Question: Nebraska Subscriber Answer: Use 706.2 (Sebaceous cyst) for the sebaceous cyst and 229.8 (Benign neoplasm of other and unspecified sites; other specified sites) for the location in the perineum. You will need to also report another diagnosis code that is based on your urologist's documentation indicating the medical necessity for the sebaceous cyst removal . For example, you might report 459.0 (Hemorrhage, unspecified), 686.8 (Other specified local infections of skin and subcutaneous tissue) or 686.9 (Unspecified local infection of skin and subcutaneous tissue), 695.9 (Other specified erythematous conditions; other), or 782.0 (Disturbance of skin sensation). These diagnoses show medical necessity for the excision and ensure payment. Without the additional diagnosis codes, many payers, including Medicare, will not reimburse you for the excision.