Enhancing medical coding efficiency through domain-specific fine-tuned large language models

Medical coding is essential for healthcare operations yet remains predominantly manual, error-prone (up to 20%), and costly (up to $18.2 billion annually). Although large language models (LLMs) have shown promise in natural language processing, their application to medical coding has produced limited accuracy. In this study, we evaluated whether fine-tuning LLMs with specialized ICD-10 knowledge can automate code generation across clinical documentation. We adopted a two-phase approach: initial fine-tuning using 74,260 ICD-10 code–description pairs, followed by enhanced training to address linguistic and lexical variations. Evaluations using a proprietary model (GPT-4o mini) on a cloud platform and an open-source model (Llama) on local GPUs demonstrated that initial fine-tuning increased exact matching from <1% to 97%, while enhanced fine-tuning further improved performance in complex scenarios, with real-world clinical notes achieving 69.20% exact match and 87.16% category match. These findings indicate that domain-specific fine-tuned LLMs can reduce manual burdens and improve reliability.