How to Manage Medical Claim Denials

How to Manage Medical Claim Denials

With diligence and quick follow-through, you can recoup payments rightfully due to providers.

Managing payer denials is key to proper reimbursement. The lack of appropriate and timely claim follow-up can cost even the most successful practice significant revenue. Although appeals take time and effort, the recoupment of lost payments makes the process profitable.

Rejection and Denial Aren’t the Same

Claims may be rejected or denied. There are differences in these types of claim returns, although the words are often used interchangeably.

A rejected claim has been returned to the provider before complete processing. These claims are returned due to a submission error. They may still be payable after correction and resubmission.

A denied claim has been deemed “unpayable.” These claims have been adjudicated by the payer. A resubmission is not an acceptable response to a denial. These claims must be evaluated prior to submitting a corrected claim or an appeal.

Timing Is Key

Quick response to denials and rejections is vital to recouping reimbursement. Each practice must have a process in place to forward denials to the proper person. This may be done via paper or email in practices without an automated system. Using an automated system for placing denials into work lists is typically the fastest method. Most payers have timely filing guidelines for appeals, and these  periods may be quite short.

Turn to the RA to Determine How to Proceed

Coding denials should be forwarded to a Certified Professional Coder (CPC) for processing. The remittance advice (RA) is the first step in deciphering the adjudication decision by the payer. There are several types of coded communications on each RA. Washington Publishing Company (www.wpc-edi.com) houses these codes, but most RAs include a key to the codes. Commercial payers may have a complete listing of the codes they use on their websites, as well.

Claim adjustment reason codes (CARC) tell why an entire claim or a service line was paid differently from how the provider expected.

Remittance advice remark codes (RARC) transmit additional information regarding the claim. RARC codes always provide a greater explanation and accompany the CARC. Claim status category codes explain the general category of the claim. These categories include accepted, rejected, additional information requested, etc. Claim status codes give more detailed information regarding the claim status category.

Each piece must be put together to determine the reason for the denial and the appropriate next action to be taken. For example, what if the CARC reads as CO-19? What does the “CO” stand for? These codes are called claim adjustment group codes. The CO means a contractual obligation and the patient may not be billed for the service.

“PR” means patient responsibility, and the patient may be billed for the service. It’s very important to pay attention to these codes; billing the patient for a CO denial violates provider contracts with payers.

A CARC of CO-19 tells you that the injury/illness is work related and the claim should be filed to the Workers’ Compensation carrier. The proper next step is to contact the patient for the correct insurance to which the claim should be filed. The provider is not allowed to send the patient a bill for these services. It’s not necessary for you to process this type of denial because it’s an eligibility issue. Your work files should involve the more detailed cases, included in a coding-related denial.

What if the CARC is CO-50? This tells us “these are non-covered services because this is not deemed a ‘medical necessity’ by the payer.” A certified medical coder should handle this type of denial, and either submit a corrected claim or appeal the decision.

Why the choice between the two steps? The submission may have been a simple clerical error. The line item may have been linked to the wrong diagnosis on the claim (field 24E). As long as the documentation supports a different diagnosis for the service, you may file a corrected claim along with the medical records to support the change in diagnosis.

Coverage Determinations Provide Guidance

What should you do if the diagnosis was linked correctly according to the documentation?

The first step is to look for the payer’s coverage determination; for Medicare, these are either National Coding Determinations (NCDs) or Local Coverage Determinations (LCDs), which are housed on the Medicare Coverage Database website. Most commercial payers also have reimbursement policies, which equate to Medicare’s NCD/LCD system. You must carefully read those policies and review the records to determine how the policy was not met by the submitted claim. It may be a diagnosis issue, but policies also have frequency limitations, treatment option prerequisites, etc.

Let’s say the service was denied for a frequency limitation. The patient received five lumbar injections, but the policy states that four is the maximum for a year. You must determine if the policy outlines exceptions to the frequency limitation. Does the documentation support the reasoning behind the administration of an additional injection? If not, the provider must be queried.

Next, the manner of the appeal must be determined. Some payers require appeals to be submitted via phone request, while others require electronic submission or the use of specific forms. Can you attach medical literature such as copies of the CPT® code book or a CPT® Assistant article? Can you compose a letter to explain the provider’s reasoning for the treatment plan and why the service should be reimbursed? If not, the provider must draft a letter. You must determine if the work can be completed before the appeal time limit is reached.

Track Appeals to Ensure Payment

Following up on appeals is a must. If an appeal is denied, it’s possible to proceed to another level of appeal. If you discover a service is always denied by the payer, establish the root cause:

  • Are the services reported using the method indicated by the payer?
  • Does the contract with the payer outline why the denied service(s) is always included with another service?

It helps to set up a tracking mechanism for appeals, which allows you to report patterns of denials to management. Keeping track of denials may prove to be useful when the next round of payer contracting occurs, as well.

One important step that is often overlooked by denial management is notifying the provider of the status and type of denials. Providers are very interested in why claims are denied. Updating them on the denial progress aids in increasing their coding and billing knowledge. As they gain better understanding of the process, you may discover that the provider(s) is more than willing to be involved in the appeal when their expertise is needed.

Although working denials is not an easy task, it’s a great place to start a medical coding career.


Beverly Strube, CPC, COC, CPMA, CPC-I, CEMC, COBGC, is a senior consultant with Blue & Co., LLC, on the Indianapolis Revenue Cycle team. She has 16 years of experience in physician-based accounts receivable, coding, billing, auditing, provider education, and compliance. Strube has been a medical auditor for the past 10 years, specializing in mental health services including psychiatry, psychology, and neuropsychology. She also has extensive experience in obstetrics and gynecology including maternity care, urogynecology, and maternal fetal medicine. Strube is a member of the Indianapolis, Ind., local chapter.

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