In the world of medical billing, denial codes are like lock combinations. Using the right one determines whether health care providers get paid or not. Understanding these codes is essential for your financial success. So let’s decode this complicated language together and ensure you get the compensation you deserve.

Compare Top Medical Billing Software Leaders

What Are Denial Codes?

Denial codes are alphanumeric codes assigned by insurance companies to communicate the reasons for rejecting or denying a health care claim submitted by a medical provider.

These codes help you understand the specific issues that led to the denial, allowing you to take appropriate actions to rectify them and resubmit the claim.

Common Denial Codes

Imagine the financial consequences of investing $25 in rectifying every denied claim you encounter. To minimize these expenses, gaining a comprehensive understanding of denial codes is paramount.

Are you ready to explore the list of denial codes in medical billing? We’ve outlined further steps you should take for each denial, because how you respond to denied claims matters!

CO 4 — Required Modifier Missing

Payers may reject your claim using code CO 4 when there’s a discrepancy between the procedure code and the diagnosis code or if the necessary modifier is missing.

In other words, it means that the medical treatment or service you provided doesn’t align with the medical condition or diagnosis for which you’re billing.

Further Actions

• Carefully examine the explanation of benefits to understand the reason behind the rejection.
• Collaborate with your coding team to thoroughly review codes submitted with the claim. Ensure that the procedure and diagnosis codes, along with any necessary modifiers, are accurate and align with the services provided.
• If the coding team confirms that the claim is correct, then reprocess the claim by contacting the insurance company’s claims department.
• If the insurance representative refuses to reprocess the claim, you have the right to submit an appeal with medical records explaining the medical necessity of the provided treatment or service.

CO 11 — Error in Coding

Payers deny your claim with code CO 11 when the diagnosis code you submitted on the claim doesn’t align with the procedure or service performed. This situation can arise for several reasons, such as:

• Making a typo in the diagnosis code.
• Using an incorrect diagnosis code.
• Submitting a diagnosis code that isn’t supported by the patient’s medical records.
• Billing a procedure or service that isn’t covered by the patient’s insurance plan for the submitted diagnosis code.

Further Actions

• Stay current with the latest American Medical Association (AMA) guidelines and Local Coverage Determinations (LCDs).
• Double-check all diagnosis codes for accuracy before submitting a claim.
• Craft a strong appeal letter that details the rationale for your claim, including the correct diagnosis-procedure code linkage, and provide any supporting documentation to substantiate your case.

CO 15 — Missing or Invalid Authorization Number

The insurance company will deny your claim with the code CO 15 if you enter the wrong authorization number for a service or procedure.

You need prior approval from the health plan company to get coverage for certain services or treatments to patients.

After approval, you need to enter the prior authorization number in block number 23 on the CMS-1500 form. Failure to do so will result in claim denials.

Further Actions

• Contact the billing department to check whether or not they submitted prior authorization requests.
• Recheck block number 23 on the insurance form to identify errors.
• If pre-authorization details aren’t available, place the claim on hold and try to get retro authorization.

Compare Top Medical Billing Software Leaders

CO 16 — Lacks Information Needed for Adjudication

Health plan providers deny claims with missing information using the code CO 16. One of the top reasons for such denials is missing or incorrect modifiers.

TAccording to MDAudit’s Final Benchmark Report 2022, 34% of hospital claims were denied due to missing or incorrect modifiers.

Some reasons for CO 16 denials include:

• Inpatient hospital claims: $690
• Outpatient claims: $900
• Professional claims: $170

Some reasons for CO 16 denials include:

• Demographic and technical errors
• Incorrect modifier
• Missing social security number
• Invalid Clinical Laboratory Improvement Amendments (CLIA) number

Further Actions

• Pay attention to accompanying remark codes and make changes accordingly.
• Recheck clinical notes to find missing information.
• Contact a clearinghouse to scrub claims before submitting them to payers.

