What Are Common Denial Codes in Medical Billing That You Need to Know?

Medical billing demands accuracy, especially when handling claim denials, which are flagged with specific denial codes indicating the reason for rejection. As medical coders, understanding these codes is essential to identify issues, correct errors, and resubmit claims promptly. This process helps ensure timely reimbursement and supports a stable revenue flow for healthcare providers.

Denial Codes

Denial codes are alphanumeric identifiers that explain why insurance claims are denied, covering issues like clerical errors, medical necessity, and coverage limits. By understanding these codes, healthcare providers can resolve claim issues more efficiently and improve reimbursement rates. Common denial categories include eligibility, billing errors, and patient coverage questions

Some common reasons for denied claims include:

• Billing Errors
• Missing Information
• Questions Regarding Patient Coverage

Claim Adjustment Group Code (CAGC)

Claim Adjustment Group Codes (CAGCs) are standardized codes used to categorize adjustments in Electronic Remittance Advice (ERA) transactions, helping streamline billing and payment processes. These codes help identify the type of adjustment being made to a healthcare claim.

Each CAGC consists of two letters that indicate who is responsible for any unpaid portions of the claim. They are commonly used alongside Claim Adjustment Reason Codes by health insurance providers.

Common Claim Adjustment Group Codes:

• Contractual Obligation (CO): This code explains the difference between a provider’s charges and what the payer will actually pay. Typically, healthcare organizations write off these claim balances.
• Corrections and Reversal (CR): This code is used when a previously processed claim is corrected or reversed by the health plan. The CR code is often combined with other codes like PR, CO, or OA to clarify the situation.
• Other Adjustment (OA): This code is used when none of the other group codes apply. In such cases, the claim has been fully paid.
• Payer Initiated Reductions (PI): This code is applied when the payer believes that the adjustments should not fall under the patient’s financial responsibility.
• Patient Responsibility (PR): The PR code assigns the payment responsibility to the patient or their secondary insurance. This includes amounts for deductibles, copays, and coinsurance.

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Registration and Eligibility Denial Codes

CO 4: Required Modifier Missing

Denial code CO 4 is issued when a necessary modifier is missing or if there’s a conflict between the procedure code and the modifier used. Modifiers are two-character codes used with CPT codes to show that a service has been altered without changing its definition. Without the right modifiers, claims may face payment delays.

Next Steps:

1. Check with your coding team to see if they used the wrong modifier or missed it entirely.
2. Correct the error and resubmit the claim.
3. If the right modifier was used and the claim is still denied, contact the claims department for reprocessing. If they disagree, consider filing an appeal with supporting evidence.

CO 22: Not Covered When Performed by This Provider

This denial code often occurs when a service is provided by an out-of-network provider or when the referring physician isn’t recognized by the insurance plan.

To Avoid This Denial:

• Confirm the patient’s insurance coverage and network status before delivering services.
• Ensure that all referring physicians are credentialed and recognized by the insurance provider.
• Educate patients about their insurance plan’s network restrictions.

CO 24: Charges Covered Under Capitation Agreement

This denial indicates that a service should be billed under a capitated or managed care agreement instead of being billed separately.

To Address This Issue:

• Review all capitation agreements with payers.
• Set up a system to identify capitated services before submitting bills.
• Train staff on the specifics of managed care contracts.

CO 27: Expenses Incurred After Coverage Terminated

This code indicates that a service was provided after the patient’s insurance coverage had expired.

To Minimize These Denials:

• Verify insurance eligibility during each patient visit.
• Keep patient insurance information updated regularly.
• Educate patients on the importance of maintaining current insurance details.

CO 29: Limit for Filing Expired

Claims submitted after the deadline will be rejected with denial code CO-29.

Filing Deadlines Examples:

• Aetna: Claims must be submitted within 12 months for hospitals and within 90 days for doctors.
• Cigna: Participating providers have 90 days, and out-of-network providers have 180 days to submit claims.
• TRICARE: Claims need to be submitted within one year.
• United Healthcare: Claims must be submitted within 90 days post-service.

Next Steps:

1. Verify the date the claim was submitted to the health plan.
2. Calculate to ensure the claim was filed before the deadline.
3. If you can prove timely submission, file an appeal.

CO 31: Patient Cannot Be Identified as Our Insured

This denial means that the patient’s information doesn’t match the records of the insurance company.

To Prevent This:

• Double-check patient demographics at every visit.
• Use insurance card scanners to minimize data entry errors.
• Implement a verification system for patient identity and insurance details.

