes1 clinical exception causes improper claim denials and lost test marks. When two conditions are clinically unrelated to each other, CMS guidelines permit both codes to be reported simultaneously.

The 2 ICD-10-CM Exclusion Notes Decoded
Excludes1 (“Not Coded Here”)

Indicates two conditions cannot occur together because they represent mutually exclusive manifestations of the same disease (e.g. congenital vs acquired form).

The Exception: Allowed together ONLY if clinical documentation proves the two conditions are completely unrelated.
Excludes2 (“Not Included Here”)

Indicates that the condition excluded is not part of the condition represented by the code, but a patient may have both conditions concurrently.

Default Rule: Perfectly acceptable to report both codes together if documented in the patient chart.

The Official CMS Excludes1 Exception Rule

The Centers for Medicare & Medicaid Services (CMS) and the National Center for Health Statistics (NCHS) published formal clarification regarding Excludes1 notes to prevent clinical inaccuracies. The official guideline states:

“An exception to the Excludes1 definition is the circumstance when the two conditions are unrelated to each other. If it is documented that the patient has both conditions, and one is not due to or related to the other, both codes may be reported.”

— Official ICD-10-CM Coding Guidelines (Section I.A.12.a)

Clinical Case Study: How to Apply the Exception

Consider a 68-year-old female presenting to an orthopedic clinic with severe right hip pain and a separate history of a benign bone cyst in her mandible:

AAPC CPC Exam Alert: The Trap Question

On the CPC exam, question writers will test your knowledge of new code changes outlined in our Top 10 ICD-10-CM Changes for 2026. If a multiple-choice question presents two unrelated conditions under an Excludes1 header, Option A will omit the second code citing Excludes1. The correct option reports both codes under the official CMS guideline exception.

Frequently Asked Questions

Can two ICD-10-CM codes under an Excludes1 note ever be billed together?

Yes, two codes under an Excludes1 note can be reported together if clinical documentation clearly demonstrates that the two conditions are unrelated to one another. CMS and CDC official coding guidelines explicitly establish this exception to prevent undercoding clinically distinct diagnoses.

What is the primary difference between Excludes1 and Excludes2 notes?

Excludes1 means “Not Coded Here” and prohibits reporting both codes unless the unrelated clinical exception applies. Excludes2 means “Not Included Here” and indicates that while the excluded condition is not part of the primary code, the patient may have both conditions concurrently and both can be reported.

What happens if a claim is submitted with two related codes under an Excludes1 note?

If two clinically related codes under an Excludes1 note are billed together, clearinghouses and commercial payers will issue an automated claim rejection or denial for mutually exclusive diagnosis coding, requiring chart correction and claim resubmission.

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