CO 18 — Duplicate Claim

Insurance companies use the code CO 18 in conjunction with RARC N522 to deny duplicate claims. They mark claims as duplicates if you:

• Submit the same claim for a service or treatment twice.
• Resubmit the claim without indicating that it’s corrected.
• Provide the same service multiple times on the same day without a modifier.

When you send a claim to both primary and secondary payers, there’s a risk of denial if your primary insurer has already submitted it to the secondary payer.

You should check the electronic remittance advice to know whether or not the primary insurance provider crossed the claim over to the secondary one. If they did, you don’t need to resubmit the claim.

Further Actions

If you received the CO 18 denial, you should:

• Contact the insurance provider to uncover duplication reasons.
• Verify the claim processing status.
• Request the health plan company to reprocess the claim if you’re certain you submitted the claim only once.
• File an appeal if the health plan provider doesn’t provide a reasonable cause for the denial.

CO 22 — Coordination of Benefits

When dealing with patients who have multiple payers, it’s crucial to establish primary, secondary and tertiary insurance providers through coordination of benefits rules.

If you bill tertiary insurance companies for procedures covered by secondary providers, they’ll deny your claim with code CO 22.

You should always submit the claim to the primary health plan provider first. Then you can send the bill for the remaining balance to secondary or tertiary providers.

CO 22 denials can occur due to failure to update patients’ insurance details and incorrect coordination of benefits information.

Further Actions

• Perform insurance eligibility checks to identify primary insurance providers.
• Update clients’ coordination of benefits data.
• Know where to file the claim — Medicare, an employer-sponsored group insurance plan, private insurer or Medicare Advantage Plan.

Compare Top Medical Billing Software Leaders

CO 27 — Expenses Incurred After the Patient’s Insurance Expired

If you provide services to patients past their insurance expiration date, health plan providers will reject your claims with code CO 27.

It’s challenging to fight these denials. You should perform insurance eligibility verification checks before appointments to avoid such rejections. Prevention is better than cure!

Further Actions

• Contact the claims department to confirm the insurance policy’s effective and termination dates.
• Reach out to patients to check if they have any secondary insurers.
• Send the claim back for reprocessing if the policy is still active because even insurance providers can make mistakes.
• After conducting insurance verification, if you find out that patients don’t have any active insurance, you’ll need to bill them directly.

CO 29 — Limit for Filing Expired

Each insurance carrier has its claim submission time frame. And if you send them claims after submission deadlines, they’ll reject them using the denial code CO 29.

Further Actions

• Check the date you submitted the initial claim to the health plan provider.
• Calculate whether or not you submitted the claim before the filing deadline. You can use the following formula to calculate the same.
  • Time taken to submit original claim = Date insurance received the initial claim – date service provided to the patient
• If you have proof of timely filing, file for an appeal.

CO 45 — Charges Exceed Fee Schedule

Insurance companies deny your claim with code CO 45 when charges for the medical services you provided exceed the fee schedule maximum allowable or contracted amount that the insurance company has agreed to pay you.

Further Actions

• Review the bill and verify that the charges align with the agreed-upon rates in your contract with the insurance company.
• Confirm that the fee schedule in question is accurate and up-to-date.
• If the charges do indeed exceed the fee schedule and the patient is responsible for the difference, work with the patient to arrange a reasonable payment plan.

CO 97 — Service Already Adjudicated

Health plan providers deny claims using CO 97 when you file multiple claims for bundled services — procedures performed in a single care episode.

Evaluation and management (E&M) services billed within the global period fall under this category as insurance companies don’t reimburse you for each performed service; they pay an overall amount for performed procedures.

Some common examples of bundled services that aren’t payable separately include:

• Collecting blood samples during patient encounters.
• Transferring specimens from the lab to the doctor’s office.
• Using extended codes even though your practice runs 24 hours daily.

Further Actions

• Check whether the procedure code falls under the inclusive, exclusive or bundled category.
• Once you determine the type of procedure code, contact the coding department and ask them if they can use a modifier and resubmit the claim.
• Call the claims department and ask them about the procedure for filing an appeal.