CO 32: Dependent Not Eligible

This denial occurs when a claimed dependent does not meet the eligibility criteria set by the insurance plan.

To Address This:

• Verify dependent eligibility during registration.
• Maintain detailed and updated records of dependent information.
• Educate patients about the coverage rules for dependents.

CO 45: Charges Exceed Fee Schedule

This denial code is issued when a service charge exceeds the maximum allowable amount. It may also involve copays and deductibles, indicating the patient’s responsibility.

Next Steps:

1. Include all relevant HCPCS codes to describe the services provided in replacement claims.
2. Attach any necessary supporting evidence to ensure proper processing.

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Coding and Billing Denial Codes

CO 11: Diagnosis Inconsistent with Procedure

This denial means that the submitted diagnosis code does not support the billed service.

To Prevent This:

• Ensure coders are well-trained on proper code linkage.
• Use coding software that flags potential mismatches.
• Conduct regular audits to identify and rectify error patterns.

CO 15: Missing or Invalid Authorization Number

This denial occurs if the authorization number provided for a service is incorrect. Prior authorization from the insurance provider is required for specific services.

Next Steps:

1. Check with the billing team to confirm if prior authorization was requested.
2. Verify block 23 on the CMS-1500 form for errors.
3. Hold the claim until you can obtain retroactive authorization if necessary.

CO 16: Missing Information or Submission Errors

This general denial indicates that the claim lacks essential information or contains errors.

To Address This:

• Implement a claim scrubbing process to catch common errors before submission.
• Provide ongoing training to staff on correct claim submission procedures.
• Regularly update your billing software to comply with current requirements.

CO 18: Exact Duplicate Claim

This denial happens when the same claim is submitted more than once for the same service on the same date.

To Prevent Duplicates:

• Use a tracking system for submitted claims.
• Train staff to check for existing claims before resubmission.
• Regularly audit your billing process for duplicate submissions.

CO 97: Service Included in Payment for Another Procedure

This denial, often called “bundling,” occurs when a charge is submitted separately for a service that should be included in another procedure’s payment.

To Address This:

• Stay informed about current bundling rules and regulations.
• Use coding software to flag potential bundling issues.
• Train coders regularly on proper unbundling techniques.

CO 167: Diagnoses Not Covered

Some procedures are not covered by payers, leading to denial code CO-167.

Next Steps:

1. Review the ICD-11 denial codes for errors.
2. Consult with your insurance company to clarify which diagnoses are covered.
3. Resubmit the claim after making necessary corrections.

CO 234: Procedure Not Paid Separately

Similar to CO-97, this denial indicates that the service should not be billed separately.

To Prevent This:

• Educate billing staff on payer-specific billing guidelines.
• Use coding software to identify services that are typically bundled.
• Regularly review charge capture processes.

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Medical Necessity Denial Codes

CO 50: Non-Covered Services

This common denial occurs when a service is deemed not medically necessary by the payer.

To Address This:

• Ensure thorough documentation of medical necessity in patient records.
• Familiarize providers with payer-specific medical necessity criteria.
• Implement a pre-authorization process for frequently denied services.

CO 55: Experimental or Investigational Procedure

This denial is issued when a payer considers the service to be experimental or not proven effective.

To Minimize Denials:

• Stay updated on current medical practices and payer policies.
• Obtain pre-authorization for treatments that may be considered experimental.
• Provide comprehensive documentation supporting the use of new treatments.

CO 56: Treatment Not Proven Effective

Similar to CO-55, this denial indicates that the payer doesn’t recognize the treatment as established and effective.

To Address This:

• Keep informed about the latest clinical research and payer policies.
• Keep clear records that show how well the treatment works.
• Consider appealing denials with peer-reviewed literature that supports the treatment.

CO 119: Benefit Maximum Reached

This denial means that the patient has exhausted their coverage for a specific service.

To Prevent This:

• Track patient benefit usage throughout the year.
• Educate patients about their benefit limits and usage.
• Implement alerts for providers when a patient is nearing benefit limits.

CO 150: Information Does Not Support Level of Service

This denial indicates that the documentation does not justify the billed service level.

To Address This:

• Train staff on proper documentation techniques.
• Regularly audit documentation and coding practices.
• Use EHR templates that prompt for necessary documentation elements.

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Payer-Specific Denial Codes

CO 109: Claim Not Covered by Payer

This denial occurs when a claim is submitted to the wrong insurance provider.

