September, 2024

Decoding the Top Medical Billing Denial Codes and Next Steps in Addressing Them

Most healthcare providers deal with managing claim denials. While frustrating, any denial for coverage typically comes with what seems like a secret code that, if you can decipher, helps you to know why it was denied.

While denial codes in medical billing are not all that mysterious, it can be somewhat frustrating to try to figure out what went wrong. Yet, it is highly critical to do so. The American Medical Association reports that in 2022, denials rose to 11% of all submitted claims, translating to 110,000 unpaid claims for the average-sized health system.

Data from a survey conducted by Premier shows that nearly 15% of all claims submitted to a private payer and 15.7% of Medicare Advantage claims are denied initially, with the average denial charge at $14,000. What’s more, only about 54.3% are overturned, but it requires providers to spend a significant amount to turn them around, costing hospitals and health systems as much as $19.7 billion in total.

Given the significant impact of denial costs, it is always critical to minimize the risk of them in the first place. Even then, you may end up facing them on a routine basis. Knowing what denial codes in medical billing are, as well as having a quick and easy way to consider the top denial codes enables your practice to move fast at overturning them, potentially saving time and money as a result.

What Are Denial Codes for Medical Billing?

When payers deny coverage for claims submitted by providers, they issue a denial code to the provider. That code provides the details providers need to find out why the claim was denied. They offer a specific explanation for why the claim was rejected. In many situations, that means the provider can resubmit the claim, if applicable, to recover the value.

The denials are found in electronic remittance advice (ERAs), which provide a breakdown of critical factors about all aspects of claims, including payment, adjustment of claims, submission, and denials. ERAs have various unique codes to cover numerous claim status updates, including remittance advice remark codes, claim adjustment reason codes, and claim adjustment group codes.

List of Denial Codes in Medical Billing

The following are some of the most common denial codes and what they mean. While other denial codes exist, these are the top 10 denial codes in medical billing across most healthcare systems. You can view a full list of denial codes from www.medicaid.utah.gov.com.

CO 4: Required Modifier Missing

Discrepancy between procedure code and diagnosis code or a missing necessary modifier lead to the CO 4 denial code. The medical treatment or service provided is not in alignment with the medical condition or the patient diagnosis that the provider is billing for, in short.

CO 11: Error in Coding

A CO 11 denial claim means that the claim submitted does not align with the procedure or the service the patient received. There are various reasons this can occur, but most commonly it is due to human input error (a typo) or the use of an incorrect diagnosis code. This may also be applied when the patient’s medical records do not support the diagnosis, or when a service or procedure is not covered by the payer’s policy.

CO 15: Missing or Invalid Authorization Number

The wrong authorization number of the procedure or service will lead to the CO 15 denial code. To receive coverage for this type of claim, the provider needs to seek approval from the health plan company first, prior to providing services to the patient. After the approval from the payer, the prior authorization number is then placed on the CMS-1500 form. Any time this process does not happen, the CO 15 denial claim is likely.

CO 16: Lacks Information or Contains Errors

The issuance of a CO 16 denial code indicates there is an error due to missing essential information related to claim adjudication. Payers use this denial code in a range of situations, including demographic or technical errors, no social security number of the patient, an invalid Clinical Laboratory Improvement Amendment number, or the wrong modifier used.

CO 18: Duplicate Claim

A bit more of an obvious denial code, the CO 18 code, indicates that the provider submitted the same claim for the treatment or service more than once. It may also be applied when the provider resubmits the claim without indicating that it is an updated or corrected claim. Also, note that this may indicate that the same service or treatment was provided numerous times in one day, but the provider did not provide the correct modifier to indicate this.

CO 22: Coordination of Benefits

Many patients have more than one payer. In these situations, providers must clearly establish who the primary, secondary, and tertiary payers are. This is done through the coordination of benefits rules. In situations where another payer is responsible for the claim, the payer will deny the claim submitted to them. The CO 22 denial code indicates the wrong payer was billed for the treatment or service and another payer, such as the primary payer, is responsible.