CO 167 — Diagnoses Not Covered

Payers don’t cover every procedure. They use the denial code CO 167 to reject claims that don’t fall within their coverage area.

Further Actions

• Review diagnosis codes (ICD-11) to identify errors.
• Contact the insurance provider to determine which diagnoses aren’t covered.
• After revisions, resubmit the claim as a corrected claim.

Go through the claim denial codes list to learn more about denial codes.

Compare Top Medical Billing Software Leaders

How To Avoid Denials

Denials can damage the financial health of your practice or company. Now that you know the common reasons and denial codes, you can predict and prevent denials.

We’ve highlighted some things you can follow to avoid denials.

Leverage Technology

Following manual processes can invite errors. And there’s no room for mistakes when it comes to submitting claims. One typo and there goes your claim into the denial bin.

You should invest in medical billing solutions, medical practice management software, medical claims processing platforms and electronic health records to submit clean claims. They help you store and update patients’ insurance details whenever required.

Clearinghouse integration assists you in scrubbing claims for coding and formatting discrepancies before sending them to payers.

Use these products as shields and bid farewell to denials!

Educate Your Staff

Employees unaware of the latest claim submission guidelines are likely to process claims incorrectly. This can cause claim rejections and revenue losses and pressure patients financially. That’s why training your staff about claim processing workflows is vital.

You should encourage medical coders to register for the American Academy of Professional Coders medical coding certification programs to help them achieve coding accuracy. Every employee should know about insurance plans and payers’ guidelines.

Perform Insurance Verification

To assume that the same insurance provider still covers the client’s health care expenses is a grave mistake. The client might change their health plan company over time.

Sending claims to the wrong insurance organizations will result in rejections. That’s why you should always run benefits eligibility checks before appointments to reduce denials and determine financial responsibility at an early stage.

Improve Clinical Documentation

Relying on short-hand notes is not the best practice. Traveling from department to department, they can get lost in translation, causing miscommunication. And miscommunication gives birth to errors. That’s why you should invest in electronic medical records to capture correct patient demographic, clinical and insurance details.

Know Your Payers

Insurance companies keep changing their guidelines. For instance, Aetna changed its nonparticipating-provider claim filing limit from 27 months to 12 months. That’s why it’s essential to stay updated about insurance companies’ evolving rules for prior authorizations, referrals and medical necessities to reduce denial rates.

Run Audits

Remember how our parents used to advise us to learn from our mistakes? You need to apply the same rule to avoid denials too. You should generate denial reports to identify similar trends and resolve issues.

Compare Top Medical Billing Software Leaders

Review Reason Codes and Statements

Centers for Medicare and Medicaid Services (CMS) contractors review claims and prior authorizations to check whether or not the services billed for follow Medicare guidelines.

If the review results in a denial or non-affirmed decision, contractors provide a detailed explanation with review reason codes and statements.

Because it’s challenging to understand denial codes from different providers, CMS developed a standardized list to make it easy. They added a new set of generic reason codes and statements to Part A, Part B and durable medical equipment.

Access the current list of review reason statements and document codes to avoid future denials.

Where Are Denial Codes Located?

You can find denial codes on electronic remittance advice. It includes details about claim processing, covering payment or denial information.

We’ve highlighted some codes that you can find in electronic remittance advice below.

Claim Adjustment Group Code

Claim adjustment group codes contain two alpha characters that determine financial responsibility for the unpaid amount of the claim balance. Health plan companies use them in conjunction with claim adjustment reason codes.

We’ve listed the five claim adjustment group codes below.