To Prevent This:

• Implement a thorough insurance verification process.
• Train front-desk staff on identifying and verifying correct payer information.
• Utilize electronic tools to verify patient insurance details accurately.

CO 133: Service Pending Further Review

This code indicates that the payer requires more information before making a determination.

To Address This:

1. Respond promptly to requests for additional documentation.
2. Clearly outline the services rendered to facilitate the review.
3. Follow up with the payer to confirm the status of the review.

To manage claims effectively, it’s essential to understand the handling procedures for each denial code. Keeping billing software current, training staff regularly, and conducting audits are crucial steps to reduce errors and prevent rejections.

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Strategies to Prevent and Manage Claim Denials

Improving your medical billing process goes beyond understanding common denial codes. It’s vital to implement effective strategies to prevent denials and handle them efficiently to ensure a healthy revenue cycle.

Here are essential strategies to consider:

Establish a Comprehensive Verification Process

A solid insurance verification process is crucial for minimizing denials. Key steps include:

• Confirming patient eligibility and benefits prior to each visit
• Verifying coverage details, including limitations and exclusions
• Checking for any pre-authorization needs
• Regularly updating patient information

Invest in Continuous Staff Training

Ongoing training for your billing staff is essential. Focus areas should include:

• Keeping up with coding changes and payer policies
• Mastering proper documentation techniques
• Understanding common denial reasons and prevention methods
• Developing effective communication skills for interacting with payers and patients

Leverage Technology

Utilizing technology can enhance billing accuracy and efficiency. Consider:

• Implementing claim scrubbing software to identify errors before submission
• Using electronic eligibility verification tools
• Adopting EHR systems with integrated coding and billing features
• Employing analytics tools to track denial trends and highlight areas for improvement

Develop a Denial Management Process

A structured approach to managing denials can boost resolution rates. This process should involve:

• Prompt review and categorization of denials
• Assigning denials to appropriate staff for follow-up
• Tracking the progress of denial resolutions
• Analyzing denial trends to inform process enhancements

Ensure Proper Eligibility Checks

A robust system for verifying patient eligibility is critical. It’s important to establish real-time eligibility checks to ensure services provided fall within the parameters of the patient’s insurance coverage, reducing the likelihood of denials.

Enhance Documentation Practices

Proper documentation can prevent many denials or support successful appeals. Encourage providers to:

• Document thoroughly, including all relevant details that justify medical necessity
• Use precise language in their notes
• Clearly link diagnoses to treatments
• Stay informed about documentation requirements for different payers

Conduct Regular Audits

Regular internal audits help identify and rectify potential issues before they lead to denials. Focus on:

• Performing coding audits for accuracy
• Reviewing claims pre-submission to catch possible problems
• Analyzing denied claims for patterns and improvement areas
• Periodically reviewing the entire revenue cycle process

Foster Interdepartmental Communication

Effective communication between clinical and billing teams is vital in preventing denials. Encourage:

• Regular meetings among coding, billing, and clinical staff
• Clear channels for discussing complex cases or billing challenges
• Collaborative problem-solving for denial issues

Cultivate Strong Payer Relationships

Building solid relationships with payers can be beneficial. Consider:

• Regular communication with payer representatives
• Participating in payer-sponsored training sessions
• Providing constructive feedback on unclear policies
• Negotiating contracts with clear terms and expectations

Educate Patients on Insurance and Billing

Patient education can help prevent denials. Ensure patients:

• Understand their insurance coverage and limitations
• Are aware of potential out-of-pocket expenses before receiving services
• Keep their insurance information current
• Have a clear understanding of billing processes and their responsibilities

Establish an Effective Appeals Process

Despite best efforts, some denials will occur. A strong appeals process can help recover lost revenue. This should include:

• Quickly identifying denials that are eligible for appeal
• Gathering necessary documentation to support the appeal
• Crafting clear and concise appeal letters that directly address the reasons for denial
• Tracking appeal outcomes to refine future strategies

By implementing these strategies, healthcare organizations can significantly reduce claim denials and enhance their overall revenue cycle management.

Summary

Effectively managing billing denials is crucial for healthcare providers to maintain a healthy revenue cycle. By understanding denial codes and implementing preventive strategies, providers can enhance reimbursement rates and financial health. Regular training and process reviews are essential since payer policies and coding standards are always evolving.

A proactive approach focusing on prevention and efficient resolution leads to improved financial outcomes and patient satisfaction, allowing providers to turn the challenge of claim denials into opportunities for operational excellence.

Tranquil Medical Billing & Coding experts help you avoid all kinds of code errors.