If you've ever opened your ICD-10-CM code book, found your code, and then hit a wall of fine print underneath it that says "Excludes1" or "Excludes2," you are not alone. Most new coders read those notes, panic slightly, and then either ignore them or over-apply them. Both are costly habits.
Here's the thing: CMS just released the April 2026 ICD-10-CM update, and while there are no new diagnosis codes in this cycle, they changed several Excludes1 notes to Excludes2. That matters more than it sounds. It means some code pairs that were wrong to use together last year are now correct to use together starting April 1st. If you don't understand the difference between those two types of notes, you will not know why that matters or what to do about it.
So let's fix that right now.
What is an Excludes1 Note?
An Excludes1 note means the two conditions cannot exist together in the same patient, or they are so mutually exclusive that you should never assign both codes on the same claim. It is a hard stop.
Here is a simplified example of how this looks in practice. If a code has an Excludes1 note listing another code underneath it, you are being told: don't use these two codes together. Pick one. The documentation doesn't support both.
In most Excludes1 situations, the condition listed in the note represents the same condition described differently, or a condition that by clinical definition cannot coexist with the one you are coding.
What is an Excludes2 Note?
An Excludes2 note is different. It means the excluded condition is not included in the code you're looking at, but the two conditions can coexist in a patient. When a patient has both conditions and both are documented, you can code both.
Think of Excludes2 as a reminder note, not a prohibition. It is saying: the code you are looking at doesn't capture this other thing, so if the patient also has it and the physician documented it, you need a separate code for it.
Why Does This Distinction Trip Up New Coders?
Because at first glance, both types look like warning signs that say "don't use this code." And that is not what Excludes2 is telling you.
New coders who don't know the difference will see an Excludes note and skip the second code entirely, even when the patient clearly has both conditions and both are documented. That is an underreporting error, and it can affect DRG assignment and reimbursement.
What Changed in April 2026, and Why It Matters
CMS converted a number of Excludes1 notes to Excludes2 in the April 2026 update, which went live April 1st. This is not a minor housekeeping change. It reflects clinical reality catching up with the code set.
One example is in the area of opiate use. The code Z79.891 (long-term current use of opiate analgesics) previously had an Excludes1 note for certain opioid use disorder codes. That has been revised to Excludes2, recognizing that a patient can legitimately be on long-term prescribed opiate therapy and also have a concurrent opioid use disorder diagnosis. Before April 1st, coding both would have been flagged as an error. After April 1st, it is not only allowed, it may be required when the documentation supports both.
If your team is auditing charts dated April 1, 2026 and beyond using pre-April 2026 coding logic for these specific code pairs, you are applying outdated rules.
A Real-World Example of Getting This Wrong
Picture a 72-year-old patient admitted with acute kidney injury on top of known chronic kidney disease stage 3. The physician documents both clearly throughout the encounter. The Excludes note relationship between certain AKI and CKD codes requires you to understand how they interact.
If you see "Excludes" and stop, you may undercode the encounter. If you understand that AKI on CKD has its own combination code and the Excludes notes tell you what else can or cannot be added, you code it correctly and the DRG lands where it should.
This is exactly the kind of scenario we work through in the Reilly Coding Edge case studies, where you read the full chart, see the documentation, and figure out what the notes are actually telling you, rather than guessing.
The Bottom Line
Excludes1 = never code these together. Hard stop. Clinical impossibility or duplication.
Excludes2 = not captured here, but the patient can have both, and you may need to code both.
And as of April 1, 2026, some code pairs that used to fall under Excludes1 have moved to Excludes2. That changes your coding logic for those specific combinations going forward.
If you're still building your confidence with ICD-10-CM notes, sequencing rules, and coding logic that actually matches the real medical records you'll see on the job, that's exactly what the practice cases inside Reilly Coding Edge are built for. Not memorization. Thinking it through.
Have you run into an Excludes note that confused you this week? It's probably one a lot of new coders are struggling with at the same time.
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