Denial Coding: Master Claim Denials & Maximize Revenue

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Understanding Medical Billing Denial Codes

When a healthcare claim is rejected or adjusted by an insurance company, the reason is often communicated through a denial code. Understanding these codes is critical for a healthy revenue cycle and the overall financial well-being of any healthcare organization. Effective denial management is about more than just fixing errors; it’s about optimizing your entire billing process.

Unfortunately, claim denials are on the rise, significantly impacting healthcare organizations’ bottom lines. The administrative costs associated with these denials can be substantial, eating into already tight margins.

This guide provides a comprehensive look at denial codes: what causes them, and how to prevent and resolve them. We’ll cover the most common codes, the reasons behind the denials, and actionable steps you can take to minimize their impact and improve your billing practices. Let’s dive into the world of denial coding and learn how to turn those denials into revenue.

Understanding Denial Codes: Categories and Structure

When a healthcare claim is denied, it comes with a code — or rather, several codes. These codes explain why the claim was rejected and what, if anything, can be done to fix it. Let’s break down the main types of codes you’ll encounter.

Claim Adjustment Group Codes (CAGCs)

CAGCs give you a broad overview of why a claim was adjusted.

  • Contractual Obligation (CO): The adjustment was made based on a contract or agreement.
  • Corrections and Reversals (CR): This relates to fixing errors on previous claims.
  • Other Adjustments (OA): For adjustments that don’t fit into the other categories.
  • Payer-Initiated Reductions (PI): The insurance company reduced the payment.
  • Patient Responsibility (PR): This is the amount the patient owes.

Claim Adjustment Reason Codes (CARCs)

CARCs provide more specific reasons for the claim adjustment. These codes are super important because they tell you exactly why the claim was denied, so you know what steps to take to correct it.

Remittance Advice Remark Codes (RARCs)

RARCs offer extra details or instructions related to the claim adjustment. They can guide you on how to resolve the denial or provide additional context to understand the situation better.

Common reasons for denial codes

Payers deny medical claims for all kinds of reasons. Here are some of the most common:

  • Missing information. If you leave out key details, like the patient’s name or the procedure code, the payer will likely deny the claim.
    • Action: Use checklists to make sure you’ve included all the necessary information.
  • Lack of authorization/pre-certification. Some services need approval before you provide them. If you don’t get that approval, the claim will be denied.
    • Action: Set up a system to verify which services need pre-authorization.
  • Patient eligibility issues. If the patient’s insurance isn’t active at the time of service, the claim will be rejected.
    • Action: Check the patient’s eligibility and coverage before you provide care, using real-time verification tools.
  • Medical necessity concerns. Payers might deny claims if they don’t think the service was medically necessary, based on the documentation.
    • Action: Make sure your documentation clearly supports the medical necessity of the service.
  • Duplicate claims or services. Submitting the same claim more than once will result in a denial.
    • Action: Use practice management software that checks for duplicates and cross-reference your submission records.
  • Exceeded filing deadline. Insurers have deadlines for claim submissions. If you miss the deadline, the claim will be denied.
    • Action: Keep track of claim submission dates and set up reminders to ensure timely filing.

Top denial codes and how to address them

Dealing with claim denials is a headache, but understanding the reasons behind them is the first step toward getting paid appropriately. Here’s a rundown of some of the most common denial codes and what you can do about them.

CO-11: Coding Error / Diagnosis Not Specific

  • Reason: You’ve used an incorrect code or the diagnosis code wasn’t specific enough.
  • Action: Double-check that your documentation supports the most specific diagnosis code available. Make sure your staff is up to date on proper billing practices and coding changes with regular training.

CO-15: Missing or Invalid Authorization Number

  • Reason: You didn’t get the required authorization or pre-certification.
  • Action: Put a verification system in place so you can easily check whether authorization is needed.

CO-16: Incomplete Information

  • Reason: The claim is missing some info that’s needed for it to be processed.
  • Action: Use a claim submission checklist to make sure you have all the necessary documentation. Electronic claim tools can also help by flagging missing info.

CO-18: Duplicate Claim/Service

  • Reason: The same claim or service was submitted more than once.
  • Action: Use practice management software with duplicate checking features.

CO-22: Coordination of Benefits (COB)

  • Reason: Another payer might be responsible for covering this claim.
  • Action: Always check to see if a patient has other applicable insurance policies. Submit claims to the primary insurer first.

CO-29: Filing Deadline Expired

  • Reason: The claim was submitted after the payer’s deadline.
  • Action: Set up a system to track and monitor claim submission dates so you can make sure you get them in on time.

CO-45: Excessive Fees

  • Reason: The amount you billed is higher than the allowed amount or contracted rate.
  • Action: Review your fee contracts regularly to make sure your charges are in line with what the payers have agreed to.

CO-97: Service Included in Another Service

  • Reason: The service is already included in the payment for another service.
  • Action: Refer to the payer’s bundling guidelines and rebill with the appropriate modifiers if necessary.

CO-167: Diagnoses Not Covered

  • Reason: The patient’s insurance plan doesn’t cover the diagnosis.
  • Action: Before you provide a service, make sure the patient’s plan covers it.

CO-204: Service Not Covered

  • Reason: The patient’s plan doesn’t cover the service, equipment, or drug.
  • Action: Educate patients about the limits of their coverage and let them know about other options.

How can you prevent claim denials?

Claim denials eat into your revenue. Luckily, there are several steps you can take to protect your bottom line.

  • Train and educate your staff. Make sure your team is up-to-date on all coding changes, billing practices, and insurance coverage rules. Give them easy access to current codes and modifiers.
  • Verify insurance. Always check a patient’s eligibility and coverage before you provide services. Make insurance verification a standard part of patient check-in.
  • Use technology. Take advantage of electronic claim tools and practice management software. Use real-time eligibility checks and automated systems to track authorizations.
  • Improve documentation. Make sure your documentation is clear, complete, and accurate in electronic health records. It should always support the medical necessity of the service and use the most specific diagnosis code available.
  • Check eligibility proactively. Confirm patient eligibility to be sure you have the correct insurer information. Use payer portals and automated systems for authorization tracking.
  • Stay on top of payer policies. Always be aware of current payer policies and guidelines, including claim filing deadlines and coverage requirements.
  • Conduct regular audits. Audit your processes periodically to find denial patterns and areas where you can improve. Keep track of how often certain denial codes appear and their financial impact.

Appealing denied claims

If a claim is denied, you have options. Here’s a basic outline:

Internal Appeals

First, check the Explanation of Benefits (EOB) to see why your claim was denied. Did you leave out information? Was there a coding error? If so, correct the claim and resubmit it with the correct information and any supporting documentation.

External Appeals

If your internal appeal fails, you may be able to request an external review. You’ll need to write a comprehensive appeal letter and include medical records and any forms specific to your payer.

Understanding the EOB

The EOB is key. It will tell you exactly how the claim was processed, including any denials or adjustments.

Key Takeaways

Understanding and managing denial codes is essential for keeping a healthcare organization’s revenue cycle healthy. Preventing denials proactively and appealing them effectively are the best ways to minimize their impact.

Denial management is a process of continuous improvement. You can regularly review patterns in denials, update staff training, and use technology to improve claim accuracy and lower denial rates. By adapting to changes in payer policies and coding guidelines, you can ensure that your organization is always working to minimize denials.