• Contractual Obligation (CO): Assigns financial responsibility to medical providers based on their payer contracts, often leading to the write-off of claim balances.
• Corrections and Reversal (CR): Indicates health plan companies’ correction or reversal of a previously adjudicated claim. Paired with PR, CO or OA to signify revised information.
• Other Adjustment (OA): Signifies that no other code fits the adjustment criteria.
• Payer Initiated Reductions (PI): Demonstrates that the adjustment isn’t the client’s responsibility.
• Patient Responsibility (PR): Denotes denials that assign financial responsibility to patients or their secondary insurance provider, encompassing deductibles, copays and coinsurance.

Claim Adjustment Reason Code (CARC)

Claim adjustment reason codes explain financial adjustments. When health care companies don’t make any adjustments to a claim, they leave the CARC column in the electronic remittance advice empty.

Remittance Advice Remark Code (RARC)

Remittance advice remark codes provide additional information for the reasons stated in the CARC. There are two types of RARCs:

• Supplemental: Insurance providers use them to offer supplementary details related to the CARCs already mentioned. These codes act as an extension of the CARCs, providing a more comprehensive explanation for the adjustments made to the claim.
• Informational: Health plan companies preface these as alerts to convey details about remittance processing such as payment processing timelines, administrative guidelines or any additional information necessary for efficient claims processing.

Compare Top Medical Billing Software Leaders

Reason for Denials

Understanding the reasons for denials is essential, as it enables you to address and rectify issues, ensuring a smoother and more efficient revenue flow while providing patients with the care they need. We’ve highlighted some of the reasons below.

Missing Information

Ensure you provide all necessary information when submitting claims, including patient and provider details, and required medical codes for proper billing. If you forget to mention even a tiny detail, payers may deny your claim.

Let’s say you submit a claim for a patient’s MRI, but you forget to include the diagnosis code indicating the medical reason for the MRI. The payer may deny your claim due to missing information.

Lack of Authorization

If you provide services without obtaining the necessary authorization, health insurance companies might deny your claim. To prevent this, verify and secure authorization before performing any services.

Patient Eligibility

Denials can result from treating a patient who doesn’t have active or valid insurance coverage.

To prevent such denials, confirm the patient’s insurance eligibility before rendering any services to ensure that the insurance will cover the costs.

Medical Necessity

Consider a scenario where you perform an expensive diagnostic test, but the medical records lack sufficient information explaining why the test was necessary for the patient’s condition. In such a case, payers can deny your claim due to insufficient documentation of medical necessity.

Duplicate Claim or Service

Maintaining accurate records and billing systems is crucial to prevent unintentional duplicate claims. If you accidentally submit the same claim multiple times, it can lead to denials.

Limit for Filing Expired

Suppose you have a patient with a procedure performed a year ago, and you submit the claim well beyond the insurer’s one-year filing limit. In this case, the insurance company is likely to deny the claim due to the expired filing period.

We’ve outlined the claim filing timelines of some payers below.

• Cigna: Participating health care providers need to submit claims within 90 days and out-of-network providers should submit claims within 180 days after the date of service.
• TRICARE: You should file claims within one year of service or inpatient discharge or within three years if overseas.
• United Healthcare: You should request payment of benefits within 90 days after the service or discharge date.

Service Not Covered By Payer

Some services or procedures — cosmetic, experimental, dental or vision — may not be covered by a patient’s insurance plan.

Providing such services without verifying coverage can lead to denials, leaving the patient responsible for the cost.

To prevent this, always check the patient’s insurance plan to ensure it covers the services you plan to provide.

Compare Top Medical Billing Software Leaders

How To Avoid Denials

Denials can damage the financial health of your practice or company. Now that you know the common reasons and denial codes, you can predict and prevent denials. We’ve highlighted some ways to help you avoid denials below.

Use Technology

Following manual processes can invite errors. And there’s no room for mistakes when it comes to submitting claims. One typo and there goes your claim into the denial bin.

You should invest in medical billing solutions, medical practice management software, medical claims processing platforms and electronic health records tools to submit clean claims. They help you store and update patients’ insurance details whenever required.

Some of these solutions integrate with clearinghouses, assisting you in scrubbing claims for coding and formatting discrepancies before sending them to payers.
Use these products as shields and reduce denials!

