Claim denial rates are a significant challenge for healthcare providers, with substantial variations based on payer type, location, and specific insurance companies. To understand these variations, it’s crucial to analyze the specific claim denial codes issued by each payer. While the industry standard for claim denials hovers between 5% and 10%, certain payers, notably those within the ACA Marketplace, report denial rates approaching 20%. This upward trend, highlighted in Experian Health’s “2024 State of Claims” report, reveals that 73% of healthcare staff, including those in medical billing companies, is witnessing increased denials—a sharp rise from just 22% in 2022.
The Financial Burden of Claim Denials
These denials have a profound impact on healthcare revenue. Beyond jeopardizing reimbursement, providers spend an average of $42.84 per denied claim in appeals, according to Premier Inc. A significant contributor to this cost is the complexity and variety of claim denial codes, which necessitate thorough review and often, costly appeals. With approximately 3 billion claims processed annually, this translates to $19.7 billion spent on reviewing denials, with over half ($10.6 billion) wasted on disputing claims that should have been approved. For medical billing companies, this represents a substantial operational challenge, particularly in deciphering and rectifying the diverse array of claim denial codes that lead to these financial burdens.
Decoding Claim Denial Reason Codes: A Key to Prevention
Understanding claim denial reason codes is essential for mitigating these issues. These standardized alphanumeric codes, categorized by claim adjustment group codes (CO, PR, OA, PI, CR), pinpoint the exact reason for denial.
- CO (Contractual Obligations): Denials based on payer agreements (e.g., CO-45: Charges exceed contracted fee schedule).
- PR (Patient Responsibility): Costs borne by the patient (e.g., PR-1: Deductible amount).
- OA (Other Adjustments): Non-billable adjustments (e.g., OA-18: Duplicate claim/service).
- PI (Payer-Initiated Reductions): Reductions unrelated to contracts (e.g., PI-204: Service not covered).
- CR (Correction and Reversal): Adjustments for corrected or reversed claims.
Top Claim Denial Codes and Prevention Strategies
To reduce denials, both healthcare providers and medical coding companies must understand and address common denial codes:
- CO-4: Missing Modifier: Ensure accurate modifier application and review coding practices.
- CO-11: Diagnostic Coding Error: Maintain precise clinical documentation and provide ongoing coding training.
- CO-15: Authorization Number Problem: Verify prior authorizations before submission.
- CO-16: Lack of or Incorrect Information: Implement checklists and verification processes.
- CO-18: Duplicate Billing: Utilize practice management systems to prevent duplicates.
- CO-22: Coordination of Benefits (COB) Mistake: Verify primary and secondary payers.
- CO-29: Expired Time Limit: Automate reminders for timely submissions.
- CO-50: Service Not Medically Necessary: Strengthen clinical documentation to support medical necessity.
- CO-97: Already Adjudicated: Regularly update billing and coding knowledge and conduct audits.
- CO-167: Diagnosis Not Covered: Ensure proper coding and documentation align with payer requirements.
Strategies for Addressing Claim Denials
When denials occur, providers and medical billing companies should:
- Identify Trends: Track and analyze denial codes to pinpoint recurring issues.
- Address Root Causes: Invest in staff training, improve documentation, and refine coding.
- Act Quickly: Correct and resubmit soft denials promptly.
- Leverage Technology: Utilize automated tools for claim verification and eligibility checks.
Conclusion
Claim denials incur significant costs, diverting resources from patient care and revenue generation. By understanding the intricacies of claim denial codes and addressing common denial reasons associated with them, healthcare providers and specialized medical coding companies can streamline revenue cycle management and ensure timely reimbursement.