Navigating the complexities of medical billing involves encountering claim denials and the accompanying denial codes. These codes serve as keys to understanding why claims are rejected, providing essential insights for revenue cycle management and accurate reimbursement. This comprehensive guide delves into the various denial codes, common reasons behind denials, and strategies to avoid them, offering valuable insights for healthcare providers, billing specialists, and anyone interested in understanding the intricacies of claim rejections.

Denial Codes in Medical Billing

Insurance companies utilize denial codes to communicate the reasons for fully or partially denying healthcare claims. These codes offer specific explanations, enabling providers and billing professionals to comprehend the basis for denials and take corrective action. Denial codes enhance transparency and clarity in claim processing, benefiting both patients and providers.

Types of Denial Codes

Claim Adjustment Group Codes (CAGCs)

These standardized codes indicate the category or type of adjustment made to a healthcare claim. CAGCs are used in conjunction with claim adjustment reason codes (CARCs) by health plan providers.

Claim Adjustment Reason Codes (CARCs)

 CARCs provide standardized denial codes that explain financial adjustments in electronic remittance advice (ERA) transactions. They help identify the reasons for financial adjustments in claims.

Remittance Advice Remark Codes (RARCs)

RARCs offer additional information accompanying CARCs, providing more detailed insights into claim adjustments. They are categorized into supplemental and informational codes.

Common Reasons for Denial Codes

Missing Information

 Denials may occur due to incomplete patient information, such as missing social security numbers, modifiers, or addresses.

Lack of Authorization

   – Failure to obtain prior authorization for services can lead to claim denials.

Patient Eligibility

Claims may be denied if patients are not eligible for the services under their insurance plan.

Medical Necessity

 Insurance companies assess whether medical procedures meet their criteria for necessity, leading to denials if criteria are not met.

Duplicate Claims or Services

Submitting duplicate claims or services can result in denials, as insurance companies identify and reject duplicates.

Limit for Filing Expired

Claims submitted after the deadline are denied, emphasizing the importance of timely filing.

Common Denial Codes in Medical Billing

CO-4 – Required Modifier Missing

 Denotes the absence or incorrect use of a necessary modifier in the claim.

CO-11 – Error in Coding

Indicates an incorrect diagnosis code for the procedure, leading to claim denial.

CO-15 – Missing or Invalid Authorization Number

 Used when an incorrect authorization number is provided for a service or procedure.

CO-16 – Lack of Information

Denotes claim rejections due to missing information, including incorrect or absent modifiers.

CO-18 – Duplicate Claim

Occurs when the same service or treatment is billed twice, resulting in a duplicate claim.

CO-22 – Coordination of Benefits

Denies claims when billed to the wrong insurance provider in cases of multiple insurance coverage.

CO-27 – Expenses Incurred After the Patient’s Insurance Expired

Rejects claims for services provided after the patient’s insurance coverage has expired.

CO-29 – Limit for Filing Expired

Denies claims submitted after the deadline for filing, emphasizing the importance of timely submission.

CO-45 – Charges Exceed Fee Schedule

 Indicates charges higher than the maximum permitted service charge, often related to copays and deductibles.

CO-97 – Service Already Adjudicated

Denies claims for bundled services or procedures already paid for by insurance companies.

CO-167 – Diagnoses Not Covered

Rejects claims for procedures not covered under the patient’s insurance plan.

What to Do After Receiving a Claim Denial

Present an internal appeal within 180 days following the claim denial notice, ensuring proper documentation to support the appeal.

If the internal appeal is unsuccessful, consider an external review by a neutral third party to resolve the issue.

Stay proactive in addressing claim denials, implementing strategies to reduce mistakes and raise the acceptance rate of claims 

How to Avoid Claim Denials in Medical Billing

Train staff on current claim filing rules and insurance policies to minimize errors.

Verify insurance eligibility prior to appointments to ensure accurate billing and reduce denials.

Leverage technology, such as medical billing software, to prevent errors and streamline claim submission processes.

 Improve documentation accuracy by utilizing electronic medical records to record patient information.

Implement real-time eligibility checks to confirm insurance coverage and prevent claim denials.

 Stay updated on insurance company policies and requirements to adapt billing practices accordingly.