Educate Your Staff

When employees aren’t up-to-date with the latest claim submission guidelines, it can lead to incorrect claim processing, resulting in claim rejections and revenue losses. That’s why training your staff about claim processing workflows is vital.

You should encourage medical coders to register for the American Academy of Professional Coders’ medical coding certification programs to help them achieve coding accuracy. Every employee should know about insurance plans and payers’ guidelines.

Perform Insurance Verification

To assume that the same insurance provider still covers the client’s health care expenses is a grave mistake. The client might change their health plan company over time.

Sending claims to the wrong insurance organizations will result in rejections. That’s why you should always run benefits eligibility checks before appointments to reduce denials and determine financial responsibility at an early stage.

Improve Clinical Documentation

Relying on short-hand notes isn’t the best practice. Traveling from department to department, they can get lost in translation, causing miscommunication. And miscommunication gives birth to errors.

That’s why you should invest in electronic medical records systems to capture correct patient demographic, clinical and insurance details.

Know Your Payers

Insurance companies keep changing their guidelines and policies. For instance, Aetna postponed the payment reduction for occupational and physical therapy assistants from December 2023 to March 2024.

It’s essential to stay updated about insurance companies’ evolving rules for prior authorizations, referrals and medical necessities to reduce denial rates.

Run Audits

Remember how our parents advised us to learn from our mistakes? You need to apply the same rule to avoid denials too. You should generate denial reports to identify similar trends and resolve issues.

Audits often uncover breakdowns in communication between different departments, such as coding, billing and clinical teams. By improving communication and collaboration among these teams, you can reduce errors and denials.

Compare Top Medical Billing Software Leaders

FAQs

How can I file an appeal?

You can file for an internal appeal or external review.

Follow the steps below to file an internal appeal.

• Write a letter to the insurance company requesting an internal appeal. You should include the patient’s name, claim number and health insurance ID.
• Attach the explanation of benefits to the letter to show denied services.
• Send supporting documents and a letter to the insurance provider.

Remember you need to file an internal appeal within 180 days after you receive a denial.

If insurance companies still deny your claim, you can file for an external review.

Find out who administers the external claim review process in your state. Some states have their external review programs, while others use the federal external review process administered by the Department of Health and Human Services (HHS).

Don’t forget to check the list of states’ external review programs.

What are hard and soft denials?

Hard denials are hard to overturn. It means that the insurance company reviewed the claim and decided to deny it. They might also tell you to write off the claim amount.

Soft denials are easy to resolve. It can occur due to formatting or coding mistakes. You can correct the claim and resubmit them to the payer within the assigned deadline.

How can I select the best medical billing solution?

With hundreds of billing products on the market, selecting the one that best fits your company can take time and effort. There are several factors you need to consider before making a buying decision.

First, you should assess your organizational needs. You can conduct surveys to take your employees’ opinions into account. You can also refer to our medical billing software requirements checklist to list your software needs.

Secondly, consider software pricing. Don’t invest all your money in a product. You should review your budget plans and choose a system that doesn’t burn a hole in your pockets.

Lastly, contact health care providers using the product to gather honest software reviews.

If you prefer web-based software, don’t forget to read our article on the best cloud medical billing solutions.

Compare Top Medical Billing Software Leaders

Next Steps

Handling denials is daunting. Insurance companies might deny your claim for minor discrepancies, causing revenue losses. Medical billing software can save you from making silly mistakes and help you submit clean claims.

But how do you compare hundreds of products quickly? Don’t worry! We got you covered! You can refer to our free comparison report to compare products simultaneously and generate scorecards. You can also view their user sentiments and functional and technical requirements to make an informed decision.

Why do you think it’s essential to learn about denial codes in medical billing? How do you deal with denials? Please let us know in the comments below.

Related Articles

• Best Medical Compliance Software for Practices
• Key Steps to Follow for a Successful Medical Billing Process
• Best Free Medical Billing Software