Excludes 1 vs Excludes 2 in ICD-10: The Rules That Trip Up Even Experienced Coders

The Core Difference

ICD-10-CM uses two types of Excludes notes to define relationships between codes:

Excludes 1 = "NOT CODED HERE"

The two conditions cannot be coded together. They are mutually exclusive. If a patient has condition A, you cannot also assign condition B from the Excludes 1 list for the same encounter.

Excludes 2 = "NOT INCLUDED HERE"

The code does not include the excluded condition, but a patient CAN have both conditions simultaneously. If both are documented and meet coding criteria, assign both codes.

The practical impact for HCC coding: Excludes 2 notes are opportunities to capture additional HCC value by coding both conditions. Excludes 1 notes are guardrails that prevent invalid code combinations. Confusing the two can result in either missed HCC capture (treating Excludes 2 as Excludes 1) or invalid submissions (treating Excludes 1 as Excludes 2).

Excludes 1 Rules and Examples

When you see an Excludes 1 note, the listed conditions are considered mutually exclusive with the current code. You must choose one or the other based on the documentation.

Example: J44.1 (COPD with acute exacerbation)

Excludes 1:

This means you cannot code both J44.1 and J44.0 for the same encounter. If a COPD patient has both an acute exacerbation and an acute lower respiratory infection, you code J44.0 (COPD with infection) because the infection is the more specific condition — and add a code for the specific infectious organism.

Example: E11.9 (Type 2 diabetes without complications)

Excludes 1:

This confirms that E11.9 cannot be coded alongside any diabetes-with-complications code. If the patient has documented complications, code the specific complication code — do not add E11.9 alongside it.

HCC Impact of Excludes 1

Excludes 1 notes rarely cause HCC value loss because the excluded codes typically map to the same or a higher-value HCC. The risk is in coding the wrong member of the mutually exclusive pair — for example, choosing E11.9 (HCC 35, RAF 0.105) instead of E11.22 (HCC 38, RAF 0.302) when CKD is documented.

Excludes 2 Rules and Examples

Excludes 2 notes mean the excluded condition is not part of the current code, but both conditions can coexist. If both are documented, code both.

Example: I50.2 (Systolic heart failure)

Excludes 2:

A patient can have both systolic and diastolic heart failure. If both are documented, assign both I50.2x and I50.3x. Under V28, both map to heart failure HCCs, and the hierarchy rules determine which is paid — but the documentation supports both diagnoses existing.

Example: N18.3 (CKD Stage 3)

Excludes 2:

This is a staging code — a patient is at one stage, not multiple. However, the Excludes 2 designation means these are not mutually exclusive in the ICD-10 sense; a patient could theoretically progress from Stage 3 to Stage 4 during a documentation period. For a single encounter, code the current documented stage.

HCC Impact of Excludes 2

Excludes 2 notes are where coders most often miss HCC value. When you see Excludes 2, ask: "Does the patient have the excluded condition documented in addition to the primary code?" If yes, code both — each may map to a separate HCC.

Common missed opportunity: J44.1 (COPD with exacerbation) has an Excludes 2 for J96.x (Respiratory failure). A patient with COPD exacerbation who also has documented respiratory failure should have both conditions coded. COPD maps to V28 HCC 280 and respiratory failure maps to V28 HCC 277 — two separate HCCs from the same encounter.

Common Mistakes

1. Treating All Excludes Notes the Same

The most frequent error: assuming all Excludes notes mean "do not code together." This causes coders to miss valid Excludes 2 combinations that capture additional HCC value.

2. Not Checking the Tabular List

Excludes notes are in the ICD-10-CM Tabular List (the detailed code listing), not in the Alphabetic Index. Coders who rely only on the index or on memory miss Excludes notes entirely. Always verify in the Tabular List — or use a tool like the HCC Buddy encoder that displays Excludes notes with each code.

3. Ignoring Excludes Notes in EHR Auto-Coding

Many EHR systems suggest ICD-10 codes based on problem list entries. These auto-suggestions do not check Excludes 1 rules. A coder who accepts auto-suggested codes without verifying Excludes 1 compliance may submit invalid code combinations.

4. Confusing "Cannot Coexist" with "Does Not Coexist in This Code"

Excludes 2 does not mean the conditions rarely coexist — it means the current code does not include the other condition. Both conditions are common, expected to coexist, and should be coded separately when documented.

Quick Reference

Use the HCC Buddy encoder to check Excludes notes and HCC mappings for any ICD-10 code.