CO 27: Expenses Incurred After the Patient's Insurance Expired

The CO 27 denial code indicates the patient’s insurance coverage was expired at the time of providing the treatment or service. This leads to an automatic rejection of the claim. These denials, though challenging to overturn, could be avoidable with verification of insurance and provider coverage before appointments are scheduled.

CO 29: Limit for Filing Expired

Most payers have a specific timeframe in which providers may submit a claim for service or treatment provided. In situations where the claim submission timeframe is missed, the CO 29 denial code is applied. These common rejections are difficult to overturn and often signal avoidable delays in the medical billing cycle.

CO 45: Charges Exceed Fee Schedule

When a claim is denied with the CO 45 code, it points to a discrepancy between the amount billed by the provider and the maximum amount allowed by the payer, as dictated by the fee schedule or the contractual agreement. This denial not only highlights a financial mismatch but also underscores the need for a practice to regularly review and update its billing practices in alignment with payer agreements.

CO 97: Service Already Adjudicated

The CO 97 denial code occurs when more than one claim is filed for bundled services, or services provided during a single care episode. The Evaluation and Management Services billed in these situations are not charged based on the individual service provided but rather an overall amount for the performed procedures.

CO 167: Diagnoses Not Covered

In situations of a CO 167 denial code, this indicates the payer does not cover the services provided. This code indicates the payer rejected the payment request from the payer because it does not fall under the coverage of the patient’s policy.

Actions After Receiving a Denial Code Matter

Payers distribute rejections of claims for specific reasons, and understanding them is necessary to get a better understanding of why this happens. Denials of claims are common, but they do indicate lost revenue or potential revenue leakage if the provider or medical billing service does not turn them around in time.

A claim appeal is the most likely next step. It enables the provider to resubmit the denied claim to the payer for additional review. It must occur within 60 to 180 days of receiving the initial claim denial notice, depending on the payer. Prior to resubmission, the provider typically must gather additional documentation of why the claim is payable. This involves providing evidence that the service or treatment was indeed covered.

In situations of continued denial after an appeal, it is possible to request an independent third-party review of the denial codes. Internal appeals are faster and less expensive, but there are situations in which a third-party review is necessary. To obtain this, you must file the appeal in writing, typically within four months of the claim denial notice.

Strategies to Reduce Denials in Medical Billing

Medical billing denial codes and reasons are always frustrating to see. It is money that is being held back that providers need to continue to operate. While they will happen, there are several pointers that may help healthcare organizations to reduce their frequency.

Enhance skills and engage in continuous education: Refresh the team’s skills and knowledge. It is critical to ensure that anyone applying medical codes has up-to-date knowledge.
Ensure process consistency amidst updates: When software or other updates occur on the provider or payer’s side, verify the entire process remains the same.
Invest in real-time eligibility verification: Implement real-time eligibility checks to quickly confirm coverage before services are provided, ensuring faster and more accurate verification.
Automate tasks to minimize human error: Incorporate technology to automate tasks that commonly lead to human-implemented errors, such as verification of patient information.
Build and maintain payer relationships: Invest in building relationships with payers to ensure you know what is expected and can mitigate risks early on.
Improve data management and implement quality assurance: Strengthening data management and ensuring accurate verification through a quality assurance process before claims submission can significantly reduce errors and oversights.

Additionally, it’s fundamental to invest in the right technology and skilled professionals to minimize these risks in the long term.

Leverage the Help You Need from Benchmark Solutions to Maximize Medical Billing Outcomes

The most important strategy for minimizing the number of denial codes your healthcare organization faces is to empower help. By working with the right team and software, it is possible to reduce these costly oversights significantly.

Benchmark RCM team can take over any of your denial-related tasks, including payer communications and establishment of professional relationships with them as well as taking care of the appeals process. They are highly skilled in preparing, documenting, and submitting detailed claims to avoid denials in the first place.

Benchmark PM’s software provides the resources necessary by offering advanced capabilities throughout the revenue cycle management process that ultimately reduce denial rates. Learn more about how Benchmark PM software can help optimize the denial management process, including a simple-to-use but comprehensive dashboard that provides clarity on claims, allowing for faster support when needed. More so, the automated coding recommendations help to streamline the billing process, reducing the risk of any claim denials.

Get assistance with denial codes